ML19210C436

Forwards Financial Info in Response to NRC 790921 Request, Supplementing Response to Request 10-(C).Includes PA Public Util Commission Rate & Financing Orders,Descriptions of Pending Rate Relief Proceedings & Sec Form 8-K

ML19210C436
Person / Time
Site:	Three Mile Island
Issue date:	11/06/1979
From:	Hafer F GENERAL PUBLIC UTILITIES CORP.
To:	Vollmer R NRC - TMI-2 OPERATIONS/SUPPORT TASK FORCE
References
NUDOCS 7911140262
Download: ML19210C436 (100)

Text

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     >        eMme                                                                  100 Interp ce Parkway Parsippany, New Jersey 07054 201 263-6500 TELEX 136-482 Writer's Direct Dial Number (201) 263-6013 November 6, 1979 Mr. Richard H. Vollmer Director, Three Mile Island-2 Support Offlce of Nuclear Reactor Regulation U. S. Nuclear Regulatory Commission 7920 Norfolk Avenue Bethesda, Maryland 20014 RE:   NRC Docket No. 50-289 TMI-1 Restart Proceeding

Dear Mr. Vollmer:

In response to the requests for financial information enclosed with your letter dated September 21, 1979 to R. C. Arnold, enclosed are eight copies of a supplementary response to Request No. 10-(c) (copies of PA PUC and NJ BPU rate and finan-cing orders, descriptions of pending rate relief proceedings). The supplementary response transmits copies of the following:

1. PA PUC's Order entered November 1, 1979 in Docket No. I-79040308 requiring Met-Ed to "show cause why its certificate of public vonvenience should not be revoked".

2. Met-Ed's Petition for Modification of the PA PUC's Docket No. I-79040308 Order filed November 1, 1979 requesting an increase in Met-Ed's levelized energy cost adjustment charge.

3. Met-Ed's Petition for Declaratory Order in Docket No. I-79040308 filed October 10, 1979 requesting Commission approval of PJM's proposed pricing of GPU's TMI-related interchange purchases at

           " cost plus 10%" rather than on normal " split-savings" basis.

(Also includes follow-up letter dated October 18, 1979 trans-mitting additional information requested by PA PUC Staff.) Also enclosed is a copy of GPU's Form 8-K dated September 11, 1979 and filed on Oc cober 10, 1979 with the Securities S Exchange Commission. l326 048 GPU Servce Corporat,on is a subscary of General Puolc Utit.es Corporation Q( . T

l* A, Mr. Richard H. Vollmer Novenber 6, 1979 Page 2 In conclusion, please acknowledge receipt of eight copies of this letter and its enclosures by signing, dating and returning the enclosed copy of this letter. A stamped, self-addressed envelope is enclosed for that purpose. Vepy,truly yours,

                                            -O -<l 3 /
                                             'La%;

Fred D. Hafer Vice President Rate Case Management Enclosures cc: J. C. Peterson - No enclosure; to be distributed by NRC. H. Silver - No enclosure; to be distributed by NRC. 1326 049

I

  ,                                                        Person Responsible for Preparation:

F. D. Hafer, Vice President- Rate Case Management, GPU Service Corp. s Telephone: (201) 263-6013 Date: November 6, 1979 Page 1 of 2 GENERAL PUBLIC UTILITIES CORPORATION Metropolitan Edison Company, Pennsylvania Electric Company and Jersey Central Power & Light Company NRC Docket No. 50-289 Three Mile Island Unit No. 1 Restart Proceeding Supplementary response to NRC Staff's Financial Information Request No. 10-(c), dated 9/21/79:

           " Describe the nature and amount of each licensee's most recent rate relief action and the anticipated effect on revenues. In addition, indicate the nature, status, and amount of pending rate relief proceedings, if any. Use the attached form to provide this information.

Provide copies of the hearing examiner's report and recommendation and the interim and final rate orders and opinions, including all exhibits referred to therein. Provide copies of all other orders and directives issued by the PA PUC and NJ BPU related to financing the licensee's operations, including activities at TMI. Provide copies of the submitted, financially-related testimony and exhibits of the PUC Staff and company in the most recent rate relief acticn or pending rate relief request." This response supplements our previous responses to this request (dated October 15, 19 and 29, 1979) to transmit copies of the following:

1. PA PUC's Order entered November 1, 1979 in Docket No. I-79040308 requiring Met-Ed to "show cause why its certificate of public convenience should not be revoked".

2. Met-Ed's Petition for Modification of the PA PUC's Docket No. I-79040303 Order filed November 1,1979 requesting an increase in Met-Ed's levelized energy cost adjustment charge.

3. Met-Ed's Petition for Declaratory Order in Docket No. I-79040308 filed October 10, 1979 requesting Comnission approval of PJM's proposed pricing of GPU's TMI-related interchange purchases at " cost plus 10%", rather than on normal " split-savings" basis.

(Also includes follow-up letter dated October 18, 1979 trans-mitting additional information requested by PA PUC Staff.) The requested information relative to the filing for an increase in Met-Ed's levelized energy cost adjustment charge is as follows: b h

d Page 2 of 2 Test Year Utilized: Not Applicable Amount (000's): $55 Million, based on retail sales projected for the year 1980 (approximately 8,000 GWH) Percent Increase: 15.7% (retail revenues) Date Petition Filed: November 1, 1979 Date by Rhich Decision The PA PUC has been reported in the press Must be Issued: as stating that hearings in the TMI-1 "show cause" proceeding (see response dated October 15, 1979) will be held in November and December, 1979, and a decision rendered by December 31, 1979. It is anticipated that the clause increase filing will be consolidated with the TMI-l "show cause" proceeding, and there-fore be concluded by the end of the year as well. Rate of Return on Rate Not Applicable Base Requested: Rate of Return on Common Not Applicable Equity Requested: Amount of Rate Base Not Applicable Requested: Amount of Construction Not Applicable Work in Progress Requested for Inclusion in Rate Base: O y . _  ;

PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg, TA 17120 Public Meeting held Neverber 1,1979 Commissioners Present: W. Wilson Goode, Chairman

• Michael Johnson Pennsylvania Public Utility Commission Docket No.

v. I-79040308 Metropolitan Edison Company, Respondent ORDER TO SHOW CAUSE BY THE COMMISSION:

The Commission hereby takes official notice of the following matters:

1. The costs associated with Three Mile Island, Unit No. 2

("TMI-2") which are being incurred by Metropolitan Edison Company (" Met Ed") but which are not recoverabic through charges to ratepayers because of the Commission's order adopted June 15, 1979.

2. The recent, extensive short+ term borrowings of Met Ed 3

pursuant to a revolving credit agreement with several banks.

3. The statement of Me: Ed in the proceedings at this docket that it will require two to four years to return TMI-2 to service.

4. The finding of the P.esident's Commission on the Accident at Three Mile Island (" President's Commission") that:

                       "A. . ..

15. The cost of the accident, including this cleanup and a portion of the waste disposal, will 1326 052' be between $1 billion and $1.86 billion, if the plaat can be refurbished. If it cannot be refurbished, the total cost vill be significantly higher."

.. r ,

5. The status of Three Mile Island, Unit No. 1 ("TMI-1")

in that it is (a) out of service, (b) subject to orders of the Nuclear Regulatory Commission ("NRr") which have suspended the license to operate the plant and required a hearing process prior to a restart of the plant which will extend well into 1980 or beyond, and (c) subject to the order to show cause of this Commission why the plant should be considered used and useful in the public service.

6. The recent action of the NRC in imposing civil penalties against Met Ed as the licensee G2: TMI-2 for violations of the NRC's regulations in the operation of TMI-2.

7. The finding of the President's Commission that:

                    "E.  . . .

1. I. a number of important cases, General Public Utilities Corporation ("GPU"), Met Ed, and B&W failed to acquire enough information about safety problems, failed to analyze adequately what information they did acquire, or failed to act on that information. Thus, there was a serious lack of communication about several critical safety matters within and among the companies involved in the building and operation of the TMI-2 plant. .. ."

8. The finding of the President's Commission that:

                   "A.  . . .
  ,-                    14. The process of recovery, cleanup, and waste disposal (with respect to TMI-2] will be            1326 053 lengthy, costly, and presents its own health dangers.     ...

_9

, =;

9. The recommendation of the President's Commission that:

           "B.  . . .

1. To the extent that the industrial institutions we have examined are representative of the nuclear industry, the nuclear industry must dramatically change its attitudes toward safety and regulations. The Commission has recommended that the new regulatory agency prescribe strict standards. At the same time, the Commission recognizes that merely meeting the requirements of a government regulation does not guarantee safety. Therefore, the industry must also set and police its own standards of excellence to ensure the effective management and safe operation of nuclear power plants."

10. The recommendation of the President's Commission that:

           "B.  . . .

6. Utility rate-making agencies should recognize that implementation of new safety measures can be inhibited by delay or failure to include the costs of such measures in the utility rate base. The Commission, therefore, recommends that state rate-meking agencies give explicit attention to the safety implications of rate-making when they consider costs based on " safety-related" changes."

1326 054 . s

11. The recent 2-2 vote of the NRC on whether to revoke the license of Met Ed to operate TMI-2.

Recognition of the listed 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 interest to put at issue in these proceedings the continued viability of Met Ed as a public utility. No one -- either utility, investor or ratepayer -- should view this action as implying a determination by this Commission of the ability or desirability of Met Ed continuing to provide public utility service in Pennsylvania. Rather our action represents a conscious, unflinching effort to address the difficult issues before this Commission. Protection of the broader interest requires that we candidly address the financial, technical and legal problems now facing Met Ed. THEREFORE, the Commission hereby orders Metropolitan Edison Company to show cause why its certifi ate of public convenience should not be revoked. Arad TilEREFORE: IT IS FURTilER ORDERED:

1. That Metropolitan Edison Company shall answer this order to show cause _is provided in 1 Pa. Code 535.37 within twenty (20) days after the date of entry.

2. That interested persons may respond to this order to show cause within twenty (20) days after the date of entry.

026 055 ,. s.

3. That a copy of this order to show cause shall be served on respondent a i all parties of record at Docket No. I-79040308.

