ML19310A305

Forwards Gpu 800514 Cash & Earnings Forecast,Reflecting Recent Nj & PA Rate Order Impact in Response to Interrogatory 6 of PA Public Util Commission

ML19310A305
Person / Time
Site:	Crane
Issue date:	06/06/1980
From:	Herbein J METROPOLITAN EDISON CO.
To:	Harold Denton Office of Nuclear Reactor Regulation
References
TLL-264, NUDOCS 8006110066
Download: ML19310A305 (54)

Text

{{#Wiki_filter:r I t e Metropolitan Edison Company p g Post Office Box 480 Middletown, Pennsylvania 17057 717 944-4041 Writer's Direct Dial Number June 6,1980 TLL 264 Of fice of Nuclear Reactor Regulation Attn: Mr. H. R. Denton, Director U. S. Nuclear Regulatory Commission Washington, D.C. 20555

Dear Sir:

Three Mile Island Nuclear Station, Unit I (TMI-1) Operating License No. DPR-50 Docket No. 50-289 Financial Information for Restart In response to Interrogatory No. 6 of the Pennsylvania Public Utility Commission (PaPUC) in the ASLB Docket No. 50-289 (TMI-I Restart), GPU provided copies of thirteen financial forecasts prepared during the time period of February 1979 through April 1980. Enclosed is the most recent forecast material (dated May 14) which reflects the impact of the recent rate orders in New Jersey and Pennsylvania (copies of the rate orders are enclosed). We are currently revising our monthly 1981 forecast to reflect the recent rate orders and other changes in our planning assumptions. This forecast will be available oa June 5 and a copy will be forwarded to the NRC. Our long range ten year financial forecast is currently being revised to reflect these changes and we anticipate this material being available in late June or early July. Summarized results of this forecast will also be forwarded to the NFC when it is available.

incerely, s

/ J. G. Herbein 7 Vice President TMI-I JGH:CWS: hah Enclosure cc: D. DiIanni Q $ M. Karlowicz R. W. Reid S H. Silver J. T. Collins THIS DOCUMENT CONTAINS j / B. J. Snyder P00R QUALITY PAGES l 800611 00 % Metrocohtan Edison Company is a Member of the Generai Put:!c, Utet:es System u

f 9 J GPU SYSTEM CASH AND EARNINGS FORECAST 1980 4 May 14, 1980

e f f 2. GENERAL PUBLIC UTILITIES May to December 1980 Forecast Major Assumptions Oyster Creek June i return to service. Add'1 five week outage scheduled in October and November Energy Costs Oil increases to $42 per barrel by year end. Continued availability of coal-based purchased power for the System and natural gas for Jersey Central. PJM "Cose plus 10 pricing - Not available. Energy Clause Effective Increases Company Date Increase Met-Ed 3/1/80 6.9 mills /kwh Met-Ed 6/2/80 10.8 mills /hwh Penelec 6/2/80 2.5 mills /kwh JCP&L 3/6/80 6.7 mills /kwh JCP&L 4/1/80 3.0 mills /kwh JCP&L 9/1/80 5.7 mills /kwh TMI-1 Base Rates Eliminated 4/1/80 in New Jersey. Revenues will eetinue to be collected, but will be amortized agarcst prior deferred energy belances. Eliminated from base rate cariffs. Effective 6/2/80 for Pennsylvania companies, however, 5 energy clause revenues have been increased an equivalent amount. Base Rate Increase JCP&L $60 million effective 6/2/80 TMI-2 Insurance Proceeds Same total recavery for 1980 as in original budget except that $15 million of recoveries moved f rom May to June. First Mortgage Bonds $30 million Penelec bond issue in December and a $5 million refinancing for Met-Ed in November eliminated from forecast. y 'm

3. GENERAL PUBLIC UTILITIES May to December 1980 Forecast Major Assumptions (Contimsed) Sales Company Reduction Decrease JCP&L $16 million 2.5% Met-Ed $11 million 4.5% Penelec S13 million 3.5% Seward 7 Ownership Transfer Eliminated Short-Tern Debt 18% interest Coal Refund Met-Ed's deferred energy balance reduced by $4.9 million per order of PaPUC. a--w.< w n.+-.. w e. =: .m.

I CENERAL PUBLIC UTILITIES CORPORATION Projected Net Short-Tern Debt April-December 1980 ($ Millions) Apr. May June Jul'y Aug. Sept. Oct. Nov. Dec. u Jersey Central 100 13 1 133 131 129 121 95 105 92 Met-Ed* 94 17 100 97 96 104 101 100 96 l 'Penelec 2 6 j GPU Corp. 42 _44 46 43 60 61 61 78 82 System Total 236 2'42 279 271 28 5 28 6 257 28 5 276 Elimination of CPU Dividend (15) (15) (15) (30) (30) System Total 236 272 279 271 270 271 242 255 246 CIncludes $13 million of First Hortgage Bonds Issued and outstanding to Banks l i I i

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e. 6. GENERAL PUBLIC UTILITIES Deferred Energy Balances (SMillions ) Current Forecast JC ME PN Total December 1979 77 83 13 17 3 March 1980 143 97 21 261 J2ne 1980 144 87 24 255 September 1980 127 72 15 214 December 1980 124 55 17 196 O J 1 .n-.e-. wm e w e-ewm1ma eno+ w--m mo m.n_,m..m =

I l GPU SYSTEMI TOTAL FORECASTED GHORT-TERM DEBT BALANCE 500 I I I I I I I I I i i I 450 400 M I L 350 L y RESTORATION OF 80.25/ SHARE DIVIDEND IN AUGUST 0300 ,a.C.A.,LIMIJ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, N D 250 wN O r L CONTINUED ELIn! NATION OF THE DIVIDEND L 200 A R S 150 100 50 I I I I I I I I I I I I 0 w JAN FEB NAR APR MAY JUN JUL AUG SEP OCT NOU DEC 1980 i

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I! C i E E I D C N s A L U A g O I B i t Y G R T g C E l O it E N D P E i E l R S R E F E E E G %C c D U n I N A A A L L a NB A s ak~ T r Y L B G i E U R I E D E J0 D N E 8 n R 9 M E D E 1 T R R N T o '- R g E r U I R EF J s u E s D T R ~ Y O g A H I M S D R E T g _y P I S A A C E R R i O A I F M T-I- M B I-D E E L-I F A. - T E C. - M R. N g A I J 0 0 0 0 0 0 0 0 0 0 0 0 8 6 4 2 0 8 6 4 2 2 1 1 1 1 1 MIL I0N DO LfS y , lI ,t i i i !(

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I g PENNSYLVANIA ELECTRIC COMPANY Projected Source & Application of Funds ~ May-December 1980 ($ Millions) f. Apr. Hay June July A3 Sept. Oct. Nov. Dec. Total i Application of Funds (Per 1 +11 CFS) Construction 14 9 9 8 10 9 8 9 76 Sinking Funds & Refinancing 1 2 1 4 Total Applications 14 9 10 8 10 11 8 10 80 Source of Funds Internal (Below) 9 4 (2) 12 10 16 (9) 6 46 Short-Term Debt 5 5 12 (4) (5) 17 4 34 Total Sources 14 9 10 8 10 11 8 10 80 Net Short-Tern Debt Outstanding (28) (23) (18) (6) (10) (10) (15) 2 6 Internal Sources (Per 1 +11 CFS) 5 13 10 14 (10) 5 37 Preferred DJvidends 4 4 011 (WI 1 Restart) (1) (1) MI #2 Insurance Proceeds (4) 4 Sales Reduction (2) (1) (2) (1) (2) (1) (2) (2) (13) Energy Cost Savings (Reduced Sales) 1 1 1 1 1 5 Seward 7 Sale 5 5 Taxes, Other (2) (2) Robindale Tract Purchase (2) (2) Reduced Common Dividends 2 2 4 Add'1 Energy Clause Revenues 2 2 1 2 2 3 3 15 Loss of WI #1 Base Rates (1) (1) (1) (1) (1) (1) (6) Total Internal Scarces 9 4 (2) 12 10 16 (9) 6 46 l l ? i 4 f 4 l

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e v ) PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg, PA 17120 Public Meeting Held May 23, 1980 Commissioners Present: Susan M. Shanaman, Chairman Michael Johnson Janes H. Cawley Linda C. Taliaferro Pennsylvania Public Utility Commissior., et al. Docket No. v. I-79040308 Metropolitan Edison Company and Pennsylvania Electric Company 0RDER BY THE COMMISSION: The current proceeding; are a continitation of an investigation at this docket which began shortly after the accident at Three Mile-Islaad on March 28, 1979. This order is a sequel to the Commission's order entered June 19, 1979. At issue here are three matters: First, on September 20, 1979 the Commission ordered Metro-politan Edison Company (" Met Ed") and the Pennsylvania Electric Company ("Penelec") to show cause why the Three Mile Island Power Station, Unit No. 1 ("TMI-1") should be considered used and useful in the public service and why all of the costs. associated with THI-1 should not be removed from their respective base rates. The second matter at issue in these proceedings _ arises from an order to show cause adopted on November 1, 1979, directed only to Met.Ed. After taking notice of recent financial, operational and regulatory difficulties facing Met Ed, the Commission orde publicconvenience-{pdMetEdtoshowcausewhyitscertificateof should'not be revoked. Third, on November 1, 1979 Met Ed filed a petition for modification 'of the order entered June 19, 1979, seeking a 6.9 mill per kilowatt hour increase in its energy cost. rale' and an extension of time within which to include as recoverable costs under the energy cost rate the demand or reserve capacity costs associated with purchased power. 1/_ For economy of expression, all of the pertinent certificates granting Met Ed its present rights to operate as a_public utility are' referred to as its " certificate of convenience." m.