BY Tile CO:cilSSION,

                                                                  ~

A. l '/ {} j sc2,l-//luu " $.f. William P. Thierfflder Secretary

          '3EAL)

ORDER ADOPTED: Fovceber 1, 1970 ORDER ENTERED: [[f f)h h

s. 1326 056'

                                         - 5_

law orrtecs RYAN, RUSSELL & McCoNAGHY 530 PENN SQUAAE CENTE A SAMUEL B. RUS SELL P. O. B O X 6 9 9 rREDERICR L. REIOLE R CAOING, PA. f 9603 w.Eowin CODEN - JOHN s.MCCON AGMT CRic L.s. STR AMN CouMSEL ALAN MICMACL sCLTZER November 1, 1979 Mr. William P. Thierfelder, Secretary Pennsylvania Public Utility Commission P. O. Box-3265 Harrisburg, PA 17120 Re: Pennsylvania Public Utility Commission et al.

v. Metropolitan Edison Company and Pennsylvania Electric Company, Respondents Docket No. I-79040308

Dear Sir:

Enclosed herewith for filing are an original and three copies of the petition of Metropolitan Edison Company

                     .for a modification of the Order entered by the Commission an June 19, 1979 in the above proceeding.
                                                                    ~Very truly yours, RYAN, RUSSELL S McCONAGHY

j. ]h' N.s

                                                                      " (E& 2 o. un=

SBR:ph cc: Chairman W. Wilson Goode Commissioner Michael Johnson 1316 057

BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION Pennsylvania Public Utility Commission, : at al.  :

v.  : Docket No .

I-79040308 Metropolitan Edison Company and  :

Pennsylvania Electric Company,  : Respondents  : PETITION OF METROPOLITAN EDIs0N COMPANY FOR MODIFICATION OF COMMISSION ORDER ENTERED JUNE 19, 1979 Metropolitan Edison Company (" Met-Ed" or " Petitioner"), pursuant to 52 Pa. Code E3.291, hereby petitions the Commission for modification of the Order entered in the above proceeding on June 19, 1979, and in support thereof respectfully represents that:

1. Petitioner is Metropolitan Edison Company, 2800 Pottsville Pike, Reading, Pennsylvania.

2. By Order entered June 19, 1979 at I-79040308, the Commission permitted Met-Ed to put into effect a levelized energy cost adj us tment charge of 8.8 mills /KWH to recover 8 4 mills of energy costs and certain demand costs and .4 mills of the associated Pennslyvania gross receipts tax under its net energy adj us tmen t clause, for a period of 18 months commencing July 1, 1979.

3. On June 22, 1979, Met-Ed filed an Addendum to Rider B of its Tariff Electric Pa.P.U.C. No . 42 (a copy of Rider B, Energy Cost Adj us tme n t Clause,,and the Addendum thereto is included in the attached Appendix A) in compliance

                                                                    ~

1 0 ' E fL-

_ 2 with the above Order authorizing the 3.8 mills /KWH levelized net energy clause charge.

4. The Addendum to Rider B permits interim reviews of the operation of the levelized charge to be made if " requested by the company or directed by the Pa.P.U.C."

5. There is attached as part of Appendix Aa statement of the inf orma tion with respect to the operation of the levelized charge for the three-month period ended September 30, 1979, as required by iteme (a) through (c) of the third paragraph of that Addendum.

6. The unrecovered balanc e of energy costs which Me t-Ed has incurred and deferred for subsequent collection under the 8.8 mill levelized charge has increased rapifly since July 1, 1979 and is continuing to increase rapidly.

Unless the 8.8 mill charge prescribed by the above Order is modified to permit Met-Ed to recover currently from its customers a greater amount of the energy costs which it is incurring currently to serve those customers, Me t-Ed expects that by mid-1980 the unrecovered balance of such costs will exceed its capability to borrow funds to finance such costs, as shown by Figure 1 and Table 1 contained in the attached Appendix B.

7. Included among the assumptions upor. which the aforesaid 8.8 mills levelized charge pr es c rib ed by the above Order was predicated were the following:

   ,.                 (a) Met-Ed (and the other TMI owners) would~

• be able to find al t e r n a t iv e s to normal purchases. of

                                                               . },}2h .059

_3 interchange from the Pennsylvania-New Jersey-Maryland Interconnection ("PJM") on a split-savings basis to reduce, by about 25%, Met-Ed's then estimated share ($10 million per month for the April 1 - December 31, 1979 period) of the cost of replacing the energy from the Three Mile Island nuclear generating station ("TMI"); (b) Three Mile Island Unit No . 1 ("TMI-1") would resume power operation on January 1, 1980; and (c) For a period.of six months (July 1, 1979 until January 1, 1980), as an incentive to enter into such alternate purchase arrangements for TMI replace-ment energy, Met-Ed would be permitted to include as part of the recoverable costs under its levelized adj us tmen t charge the demand or reserve capacity charges associated with such purchases.

8. Me t-Ed and its affiliates have aggressively pursued alternative sources of purchased power and have effected substantial alt anative power purchases both before and since the aforesaid Order entered June 19, 1979.

9 The petition for a declaratory order, which was filed by Met-Ed and its affiliate, Pennsylvania Electric

   ~

1326 060

e

                                            -4   -

Company ("Penelec"), with your Commission on October 10, 1979 in the above proceeding, sets forth in detail various efforts made by them and their New Jersey affiliate, Jersey Central Power and Light Company (" Jersey Central"), to achieve net energy cost savings by means of purchase power dgreements and to minimize the net Cost of energy purchased from PJM. That petition is incorporated herein by reference, pursuant to 1 Pa. Code E33 3. .

10. A detailed statement of the efforts made by Met-Ed and its affiliates to obtain authorization to return TMI-1 to power operation at th e earliest date consistent with public health and safety is set forth in the answer to the Commissions's Order to Show Cause entered in the above proceeding on September 21, 1979 filed by Met-Ed and Penelee with your Commission on October 11, 1979. That answer is incorporated herein by reference, pursuant to 1 Pa. Code 233.3.

11. In view of the fact that TM.1 - 1 will not resume power operation by January 1, 1980, despite the many efforts by Met-Ed to obtain authorization for such operation, and in view of fuel and energy cos t increases that have occurred since the Commission's determination of the 8.8 mill level charge in I-79040308, such charge 1326 061

has not been and will not be suf ficien t to recover the energy costs Met-Ed is incurring to serve its customers. (Summaries of Met-Ed's actual and proj ec ted fuel and energy costs are attached as Figures 3, 4 and 5, and Tables 3, 4 and 5 of Appendix B) .

12. Met-Ed is therefore petitioning the Commission to increase th e 8.8 mill level charge, but by only the minimum amount necessary to keep Met-Ed's short-term debt within manageable limits, as shown by Figure 2 of Appendix B.

The requested increase is 6.9 mills (6.854 mills, when calculated to the nearest thousandth of a mill, pursuant to Met-Ed's Tariff), to become effective with bills rendered on and after January 1, 1980.

13. This increase, if granted, would increase Me t- Ed 's overall charges to retail customers by 15.7%,

and increase charges to the typical residential customer using 500 Kwh per month by 12.5%, as shown by Tables 10 and 9 of Appendix B, respectively. With the 6 9 mill increase, Me t-Ed 's charges to this same residential customer would still be below those experienced by a substantial number of other Pennsylvania utility customers, as shown by Figure 6 of Appendix B. The increase would provide Met-Ed with approximately $55 million of additional retail revenue, of which $52 million would be for energy costs and $3 million for additional revenue taxes. 1326 062L.

                                 -6   -

14. The 6 9 mill requested increase is reasonable based on the level of energy costs experienced by Met-Ed since July 1, 1979. Met-Ed's energy costs are expected to continue at this level well into 1980 due to the unavaila-bility of TMI-1, as shown by Table 3 of Appendix B. If Met-Ed's request we e based on its July through September 1979 energy cost experience, an increase of 8.2 mills would be indicated, as shown by Table 6 of Appendix B- Alterna-tively, a surcharge to recover Met-Ed's balance of energy costs proj ected to be unrecovered as of January 1, 1980, the proposed effective date of the clause increase, would require an increase in the 8.8 mill factor of 7.7 mills, as shown by Table 7 of Appendix B. A " full cost recovery" increase, essentially replicating the Commission's I-79040308 determination of the 8.8 mill level charge, would be 10.4 mills, as shown by Table 8 of Appendix B.

WHEREFORE, Pe titioner Me tropolitan Edison Company, prays that the Commission modify the aforesaid Order entered in the above proceeding on June 19, 1979 so as to aathorize a levelized net energy cost adj us tmen t charge increase of at least 6 9 mills /KWH, effective January 1, 1980 or at th e earliest possible date, and extending the tire within which Pe titione r will be permitted to include (as part of the recoverable costs under its net energy clause) the demand or reserve capacity costs associated with alternative sources of purchased power.1 .326 063 METROPOLITAN EDISON COMPANY I By he*%

                                           /. J . Smith
                                         /Senio r  Vice President

Commonwealth of Pennsylvania County of Berks F. J. Smith, being duly sworn according to law, deposes and says that he is a Senior Vice President of Metropolitan Edison Company; that he is authorized to and does make this affidavit on its behalf; and that the facts set forth in the foregoing petition are true and correct to the best of his knowledge, information and belief. a.u-F J. SMITil Sworn to and subscribed before me this ist day of Nov emb e r , 1979 AnL No tary Public RITA M. POWERS Notary Public. MuhfenNrg Twp., Berks Co. My Commissiort Expires September 30, / f i1 1326 064

CERTIFICATE OF SERVICE I hereby certify that I'have this day served the foregoing document upon all parties of record in this pro-ceeding in accordance with the requirements of 1 Pa. Code 533.32 (relating to service by a participant). Dated this 1st day of November, 1979.

                              ,#Ryan,' nussell & McConaghy Attorneys for Metropolitan Edison Company
                                                            +

9 s 5 1326 065'

APPENDIX A , HETROPOLITAN EDISON COMPANY Petition for Increase in Levelized Energy Cost Adjustment Charge Rider B, Energy Cost Adjustment Clause, and Addendum to Rider B. Statement of Energy Clause Revenues, Expenses and Deferrals for the 3 Months Ended September 30, 1979 e 9 e G 1326~066

Electric Pa. P.U.C. No. 42 (Supp. 4) METROPOLITAN EDISON COMPANY First Revised Page 89 Superseding Original Page 89 RIDER 3 ENERGY COST ADJJSTMENT CLAUSE An energy clause shall be applied to each kilowatthour supplied under this tariff. This energy clause factor determined to the nearest one-thousandth of 1 mill per kilowatthour in accordance with the for=ula set forth below, shall be applied to all kilowatthours billed during the billing month: A= -

                                            -Ecx[f      T Where A = Adjustment factor in mills per kilowatthour to be applied to each kilowatthour supplied under this tarif f.