~ i The three matters were consolidated for hearing at this docket. The Commission, sitting en banc, presided at the taking of evidence and rendered this decision without the interjection of a recommended decision of an administrative law judge. Af ter twenty-seven (27) days of hearings, which produced more than 4,000 pages of-transcript, the parties were permitted to file briefs and present oral arguments before the Commission.2/ Consolidated with the current proceedings are complaints docketed at C-79101682, C-79121754, and C-79121808. This order disposes of these complaints. There are also three complaints which were filed during our initial proceedings which culminated in the order entered June 19, 1979. Those complaints are C-79040831, C-79050907, and C-79050909. The order of June 19, 1979 effectively disposed of all 2/ The parties to these proceedings are: Respondents, Met Ed and Penelec; Staff; Consumer Advocate; St. Regis Paper Company of York, Airco Speer Carbon Graphite of St. Marys, Autex Corporation of Meadville, Avtex Fibers, Inc. of Lewistown, and P.H. Glatfelter Company of Spring Grove, jointly ("St. Regis, et al."); Patricia Street, Dr. Timothy Percarpio, and Three Mile Island Alert, Inc.,- jointly ("TMIA, et al."); Senior Power Action Group of York and Louise Riley, jointly (" Senior Power Action Group,,et al."); Holly Peck and Deep Run Farm, Inc., jointly (" Holly Keck, et al."); Bethlehem Steel; Standard Steel Division, Titaniur Metals Corpor-ation of America (" Standard Steel"); Citibank, N.1. Agent and Chemical Bank N.A.' Co-Agent ("Citibank, et al."); Mrs. Patricia Smith; Pennsylvania Foundrymen's Association and Lebanon Steel Foundry of Lebanon, jointly (" Pennsylvania Foundrymen's Association, et al."); Universal Cyclops Corporation,.Electralley Corporation,~ -Erie Malleable Iron Company, Franklin Steel Company,- National Forge Company, Proctor & Gamble Paper Products Company, Talon Textron and Welch Foods, Inc., jointly (" Universal

• Cyclops Corporation, et al.");

~ Lehigh Pocono Committee of Concern; Louise Dufour and Limeric!. Ecology Action (Complaint Docket No. C-79101682); Representative Harold Brown (Complaint Docket No. C-79121754); Joyce Wendler (Complaint Docket No. C-79121808);- and the City of Lancaster.

matters raised therein; tgprefore, we hereby direct that these complaint dockets be marked closed An initial decision of the presiding commissioners was issued on May 9, 1980. Exceptions were filed by: Respondents; Staff; Consumer Advocate; TMIA, et al. ; Senior Power Action Group, et al.; Holly Keck, et al.; Standard Steel; Citibank et al.; Mrs. Patricia Smith; Lehigh Pocono Committee of Concern; Louise Dufour and Limerick Ecology Action; and, by permission, the Pennsylvania Electric Assoc.iation. The Com-mission has reviewed and considered each exception. For the most part the exceptions are denied - for the reasons already given for the initial decision. A seristim discussion of each exception would serve only to reiterate the original text, other than where a specific departure is noted. Therefore, this order, in its entirety, should be treated as the Commission's response to the exceptions. The current proceedings have presented exceedingly difficult issues for this Commission to resolve. The Commission has had to balance the need to explore and carefully examine Met Ed's continuing, long-term viability against the urgency to act promptly to avoid being overtaken by events. In addition, the Commission has had to resolve the competing concerns of creditors who want assurance of earnings and ratepayers who want equity in allocating the costs associated with the Three Mile Island accident (and who see an inequitable duplication in paying the costs of THI-l and the costs of THI-l replacement power); and c " Respon-dents who would emphasize their financial needs and other part.as seeking a determination based on other economic, social and political principles. The responsibility presented to the Commission by these concerns '.s indeed a grave one, and whereas each of the parties may propose solutions, this Commission recognizes one factor which applies solely to 3/ A request to intervene in the nature of a complaint was received on March 24,'1980 from David D. Trout. Mr. Trout complains of the application of the increase granted to Met Ed on February 8,1980 to his service. It appears that Mr. Trout was unaware of the Com-mission's intent to make the increase effective for bills rendered on and after March 1, 1980. Met Ed's energy cost rate was previous-1 ly changed effective for bills rendered on and af ter a date certain. The February 8,1980 action of the Commission was consistent with that practice. Also, it was the~ Commission's intent to increase Met Ed's. rate so as to generate revenues in March and April, 1980 sufficient to abviate increasing the short-term debt' limit under the Revolving Credit Agreement until a final order is issued. If the tariff was made effective for service rendered on and after March 1, 1980 there would have been a lag in the collection of revenues in March and April, 1980. Thus, Het Ed was allowed to increase its energy. cost rate effective for bills rendered on and after March 1,1980. In light of the above ' discussion, we do not perceive a basia for. a complaint by Mr. Trout. The request to intervene fileu by David D. -l Trout on March 24, 1980 is hereby denied without prejudice to ' Mr. Trout to file ' a formal complaint. .-3

1 it -- namely, it does not have the luxury of avoiding responsibility for being_ wrong. The basic conclusion of the Commission in this order is that Met Ed should continue to operate as a public utility. The Commission will provide Met Ed the means of financial rehabilitation. However, we will' write no blank checks on its ratepayers. We find that THI-1 is no longer used and useful and that the base rates of both Met Ed and Penelec should be reduced. This order, _ with its provisions. for a fully current recovery of energy costs and an accelerated amortization of deferred energy costs provides an adequats framework for Met Ed's recovery. Respondent must convince its bank creditors that it has the will and the ability to rehabilitate itself. Above all, Met Ed must demonstrate candor and a willingness to address its problems and the initiative and ability to find solutions to those problems. The very real fears and concerns of its customers and neighbors must be allayed. Met Ed's costs must be reduced through load management and conservation-inducing rate structure change. Met Ed must aggressively pursue the return to service of TMI-l or an early decision on its conversion to the use of an alternative fuel. If these things are done, the Commission is confident that Met Ed will not only survive but will regain its financial health. Finally, we emphasize that this order does not end our regulatory concern. The management investigation of the GPU Companies at Docket No. I-79080320_ continues. Further, we will continue to closely monitor the operations of Met Ed, Penelec and the GPU Companies to assure the continued provision of safe, adequate and reliable service to Pennsylvania ratepayers at reasonable rates. Order to Show Cause on Revocation of Het Ed's Certificate of Public Convenience In the order to show cause adopted November 1, 1979, the Commission. concluded, after taking notice of recent financial, operational and regulatory difficulties facing Met Ed: " Recognition of [these] matters raises serious questions about the continued ability of Met Ed to provide safe, adequate and reliable electric service at just and reasonable rates. The Commission therefore finds it in the public intetest to put at issue in these proceedings the continued viability of Met Ed as a public utility. .)

• w Therefore, the Commission hereby orders Metro-politan Edison Company to show cause why-its certificate of public convenience should not.be revoked."

The order to show cause manifests the Commission's concern for the continuing adequacy and reliability of Met Ed's service and for the,

continuing ability of Met Ed.to provide that service at reasonable rates. The. accident at Three Mile Island and subsequent events have placed severe strains on the utility. This Commission would be remiss if it did not formally examine Met Ed's overall condition to ensure that service to. Met Ed's customers will continue. That purpose is served by making Met Ed's continuing viability an issue in these pro-ceedings. We need not here decide the limits of the Commission's authority to revoke. the certificate of an electric public utility. But we note:in general that although there is no express provision in the Public Utility Code dealing with the subject, the Commission has the same power to revoke a certificate as it has to issue it, upon'due cause being shown, and that a utility holding a certificate of public con-venience accepts it subject to the statutory provision which permits the certificate to be modified or rescinded for legal cause. We disagree with Respondents' statement of the law, not finding it relevant to draw distinctions between past and future actions, or between service and rate functions, or that in a proceeding upon motion of the Commission the burden lies with any party other than the respondent-utility. There is no vested or property right in a certificate of A public' convenience. Common sense and due process require that a certi-ficated public utility be given notice of its deficiencies and a reason- ~ / able opportunity to correct those deficiencies. However, what is para-I mount to this Commission is the continued provision of safe, adequate 2 and reliable electric service. If the welfare of the public should require an immediate transfer of the right to serve the public, either temporarily or permanently, we would not hesitate to order such action. i On the.other hand, if the question posed is whether another provider .t could make the required service available at a lower cost, then the certain benefit of such a change must be clearly and unequivocally established. We must conclude that based upon this record no modification or revocation of Met Ed's certificate is required at this time because we find no imminent and foreseeable threat to continued provision of adequate and reliable service ^at reasonable rates. Nor do.we find that 1' the record supports the issuance of a complaint. However, in all. cases + this Commission 'has continuing jurisdiction over the services, rates, and ' certificates of public utilities. j .. The Commission is acutely aware of.the substantial, continuing public debate over whether. or not radiological dangers exist at Three. Mile Island..This record contains many allegations concerning Met Ed's -responsibility for the construction, maintenance, operation and clean up of the Three Mile Island ' nuclear units. To-the extent that these . allegations relate to the safety.of the people of Pennsylvania, this . Commission is required to recognize that the Federal government has i completely pre-empted the States in the licensing and regulation of the. ) commercial use of nuclear reactors and in the protection.of. the public - from radiological hazards. Northern States -Power Company v.. r-m* h

4 State of Minnesota, 447 F.2d 1143 (8th Cir.1971), aff'd mem. 405 U.S. 1035 (1972). These allegations also present difficult questions of whether they constitute a sufficient basis for the revocation of the certificate of an electric utility which owns and operates nuclear facilities. If the courts and/or the NRC ultimately conclude that Met Ed has been imprudent or negligent or is incompetent, then this Com-mission will take notice of such determination and will respond appropriately. For the present, the Commission believes it to be most appropriate to monitor any proceedings before the NRC and the courts. The Commission will. follow the proceedings before the NRC on the restart of TMI-l and with respect to the clean up of THI-2. The management consultants engaged to audit the management of the GPU Companies will consider carefully those proceedings. Any finding by the NRC of -incompetence or inability by the management of Met Ed to operate the TMI units would be a matter of grave concern to this Commission. Our management consultants auditing the management of the GPU Companies will carefully and thoroughly examine any proposed management changes. To the extent that other issues relating to the reasonableness or prudence of the management of the GPU Companies remain or arise, they can and should be explored in our investigation at Docket No. I-79080320. Regretably, the Commission must again decry the failure of the Federal government to respond to the accident at Three Mile Island with financial assistance that is commensurate with its responsibility for the development of nuclear energy. The Federal government has been a keystone in the development of commercial uses of nuclear power. It has insured, promoted and exclusively regulated its development. Duke Power Company v. Carolina Environmental Study Group, Inc., 438 U.S. 59 (1978). The people of Pennsylvania should not have to bear the entire burden--emotionally or financially -- where that burden properly belongs to all those who have-benefited from the development of nuclear energy. The enactment of the Price-Anderson Act in 1957 reflected Congress's acceptance of the idea that the Federal government should intervene in the event of a major nuclear incident. In discussing the-basic approach and underlying principles of the new legislation, the Joint Committee of Atomic Energy commented as follows: "The chance. that a reactor wil! run away is too small and.the foreseeable p'bssible uinages of the reactor are too. great to allow the accumulation of a fund which would be adequate. If this unlikely event were to occur, the contributions of the companies protected are ~likely to be 'too small by far to protect the public, so Federal action is . going to be' required anyway." . S.' Rep. No. 296, 85tn Cong.. lst Sess. reprinted in _(1957] U.S. Code - ~ .Coog. & Ad.-News-1810-11'.

_7 Moreover in extending the Price-Anderson Act for the second time in 1975, Congress expressly included the concept in the statute itself: "Provided, that in the event of a nuclear incident involving damages in excess of the amount of aggregate liability, the Congress will thoroughly review the particular incident and will take whatever action is deemed necessary and appropriate to protect the public from the consequences of a disaster of such magnitude." 42 U.S.C. $2210(e)(Supp. 1979). Nevertheless, what is painfully clear is that an economic catastrophe has befallen the GPU Companies, and their ratepayers and investors as well. We believe that Congress has a parallel responsi-bility to act in this situation, noting that when the prospect of a nuclear " incident" seemed remote, Federal willingness to render assistance to the nuclear industry was freeflowing. Now that such a tragedy has become more than a remote possibility, that willingness has dissipated. Never has it been more true that victory has a thousand. followers, but that defeat is an orphan. The only action of the Federal government reflected on T this record is contained in the statement of the Respondents at i HE/PN Exhibit'A-74, that: s "The DOE has ag eed to fund up to $500,000 for certain. work relating to radioactive decontamina-i tion used at TMI-2. Moreover, a contract is U being negotiated with a DOE contractor in which i it is anticipated that the DOE will fund up to C $1,000,000 of engineering services and health physics work in support of a research program which should be of assistance in the TMI re-covery program." We find the Federal response described in Exhibit A-74 to be woefully inadequate at a time when the owners of the plant, the utility rate-payers, and a consortium of bankers are acting as surrogate insurers of a nuclear accident which may yet threaten to bankrupt three major electric utilities. The Commisrion notes with disappointment the failureLof Presi-dent Carter to respond to our letter of March.19. We again urge. President Carter and theLUnited States Congress to recognize their responsibility and use their power to minimize the financial burden of this unfortunate accident. -Order to Show Cause on-Used and Useful Status of TMI-l The genesis of this order to show cause was the statement of the Commission, in the order entered June 19, 1979 at this docket that: _ 1 a

"At this time it appears reasonably certain that TMI-1 [ will return to service. Witness Herman Dieckamp, President of GPU, testified that resumption of generation at TMI-l could occur as early as August, 1979, and certainly no later than January 1, 1980. However, the Commission will monitor the status of TMI-1. We will require Met Ed to report to the Comnission monthly on the progress in returning TMI-l to service. If that start-up is delayed beyond January 1, 1980, the Commission will issue an order to show cause why THI-l should be considered used and useful in the public service." TMI-l did not return to service by January 1, 1980. By September 29, 1979 (when the order to show cause was adopted) it was clear that the l resumption of generation at THI-1 would be delayed substantially, and, at this time, remains uncertain. The Commission nas narrowed the issues somewhat with respect ,to this matter. In a prehearing order adopted December 21, 1979, the Commission declined to fix a test period for adjusting Respondents' base rates, stating: "The Commission does not yet have before it the issue of finding just and reasonable rates for Respondents." The Commission further stated: "With respect to the motion (of Respondents] for an initial decision on the used and useful status of THI-1, prior to the presentation of the base rate adjustments associated with the removal of TMI-l from rate base, the motion _is granted. The Commission has no desire to undertake a re-determination of Respondents' base rates as a hypothetical exercise. If this Commission finds TMI-1 no longer used and useful in the public service, then the determination of just and reasonable rates for Respondents will be an issue before us." As a result of that ruling, the present record was not developed with respect to'a current test period determination of Respondents' revenue requirements. Subsequently, in a prehearing order adopted January 18, 1980, the Commission deferred the intervention of certain customers of Penelec (who wished to address Penelec's rate structure), stating: "In light of ~ the Commission's decision in its . December 21, 1979 prehearing order to grant ~ Respondents' motion.for an initial decision:on the status of TMI-l prior to developing the record with respect to any associated changes in Respondents' base rates, it appears that the g.. M

concerns of the hospitals will not be addressed until a decision is reached on the matters now being developed on the record." Thus, the Commission finds that it cannot now determine and fix the just and reasonable base rates to be charged by Respondents. However, the Commission has the authority and discretion, upon the notice given in this proceeding and the record as developed, to determine (a) whether TMI-l is used and useful in the public service, and-whether Respondents' base rates should be adjusted to eliminate the costs associated with TMI-1, and (b) whether to fix temporary rates pending further investigation. (a) Used and Useful Status of TMI-l In the order entered June 19, 1979, the Commission concluded with respect to TMI-l that: "The parties have raised the issue of the used and useful status of TMI-1; however, the Com-mission need not reach that issue at this time. Consist'ent with the principles discussed with respect to TMI-2, TMI-l is at present only experiencing an outage." We now have before us the issue of whether TMI-l is used and useful in the public service. The decisional pricciole used to determine that TMI-2 was not used and useful in the public service was succinctly stated in our prior order: / "The length of time which utility plant may be out of service and not be removed from rate base depends upon the nature of the plant, the degree to which the outage can be expected to occur during normal operation of the plant, and the certainty with which resumptica of service can be predicted." The parties were provided ample opportunity to put before us the legal and factual bases that they advocate the Commission adopt in determining the status of TMI-1. In addition to the usual briefs and reply briefs, memoranda of law were requested by the Commission in its prehearing order adepted December 14, 1979. Before discussing the evidence of record, the Commission should clarify one aspect of the law which appears to r_rt,uble the Respondents. In the Respondents' memorandum of law da' ed January 14, 1980 ~ and their main brief, uncertainty is expressed concerning the Commission's ~ use of the phrase "used and useful" rather than "used or useful," and the possible intent of the Legislature in employing both phrases in the Public Utility Code, 66 Pa.C.S. 5101, et seq. The' answer to these -concerns is quite simple and straightforward. In our opinion, the Legislature anticipated and intended a difference in these phrases. "Used or useful" has a broader, more - inclusive connotation and is employed to define Lthe types of property - which are subject to the reporting, accounting and certification re-quirements. See 66 Pa. C.S. SS1102(a) (3), 1702, and 1703(a). Whereas, "used and useful" has a narrower, less inclusive connotation anf is employed to define and describe the types of property which are in-ciudable in the utility's rate base for purpose of fixing rates. Se 66 Pa. C.S. $S1102(a)(3)(iii),1307(a),1310(a),1310(d) and 1311. Circe our present focus is on the status of TMI-1. for ratemaking purpsses, the phrase "used and useful" is appropriate. However, our view of the ~ Legislative intent in employing these different phrases is independent of the determination of the substantive content of the phrase "used and useful." The point here is that'the scope of the reporting, accounting and certification provisions, with respect to utility property, is broader and more inclusive than the class or classes of property which are includable in the utility's rate base. It is appropriate at this time to bring into focus the concept of "used and useful" property for rate making purposes. The Commission is in agreement that "used and useful" is a flexible rate making tool whose definition to some extent is shaped by the individual circum-stances of each case. Whether property is used and useful in providing service to the customers of a utility is a question which of necessity must be resolved on the basis of a case-by-case analysis. The status of plant cannot be determined through the application of any set formula but should be ascertained in light of all the circumsta'nces. The Respondents distinguish the present circumstances of TM1-1 and the circumstances of TMI-2 at the time it was determined not to be used and useful in the public service. TMI-l has been in service for a substantial period of time. Its operating record from September, 1974 until March, 1979 has been excellent. TMI-l's experienced annual capacity factor th.ough 1978'was about seventy-eight percent (78%), well above the national average for nuclea r generating units. THI-l was not extensively damaged, as was TMI-2, by the accident on March 28, 1979. Respondents maintain it is presently operable, if permitted by the NRC, and that all modifications which it-is anticipated the NRC will require should be completed by June, 1980. Finally, Respondents claim that even with the required NRC approval pursuant to the restart hearings at NRC Docket No. 50-289 the-plant will return to service by January 1, 1981. ~ We' recognize the plant's past operating history and the fact that TMI-l's unusually high level of operation has inured to the benefit of ' Respondents' customers. Similarly, the Commission notes that TMI-1, according to Respondents,'is physically ready to commence; commercial . operation, but that the delay of its in-service date is presently due tc ~ ongoing Federal investigations. These circumstances materially.distin-guishtthe condition of TMI-1 from plant that might.have otherwise been i-excluded from base rates due to'obsolesence'and operational or structural defects. Although wc recognize these apparent distinctions, the Commission - is not convinced that these facts should result in ratepayer contribution toward returns on the investments associated with TMI-1. I. ,e-- --m

a Notwithstanding the Respondents' contentions, for rate making purposes for classes of property which are to be included or excluded from rate base, we are compelled to draw the line between the operating history and present condition of the plant and the timing and certainty of the return to service. The reasonableness of Respondents' actions in operating and maintaining the plant is not being measured here. Nor ~ will the reasoggbleness of Federal regulatory action enter into our determinacion.- ' For ratemaking purposes our primary issue is the weight that is to be accorded TMI-l's present circumstances and when the plant will return to service. I The Pennsylvania Public Utility Code and various Connission orders that refer to property valuations for ratemaking purposes in-corporate the generally accepted principle that a utility is not entitled to include, in the valuation of its rate base, property not actually used and useful in providing its public service. Whether THI-l was related to the provision _of utility service is not at issue here. TLt focus with regard to THI-l's treatment here relates te the length of the plant's present and ongoing outage. A plant's timely return to public service, so as to be properly included in utility base rates, is an established principle enunciated by the courts. See Schuylkill Valley Lines v. Pennsylvania Public Utility Commission, 165 Pa. Super. Ct. 393, 68 A.2d 448 (1949); Glenwood Light & Water Company v. Glenwood Springs, 98 Colo. 340, 55 e P.2d 399 (1936); Office of Consumer's Counsel v. Public Utility Commission, et al., 580 Ohio St. 2d 449, 391 N.E. 2d 311 (1979). The standard by which courts and this Commission have measured a plant's timely return to service has been the plant's imminent or certain use in t providing service to the public. Schuylkill Valley Lines, supra. ? r The Commission's treatment of THI-1 and TMI-2 in our June 19th order expressed our intent to continue applying " imminence and certainty" r as a standard for the determination of a plant's used and useful status. There our decision not to exclude TMI-1 from the Respondents' base rates was due prir rily to the plant's expected return that appeared l to be both imminent at.o certain. "At this time it appears reasonably certain that TMI-l . will return to service. Witness Herman Dieckamp, President of GPU, testified that resumption of 'gener-ation at TMI-l could occur *as early as August, 1979 l and certainly no later than January 1, 1980." From the evidence we have before us, TMI-l is out of service and,' based on Respondents'~ testimony of an in-service date.of approx-imately January 1, 1981, the unit will have been out of service for. nearly two-(2) years. I 4/. Although the Respondents have contended throughout these proceedings that.the Unit No. 1 in-service date is due to unjustified or discriminatory Federal action, the Commission will.not attempt to look behind-these investigations to ' determine thel reasonableness of those. acts. -111 -

n L Also, there exists substantial uncertainty with respect to the return of service of TMI-1. On the last day of hearings, Mr. Robert C. Arnold, GPU Vice President for Generation testified: Question: "How would you assess. . or how would you characterize the track record of the respondent in making representations to the ' Commission with respect to the restart of TMI-1?" Answer: . I would have to judge that our ' forecasts have not been accurate in terms of what has actually worked out." Tr. 3998-4000 Dr. Robert B. Parente, a power production and operations planning consultant with Theodore Barry &~ Associates, testified: "We believe that there is a strong probability that significant delays will occur in the restart of TMI-1, currently scheduled for January 1,-1981 for the Company's financial forecastiag purposes, and furthermore, the distinct possibility exists that the unit may never be permitted to restart." (TB&A Statement No. 2, p. 11-14) On cross-examination, Dr. Parente testified that mid-1983 was, in his view, a realistic start-up date for TMI-1. Tr. 3448. Finally, we take notice of an order adopted on March 6,1980 by the NRC, docketed at CLI-80-5 (In the Matter of Metropolitan Edison Company, Docket No. 50-289), whereir the NRC directed its Atomic Safety a and Licensing Board to consider the following issues in the'TMI-l restart proceedings: "(1) whether Metropolitan Edison's management is sufficiently staffed, has sufficient resources and is appropriately organized to operate Unit 1 safe'y; (2) whether facts revealed by the accident at Three Mile Island Unit 2 present questions concerning management _ competence which must be resolved before Metropolitan Edison can'be found competent to . operate Unit 1 safely; and (3) whether Metropolitan Edison is capable of operating Unit 1 safely while simultaneously conducting the clean-up operation 'at Unit 2."' The. scope'of those issues and the obvious concern of the NRC_with the restart of TMI-l while the clean-up continues at TMI-2 convince the Commission that a substantial uncertainty presently exists with respect. +