F = The energy-related cost of net energy generated in the Company's fossil and nuclear generating stations, excluding the cost of energy generated and sold to other utilities on a finn basis, plus the Company's energy-related cost of energy purchased and net energy interchanged in the current (c) and base (b) periods, defined as follows: Fossil Generation - the costs charged to fuel Accounts 501 and 547 which are computed on the basis of the cost of fuel delivered to the generating site at which it is consumed, plus the cost of disposing of solid waste from sulfur oxide removal devices. Nuclear Generation - the costs charged to fuel Accounts 518 and 521 which are computed on the basis of the cost of such fuel delivered at the generating site at which it is to be consumed after deducting therefrom the present . salvage or reuse value of such fuel. Net Energy Purchases - the amounts charged or credited to Account 555, excluding demand charges. Net Energy Interchanged - the amounts charged or credited to Account 555, excluding charges or credits for reserve capacity transactions. Ec = A factor expressed in mills per kwh to adjust for any over and under collection of energy cost that resulted from the operation of this clause in the prior six months, ending with the second month preceding the billing month. j326 067 Issued October 17, 1978 Ef fective September 18, 1978

Electric Pa. P.U.C. No. 42 (Supp. 9) Second Revised Page 90 Superseding METROPOLITAN EDISON COMPANY First Revised Page 90 The Ec factor, expressed in mills per kwh, shall be determined by dividing (a) the revenues (excluding revenues for gross receipt taxes) produced by the energy clause less the related energy costs recoverable by the clause, both determined as of the end of the second conth preceding the billing c:onth, by (b) the six month retail sales. S = The Company's total kiTn sales to Customers, excluding firm (C) sales to other utilities and energy produced from facilities undergoing operational tests prior to being placed into com-cercial operation, in the current (c) and base (b) periods. Fb g = Base energy cost of 8.000 mills per kilowatthour I = The Pennsylvania gross receipts tax rate in effect during the bil!.ing conth, expressed in decimal form. The "Fe" and "Sc" factors shall be decemAned as the six month totals for the period ending with the s.!cond/ month preceding the billing month. This clause shall be applied to all hilowatthours supplied and such charge shall be an additien to any minimuz:.a applicable. At least ten days prior to the beginning of each billing month, the Company will file with the Pennsylvania Public Utility Ccesission in ;uch form as the Commission shall have prescribed, (a) a copy of the cceputation of the energy clause to be applied during such month, and (b) stich other information per-taining thereto as the Commissior. may require. The application of this clause shall be subject to continuous review and to audit by the Cc= mission at such intervals as the Commiasion shall determine. The Commission shall continuously review the reasonableness and lawfulness of the a=ounts of the surcharges produced by the energy cost adjust: eat clause and the charges included therein. If from such audit it shall be determined, by final order eatered after notice and hearing, that this clause has been erroneously or improperly utiliced, the Company will rectify such error or hpropriety, and in accordance with the terms of this order apply credits against future energy clauses for such revenues as shall have been erroneously or improperly collected. The Cocaission's order shall be subject to the right of appeal. 1326 068 (C) Change Issued August 16., 1979 Effective September 15, 1979

Electric Pa. P.U.C. No. 42 (Supp. 8) METROPOLITAN EDISON COMPANY Original Page 90.1 ADDENDUM TE _tIDER B (C) In lieu of the adjustment factor otherwise chargeable via the operation of this Rider B during the eighteen month period commencing July 1, 1979 and ending December 31, 1980, a icvelized adjustment factor of 8.8 mills per kilowatt-hour shall be applied during such period to each kilowatthour supplied under this tariff, on account of costs (as hereinaf ter identified) incurred by the Company and not recovered through its base rates. Such costs shall consist of (a) the unrecovered balance at June 30, 1979 of energy costs incurred and deferred by the Company for collection via the operation of this Rider 3, (b) the energy costs incurred and deferred during such eighteen tionth period for recovery via the operation of this Rider B, (c) the dc=and or capacity costs incurred by the Company during the period of July 1, 1979 through January 1, 1980 in connection with purchased power agreements entered into by it to provide energy needed to serve the Company's customers during the continuing outage of Units 1 and 2 (or of Unit 2 alone) of the Three Mile Island nuclear generating station and (d) applicable gross receipts taxes. All such costs (exclusive of gross receipts tax) shall be reflected in the appropriate deferred debit (or credit) account of the Company. Unless otherwise directed by the Pa.P.U.C., this Addendum to this Rider B shall cease and determine effective December 31, 1980, and this Rider B shall resume operation effective January 1,1981 in accordance with its terms, subject, however, to such modification as may be directed by the Pa.P.U.C. as i result of any hereinafter mentioned accounting. On or before February 1,1981 (and on or before the first day of the second m .th following a shorter accounting period, if an earlier accounting is requested by the company or directed by the Pa. P.U.C.), the Company shall file with the Pa.P.U.C. , in such form as the latter may prescribe, a statement showing as of December 31, 1980 (or as of the end of such other accounting period) (a) the respective amounts and the aggregate total of the aforesaid costs incurred as of the end of such accounting period, (b) the revenues derived as a result of the aforesaid levelized adjustment factor during such accounting period, (c) the balance of such deferred debit (or credit) account as of the end of such accounting period (less the portion of such costs to be collected via the normal operation of this . Rider B subsequent to December 31,1980), (d) the efforts made by the Company during such period to achieve net savings by means of purchased power agreements and (e) such other information as to the Company's ef forts to minimize the net cost of obtaining the energy needed to serve its customers during such period as the Pa.P.U.C. may require. After notice and hearing, if the Pa.P.U.C. shall determine that the Company has utilized diligence and reasonable efforts to minimize the net cost of obtaining such energy during such period, the Company shall, be permitted to recover from (or credit to) its customers, such undercollection (or overcollection) of the costs, including said demand or capacity ccsts, incurred and deferred as aforesaid and not recovered (or overrecovered) during the above eighteen month period (or other applicable accounting. period) via the levelized adjustment factor, as are found to be reasonable. 069 (C) Change Issued June 22, 1979 Effective with bills

                                                                 . rendered during the billing month of July 1979.

4 METROPOLITAN EDISON COMPANY Statekent of Ratail Energy Clause Revenues, Expenses and Deferrals (I) 3 Months Ended Seetember 30. 1979 3 Months September Julv AuRust Seoteeber 1979 Sales and Revenues Fannsylvania Retail Sales (Gvh) 582 613 625 1820 Level Energy Cost Adjustment Charge (mills /Kwh) 8.8 8.8 8.8 8.8 j/ Clause Revenues Before Billing Adjustments ($ millions) $ 5.1 354 $ 5.5 $16.0 silling Adjustments (0 0) 0.0 s.O (0.0) Clause Revenues as Adjusted $5.1 $5.4 $5.5 $16.0 (Less): Pa. Gross Raceipts Tax 0 4.51 (0.2) (0.2) (0 3) J0.7) Ratail Clause Ravenues for Energy Costs $ 4.9 $ 5.2 S 5.2 $15.3 Erpenses Total System Energy costs ($ millions)(2) $15.5 $16.6 $14 7 $46.8 Total System Sales (Gwh) 619 654 662 1935 Energy Costs per Kwh Sold (mills) 25.1 25.4 22.2 24.2 (Less): Energy Costs per Kwh Included in Retail Base Rates (8.0) (8.0) (8.0) (8.0) Energy costs per Kuh above Esse 17.1 17.4 14.2 16 2 Energy Costs (above Level Recovered by Base Rates) Applicable to Retail Sales (Costs per Kwh Times Retail Sales) ft0.0 $10.7 $ 8.8 $29.5 Deferrs1s Balance of Retail Energy Costs Deferred at Beginning of Month ($ millions) $28 1 $33.2 $18.7 $28.1 Flus: Current Month's Deferra1(3) 10.0 10.7 8.8 29.5 (Iass): Current Month's Retail Clause Revenues for Energy Costs (4.9) (5.2) (5.2) (15.3) Balance of Retail Energy Costa Deferred at End of Month $33.2 $38.7 $42.3 $42 3 (1) as reported monthly to the Commission (2) includes demand component of cost of TMI-related short-term power purchases ($5.5 million for 3 months ended September 30, 1979). (3) includes demand component of cost of TMI-related short-term power purchases ($5 2 million for 3 months ended September 30, 1979). e

e APPENDIX B METROPOLITAN EDISON COMPANY , Petition for Increase in Levelized Energy Cost Adj ustment Charge Supporting Material: FIGURE 1 - Proj ected Short-Ters Debt Balances, No Revision in 8.8 Mill Level Charge TABLE 1 - Data for Figure 1 FIGURE 2 - Proj ected Short-Term Debt Balances, 8.8 Mill Level Charge Increased by 6.9 Mills Effective 1/1/80 TABLE 2 - Data for Figure 2 TABLE 3 - S;Jtem Energy Costs and Sales, July 1979 - December 1980 FIGURE 3 - Actual and Proj ected Cost of Coal, 1970-1980 TABLE 4 - Data for Figure 3 FIGURE 4 Actual and Proj ected Cost of oil, 1970-1980 TABLE 5 - Data for Figurc 4 FIGURE 5 - Average Annual PJM Running Rate, 1970-1979 TABLE 6 - Indicated Increase in Level Charge Based on Energy Costs Experienced in July, August and September, 1979 TABLE 7 - Increase in Level Charge That would be Required to Recover during 1980 the Energy Costs Proj ected to be Unrecovered as of December 31, 1979 TABLE 8 -

                                " Full Cost Recovery" Increase in Level Charge TABLE 9    - Residential Rate Comparison, Current Level Charge vs. Proposed Increase FIGURE 6 - Residential Rate Comparisons , Met-Ed (Including Clause Increase) vs. Other Pennsylvania Utilities TABLE 10 - Overall Incrc.ase to All Retail Customers 1326 071 .

METROPOLITAN EDISON CO!FANY Projected Short-Term Debt Balances, No Revision in 8.8 Mill Level Char m i I I I I I I I I I I I I i 160 - _ Total Short- _ Debt Limit Term Debt 140 - Under Revolving -

      ,                 Credit Agreement e        _                                                                                 ,                         _

o ........................ .......................... g120 - w 2: ._.................... ............................ ._ 4f>  % i 100 - Margin of Safety M y _ ($15 Million) O e _ a El g 80 - O H - Deferred - I u

                                                                          - Energy Costs t so
     .c
                                        ~

40 - 20 - All

                                                                                                                          ~

U y _ other _ O' o i I I I I I I I I I I I I o 0 N D J F M A N J J A S 0 N D N N 1979 1980 O

METROPOLITAN EDISON COMPANY Projected Short-Term Debt Balances, 8.8 Hill Level Charge Increased by 6.9 Mills (Total Charge of 15.7 Mills) l I I I I I I I I I I I I i 160 - - Debt Limit 140 - Under Revolving - g Credit Agreement o - _

      ~120    -                                                                                                                              -
      =                                                                     .

m -................... ....... .................. - 8 Margin of Safety y u

      .o 100  -

($15 Million) #7 -- o g _ Total Short- _ Term Debt m e l 80 - - " 3 - _ u

      .E 60 -                        3                                                                                                      -

e

                                       ,g                                                 Deferred                                           -

Energy Costs 40 - 3m u- - D r w 20 -

   -                                     U                                                                               %       All M         -

Y Other - N 0 I I I I I I I I I I I I Cb O N D J F M A N J J A S 0 N D m 1979 1980

TABLE 1 METROPOLITAN EDISON COMPANY Projected Short-Term Debt Balances, No Revision in 8.8 Mill Level Charge ($ Millions) Requirements Total Other Than Deferred Projected Deferred Energy Short-Tern Energy Costs Costs (1) Debt Oct. 1979 $28.8 $ 62.4 $ 91.2 Nov. 30.4 66.3 96.7 Dec. 12.4 71.5 83.9 Jan. 1980 $ 7.8 $ 81.4 $ 89.2 Feb. 4.6 88.8 93.4 Mar. 9.0 94.2 103.2 Apr. 22.5 99.1 121.6 May 20.7 105.1 125.8(2) June 27.9 108.9 136.8 " July 23.8 112.9 136.7 " Aug. 20.8 119.7 140.5 " Sept. 31.3 116.8 148.1 " Oct. 25.8 115.6 141.4 " Nov. 30.9 112.5 143.4 " Dec. 18.3 112.2 130.5 " (1) includes unamortized "old clause" balance recoverable by base rates. (2) exceeds $125 million limit under revolving credit agreement. b26074

METROPOLITAN EDISON COMPANY Projected Short-Term Debt Balances _8.8 Mill Level Charge Increased by 6.9 Mills (Total Charge of 15.7 Mills), Effective 1/1/80 ($ Millions) Requirements Deferred Energy Costs

• Total Other Than No Revision Reduction Balance Projected Deferred Energy in 8.8 Mill Due to 6.9 Reflecting Short-Term Costs Level Charge Mill Increase 6.9 Mill increase Debt Oct. 1979 $28.8 $ 62.4 $

                                                                                       $62.4              $ 91.2 Nov.                      30.4                  66.3                    -

66.3 96.7 Dec. 12.4 71.5 - 71.5 83.9 Jan. 1980 $ 7.8 $ 81,4 $ (4.8) $76.6 $ 84.4 Feb. 4.6 88.8 (9.6) 79.2 83.8 Mar. 9.0 94.2 (14.3) 79.9 88.9 g Apr. 22.5 99.1 (18.7) 80.4 102.9 g; May 20.7 105.1 (22.8) 82.3 103.0 p; June 27.9 108.9 (26.8) 82.1 110.0 g July 23.8 112.9 (30.8) 82.1 105.9 Aug. 20.8 119.7 (35.0) 84.7 105.5 Sept. 31.3 116.8 (39.3) 77.5 108.8 Oct. 25.8 115.6 (43.4) 72.2 98.0 Nov. 30.9 112.5 (47.6) 64.9 95.8 Dec. 18.3 112.2 (52.1)' 60.1 78.4 i

• includes unamortized "old clause" balance recoverable by base rates.

FNJ . C3s - CD N LD

TABLE 3 METROPOLITAN EDISON C0:1PANY . System Enerav Costs and Sales, July 1979 - December 1980 Energy Total Retail Sales Costs Sales  % of ($ millions) (Gwh) mills /Kwh Gwh Total Sales July 1979 (actual)

                                  $ 15.5            619        25.1         582        94.0%

Aug. 16 6 654 25.4 613 93. 7 Sept. 14.7 662 22.2 625 94.4 Oct. (forecast) 17.0 642 26.5 607 94.5 Nov. 15.6 664 23.5 625 94.1 Dec. 17.3 712 25.0 666 93.5 6 Months Dec.1979 $ 97.2 3 953 24.6 3 718 94 1% Average Month $ 16.2 659 24.6 620 94.1% Jan.1980 (forecast) $ 24.0 785 30.6 733 93.4% Feb. 21.4 789 27.1 738 93.5 Mar. 18.2 738 24.7 717 97.2 Apr. 16.7 633 24.5 666 97.5 May 17.0 635 26.8 621 97.8 June 14.7 633 23.2 618 97 6 July 14 9 629 23.7 614 97.6 Aug. 18.3 662 27.6 646 97.6 . Sept. 8.5 670 12.7 655 97.8 Oct. 9.8 645 15.2 631 97.8 Nov. 8.3 666 12.5 648 97.3 Dec. " 11.8 709 16.6 685 96.6 12 Months Dec.1980 $183.6 8 244 22.3 7 972 96.7% Average Month $ 15.3 687 22 3 664 96 7% 18 Months Dec. 1980 $280.8 12 197 23.0 11 690 95.8% Average Month $ 15.6 678 23.0 , 649 95.8% Assumptions TMI-1 returns to service 9/1/80.

              "Co s t plus 10%" pricing of GPU's TMI-related purchases from PJM ef fective 11/1/79.

Other economic TMI-related purchases (Ontario, Jamestown, APS) continue for forecast period. Demand con:ponent of cost of T:!I-related purchases included for full forecast period. 15% oil price escalation, Dec.1980 over Dec. 1979. 1326'076-

METROPOLITAN EDISON COMPANY Actual and Forecast Cost of Coal, 1970-1980 50 g i  ; i l l l  : l l 45 - - 40 - -

                                                                                $34/ Ton (1979)     k
                                                                                        .,_4 35
                                                                                                 '/i-
                                               ,'                                             $36/ Ton 30   -

(1980) -- 8 "' e t c. 25 - g - m "

   $4 a     20  -

o a 15 - 10 - Actual - Forecast 5 - o I I I I I I I I I I I -

 ]         1970     1971  1972   1973     1974      1975       1976  1977  1978        1979       1980 N

O' CD . N N

7_. TABLE 4 METROPOLITAN EDISON COMPANY Actual and Projected Cost of Coal, 1970 - 1980 Tons Purchased Cost Year (000's) (S millions) S/ ton 1970 2 454 S25.6 S10.44 1971 2 108 24.0 11.40 1972 2 271 28.4 12.50 1973 2 356 32.6 13.86 1974 2 341 61.1 26.09 1975 2 000 60.4 30.22 1976 2 046 57.0 27.88 1977 2 212 63.1 28.51 1978 1 884 63.0 33.43 1979 Jan. 130 $ 4.3 $32.96 Feb. 81 2.8 34.49 Mar. 197 6.9 35.30 Apr. 189 6.3 33.50 May 147 5.1 - 34.76 June 138 4.5 32.84 July 168 6.0 35.56 Aug. 159 5.4 33.91 Sept. 138 4.9 35.32 Oct. (forecast) 130 4.5 34.33 Nov. 133 4.6 34.34 Dec. 197 6.8 34.68 Year 1 807 $62.1 $34.37 1980 Jan. (forecast) 205 $ 7.1 $34.84 Feb. 182 6.4 35.08 Mar. 200 7.1 35.35 Apr. 180 6.4 35.57 May 172 6.1 35.72 June 199 7.2 36.13 July 207 7.5 36.40 Aug. 192 7.1 36.81 Sept. 168 6.2 36.96 Oct. 164 6.1 36.97 Nov. 199 7.4 37.43 Dec. 204 7.7 37.68 Year 2 272 $82.3 $36.24 1326 078

METROPOLITAN EDISON COMPANY Actual and Projected Cost of oil, 1970-1980 45 g g  ; g i g i i i i i 40 _ 35 - 30 - 2 ' U m a 25 - Projected for Year 1979 /_ Based on 9 Months Actual h g

o. ($ 24. 65 /bb1) @p#/ [d M 3

g 20 - j ~ July Budget Y Revision A

     ;         15 -

_($26.65/bb1) 10 - - Actual 5 _

                                                            - - ~ ~ ~ Forecc.st                                  -

p i l i I I I I I I I I y 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 m O N-4

TABLE 5 METROPOLITAN EDISON COMPANY Actual and Projected Cost of oil, 1970 - 1980 Barrels Purchased Cost Year (000's) (S millions) S/ bbl 1970 323 $ 1.4 $ 4.41 1971 961 4.9 5.06 1972 1 332 6.8 5.09 1973 1 341 8.7 6.52 1974 1 457 19.0 13.01 1975 636 8.5 13.37 1976 403 5.8 14.34 1977 683 11.0 16.04 1978 668 10.9 16.26 1979 Jan. 57 $ 1.0 $17.94 Feb. 48 0.9 18.87 Mar. 28 0.5 19.80 Apr. 20 0.4 20.32 May 24 0.5 21.91 June 16 0.4 23.49 July 53 1.4 25.92 Aug. 37 1.0 26.13 Sept. 19 0.5 27 88 Oct. (forecast) 40 1.0 24.12 Nov. 41 1.0 24.52 Dec. 55 1.4 25.46 Year 438 $10.0 $22.82 1980 Jan. (forecast) 39 $ 1.0 $25.56 Feb. 31 0.8 er.33 Fur. 29 0.7 25.21 Apr. 30 0.8 25.65 May 27 0.7 25.72 June 29 0.8 26.37 July ~ 30 0.8 26.57 Aug. 30 0.8 26.84 Sept. 27 0.7 27.06 Oc t . 30 0.8 27.55 Nov. 28 0.8 27.94 Dec. 42 1.2 29.26 Year 372 $ 9.9 $26.65 1326 080

t METROPOLITAN EDISON COMPANY , Average Annual PJM Running Rate, 1970-1979 50 j l l l l l l l l l 45 - - 40 - 35 L . 31.7 - (Est.)  % o - m a 30 - 5 E e u m

8. 2 5 - -

                                                                                                      =

4 -

             @20    -

u. 15 - -

N ON o 10 - - co 7_ - g _ _ O I I I I I I I I I I i 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 . Mills per KWil--)- 7.8 9.3 8.5 10.5 24.5 20.0 19.8 24.6 25.2

TABLE 6 METROPOLITAN EDISON COMPANY Indicated Increase in 8.8 Mill Level Charge Based on Enerav Costs Exoerienced to Date 1979 Actual 3 Months July Aug Sept ' Sept Total System Energy Costs * ($ millions) $15.5 $16.6 $14.7 $4 6. 8 Total System Sales (G'4H) 619 654 662 1,935 Mills /KWH of Sales 25.1 25.4 22.2 24.2 (Less): Total Retail Charges for Energy Costs (8 mills base, 8.4 mills clause, excl. taxes) (16.4) Increase in Energy Costs Over Level Provided for by Currently Ef fective Retail Races 7.8 Indicated Increase in Level Charge (above X 1.047 revenue tax factor) 8.2

• includes demand component of cost of TMI-related short-term power purchases.