to the resumption of generation at TMI-1.EI The implications of an NRC ' decision to delay the restart of TMI-l until the clean up of TMI-2 is completed are even more serious in light of the fact that Mr. Robert C. Arnold, GPU Vice President for Generation, has testified that it is now unlikely that the clean up and restoration of TMI-2 will be completed by June, 1983 and that considerably more time will be required. Tr. 741. Considering the above, the Commission hereby finds that the Three Mile Island Power Station, Unit 1 is not used-and useful in the public service. In the case of Philadelphia Electric Company (PECO) at R-79060865, we disallowed approximately $25 million of PECO's claimed original cost based upon a finding of 748 megawatts of excess generating capacity. There are certain similarities between the issue of excess capacity in the PECO case and the matter of TMI-l in this investigation; ~ however, there are a number of features which distinguish the issue in the PECO case from the problem of TMI-1 in this proceeding. The issue in the PECO case was one of excess capacity. The problem which confronts us in this case is one of unusable capacity caused by the outage of a particular generating facility, complicated by the need to purchase energy to replace that capacity. The matter of replacement energy was not at issue in the PECO case and we concluded that a proper method of allocating the risk relating to the excessive ? generating capacity would be to require the stockholders to forego a return on their investment in that capacity while allow'ing the company to recover the associated expenses and depreciation from the ratepayers. In this proceeding, while we have not specifically allocated the 5/ Notwithstanding the Commission's-concern with and recognition of the probable effects of NRC proceedings on the restart of TMI-1, in the context of determining the used and useful status of TMI-1, the implications of that specific decision should not be misunderstood by the NRC or the Atomic Safety and Licensing Board which presides over the TMI-1 restart hearings. We understand that Met Ed's financial ability to operate the unit is an issue to be resolved in the restart hearings. _No specific implication should be drawn from our determination that TMI-1 is no longer used and useful that Met Ed is therefore financially unable to operate the unit..To do so would be to create a regulatory"self-fulfilling prophecy of unfortunate consequences. The financial capability of Met Ed'as' the operator of TMI-l is more appropriately reflected in our overall determination in this order-that Met Ed should continue to operate as a public utility and should recover financially. - 13'-

responsibility for the risk related to the outage of TMI-1, we note that with this order the Respondents' will be permitted full recovery of the reasonable costs of energy needed to replace that unit's capacity. In our opinion it would be inequitable to also permit the Respondents to recover.the maintenance and depreciation costs on a plant which should be, but which is not, providing their customers with economical energy. We further note that our treatment of TMI-I in this decision does not.epresent the permanent disposition of this issue. When that facility is permitted to resume commercial operation, the Respondents' right to again earn a return on the investment in that plant and to resume recovery of the costs associated with its operation will be given full consideration by this Commission. With respect to the recovery of clean up costs through rates, nothing in this order negates the statements of the Commission in the June 19, 1979 order. (b) Adjustment of Base Rates - Temporary Rates Inasmuch as the Commission has determined that TMI-l is not used and useful in the public service, the adjustment of the respective base rates of Met Ed and Penelec, as a matter of ratemaking, is com-pelled. liowever, the Commission will not fix new permanent rates. The issue to be resolved with respect to TMI'1 is whether the Commission should exercise its discretion to set temporary rates for Respondents. The Commission has the authority pursuant to Section 1310(d) of the Public Utility Code to prescribe temporary rates for a period of six (6) months. This Commission has examined the financial data presented on this record, Respondents' recent financial reports to the Commission and to their shareholders, and the orders of the Commission at Docket Nos. R-78060626 and R-78040599. ' Based on this information, and on its finding that TMI-1 is not used and useful in the public service, the Commission is of the opinion that-Respondents' rates are producing a return in excess of a fair return upon the fair value of the utilities' property. The determination that TMI-l is not "used and useful" gives rise to an unquestionable need to adjust Respondents' base rates. Based upon recent determinations of the Commission, the annual revenues associa-ted with TMI-1 are approximately'$2679 million for Met Ed (ME/PN Ex. A-16) and $11.7 million for Penelec (ME/PN Ex. A-32). Whatever the proper level:if determined today, these are not insignificant or de minimus amounts. The substantial nature of the. revenues and return-associated with TMI-1 is a consideration in the Commission's exercise of discretion'in setting temporary rates. Also relevant is the determination that Respondents should be granted full recovery' of current. energy' costs. L The Commission affirms its conclusion in the June'19th order that ratepayers should not pay - both the cost of a generating _ station which :is out of service and the costs of replacement _ generation where the outage _ is beyond normal' expec- - .tations 'and of uncertain duration.10ur' allowance of a full recovery

. 14

~ of replacement power, including power purchased and generated to replace TMI-l generation, necessitates the setting of temporary rates. Finally, the Commission notes that the return associated with TMI-1 for Met Ed is approximately $15.2 million (ME/PN Ex. A-16) and for Penelec is approximately $7.0 million (ME/PN Ex. A-32). These amounts create excessive returns, in our opinion,-on the remaining rate base, given the determination that TMI-1 is not used and useful. For these reasons, we hereby prescribe temporary base rates at an annual level of $26.9 million less than existing rates for Met Ed and $11.7 million less than existing rates for Penelec. We find that these base rate revenue reductions should be allocated to Respondents' customer classifications according to the contribution of those customer classes to Respondents' total base rate revenue requirement as determined in their most recent rate investigations (R-78060626 and R-78040599 respectively). If Respondents file a complaint against the temporary rates set by this order and subsequently the Commission determines that the temporary rates were set unreasonably low, an adjustment can be granted through cestatement of Respondents' balances of deferred energy costs. However, the inclusion of TMI-1 in Respondents' base rates will not be { retroactively restated, even if TMI-1 returns to service as expected by Respondents and is determined by the Commission once again to be used and useful in the public service. Petition of Met Ed for Modification of Order Entered June 19, 1979 A The third matter at issue in these proceedings arises from a petition filed by Met Ed on November 1, 1979 for modification of the Y order entered June 19, 1979. Met Ed's prayer for relief was a 6.9 mill increase in its levelized energy cost charge, effective January 1, 1980, and an extension of the time within which to include demand or reserve capacity charges associated with purchased power as recoverable costs through the energy cost charge. On February 8, 1980, the Commission granted Met Ed a 6.9 mill increase in its energy cost charge, effective March 1, 1980 and until a final order is issued, subject to the comple-tion of our investigation. Respondents' request for energy. cost relief was broadly stated in their main brief, as - follows: "... Met Ed requests that this Commission: (1) effective June-1, 1980,. grant a levelized energy clause increase of 3 mills /kwh; (2) permit the energy clause in effect ' prior to this Commission's June 19, 1979 order to. resume normal operation, effective January 1, 1981;-.

t 4 '(3) extend the permitted inclusion of_ demand or: reserve capacity costs associated with purchased power from January 1, 1980 until TMI-l returns'to service; and P (4) permit the amortization of Met Ed's and Penelec's t unrecovered balance of energy costs incurred since THI-2's accident'through a surcharge which will recover such costs over a 14 month period, beginning' June 1,-1980." ~ R'espondents' request for a 6.9. mill increase for Met Ed was predicated upon meeting short-term cash needs. However, Met Ed's and +. Penelec's past, present and projected energy costs, as well'as short-i term cash and credit needs, have been fully developed on this record. 3-We consider all issues with respect to the proper energy charges for Met Ed and Penelee to have been fully developed and to be properly before us now for decision. 4 The Commission again finds that Met Ed and Penelec are pro-l viding adequate, reliable service in spite of the loss of generation at TMI. We affirm our determination in the order of June 19, 1979, that: a " Met Ed and Penelec are presently providing reasonable, i adequate, reliable electric service. 1The costs of purchasing power are ' unquestionably direct, necessary and reasonable costs of providing that ' utility service. The Commission cannot punish Respondents by denying the recovery of these costs; nor can it create a windfall for the ratepayers of service without payment. The. j Commission is of.the opinion that the recovery of these costs is required by law." However, the last quoted sentence. requires _ qualification. The use of that Commission language by somefof the parties indicates a misunder-- standing of the, Commission's intent. The statement that the recovery of purchased power costs is ~" required by 1aw" was obviously'not intended to mean'that some' specific- ~ element of ' statutory or case law generally required the recovery-of purchased = power ~ costs from ratepayers -- regardless of how'or why 'those . costs were incurred. In.our' view, there is.no such_ legal requirement. ~ Rathe'r, the i statement must be. viewed *in its context. The~ Commission:had removed the costs associated with TMI-2.from. Respondents base rates,. i determined-that TMI-l was only experiencing a normal: outage, and' deter - mined that the currentfpurchases of power by Respondentsf were direct'and' immediate: costs of providing servi'ce.~ In that context, those costs were-recoverable _from ratepayers. In.the current proceedings, the Commission. finds that Met Ed. and Penelec_have similarly. incurred additional. purchased power. costs. -Thislisf not, Lhowever, a determination that every' dollar of. purchased . power? costs recorded on Respondents'1 books is. recoverable;from.their. ratepayers.-Those'amountsJare subject to audit ~and' review by1the Com. + .16; ' a- ~ c .Vj e ,r n+.-

i 9 e mission and to a later determination that specific amounts of energy costs were imprudently or unreasonably incurred. If the courts and/or the NRC should ultimately conclude that Met Ed was imprudent or negli-gent in its operation or management of Three Mile Island, then this Commission will take notice of such determinations and their relevance to any portion of the replacement power costs for which current recovery is permitted today. Any subsequent examination of these issues would heve to be made with the public's interest in the continued provision of adequate, reliable electric service clearly in mind. This Commission recognizes j the close relationship between that public interest and Met Ed's financial viability, and, if necessary, would balance the public's interest in adequate, reliable service against its interest in refunds. We point out that the Pennsylvania Commonwealth Court has affirmed our discretion with respect to the' extent of refunds to be made to public utility patrons if good reason is shown for the contrary. Community Central Energy Corporation v. Pennsylvania Public Utility Commission, No. 451 C.D. 1979 (Pa. Cmwlth. Ct., May 6, 1980). The basic determination in this order is that neither TMI-l nor TMI-2 is used and useful, that Respondents are providing adequate, reliable service without those generating units, and that the costs of power prudently and reasonably incurred to replace generation lost at r TMI-l are direct costs to serve Respondents' ratepayers. Furthe rmo re, r for the reasons stated below, the Commission finds that Respondents should be allowed a full recovery of current energy costs. First, by this order, the Commission is denying Respondents' recovery of the revenues associated with Three Mile Island. Since the Respondents are providing service through greatly increased costs of purchased power, those energy costs should be promptly recovered from their ratepayers. The determinations that TMI-l is not "used and useful," and that the revenues associated with TMI-1 should not be' recovered through Respondents' base rates, are inseparably interwined with our determination to allow a full and current energy cost recovery. If our determination on THI-l were reversed, the recovery of energy costs would have to be modified. Second, the. extreme dependence of Respondents on short-term -j debt creates an unstable financial condition which potentially threatens j the continued provision of utility. service to Respondentscustcmers. The costs of purchasing energy are a " major reason for short-term borrowing. A full recovery of current energy costs should lessen the need for. short-term debt and facilitate the obtaining of permanent financing by-Respondents. Finally, the continued accrual of deferred energy. costs may ultimately prove to be burdensome to Respondents' ratepayers. -If not collected now, those amounts will1have to.be collected later in the form of additional charges. In addition,- there is greater equity in requiring i the ratepayers of today to pay the costs of service today, rather than requiring' tomorrow's ratepayers to pay today's costs. The Commission therefore finds that a fully current energy cost. recovery for the balance of 1980 for Met Ed requires an energy charge of-19.1 mills per kilowatt hour, calculated as follows-Met Ed Energy Charge Full Cost Recovery for' Period June 1, 1980 through December 31, 1980w Total System Energy ~ Cost ($ millions) 120.7 Total System Sales (GWH) 4614 Average Mills per KWH of Sales 26.2 Less: energy cost recovery allowed by June 19, 1979 Order, exclusive of gross receipts tax 16.4 (8.0 mills - base rates) (8.4 mills - energy cost rate) Required Jncrease in Energy Charge exclusive of gross receipts tax 9.8** Plus: Energy Charge allowed by June 19, 1979 Order, exclusive of gross receipts tax 8.4 Required Energy Charge for full cost recovery, exclusive of gross receipts tax 18.2 Required Energy Charge for full cost recovery, including gross receipts tax 19.1