O 1326 082

TABLE 7

                                                                                   ~

METROPOLITAN EDISON COMPANY Increase in 8.8 Mill Level Charge That 'r'ould be Required ' to Recover During 1980 the Energy Costs Proj ected to be Unrecovered (Deferredj As of December 31, 1979 6 Deferred Energy Costs as of 9/30/79* (actual; $ millions) $42.3 Estimated Additional Unrecovered Energy Costs through 12/31/79 16 2 Proj ected Balance as or Proposed 1/1/80 Effective Date of Clause Revision $58.6 Retail Sales Proj ected for the Period January 1980 - December 1980 .(Gwh) 7,972 Amortization Rate per Kwh, Excluding Revenue Taxes 74 Increase in Currantly Effective 8.8 Mill - Level Charge (above x 1.047 revenue tax f actor) 7 .7

• excludes unamortized "old clause" balance recoverable by base rates ($14.4 million).

1326 083

TABLE 8 METROPOLITAN EDISON COMPANY

    " Full Cost Ret svery" Increase in 8.8 Mill Level Charge, Assuming Return to 6-Month Historical Clause Effective 1/1/81 S Millions Total energy costs projected for the 18-month period July 1979 - December 1980 (July -

September 1979 actual, TMI-1 back 9/1/80,

       " cost plus 10%" PJM pricing effective 11/1/79, APS, O'ntario and Jamestown purchases, 15% oil price escalation)                                   $281 Amount applicable to retail sales (above X 0.958, ratio of retail to total sales, July 1979 -

December 1980) $269 Plus: Energy costs deferred under retail clause in effect prior to shift to level clause on July 1,1979 (actual balance of costs deferred under 6-month historical clause as of June 30, 1979) 28 (Less): Energy costs incurred in 1980 that would be recovered in 1981 by 6-month historical clause if that clause were reinstated effective January 1,1981 (26) Retail energy costs recoverable during 18-month period July 1979 - December 1980, assuming re-turn to 6-month historical clause effective Jan.aary 1, 1981 $271 (Less): Retai. revenues for energy . costs, July 1979 - December 1980, at currant rates (8 mills base, 8.4 nills clause (excl. taxes); 16.4 mills X 11,690 GWH retail sales vrojected for the period) (192) Unrecovered costs, no revision in current level charge $ 79 Increase in level charge required for complete re-covery, assuming increase is ef fective January 1, ]}} ggf

 . 1980 (above t 7,972 GWil retail sales projected for the period January 1980 - December 1960, X 1.047 revenue tax factor)                                          10.4 Mill s/KWH

TABLE 9 , METROPOLITA!i EDISO ; COMPA!;Y Monthly Bills Under Residential Ra te RS, Level Charge Currentiv in Effect vs. Proposed Increase Monthly Present Rates Proposed Rates Usage (8.8 Mill Level (15.7 Mill Level Increase (Kwh) Charge) Charge) Amount  % 200 $13.45 $14.82 $1 37 10.2% 300 18.11 20.17 2.06 11.4 400 22.77 25.51 2 74 12.0 460 (average) 25.60 28.75 3.15 12.3 500 27.42 30.85 3.43 12.5 600 32.08 36.19 4 11 12.8 700 36 74 41.54 4.80 13.1 800 41.40 46.88 5.48 13.2 900 46.05 52.22 6.17 13.4 1 000 50.71 57.56 6.85 13.5 Note: Both present and propued rates include 0.72% base rate tax surcharge currently in ef fect (surcharge may be revised pur-suant to Act No. 1979-27, as described in PaPUC's Secretarial letter dated 10/3/79.) e

                                                                             .1326 08 5

FIGURE 6

                     ,      METROPOLITAN EDISON COMPMIY u yp:ca,      05: Cerapa:'50cnc Pcancyban5a U25505ao Ratoo in Effect September 1,1979 Residential No V!ator I' eating 500 lCWH/ Month 35 - 33._47                               p30.85 With

[ 31.24 31.21

                                 "'                 V 6.9 Mill increase 30 -                         2 7.7 3 m                                         2 D,.

g 25 - 2 3 ,9 6 22 77 3 20 - o , I-15 - - 10 - 5 - 9

                       %,    4/g       b,      */oo   #q     d      '*!p 1326 086

TABLE 10 HETROPOLITAN EDISCN CO!PANY Total Charges to Customers Reflecting Proposed Increase in 8.8 Mill Level Charge Normalized retail base revenues allowed in R.I.D. 434, including 5.42 mill " roll-in" of energy costs into base rates $237.7 Million Normalized test year retail sales 6 872 Gwh Average retail revenue per Ewh ($237.7 million + 6 872 Gwh) 34.590 mills /Kwh Plus: Tax adjustment surcharge currently in effect (34.590 mills /Kwh x .0072) 0.249 Plus: 8.8 Mill levelized energy cost adjustment charge allowed in I-79040308 8.800 Total average annual charges to retail customers 43 639 mills /Kwh Proposed increase in 8.8 mill level charge 6.854 mills /Kwh

       % Increase in total charges to retail customers                                             15 7%          .

Annua 11 zed increase in retail revenues, 12 months ended December 31, 1980, based upon proj ected retail sales of 7,972 Gwh: Mills /Kwh $ Millions For energy costs 6.546 $52.2 For revenue taxes (6.546 x .047) .308 2.4 Total 6.854 $54.6 1326087

     .o                                                                                                        g

., s. .4 (/ y GENERAL 260 cherry Hill Road PUSLIC Parsippany New Jersey 07054 201 263 4 900 UTILITilS TELEX 136482 CORPORATION

                                                                         . October 10, 1979 Mr. William P. Thierfelder, Secretary Pennsylvania Public Utility Commission P. O. Box 3265 Harrisburg, Pennsylvania 17120 Re:     Metropolitan Edison Company and Pennsylvania Electric Company Docket No.)I-79040308

Dear Mr. Thierfelder:

There is enclosed a petition of Metropolitan Edison Company (" Met-Ed") and Pennsylvania Electric Company ("Penelec") request-ing that your Commission issue a Declaratory Order determining that acceptance by Met-Ed and Penelec of the proposal of the other men-bers of the Pennsylvania-New Jersey-Maryland Interconnection ("PJM") with respect to the sale by them of power to replace that not available to Met-Ed, Penelec and Jersey Central Power & Light Company (the "GPU Companies") from the Three Mile Island nuclear generating station ("TMI") will constitute appropriate compliance with the directive of your Commission in Clause ' of your Commis-sion's Order dated June 15, 1979 in Docket No. I-79040308. The subject clause of that Order directs Met-Ed and Penelec to petition the Federal Energy Regulatory Commission (FERC) and to negotiate with the other members of PJM for the pricing of pur-chases of energy during emergency conditions at cost, consistent with the findings of the Commission that, during energency con-d i tions , the split savings pricing of interchange sales is not in the public interest. Met-Ed and Penelec have made intensive efforts to obtain the agreement of the other PJM members to the pricing of energy to replace TMI at cost but have not been able to obtain such agreement. Houever, the proposal of the other PJM members that is the subject of the enclosed petition would substitute average incremental cost plus 10% for average in-cremental cost plus split savings as the basis for pricing to the GPU companies of PJM interchange sales to toplace TMI genera-tion. If, in 1980, the GPU companies purchased their PJM TMI re-piccoment energy as PJM interchange on a split savings basis their total energy cost is forecast to be about $345 million higher than it would be if generation were available from TMI. 1326 088~ Jt'rScy Central Powr & L ich! Com;uny/ Melropohun ftir.On Company /Pennsylvana IhtrC Conyuny

a

                                      ~2-Of this $345 million the cost of the additional energy purchased would increase by approximately $273 million. Of this increase, the GPU payments would include about $50 million of split savings paid to other PJM companies.

Under the PJ" proposal to sell to .ne GPU companies the incremental interchange energy attributable to the loss of TMI output at cost plus 10%, and assuming that such replacement were obtained from PJM interchange, the interchange purchase costs of the GPU companies would decrease by approximately

       $32 million as against pricing on a split savings basis.

Of the $32 million decrease in cost to GPU resulting from the PJM proposal, approximately $14 million is attributable to Pennsylvania Power & Light Company (PL), $1 million to Philadelpnia Electric Company (PE) (S15 million to the Pennsylvania compa-nies), $1 million to Public Service Electric & Gas Company (PS),

      $7 million to Baltimore Gas and Electric Company (BC) and S9 million to Potomac Electric Power Company (PEP).

The loss of TMI energy resulted in PS's, PE's and GPU's total energy cost in 1980 increasing by S12 million, $19 million, and $345 million, respectively while PL's, BC's and PEP's total

  ,   energy cost decreased by S15 million, S8 million and S11 million, respectively. The reduction was due to split savings revenues on additional sales by PL, BC and PEP. The PJM proposal has a negligible economic effect (approximately $1 million increase) on both PE and PS and a substantial increase on PL, BC and PEP, but the not effect of the substantial increase is to essentially return the PL, BC and PEP total energy cost to that existing with a normal TMI energy output (S1 million lower, S1 million lower and S2 million lower, respectively).

The record in the proceedings in which the subject ordet was entered recognized the efforts that the GPU companies were making to purchase replacement power at costs less than those resulting from pricing PJM interchange on a split-savings basis. As a re-sult of such efforts, the GPU companies were net sellers (rather than net purchasers) of PJM interchange in July, August and Sep-tember. The GPU companies will continue their outside purchases when such purchases are economical. The availability of energy from PJM under the special TMI provision will better assure sav-ings if outside purchases opportunities become unavailable. i326 089

         /

Shortly after the t. -2 accident occurred, the GPU companies estimated that the cost to them of replacing TMI energy would be approximately $24 million a month. As a result of the OPEC oil pricing actions in the six months since the accident, that cost, with PJM interchange on a split-savings basis, has increased by approximately 35% - i.e., to $32.5 million per month. On this new basis the effect of the PJM proposal is to reduce that cost by about $2.7 million a month, or to approximately $30 million a month. The GPU companies desire to begin realizing the cost reduc-tions under the PJM proposal at the earliest feasible date. Under that proposal, the effective date is to be date of filing with the Federal Energey Regulatory Commission, assuming that such Commission permits such an effective date, but the proposal is not to be placed in ef fect without authorization by your Commission and any other Commission having jurisdiction. We, therefore, have requested in the enclosed Petition your favorable action thereon at your early convenience We understand that PL intends to file a petition concurrent with this one for your approval in rescinding the PL sa3e to GPU at cost of up to 200 MW per hour of energy from its Martins Creek Units No. 3 and 4. We assume you may wish to consider these matters concurrently. Respectfully submitted, Metropolitan Edison Company and Pennsylvania Electric Company By _.Aq- # W. G. Kuh '3, Chairman cc: The Hon. W. Wilson Goode, Chairman The Hon. Michael Johnson, Commissioner i326 090

 .. -,                             BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION Pennsylvania Public Utility Commission et al.        :

v.  : Docket No.

Metropolitan Edison Company  : I-79040308 and  : Pennsylvania Electric Company,  : Respondents  : PETITION FOR DECLARATORY ORDER Metropolitan Edison Company (" Met-Ed") and Pennsyl-vania Electric Company ("Penelec"), respondents in the above proceeding, submit this Petition for a Declaratory Order pur-suant to 1 Pa. Code 35.19, and in support thereof respectfully represent that:

1. Your Commission, in its Order adopted June 15, 1979 and entered June 19, 1979 at I-79040308 (the " Order"), made the following findings (at p. 16):

            " Pricing of Wholesale Purchases of Power "In accordance with typical agreements between interconnected electric utilities, economy dispatched energy is sold at a price midway between the cost of generation of the selling utility and the alternative generation cost to the buying utility - thereby " splitting" the savings between the buyer and the seller. Although the price at which electricity is sold at wholesale is subject to the j urisdiction of the Federal Energy Regulatory Commission ("FERC"), the cost of purchased power impacts directly on retail rates and therefore is of concern to this Comminsion.
                                                                   - 1326 091

2.

                     "Under conditions approaching an equilibrium where electric utilities each buy and sell roughly equivalent amounts of energy annually, the split-savings method of pricing economy sales seems to result in an equitable dis-tribution of the benefits of shared generation, one utility is not significantly better or worse off than another.

However, when one or two utilities are forced to buy massive amounts of power from other utilities with large amounts of available generation, such as during the coal strike of 1977-78, an inequitable imbalance occurs. The cost of purchases of power during that emergency by utilities in Western Pennsylvania imposed a considerable bur 6un on those utilities, while the utilities in Eastern Pennsylvania received unexpec-ted revenues.

                     "The loss of generation at Three Mile Island has created a similar imbalance. Metropolitan Edison Company and Penn-sylvania Electric Company will incur higher purchased power costs, while the selling companies will generate unexpected revenues.
                     "The Commission is of the opinion that the split savings pricing of interchange sales during emergency conditions is not in the public interest. We will direct Met Ed and Penelec to petition FERC and to negotiate with the other members of the PJM power pool to eliminate split savings during emer-gency conditions and to price such power at cost.      Cf., Order adopted June 7, 1979 at Docket No. P-79060181 (Petition of Pennsylvania Power & Light Company for Declaratory Order).
                     "As an incentive to pursue this elimination of split savings during emergencies, the Commission will consider the efforts of Respondents in this respect in determining whether to allow the amortization of such energy costs deferred during the 18 month period in which their energy clauses are levelized."

2. At page 18 of the Order your Commission 6irected, among other things:

                     "7. That Metropolitan Edison Company and Pc Jylvania Electric Company shall undertake in good faith to petition the Federal Energy Regulatory Commission, and to negotiate with other members of the Pennsylvania-New Jersey-Maryland Interconnection, for the pricing of purchases of energy during emergency conditions at cost, consistent with the findings of the Commission, and shall report monthly on its efforts."

1c326 092 m = -

3.

3. Promptly following the entry of the Order and the corresponding Order of the Board of Public Utilities of the State of New Jersey ("NJBPU"), Respondents and their New Jersey affi-liate, Jersey Central Power & Light Company (" Jersey Central"),

herein collectively referred to as the "GPU Companies," advised the other members of the Pennsylvania-Jersey-Maryland Intercon-nection (PJM) of such directives, requested that such members enter into negotiations to accomplish the objectives of these provisions of such Orders and informed such members of the intention of the GPU Companies promptly to file a petition with the Federal Energy Regulatory Commission ("FERC") in accordance with such directives if such negotiations were not successful. A copy of the letter, dated June 22, 1979, from W. G. Kuhns, cbief executive officer of the GPU Companies, to the other members of PJM is annexed as Appendix A.

4. Since that time, the GPU Companies have been involved in extensive negotiations with the other members of PJM.

The GPU Companies have not been able to obtain the Agreement of the members of PJM to price at cost their sales of energy to replace TMI generation. However, the other PJM companies have submitted a proposal (the "PJ!! Proposal") to reduce the " adder" to their incremental production cost for energy and operating capacity from a split cavings concept to incremental cost plus 10% for the energy purchased from PJM in interchange transactions to replace TMI generation for the GPU Companies' own load. The Proposal will apply to up to 1100 MWil/hr and up to 7,000,000 MWil 1326 093 mm m

4. .T *t 1980 and will terminate with the earlier of, the ressumption of the generation of electric energy by TMI-l on a continuing basis or, December 31, 1980. This PJM Proposal would take the form of special schedules to the PJM Interconnection Agreement which would become effective the date they are filed with FERC for acceptance, if authorized by the cognizant regulatory agencies. Drafts of these special scheCules and an explanatory filing letter are attached hereto as Appendix B. The forecast 1980 impact of the PJM Proposal on GPU is an estimated $32 million reduction in total production costs. Appendix B Table I is a PJM study entitled "PJM Study of the Effect of Three Mile Island Unit Outages Year 1980." This study summarizes the forecast 1980 differences in production costs and interchange that occur as between (a) generation being available from TMI and (b) generation from TMI not being available with some purchases by GPU from companies

   . outside PJM. Table II of the study takes the estimated S32 million reduction in GPU's total production costs arising from the change in billing due to the special pricing in the PJ M proposal and shows the impact on each PJM companies' production costs resulting therefrom. These PJM studies formed the basis of the PJM Proposal and demonstrate the impact on each of the PJM companies without the availability of generation from the TM1 units and with the application of the PJM Proposal.

As set forth below, the GPU Companies have been successful to date in their efforts to purchase substantial amouncs of 1326 09'4

5.

       ' energy from sources other than PJM inter    ange, and have corres-pondingly reduced their purchases of PJM interchange.       It is expected that some quantities may be purchased in the future from sources other than PJM if the savings resulting therefrom continue to be greater than PJM interchange including the PJM Proposal. Thus, the dollar amounts involved in the " adder" above incremental production cost for PJM interchange purchases may be different than that noted above.

5. The THI-2 accident occurred on March 28, 1979. In April 1979, the GPU Companies did not have any source of replace-ment power from other utilities except the purchase of PJM inter-change and the GPU Companies purch'ased 674,738 MWH of interchange from PJM at an average billing rate of 46.2 mills /kwh and an average adder by the selling PJM companies of 9.5 mills /kuh or 25.9% over the seller's incremental production cost. In May, the .

GPU Ccir.panies had in place a bulk purchase arrangement with Allegheny Fower System, Inc. ("APS") and purchased 102,294 MWH from APS; by virtue of such purchases, the GPU Companies reduced their purchases of interchange from PJM to 595,981 MUH at an average billing rate of 50.4 mills /kwh and an average adder by the selling PJM companies of 10.8 mills /kuh or 27.3% over the seller's incremental production cost. (Sales of interchange by the GPU Companies to PJM were nominal in April and May 1979.)

6. By June, 1979, the GPU Companies had additional bulk power supply arrangements in effect, and they purchased 229,853 MWil from sources other than PJM interchange. In the f326 095

 . .                                                    6.

light of such other purchases, the GPU Companies reduced their purchases of PJM interchange to 292,661 MWil at an average billing rate of 45.3 mills /kwh and an average adder by the selling PJM Companies of 11.0 mills /kwh or 32.0% over tP.a sellers incremental production cost. In addition, the GPU Companies sold 33,256 MWH of interchange to PJM in June.

7. In July 1979, the GPU Companies had still more bulk power purchase arrangements other than PJM interchange in effect.

In the aggregate, the GPU Companies purchased 685,980 MWH from sources other than PJM interchange purchases and their purchases of interchange from PJM were reduced to 96,917 MWH at an average billing rate of 48.3 mills /kwh and an average adder by the PJM companies of 11.2 nills /kwh or 30.2% of the seller's incremental production cost. The combination of such outside purchase's plus generation from GPU's own facilities were such that the GPU Companies sold 158,122 MWH (or 630 more than they purchased) of interchange to PJM.

8. In August, 1979, the GPU Companies continued their bulk power purchase arrangements other than PJM interchange in effect. In t'u agg regate , the GPU Companies purchased 833,156 MWil from sot.rces other than PJM interchange purchases and their purchase of interchange from PJM were reduced to 72,617 MWII at an average billing rate of 56.3 mills /kwh and average adder by the PJM companies of 14.1 mills /hwh or 33.4% of the seller's incremental production cost. The combination of such outside 1326~096

 , ,                                                     7.

purchase plus generation from GPU's own facilities were such that the GPU Companies sold 183,450 MWil (or 153% more than they purchased) of interchange to PJM.