• Source: ME/PN Exhibit A-89 Includes recovery of demand or reserve capacity charges associated with purchased power.
  • Required increase determination essentially affirms interim relief of 6.9 mills granted on February 8,1930.

l 18 - r LE

4 The. Commission also finds-that a fully current energy cost recovery for the balance of 1980 for Penelec requires an energy charge 'of 8 5 mills per kilowatt hour,. calculated as follows: 'Penelec Energy Charge Full Cost Recovery for Period June-l, 1980 through December 31, 1980* Total System Euergy Custs ($ millions) 115.) Total System Sales (GWH) 6295-Average Mills per KWH of Sales 18.1 Less: energy cost recovery allowed by June 19e 1979 Order, exclusive of gross receipts tax. 16.2 (10.0 mills - base rates) ( 6.2 mills - energy cost rate) Required Increase in Energy Charge exclusive , 1.9 of gross receipts tax Plus: Energy Charge allowed by June 19, 1979. Order, exclusive of gross receipts tax 6.2 Required Energy Charge for full cost recovery, exclusive.of gross receipts tax 8.1 Required Energy Charge for full cost recovery,Lincluding gross-receipts tax 8.5

• Source: ME/PN Exhibit A-95 Includes recovery of demand or reserve capacity charges associated with purchased power.

s s _.A

Energy Cost Rate We will further direct Met Ed and Penelee to file and comment upon proposed tariff revisions, to become effective January 1, 1981, which will replace their energy cost adjustment clause with an energy cost rate. The energy cost rate shall be applicable to customers' bills for one year periods during the billing period from January through December; provided, however, that such rate may be revised on an interim basis upon approval of the Commission. Upon determination that the ef fective rate will result in over or under collection, such interim change shall become effective 30 days from the date of filing, unless otherwise ordered by the Commission. Interest shall be computed monthly, at the appropriate rate as provided in Section 1308(d) of the Public Utility Code. Computation of interest shall begin in the month an over collection or under collection occurs, and end in the effective month any over collection is refunded or any under collection is recouped. Customers shall not be liable for interest on net under collections. The intent of the Commission is that this energy cost rate would replace the levelized energy charges presently approved through December 31, 1980. Recovery of Deferred Energy Balance The record indicates that by the end of February,1980 Met Ed's deferred energy balance was $84.6 million. Penelec's deferred energy balance totaled $7.8 million at the same point in time. We hereby find that both' companies are entitled to collect the total amount of outstanding deferred energy costs over the next 18 months. The col-lection will be in the form of a surcharge, to be applied on a Mal (usage) basis. e i i i s-0,

ri c Yearly Surcharge / Met Ed Penelec ($ millions) Deferred Energy Blance ME/PN Ex. A-91 & A-96 84.6 7.8 ~ Twelve Month Recovery. 56.4 .5.2 I l Retail Sales j' ME/PN Ex. A-89 & A-95 7904 GWH 10461 GWH l Mills per KWH 7.1. .5 l Energy charge for full cost recovery, including gross receipts tax (1.047) 7.4 .5 l

• / Exact amounts are dependent upon total deferred energy costs at j

T-the time temporary rates go into effect as well as the final 4 Commission adjustment to Met Ed's deferred energy balance v pursuant to its complaint and investigation at C.21597. Demand or Reserve Capacity Charges In the order entered June 19, 1979, the Commission stated, with respect to demand or reserve capacity charges associated with purchased power: "As an incentive to Respondents to enter into bulk power purchase arrangements and thereby reduce the energy costs to its ratepayers, the Commission will allow. Met Ed and Penelec to include in recoverable ' costs through the net energy cost rate,.the demand or reserve capacity charges-incurred ~from July 1, 1979 until January 1, 1980." l The Respondents and the Consumer Advocate request that the Commission : i extend the recoverability _ of these costs to continue to encourage Respon-l dents lto keep their energy costs as low as possible. We find'on:this record that Respondents' committed purchases-E of power, which entail demand or reserve' capacity charges, have reduced. the costs of purchasing' power' from what would be otherwise incurred. ~ Therefore, the Commission hereby extends the time within which demand or reserve capacity charges associated with purchased power may be included as recoverableccosts through Respondents' energy cost ' harges from. ~ c Janauary 1,.1980 until TMI-l returns to service or until further order .of the. Commission..

Rate Structure The changes caused by the Three Mile Island accident have drastically altered Met Ed's costs to serve. Purchased power now re-places large amounts of energy which were previously generated inter-nally. Met Ed's rate base has been reduced significantly, and there is a real need to conserve and thereby reduce current expenditures. These changes compel a re-examination of Met Ed's rate structure. As noted previo'usly in this order, rate structure is an issue which has been excluded from the' current proceedings. However, it is a matter which cannot be ignored. If appropriate, a rate investigation will be consolidated with the hearings on temporary rates for Met Ed or with hearings on any general rate increase filing. Energy Conservation Our June 19, 1979 Order expressed dismay at Respondents' failure to even consider specific actions that would encourage rate-payers to conserve energy during this crisis. Our statement of intent on this matter was to be a clarification to the Respondents that they were to act immediately to propose rate structure changes as well as to secure low cost sources of generation. The Respondents have responded by filing tariffs which expand the availability of time of day pricing, reduce stand-by charges for solar power customers and increase incentives to use po'wer on an inter-ruptible service tariff. The Respondents have developed a thirty year Master Plan designed to foster conservation and load management so that new construction can be deferred and reduced. Respondents have also proposed several tariff rule changes designed to encourage conservation of energy by providing for minimum insulation standards as a prerequisite for connecting new service and by permitting under certain conditions the use of renewable energy sources in conjunction with residential rates. We encourage the Respondents ~to continue to bring their proposals - to the Commission for prompt consideration; however, the proposals so far will'have a de minimus effect on ratepayers' bills today. We are extremely concerned about the energy emergency which has followed the TMI-2 accident. The GPU Companies have had to purchase substantial quantities of energy from 8:00 AM to 8:00 PM daily, except weekends, at greatly increased rates. This high priced, on peak expense has exacerbated the financial condition of the companies, and is causing the bills of rate. payers to increase. The Commission urges ratepayers in the strongest terms' to attempt to reduce their energy consumpton during those hours, and to try to schedule use of electricity during off peak hours and on weekends. In addition, the Company 'must-redouble its efforts to reduce its costs. r'

In particular, we point out.that in the June 19, 1979 Order we directed the_ Respondents to file a plan to implement a credit billing system which would reward conservation through a credit per kilowatt hour saved. The Respondents' reply indicated various reasons why the plan outlined would neither be equitable nor reduce purchased power costs. Respondents chose to evaluate our directive without offering an alternative proposal. We renew our directive to the Respondents to develop a proposal that will reduce today's costs of purchased power as a result of the actions of its customers. Met Ed has indicated in response to our June 19, 1979 Order that there are many uncertainties associated with a credit billing system. However, during cross-examination Respondents' witness in-dicated that any reduction in energy consumption would reduce purchases: Q: Mr. Carter, if, in fact, Metropolitan Edison were able to reduce by whatever means its total sales to customers, you were able to reduce it by say 10 million KWH, does it necessarily follow that you are going to reduce purchased power? A: Presently, yes. Q: Because you are buying so much at all times -- I A: I suspect Met Ed is buying around the cl'ock either short-term purchases from an associated company or from the pool. So any reduction in kilowatt hours at this point would be a reduction -[ in purchases at any time, regardless of the time at which the reduction occurred. (N.T. 4112-4113) (emphasis added). Therefore, we will again order Met Ed and Penelee to propose a plan, within 90 days after entry of this order, for the implementation of a test program which will measure the effects of conservation- -inducing rates on customer kilowatt-hour consumption and on revenues. The objective of the test program is to determine whether or not the ~ offer of a discount or credit to residential, commercial, and industrial ratepayers who achieve a.significant reduction-in their electric consump-tion over a comparable period in the breceding year would encourage-those customers to further conserve electricity. All parties should be aware that if cooperation is~not forth-coming in this' regard,'the Commission will_be forced to' consider imposing on its own motion such conservation measures as curtailments of various kinds, prohibition of new customer connections, ceilings on consumption with penalties for overruns,' pricing of consumption above a targeted level at the average cost of purchased power, and/or other'similar i measures. I 4 - 23 c _ _ ~

Effectivity of Tariffs ~ Notwithstanding our previous determinations, all rate changes permitted by this order shall be put into effect for service rendered on and after the date specified. The departure from this normal practice in the June 19, 1979 and February 8, 1980 orders was for the Respondents' energy charges only and for the purpose of insuring an immediate increase in cash flow. Here, Respondents' base rates are also being changed, and we do not find at present such urgency to increase Respondents' cash flow as would warrant granting an increase for bills rendered on and af ter a date specified. The substantial increases granted by this order will, in our opinion, be adequate when recovered for service rendered on and after the date specified. Inasmuch as all matters properly before the Commission at this time at this docket have been determined; THEREFORE, IT IS ORDERED: 1. That the order to show cause why the certificates of public convenience of Metropolitan Edison Company should not be revoked, t_ which was adopted on November 1, 1979, is hereby discharged. 2. That the order to show cause why Three Mile Island Power Station, Unit No. 1, should be considered used and useful in the public service and why all of the costs associated with the unit should not be removed from the base rates of Metropolitan Edison Company and Pennsyl-vania Electric Company, which was adopted September 20, 1979, is hereby made absolute, consistent with this order. 3. That temporary base rates are hereby prescribed for Mecro-politan Edison Company and Pennsylvania Electric company, effective for service rendered on and after June 1,1980, at the level of rates prescribed herein, to remain in effect until December 1, 1980. 4. That Metropolitan Edison Company and Pennsylvania Electric Company are hereby directed to file appropriate tariffs or tariff supple-ments in ' compliance with this order prescribing. temporary rates. 5. That Metropolitan Edison. Company and' Pennsylvania Electric Company are hereby permitted to-accelerate the amortization of their deferred energy costs through a surcharge, effective for service rendered on and after June 1, 1980, consistent ~with this order. 6. That the petition for modification of the order entered June 19, 1979 which was filed by Metropolitan Edison Company on November 1, 1979, is hereby granted, consistent'with this order. '7. That Metropolitan Edison-Company and Pennsylvania Electric Company are hereby. permitted to file tariffs implementing energy cost - charges, effective for service rendered on and af ter June 1,1980, and levelized at-19.1-mills per KWH and 8.5 mills per KWH respectively, consistent'with.this order. f,