9. In September 1979, the GPU Companies continued their bulk powcr purchase arrangements other t i PJM interchange in effect. In the aggregate, the GPU Companies t irchased 692,303 MWH from sources other than PJM interchange purchases and their purchase of interchange from PJM uere reduced to 118,511 MWH at an average billing rate of 54.5 mills /kwh and average adder by the PJM companies of 10.7 mills /kwh or 24.4% of the seller's incremental production cost. The combination of such outside purchase plus generation from GPU's own facilities were such that the GPU Companies sold 154,876 MWH or (31% more than they purchased) of interchange to PJM. '

10. The bulk power purchase arranger..ents which the GPU Companies have been successful in negotiating thus far are non-firm --i.e., are subject to the availability of the supplier's equipment and may be interrupted by it at any time and for any period. (For example, the lowest cost source of supply to the GPU Companies has been the arrangement with APS; that supply was interrupted July 5, 1979 due to equipment unavailability and is not scheduled to be resumed until November 1, 1979.) The volume and the pricing of intcrchange purchases by the GPU Companies from PJM will depend upon hour-to-hour changes in (a) the load levels both within GPU and outside GPU, (b) the availability of 1326 097

8.

 ~ GPU's generating facilities and energy provided therefrom on economic dispatch, (c) the reliability and availability of GPU's generating facilities, (d) the energy provided on economic dispatch by the other PJM Companies, and (e) the availability and purchase prices of energy from suppliers outside PJM.

11. In the absence of purchases from outside PJM, during the non-availability of generation from TMI, the decrease in sales of the GPU companies for 1979 were expected to average about $4 million per month and the increase in purchases of PJM interchange by the GPU Companies were expected to average about

  $20 million a month with the split-savings " adder" on such pur-chases amounting to about $4 million a month (or about 25% of the seller's cost). For that situation, the PJM Proposal would result in a reduction of ecst to the GPU Companies of approximately $1.8 million a month. The forecast for 1980.now projects this saving at $2.7 million a month, the difference being mainly due to fuel cost escalation and load growth. It is necessary to underscore that the PJM Proposal cost reduction to the GPU Companies is premised on the absence of the major portion of purchases from outside PJM. With GPU purchases from outside PJM running at the level experienced in July and August, with their attendant savings of approximately $5 million a month, the PJM Proposal would result in a reduction of cost to the GPU Companies of approximately S0.7 million a month.

1326 098

      ,       .,             12. Thus far, we have referred to purchases of inter-change by the GPU Companies from PJM.      The fact is, of course, that PJM is not an entity and the purchares by the GPU Co.npanies would be from the facilities of individual members of PJM.      Since both Philadelphia Electric Company ("PE") and Public Service Electric and Gas Company ("PS") ordinarily do not have energy available for sale from units operating below the PJM running rate and are usually heavy purchasers of interchange for their own rege'rements, the GPU purchases of so-called "PJM Interchange" will, t,r the period through 1980, normally be from the facilities of Baltimore Gas & Electric Company ("BC"), Pennsylvania Power &

Light Company ("PL") and Potomac Electric Power Company (" PEP"). Appendix B, Table I shows the estimated change in each PJM compeny's total cost for energy production in 1980 including its own generation and sales to and purchases from other PJM companies brought about by the nonavailability of generation from TMI. These estimated 1980 energy cost increases (decreases) are: PS $ 12.1 million PE $ 19.3 million PL $(15.4 million) BC $ (8.2 million) GPU $345.3 million PEP $(10.9 million) The parentheses indicate a reduction in a selling com-pany's total energy cost because of the split savings realized by it on increased interchange sales arising as a result of the non-availability of energy from TMI, ie; the PJM selling companies' costs reflect a reduction in total energy costs due to the fact

                                                                                      ~
                                                                                        ~

1326 09,9

. , 10. that their interchange sales increase and, when selling at split savings, result in unanticipated increased revenues to them over and above their increased production cost. The converse is true for the purchasing companies and most prominently for GPU where the low cost nuclear generation is not available directly to GPU and indirectly to make other lower cost energy available to PS and PE. Appendix B Table II shows the change in total energy cost of the PJM companies forecast for 1980 r~esulting from the PJM Proposal in comparison with the total energy costs resulting from pricing on the basis of split savings. These increases (decreases) resulting from the PJM Proposal are: PS $ 1 million PE $ 1 million PL $ 14 million BC $ 7 million GPU $(32 million) PEP $ 9 million

13. The major impact of the PJM proposal is that the major sellers (BC, PL and PEP) relinquish a part of the unantici-pated net revenues resulting from the increased sales of inter-change on a split-savings basis, thereby bringing their total not production cont closer to that existing before the TMI acci-dent. The dif ferential total production cost of the PJM companies forecast for 1980 for the conditions of a) energy available from TMI vs. energy not available from TMI with normal pricing and b) energy available from TMI vs. energy not available from.TMI with the PJM Proposal, is graphically illustrated in Appendix C.

1326 100

11. Although the PJM Proposal has a nominal additional adverse impact on PE and PS, it can be said that the major ef fect of the PJM proposal is to tend to bring the total production costs of the selling PJM companies closer to that forecast without the TtlI accident. It should be noted that, on the basis of the 1980 forecast, the PJM Proposal will still result in the receipt by PL of $1 million, by BC of $1 million and by PEP of $2 million more net revenues than they would have received in the absence of the TMI accident.

14. If the GPU Companies are not authorized by your Commission to accept the PJM Proposal, they are required by the Order to file a petition with the Federal Energy Regulatory Commission ("FERC") seeking a directive by the FERC that the other members of PJM sell energy to the GPU Companies during emergency cbnditions at cost. The GPU Companies are prepared to file such a petition with the FERC. However, such a peti-tion would have .to be filed under Section 206(a) of the Federal Power Act and any relief obtained by the GPU Companies in re-sponse to that petition could be effective only prospectively, i.e., after the FERC had made a decision following hearings.

If the PERC employed its usual procedure in contested rate proceedings, the filing of the petition by the GPU Companies would involve notice of filing, petitions to intervene and responses thereto, assignment to an administrative law judge, data requests and document discovery, one or more pre-hearing 1326 101

12. conferences, possible settlement discussions, hearings, briefs, a recommended decision by the administrative law judge, excep-tions thereto and briefs in support of exceptions and finally a decision by the PERC. Based on usual experience in contested rate proceedings under the Federal Power Act, it appears unlikely that a decision would be rendered in that proceeding by the TERC before 1981 and might well be later. Moreover, it is by no means certain that the FERC would require such sales to be made at cost. The report of the FERC staff on electric powe.r sales between power pools during the last coal miners' strike and the pending rulemaking proceedings before the FERC suggest that the FERC staff believes that some " adder" above incremental production cost is appropriate, even in emergency sales.

         .        15. For these reasons, the GPU Companies believe that proceeding on the basis of the PJM Proposal, rather than by filing a petition with the FERC, will best and most quickly accomplish the intent of the subject provisions of the Order and that their proceeding on that basis should be deemed to be acceptable compliance with such provisions of the Order.

16. Met-Ed and Penelec assume that it will facilitate your Commission's review of this Petition if Met-Ed and Penelec also set forth the results accomplished to date as against those contemplated by the Order and the estimates on which the Order was based and that information is set forth in the following paragraphs.

1326 102 TT . . _ _ . . _ _

                                                             ~-                  ,-

13.

17. Following the TMI-2 accicent, the GPU Companies made studies of the probabic replacement cost while energy was not available from both TMI units assuming that such replacement came from a combination of increased generation from the GPU Companies' own facilities and increased net interchange purchases from PJM. The studies indicated that replacement power costs would be approximately S24 million a month ($10 million for Met-Ed, S4 million for Penelec and $10 million for Jersey Central) or $216 million for the nine-month period, April 1-December 31, 1979. Such studies indicated that, of the S216 million of increased replacement power costs for the nine months, S40 million would be attributable to decreased sales to PJM from the GPU Companies' own facilities and $176 million (including $38 million of split-savings " adders") for increased net purchases of interchange from PJM. During the course of the proceedings which led to the entry of the Order, the GPU Companies advised your Commission and the NJBPU of the efforts which they were making to obtain bulk power supply to replace TMI generation from sources other than PJM Interchange.

18. The Order was predicated upon the assumption that the GPU Companies would be successful in efforts to find alterna-tives to normal purchases of interchange from PJM on a split-savings basis and that this would reduce their TMI replacement energy costs by about 25%, i.e., that the monthly TMI replacement power costs would aggregate about $7.5 million each for Met-Ed 1326 103

14.

     ,nd Jersey Central and about $3 million for Penclec:                          In this ifspect, the Order (at page 12) provided that Met-Ed and Penelec could include, in recoverable costs through the net energy cost rate, the demand or reserve capacity charges incurred in connec-tion with such purchases from July 1, 1979 until January 1, 1980 as an incentive to enter into such arrangements, and the NJBPU took similar action in respect of Jersey Central except that the demand or reserve capacity charges incurred are permitted to be included beyond Jan 1, 1980.              As indicated above, the GPU Companies have been purchasing increasing amounts of replacement energy from sources of supply other than PJM Interchange; in July they mhde purchases from an aggregate of nine utilities at various times.          All such arrangements have been dependent upon the availability of energy from each of the suppliers and have been subject to interruption at any time upon very short notice.

At times the GPU Companies have purchased more than 1200 MWH per hour from. sources outside PJM, as well as 200 MWH per hour from PL in bilateral transactions when such bilateral transactions were economic. At other times, these purchases were substantially less because the supplying utilities did not have generating capacity available or because the purchases were not economic.

19. The TMI associated replacement power costs experienced by the GPU Companies in April , May and June 1979 when the bulk power supply arrangements as alternatives to purchases o f PJM interchange were still in the process of being worked out were substantially in excess of those 11326 10/L 9

a_-.. . . . . - . - . - . . . . .

                        .. .            ,     ., .,  ~.   ,                -    ,       ,
                                 ~~   ~

15. contemplated by the Order (and the comparable Order of the New Jersey BPU) and amounted to $22.9 million for April, S20.5 mil-lion for May and $21.8 million for June, as comparea with the S18.0 million assumed in the State Orders for the GPU System. The major reason for this was that the Orders assumed a S6 million monthly reduction in energy cost (as against purchases y of interchange from PJM on a split savings basis) resulting from . outside purchases and from PJM negotiations (thereby reducing the estimated S24 million replacement cost to S18 million) while the actual reduction in such costs wero zero in April, $1.2 . million in May, and $1.1 million in June. These data, on an

  ,           individual company and GPU System basis, are shown on Appendix D titled " Estimates of ' Actual' Cost of TMI Replacement Energy,         ,

April - August 1979 & Forecast 1980."