8. That Metropolitan Edison Company and Pennsylvania Electric Company may amend their tariffs to include in costs recoverable through their energy cost charges the costs of demand or reserve capacity charges associated with purchased power incurred from January 1, 1980 until Three Mile Island Power Station, Unit No. I returns to service or until further order of the Commission, consistent with this order. 9. That Metropolitan Edison Company shall forthwith reduce its deferred energy cost balance in the amount fina11y determined by the Commission at C.21597, in satisfaction of the refunds ordered by the Commission. 10. That the complaints of the parties consolidated at this docket are hereby sustained to the extent consistent with this order, and are hereby otherwise denied. 11. That the request to intervene filed by David D. Trout, filed on March 24, 1980, is hereby denied without prejudice to Mr. Trout to file a formal complaint. 12. That the complaint dockets C-79040831, C-79050907, C-79050909, C-79101682, C-79121754, and C-79121808 be marked closed. 13. That Metropolitan Edison Company and Pennsylvania. Electric t Company are hereby directed to propose, within 90 days after entry of this order, a plan for the implementation of a test program which will s measure the effects of conservation-inducing rates on customer kilowatt-hour consumption and on revenues, consistent with this order. 14. That Metropolitan Edison Company and Pennsylvania Electric Company are'hereby directed to file and comment upon, within 90 days after entry of this order, a proposed energy cost rate tariff to become effective January 1, 1981, consistent with this order. 15. That the exceptions of the parties are hereby granted to the extent consistent with this order and are hereby otherwise denied. 16. That Respondents are hereby directed to serve all parties with copies -of all tariffs filed in compliance with this order. 17. That a copy of this order shall be served on' all parties. BY T!IE COMMISSION, William P. Thierfelder Secretary (Seal) ORDER. ADOPTED: May 23, 1980 ORDER ENTERED: May 23, 1980 j

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sewaax. s zw ;smssy e71oz 5/13/80 RATES INTERIM ORDER IN THE MACER OF UE PE!! TION OF ) JERSEY CENTRAL PCb'ER AND LIGHT ) CCMPANY FCR APPROVAL OF El IN- ) BPU DOCKET NO. 804-285 CREASE IN RATES AND CHARCIS FCR ) ELECTRIC SERVICE. ) IN THE MAT ~ER CF THE PETITICN OF ) JERSEY CENTM L PCkT.R & LIGHT COM- ) PANY FOR APPROVAL OF THE TRAN3 FIR ) BPU DOCIET NO. 803-172 0F ITS DITEREST IN CERTAIN PROPERTY ) ACQUIRED Di CONNECTICN 'JITH THE ) CCNSTRUCTION OF UNIT NO. 7 0F THE ) i SE'JARD CINERATI:iG STATION. ) IN THE MATTER OF THE PETITION OF ) JERSEY CENTRAL Pok'ER & LIGHT COM- ) PriY: PETITION FOR AUTHORITY TO ) THIRD AMEND E T ISSUI, SILL AND REVII'J UP TO ) TO PETITICN $189,000,000 0F PROMISSCRY NOTES ) TO BE CUTSTANDDIC FOR MORE THri ) BPU DOCKET No. 795-508A ONE YEAR: TO DELIVER A SUPPLFMEN- ) TAL INDENTURE DATED AS OF JUNE 15, ) 1979; TO ISSUE THEREUNDER AND SELL ) OR PLEDGE UP TO S100.000,000 AGCRE- ) GATE PRDiCIPAL AMot NT CF THE FIRST ) MORTCACE BONDS DUE CN CR BEFORE ) JULY 1, 1986 ) i APPEARANCES ATTACHID 1 l l 1 t

r .w n:m I AP?!ARANCE i!ST Jack B. Kirsten, Esq. William Holzapfel Esq. Kirsten, Friedman & Cherin Holzapfel, Perkins and Kelly 17 Academy Street 108 North Union Avenue Newark, New Jersey 07102 Cranford, New Jersey 07016 Dolores Delabar. Esq. Bartholemew T. 2anelli, Esq. Kirsten, Friedman & Cherin Stryker, Tams and Dill 17 Academy Street 33 Washington Street Newark, New Jersey 07102 Newark, New Jersey 07102 Carla 7. Bello, Esq. Francis P. Piscal. Esq. Deputy Attorney General Berry, Su=merill, Piscal, Kagan Office of the Attorney General and Privatera j 1100 Raymond Boulevard 34 Washington Street i Newark, New Jersey 07102 Tems River, New Jersey 03753 l Louis McAfoos, Esq. Robert H. Stoloff, Esq. Regulatory Of ficer Deputy Attorney General Board of Public Utilities 1035 Parkway Avenue 1100 Raymond Soulevard Trenton, New Jersey 08625 I Newark, New Jersey 07102 Capt. Ernest C. Pearson, Esq. Alfred L. Nardelli, Esq. Regulatory Law Office Depart =ent of the Public Advocate U.S. Army Legal Service Agency 10 Coccerce Court 5611 Columbia Pike Newark, New Jersey 07102 Falls Church, Virginia 22041 Raymond Makul, Esq. John F. Briscoe, Esq. Depart =ent of the Public Advocate 231 Third Street 10 Coc=arca Cour: Lakewood, New Jersey 08701 Newark, New Jersey 07102 James B. Liberman, Esq. Manasha Tausner, Esq. Berlack, Israels & Liberscn Depart =ent of the Pubt Advocate 26 Broadway 10 Cocmerce Court New York, New York 10004 Newark, New Jersey 07102 Ira H. Jolles, Esq. William F. Hyland, Esq. Berlack, Israeb & Liber =an Riker, Danzig, Scherer & Hyland 26 Broadway, 744 Broad Street New York, New York 10004 Newark, New Jersey 07102 David A. Waters, Esq. Waters, McPherson, Hadzin & McNeill 32 Journal Square Jersey City, New Jersey 07306 ^ Nicholas Filocco, Esq. Waters, McPherson Hudzin & McNeill t 32 Journal Square Jersey City, New Jersey 07306 Robert O. Brokav, Esq. General Counsel Jersey Central Power & Light Company Madison Avenue at Punch Sovl Road Morristown, New Jersey 07960 l Dkt. Nos. 804-285, 303-172 and 795-508A 1-A

I i ) 1 i 1 w 3Y THE BOARD DOCKIT 30. 304-285 This Order addresses the Motion of Jersey Central Power & Light Company, filed April 29, 1980 for interim or emergent rate relief in the amount of $60 million dollara annually, pursuant to N.J.S. A. 48:2-21.1. i Petitioner also has pending its =ain race application to increase rates in the amount of $173.5 million dollars, which amount includes the interim requese pursuant to N.J.S.A. 48:2-21. The main race request proposed to be effective June 1, 1980 is hereby suspended pending further hearings and full investigstion. P O After required notice, because of the emergent nature of the Petitioner's request, the 3oard held immediate hearings which co=menced on Monday, May 5,1980, and continued on May 7, 9 and 12,1980. In addition thereto the Board held public hearings to permit mezbers of the public in the Petitioner's service territory to be heard. Four such public hearings were held in Hackettstown, Morristown, Freehold and Toms River on the evenings of May 6, 7 and 8,1980. At the evidentiary hearings, there was submitted by JCPiL the testimony of Dennis Baldassari, Treasurer of JCP&L, Fred D. Hafer, Vice-President-Race Case Management of GPU Service Corporation ("GPUSC"), Paul H. Preis, Controller of JC75L, Eugene F. Carter, Assistant Vice-President-Races, GPUSC, and numerous exhibits. There was also submitted by the Board's staf f the testimony of Anthony J. Zarillo, Executive Officer of the Board, and Dr. Fred Crygtel, Chief Economise of the Board. In addition, Mr. Edward Perrault presented a statement of objection in respect to the rate design issue on behalf of Air Products Company. Active participants in the current proceedings included the Board's Staf f, the Department of the Public Advocate, Division of Race Counsel, the New Jarsey Department of Energy, the County of Ocean, the U.S. Army, Office of Regulatery Law, on behalf of the U.S. Government executive agencies, the American Association of Water Companies (New Jersey Chapter}and Air Products Company. There was extensive cross-examination of substantially all the witnesses presented. The Board is properly authorized pursuar.t to N.J.9;A. 48:2-21, 48:2-21.1, to grant interim emergent relief after notice and hearing. In Re Revision of the Ra t e s k, Redi-Flo Corporation, 76 N.J. 21 (1978), In Re Scard's Investigation 5v Telee9ene Comoanies, 66 N.J. 476 (1975). i G i DOCKIT NOS. 804-285 l 803-172 795-508A

i l Lgdeed, since Mope and pursuant to the legal standards ve have enunciated,* this Scard is duty bound to provide necessary funds to a utility on an emergent basis, subject to refund in the event of a financial I and service crises. We have defined emergency in rscher stringent terms I, to protect the consumer. There has to be a showing that but for an f *==d'.co infusion of rate payer funds Petitioner would not be able to i l' continue to provide safe adequate and proper service or reasonably ac:ess the market for needed construction or expense. This may take the fon> of a coverage crisis, an inability to access the financial markets for needed i f construction and/or a cash-flow crisis. Mere attrition in earnings is not l suf ficient u-tess it i= pacts financing, construction, or service. It is l our inescapable conclusion, af ter review of this record, that JCPSL is in 43 emergent financial crisis impacting its ability to serve customers this day and in the scaths to come and that a rate increase of $60 million in base rates is absolutely necessacy for centinued service. Without such relief Petitioner and its customers will surely suffer irreparable harm unprecedented in electric utility regulatory experience. With respect to the current motion for interim relief, the Board has given substantial weight to Staff's testimony on the financial condi-tien of the Company. The Board fiads that: p 1. JC?5L will exhaust its short-debt limit under the RCA before the end of May. 2. Under current races, JCP5L does not have suffi-cient coverages to sell long-term debt. 3. CPU, in its present financial condition, cannot sell common equity at a reasonable price. 4. Under current races. JCP&L does not have sufficient coverages to sell preferred stock. 5. Overall, under existing rates, JCP&L will not be able to finance construction required to insure safe, adequate, and proper service. Based on these observations, we conclude tha:JCP5L is eligible for interim relief. Since the accident at Threa Mile *;.aua on March 23, 1979, the Board has conmitted significane ,ou. 4* to protecting the long-run interests of the ratepayers in JCP&L's service territory. Most recently, the Board has appealed directly to the Federal Energy Regulatory Commission for relief from the burdensome split-saving s formula utilized in the pricing of PJM interchange sales. This formula has resulted in the imposition of 30 to 40% markups on cost for purchased power. These costs are ultimately placed on JCP&L's ratepayers. 3 EE 1/ Hoce Natur11 Cas Co., 320 U.S. 591, 64 S.Ct. 231, 38 L.ed. 333 (1944). 2/ In the Matter of Jersev Central Powar and Light Co., Docket No. 743-134 (5/23/ 74); Elizabetntawn Water Comoanv, Docker No. 727-606 (9/1/72); Public service Electric and Gas Come.ny, Docket No.726-562 (3/31/72);. ~ and In the Matter of Public Service Electric and Cas Co mpanv. Docket No. 103-105 (10/29/70). DOCIIT NOS. 804-235 803-172 795-508A

.... ~. .c. In addition, the 3 card has drawn up an action agenda for soli-citing Federal assistance. Most i=portantly, it is the Board's position that the costs of TMI-2 should be spread over a much broader base than just New Jersey and Pennsylvania ratepayers. The Kemeny and Rogovin investigations clearly establish that the cause of the accident at TMI was not solely limited to operator error but, in fact, was in part related to the structure of nuclear regulation in general. The 3oard in Docket 795-427 (Phase I) directed JCP&L to seek out all possible purchase power agreements that would reduce the costs ultimately imposed on ratepayers. To date, the savings from these purchased power agreements have amounted to $26 million. Further, the Board is vigorously directing JCP5L to successfully negotiate a centract for low cost power from Ontario Hydro. The Board will personally intercede on behalf of JCP&L ratepayers in these negotiations. Finally, the Board is conducting two =ajor investigations related to the TMI accident. First, the Board has initiated its inquiry into the question of JCP&L's potential fault in the accident. It is our intention to fully explore the underlying causes of the accident and the role played by the respective companies. Second, the Board has co=missioned the y Strategic options Study which will determine what is the least cost option of supplying safe, adequate, and reliable service to JCP&L ratepayers. Since the accident, the Board has taken action on numerous petitions relating principally to adjustments in the LEAC and the financing requirements of the company. Our objective in each of these cases has been a simple ^ones minisize the cost to ratepayers and keep JCP&L viable. Under present.onditions, a!. natives to JCP&L would prove extremely costly and potentially disruptive ; t? liable service. It should be noted that of the seme $234 million gran9ed in rate relief since June,1979, only 34 are directly related to the T. '. accident. The remaining 2/3 of the increases are directly related to foret; {princ.ipally OPEC oil increases) which are outside the control of this Board, JCP&L, and race-payers. Unfortunately, all of us are subject to the whims of the powerful CPEC cartel. This Board will do all it can to break this dependence. The record in this and other proceedings has clearly indicated the serious financial condition of the Company. The. tremendous cas t require-ments imposed upon the Company by the need to purchase substantial replace-ment power occasioned by the outages of TMI-1. TMI-2 and Oyster Creek have placed the Company in'a precarious financial posi-ion. In our Order of April 1, 1980, in Docket No. 795-427, we noted that Jersey Central had limited access to funds with which to maintain safe, adequate and proper service as required by N.J.S. A. 48:2-23. Since that time, the Company's ability to obtain credit and access capital markets has further deteriorated. Most recently, the Banks involved in the Revolving Credit Agreement (RCA) have declined to. -ease the Company's $139,000,000 loan limit and have further refused .xtend credit beyond the $110,000,000 now outstanding unless the Compane agrees to pledge its accounts receivable as security for additional borrowings. Furthermore, the Company has also' requested the Board's approval t to realize approximately $5 million from the sale of its interest in the I 625MW Seward Generating Station now under construction. It is apparent that unless the 3 card approves these requests or provides some other form of relief, the Company say be unable to maintain the present level of safe, i adeqvate and proper service. i DOCKET NOS. 804-235 t 803-172 795-508A i

i .3 r w -- F- --- u .. ~ Level 2f !steris Relief In approaching the question of the appropriate level of interim, the Board has again used the objective of =inimizing the cost to recepavers and keeping JCPSL viable. It is our conviction that the cost to ratepayers 9 can be nin!zized by providing the Cocnany a vehicle to begin the process of reducing the costly short-term debt outstanding. Given current prime rates, these marginal rates are estimated to be in excess of 20 percent. Secondly, the Board is convinced that the coepany's ability to consu= mate the Ontario j Hydro purchase can be positively impacted and can ultimately reduce the cost to Jersey Central ratepayers. We also believe that any relief be suf ficient to guarantee continued reliable service. The Board has reviewed Staf f testi=eny and the Company's case. Based on the review, the Board is convinced that the public interest will be served by granting an increase in base rates of $60 million. We disagree with Staff on the issue of the $15 million attributable to acceleration of old deferred ee_etgy balances. We are convinced that by allowing the $15 million in terms at earnings available, the Board will =aximize the benefits to ratepayers from the increase. ist us now turn to the* specific evidence that led us to conclude that $60 million in additional base revenues is the appropriate level of interim relief. 1. We accept the Staff position on the relevant test year, i.e., F. arch 31, 1980. 2. We adopt, as a reasonable esti= ate, a 13.75 rate of return on equity. 3. We adopt the capital structure without short-term debt included, and the respective costs of capital shown en attachment 3. 4 We accept the Staff's rate base recommendation except that we recognize an additioogi $75,238,000 of construction work in progress. Therefore, for rate making purposes, we will use a not invest =ent rate base of $1,222,631,000 for the surposes of testing, on an interim base, the reasonablene a ef the lavel of, relief. 5. The resulting race of return (10.12 percent) applied to a net investment ra6e base of $1,222.631,000 yields an operating inecme of $123,730,000 less $94,935,000 of pro-forma operating income that results in a deficiency in operating income of $23,795,000 when multip led by the tax factor (2.1086) results in additional revenue requirements of $60,717,000 (say 360 million). Based on the above analysis, we are satisfied that an interim increase of $60 million in base revenues is required. i i l III. Docket No. 795-509A (Pledge of Accounts Receivable) n he Board has heard extensive ;estimony by the petitiener as well l as representatives of the agent bank: oa the necessity of JCP&L pledging its accounts receivable for the $60 uillion in draw-downs under the RCA. It is clear from that testimony that the Banks are very concerned with the h ongoing risk associated with the regulatory environment in New Jersey, 1 Pennsylvania, and the Nuclear Regulatory Commission in Washington. Given these uncertainities, the Banks argue chat the pledge is required to justify their increased exposure of $60 million. , OKI. 804-285 803-172

• oe no,

e soum. i It is our opinion that, at the time of the filing of the petition for pledging the accounts receivable, the Banks had a reasonab'/ sound argument for requesting such a pledge. However, based on the evidence developed in these hearings, the Board now believes that the =ajor concerns of the Backs = have been met. In particular, we note that the Banks identified the following factors as support for the request tu pledge the accounts receivable: 1. Deterioration,f JC75L's earnings as a result of the Board's da. cision to renove TMI-l from base races. The Board is convinced that' the decisica to renove TMI-l from base rates was justified and totally consistent with its sharing concept enunciated in Docket No. 795-427. The present interi rate relief granted above should totally remove the Banks' concern for JC?SL earning capacity and ultisately coverages. It is clear from our analysis that the interis order should allow JCP&L to sell long-term debt and thereby reduce the financing costs of the firm. 2. Extended outage of Oyster Creek. p It is clear that the Company is well along La receiving NRC approval for the necessary repairs of this unit. We have been advised that written approval is i==inent. Therefore, this cencern has been substantially renoved and may be totally re=oved in the near future. 3. Question of non-earning assets (i.e., TMI-1. TMI-2, and Forked liver). The Board cannot control the availability of TMI-l and TMI-2. However, the Board has actively interteded on behalf of Jersey Cantral racepayers with the NRC. Specifically, the Board has repeatedly pointed out to the NRC the financial burdens i=posee on Jersey Central ratepayers by the continued unavailability of IMI-1. The Board has urged the NRC, subject to all relevant safety and health precautions, to return TMI-l to service. The issue of Forked River will be addressed by the Board in the main case. Concesw with the regulatory environment in Penn ylvania. The Board takes note that the Pennsylvania Commission has recently awarded Met-ED/Penelee substantial revenue relief, in fact, in excess of what the companies requested. Further, the Pennsylvania Commission has also ruled that the Met-Ed franchise should not be revoked. Clearly, these are extre=ely positive developments in Pennsylvania. Overall, we believe that the foundation for the pledge of the accounts receivable has been substantially eroded. Therefore, we 3 are confid6nt that the need for the pledge no longer exists. , DKT, 804-235 I 803-172 795-508A

m w.- - : Ecwever, it is important to note well that the Soard continues to share everyone's concern for the expeditious return to service of the Oyster Creek unit. Adverse devalopments, remote as they say be, still require Board recognition. Therefore, if Oyster Creek suffers a substantial setback in its return date, the 3oard will review the merits of reinstating the raques" for the pledge of accounts receivable. In additien, the Board will expeditiously address the i= pact of such develop =ent on the Company's deferred energy balances and possible resolution vis-a-vis a LZAC proceeding. We, therefore, conclude that it is in the public interest to deny the petition for the pledge'of accounts receivable without prejudice. r7. Do ck et 803-172 (T:sasfer of Seward 7) The petitioner requested authorization to sell its interest in Seward 7 for some $5 nillion. The proceeds of the sale were to be used to shoes up an emergency de=and for cash. It is recognized by all parties that the foundation for the sale was the pressing need for cash. However, all parties also agree that were the cash position improved, the need to sell Seward 7 would be eliminated. Based on the testi=ony of Mr. Baldassari, we are convinced that the prospective $10 million reduction in the PJM interchange bill in and of itself is sufficient to abrogate the need for the sale. But, = ore i=portantly, the recoc= ended interim relief surely re-moves the necessity for selling this potentially economic coal-fired generating capacity. Therefore, the Board denies JCP&L's petition to sell its interest in Seward 7 without prejudice. Rate Design The petitioner initially proposed that all of the interim increase be allocated to general service custocers. Subsequently, petitioner witness Carter developed some alternative approaches to recover any interim increase. Af ter evaluating that testimony and considering fundamental equities, we have concluded that the inter 13 increase should be allocated in the following manner: Allocated Overall : Rate Crous Increase Increase Residential $ 7,369,568 1.89 Ceneral Service 50,934,530 11.03 Lightiag 1,005.702 13.53 l Total Retail $60,000,000 6.95 i The residential increase will be effectuated through a $1.00 per month in-crease in the customer charge. This will produce sone $7.6 million of i the $60 millica in interim relief. The remaining $$3 million will be l recovered f rom the General Service and Lighting customers. On balance, we feel assured that the relevant competing equities have been appropriately addressed. t The Board recognizes that the rata design we hereby adopt is l provisional in nature subject to modification in the main proceedings, = just as the amount of rate relief provided is previsional, and subject i to refund. In, ty, Sand Ra t e s, 66 N.J. 12. Considering the present record I and cognizant that the parties will address appropriate rate design factors in the nain proceedings, such as a detailed identification and allocation of appropriate costs to demand and energy, the 3oard concludes that its allocatien above, is reasonable on an interis basis. i Docket Nos. 804-235 803-172 i 795-508A

I l . e. o; *

• o.e s. -

Che latest cost of service study in the Jersey Central proceedings Docket so. 7610-1021 (Exhibir JC-202) supports this level of increase on a cost of service basis. We I gnize this allocation is provisional and sub-jact to possible modificatic trough up-dated cost of service and other relevant rate design testimony in the main proceedings. We ecphasize that the impact of the above approach is to increase residential bills by 1.9*. f The remainder of the provisional rate increase (approxi=ately i $52.4 million dollars) will be allocated to CS curcomers on a provisional across-the-board basis between energy and demand charges. Again, we recog-ni e that additional testi=ony will be required, e.g. comparing cost factors related to peak usage or demand and comparing unitized rates of return, before this rate design say be embodied in a final Order. The effect of this allocation will be to increase GS rates by approx 1=actly 113. We have therefore cushioned the impact of this increase to the residential custo=er to the extent that we believe is legally per=issible. To go further would fly in the face of N.J.S. A. 48:3-1 and 4 which prohibits undue preferences in rate making or discriminatica in rates between classes. We believe that the above rata design is within the substantial discragion that this Board is permitted to design rates since they are reasonably related to proper purposes such as consistency of trest =ent, cost of service and conservation. In re Essex Ccuntv Velfare ?oard. 126 N.J. Super 417). Special credits were found reasenable to Laduce all electric con-sumption. Rossi v. Carton, 88 N.J. Super 233. Special concessions to builders for all electric service were found not to be discri=1: story. Watkins v. Atlantic City Electric Comoany, 67 PCR 3rd 433. We do not read the post hearing zamorandum of the Public Advocate nor the precedents cited therein, including In re St. Paul Chamber of Cee eree, (251 Northwest Re-porter Second Series) 310 as legally requiring another position. Indeed, in that matter the P.innesota Supreme Court found an allecation rates placing a substantial portien of the increase on the coz=ercial and industrial customer to be reasonably related to proper rate-making censiderations, such as cost of service and the customar's ability to pay'. The details of the tariff design, are specified in Exhibit A attached hereto and =ade a part hereof, are substantially accurate subject to technical review by the parties. We recognize that our ragulation N.J. A.C. 14:1-6.16, provides for a review period af ter Board Order, before rates are implemented. But due to the compelling emergent nature of this matter, we waive the technical requirt=ents of our regulation. We stand ready, however, on motion to the Board or in the context of the main proceeding to revisa any details of Petitioner's tariffs which do not ecmport with th1J Order. It is therefore crystal clear to us that unless responsible action is taken by utility management, the financial con =runity, this Board and the appropriate federal agencies, chia utility cannot remain viable and provide service to its customers. If the financial coc= unity or specific creditors perceive that management is not acting responsibly, by not really perceiving the nature of the financial crisis at hand, insolvency may result. It is e in this context that we view management's recent step of awarding substantial raises to its officers 1.s most unfortunate. It is not only the amount of the funds involved, at a ti=e when regular employees a a being laid of f, that is at issue. Objective consequences and risks flow from management's action. The cash flow from lendars mad customers-- the life's blood of ene utility -- could be impaired by their perceptions of that action. . Dockat Bos. 304 235 803 172 795.508A i

l I l I I I h addi:1=n. de 3 card is proceedi=3 at the Federal level to ob:ain relief f:en :se onerous spli: savi:gs =e:tod at :he Tede:21 hergy gegulatory C..missics. Ac7 relief depends upon a s7=pathe:1: response l by the utilities,Public :::111:7 C.- issions, and ?4:e Cou=sels : hat con-j pe_se :he ?.*:1 Fever Crid. Any usfsunded percep:1:n taa: relief is no d c: gen:17 seeded =ust be quickly rectified. i l 3 der c:=al ci:::=sta:ces va vould have co-41fficul:7 vi c l the rationale das key sanage=en: should be rewarded and motivated. I!or would we attempt as a general :ule to h::ude ou:selves isto =a::ars which } have been usually considered =a= age =e::'s prerogative. 3c: =anagemen: actioas 12c.udi=g salaries art suhjec: to scru 1:7e / 'aT.ere sasage:e : 1 1 l actions impact en the ac:2ns of others which could bring this c =pany to its 'caes, this 3 card mus act pursuant to a ge:eral authori

s se-cure safe, adequate and proper serviceito New Jarsay residents.p-7e fi d this anage=es acti:n to be unreasonable and ::cclude u= der preses: cir::s9 ances tha: :s =erely disallow such 1 :: ease for rate making purposes' 3 vould be an 1:suf ficient re=edy. There is au:horit7 u= der circu= seances of financial jeopa:dy to p;chibi: dividends, service fees and de like where such ac:',2:s could deteriora:s utili:7 p;cper:7 or i= pair service to the public./" 7e vill therefore 01:ee and Crder tha: the reces: 1: creases to the officers of JC?E be resci ded f::::vi:h.

p 34 sed upon the ecord is these proceed 1=gs, a=d.he fi dhgs we have =ade herei=,.he 3oard CEE25 as follows: 1. Petiticus: is au:hori:ed on as i=ceris provisi:nal basis to 1 crease Sase 2:ss is del a=cu== of $60 illien dollars accordi:3 to the rata design we have specified hereh. 1. The tariff the cespany has submitted is compliance vi:h this Order is EERI27 ACLI? ID for service re:dared en and I af:e: :tay L5,1980, on an interis provi.sienal basis subject

o refu=d, subject :o :sview as to whace; i: fully o= ports withthisOrgeandsubjecttoevidenceproducedinthemain proceedings

/1 Cc :='mi-v itilities co--'ers:1:n v. Meero-oli:1= Oade Cout--* Ta er a:d Sever 3 card, 64 PG 3:1210, (1966), :Tev ?nfland Tel. 1:d Tai. Co. 7. PCC 338.A 2d 1.16(1975) / '* N.J.S.A. 48:2-23 f.. /3 S. 7 + v_ . v.a. .,.., v-13 7G 3rd 112. (1951). El r-ta Telechene Ca-cane v. ? :blie 7:111:1es Ce _ issi:n. 110 LZ. *d 39 (1953); citing Chio Cae :zi nieencrte cor-orseten v. ? :slic Otilities C -.is sion. 139 3.I. 6f0, (1934). 'I !"?5L shall give so: ice to 1:s cus:=ners, by advertisemen: in tavspapers

u

lished and circulated is its se:vice areas. :s the effect tha:.he 2:ard has authori ed JC?E to 1:ctsase 1:s ra:es en an is:eris basis as

.e:11: authorized. which so: ice shall contain a s -v of the sev rates 1.d that :ev rates shall beccue effec:ive for all service rendered :n and i af ter.a7 13,1980. v . OC. :CS. 304-235 303-172 oe_tr=1

g =.*..., *

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- v~---.......,,,;;:- r--- l - -. y.,_ -

O l 2 m -- a m. -. ~ 3. The Petition to sell the Seward 17 coal-fired facility is DISMISSED without prejudice. w 4. The petition for Board approval of a pledge of accounts receivable as security under RCA is D Q!tSSED without prejudice. i l 5. Petitioner shall not pay to CPU any dividends during the 4 remainder of 1980. 6. Petitioner shall advise this Beard 30 days in advance of any proposed dividends during 1991 so the Soard can evaluate the financial condition of petitioner. DATED: May 13. 1980 30ARD OF P'IBLIC UTII,ITIES (SLU.) 3Y: (SIGNED) l CICROZ I'. 3AR30UR P PRESIDENT o EDWARD H. HUIS CC20tISSICNER ATTEST: (SIGNED) GERALD A. CALABRESE SECRETARY f I 3 t I - 10 DKT. NOS. 804-235 S03-172 795-508A l

b r.v i:> r.u E l .f FUGEY CENTitAT, IUWER & I.f':lt? Cof-IN.'ff Y a AI,TERNATIVE HEllioD OF A1,InCATING litfEntti E ( It:CoranE nFmrrr or t60.mo,oen I (nEsinENTrai, tNcnrxE lu ConmtEn cuAncE oNi,Y/ Non-H m INCREASE ACDoGU IUAUI) ON DASE FEVENUm) y 3 e .Il = fronttAt.TZrD NoDifAT,1 ZED 'TUTAl, tonH(l) nAr.m(2) DAGE AI,I.oCATED flopflAI.ig ovmAt.I. U 0 LINE jlEVENbJfufI) 3 ITATE cir*Ic CtCT mVh INCDEASE REVFNff m INCHEASE 7

)

(if - ~~W)-~ TI) ( ) -(W EI' IWBTH5T s itesidantlnt E ' I Pro-Vil lith 137 2 860 573 ITh 650 hh5 $ 5 09 96 '5) $238 Ph3 8ho 2.30% E! 1 l 9 2 Une VII hl 157 h60 516 23 560 256 h80 063!5) 33 95% T0r 1til u II. 3' .Totn1 Elec. 79 199 1 3h2 932 59 352 529 90h Oh!(55I09 123 909 1.02 I4 f b Cnnt wil h2 271 403 100 1 9_2:0 Ito h % 695 5) 20 056 207 1 71 y 9 a 5 Totn1 nes. 636 767 5 003 201 277 h09 3ho $ 7 369 560 4390 170 023 1.89% e Canerni Service 6 secondary To 202 h 275100 190 209 230 $3h on6 211(6) $292 98h 099 11.61% 7 Prlmary 210 1 hio 3th h6 420 oTo 7 890 703(6) 16 099 630 10.27 o O Tran=mtsalon 80 1 032 964 _52 700 350 _y_029 616(6) 91 ott 799 9 92 9 Total CG 70 500 7 526 306 297 33T 650 $50 93h 530 $h60 895 536 11.05% Lir.hting I lo or, 00 004' 11 629 1 200 060 $ 106I3h(6) $ 1 555 843 12.631 11 G t, 861_ ,0l_)]o D 69 So? I h99 M 0(6) 10 705 971 1%.01 12 Total I.lchting 061 1 200, lo 061_562 $ 1 695 902 $ 12 261 034 13.031 13 Total Detall 700 200 12 700 566 59h 953 072 $60 000 000 $063 336193 6.95% f6 ten: (1) Per Exhibit JC-iM1, Schediale 2. Par.a 1 or 2. Col. T (5) Unsed on $1 Par month incrence in cunt. chisra (2) Per Exhibit JC-201, Schedule 2, rnga 1 of 2, Col. 6 (6) (t60.000,000 total inctease - $T,369,$t,8 (3). Per Exhibit 1C-201, Uchedule 2. Pnga 1 or 2, Col. 2 ren. Incr.) * $30T hoS 219 total non= cn * (h) l'er Exhib1L.fC-Pol, Uchedule 1, Col. h I.r,t. revenner) = 17.1209% iner. timan enl. ('e ) (8) Currtemantal service, therefore, not. include.I in customar enunt 1 y s

s 4 4 l, ...,m.,. 1 i ) ] .I3.5I a.i1*. ? 4.4. & *aT CC. += CCS 2 Ca2:T.r. EtALT. 5:5 ($CCC's) t a I 13.3.': 24 ::= c= Igr.i.7, No "..=::-Ta= :ah: A=ec= _ - Case la. I '::3-Ta= ah: $393,52* 49.43 5..*7 4.09 .:2: sin::ed'.5 :et... ' ~._S, Cc;;

• L 25. -

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13.25 4.3C Cas: 7:se Capt:a!

57. 31.5 2.93 9.9g.

P e I.3.*3 I4::= ::. Ige.i.7. 5':.=: -74= 24b: - *.ded e

• 32.* cf h.___

Case Ia-9 e3 a.,.. s..u, 2... ,,:-. g sa= se.. 5.n f...- u r. s ?:sfs= sd 3::s .:*.5,*C3 10.9T 9.1~ 1.00 0. . IF.1.:7 ' 534,5CS 24.9; 12.73 a.!* Sher -Ta = Oeh 59 *17 2.53 I.I. 0I. .33 C:s 7 me Ca7*-** - 32.3'3

• 33

,C*. e t 4 9 Ok:. Nos. 304-235, 302-L7 and 12. 795-508A I l t f,}}