20. As previously noted the GPd Companies made sub-stantial power purchases in July and August, as alternatives to the purchase of PJM interchange such that the GPU Companies were I r

net sellers of interchange to PJM, although some amounts of PJM

                                                                                           ,;, , '         ,

~ n ,, interchange energy were at times purchased. In July and August gq:,5, the replacement power couts were nevertheless substantially in ~ X '^

                                                                                            .> /y .

excess of those contemplated by the Orders and were S24 million  ; for July and S19.7 million for August even though the purchase power savings at $5.5 million for each .nonth very nearly met the .-  ? C %j;;'

              $6 million projected in the Order.         If the nominal amounts of        !.          3 PJM interchange purchaned by the CPU Companies in July and 6- 9          ~

August had been under t.he terms of the PJM Proposal rather than - e

                                                                                          +r 1326 105-            x- 1

16. on the split-savings basis, the ddditional monthly reduction in their energy costs would have approximated $0.*/ million and the Orders' estimate of savings would have been met. However, the Orders' estimate of total replacement power cost of $18 million would still have been exceeded by more than SS million in July and $1 million in August. The principal factor which produced this result is that the OPEC cartel imposed substantial additional price increases after the record was closed in the proceedings in which the Orders were entered. This OPEC action increased the energy cost for the portion of the replacement power (a) supplied from the GPU Com-panies' oil-fired generation, (b) purchased from PL in bilateral transactions (since such purchases come from PL's oil-fired . Martins Creek Units Nos. 3 and 4) and (c) purchased from PJM as interchange, since a significant portion of such interchange

                  ^mes from oil-fired sources. The consequence is that, even lk ,             t.

ugh the GPU Companies were net sellers of interchange to PJM f-

         /
' .t "

s

. .,f ,

i.. July and August as a result of large purchases outside PJM >, la

     ,.a        ana thereby achieved the reduction in energy costs (as against large purchases from PJM on a split-savings basis) anticipated

[.7 bv the Orders, the base cost of their replacement energy in-creased by a substantially eqttivalent amount due to the OPEC

.s
                   -tions.

The best current estimate for the year 1980 is that s, the GPU Companies' power replacement cost, if supplied by i 1326 106

                                                                        -=*~m= ~.

17.

               ~ 'PJM on a split-savings basis, would approximate $33 million per month and that savings of $6 million per month can be achieved as a result of a combination of outside purchases and purchases from PJM under the PJM Proposal. This would result in a net replacement cost of $27 million per month which is $9 million/ month in excess of the net S18 million per month level inherent in the Commissions Orders. Details of this 1980 fore-cast cre shown on Appendix D.

21. All the purchases from outside PJM and the put.;hases in the bilateral transaction with PL are allocated in the first in-stance among the GPU Companies in proportion to their respective interests in TMI, namely, 50% to Met-Ed, 25% to Penelec and 25% to Jersey Central, and are treated as resources of these companies at an energy cost which includes the demand charge of the supplying company. (All such arrangements, other than that with PL, and Jamestown include a demand charge.) To the extent that one GPU Company cannot itself use such purchases for its own load (because it has a more economical source of supply), it relinquishes its right to such energy to its affiliates that can use it. In May, Penelec could use only about 10% of its share of the outside pur-chases. Met-Ed required almost exactly the amount of its share of such outside purchases. Thus Jersey Central purchased the portion of Penelec's purchases not required by Penelec. In June, Penelec required about one-third of its share of such purchases. For its part, Met-Ed not only required its own share of such outside 1326 1 07

18. purchases but also could uce about 20% of the Penelec share and purchased that. Jersey Central not only required its share of such outside purchases, but also could use the balance of the Penelec share and purchased it.

22. If bulk power supply purchases and the resulting savings by the GPU Companies from outside PJM Interche.nge continue to be substantial, as they were in July, the impact of the subject PJM Proposal and its resultant savings on GPU and the other PJM companies would be modest because the volume of interchange purchases from PJM would be modest, i.e., as the GPU Companies increase their purchases of bulk power from sources other than the purchase of PJM Interchange, the other PJM companies that would sell interchange more closely revert to the situation in which their interchange sales are at the level they would have been without the TMI-2 accident. At the July level, the subject PJM Proposal would reduce GPU costs by approximately S0.7 million per month and reduce the " unexpected revenues" of the selling PJM companies by the same amount. The GPU reduction from the outside PJM purchases approximated $5.5 million in July. At the June level, the reduction in GPU costs arising from the subject PJM Proposal would be approximately

                    $2.2 million per month, but, correspondingly, the GPU purchases outside PJM uould be smaller; the savingn achieved as a result of such purchases in June approximated $1.1 million.         The net 1326 108

..n . . . ~ . . . . . .'::_ . _ _

                                       ~-

19. result is that the subject PJI! Proposal lessons GPU's vulnerabil-ity to the loss of savings resulting from the nonavailability of energy from.outside PJM and thus provid6s greater assurance of alternatives with costs louer than normal PJM interchange pricing.

23. The measurement of the impact of the subject PJM Proposal on the individual GPU Companies contains the uncer-tanties referred to e,rlier. Initially, the energy (including operating capacity) available from PJM under the PJM Proposal will be allocated among the GPU Companies in proportion to their respective interests in Tt1I. If, however, at any hour, one GPU company cannot economically use such energy to serve its own load, it will relinquish such energy to its affiliates that can economically use such energy. It is anticipated that, except in periods when it is experiencing significant scheduled or forced outages of coal-fired equipment, Penelec will not be able to utilize for its own load all of its allocable share of the energy available under the PJM Proposal, rioreover, while 50S of the energy available under the PJM Proposal will be initially allocated to flet-Ed , the impact of the PJM Proposal in reducing energy costs as against pricing interchange on a split-savings basis will be less per kilowatthour for Met-Ed than for Jersey Central. This is because, even without TMI generation, Met-Ed has proportionately more base and intermediate load generating capacity (Portland, Titus and Conemaugh) than Jersey Central 1326 109

20. (Oyster Creek and Keystone). Consequently, during some hours, the purchase of PJII interchange on the basis of the PJM Proposal will not be economically advantageous to Met-Ed. Moreover, given the difference in their mix of generating capacity, the purchase of interchange from PJM on a split-savings basis results in a higher price to Jersey Central than to !!et-Ed; thus, the substi-tution of pricing of interchange purchases at incremental cost plus 10% under the PJM Proposal for normal pricing on the basis of incremental cost plus split-savings produces a greater reduc-tion in cost per kilowatthour for Jersey Central than for Met-Ed. Under these circumstances, it is reasonable to estiraade that approximately 35-45% of the benefits to the GPU Companies from the subject PJM Proposal will be received by Met-Ed, 35-43% by Jersey Central and the balance by Penelec.

24. As noted earlier, the purchases from outside PJM will continue if economic when compared with purchases directly from PJM. Since the PJM proposal reduces the PJM interchange price to be paid by the GPU Companies, it is anticipated that the volume of the outside purchases may be reduced. It should be noted that, while the PJM proposal applies to a major portion of GPU's total interchange energy purchases from PJM, there will still remain a substantial quantity of energy which the CPU companies may purchase beyond the provisions of this special agreement. If purchased f rom PJ M , this will be in excens of the replacement for TMI provided for in the PJt! Proposal and vill be priced on the split-savings basis.

                                                                'l326     110

21.

25. The PJM proposal does involve other elements which should be noted. These relate to the timing of payments for energy purchased under the PJM Proposal and the consequences if such payments are not made when due.

26. Under the existing PJM Agreement, bills are computed mo.nthly by the fifth working day of the following month, and are payable on the first banking day common to all PJM parties following the nineteenth day of the month in which the billing statements are prepared. Under th6 subject PJM Proposal, the GPU Companies will be required to make interim payments, on the basis of weekly estimates, for net energy purchases by them from or thru PJM; they will be billed weekly within two working days af ter the end of the week, for any estimated net amount due for that week's transactions.

Payment of this estimated bill will be due five banking days after rendered and in default if not paid by the sixth banking day. The interim payments will then be applied against the final monthly bill. While this schedule for interim payment is tight, it is manageable, since payments are effected by wire transfers between banks. The requirement of the PJM Proposal for interim payment on a weekly basis does increase the CPU Companies' cash working capital requirements but this is not substantially more burdensome than that involved in purchases from outside PJM which have also involved weekly payments and, in the case of many of the larger transactions, have required that such payments be made in advance. I 1326 iiI ,

22.

27. The use of the term "def ault" in the subject PJM Proposal is new, but the concept is not. Specifically, Section 11.1 of the e::isting PJM Agreement provides for a penalty rate of interest (130% of the prime rate) during a period of " delinquency" if payment is not made on the due date.

Moreover, under their f.ebenture indentures, the GPU Companies have covenanted that they will pay for labor, materials and supplies as they become due and payable in the ordinary course of business and the new revolving credit agreement contains a similar covenant. There is a 60-day grace period foc curing such a default in the debenture indenture, before the debenture indenture trustee or the holders of 25% of the debentures may accelerate the maturity. However, this grace period in the debenture .ndenture is of limited significance since, if a company is unable to pay its debts as they become due in the ordinary course of business, that would probably be a material adverse development requiring disclosure under the federal securities laws and to the bank lenders under the revolving credit agreement and might well shut off the availability of additional credit.

28. The PJM Proposal also provides that, if a condi-tion of default exists, the GPU Companies shall not have a vo_e in PJM matters so long as that def ault continues and that during the default any PJti member company may refrain from rendering PJM bene fits to the GPU companien. If the GPU Companies were in 1326 112

-. . 23. default, they would not be able to enforce the PJM contract in any event and the other PJM companies could take (or withhold) action on that basis, subject to any constraints arising under the Federal Power Act. For this reason, the provision in the subject PJM Proposal concerning the withholding of PJM benefits under such circumstances does not appear to add significantly to the remedies available to the other PJM members. Needless to say, the GPU Companies do not intend to permit a default to arise.

29. In summary, che GPU Companies believe that the PJM Proposal largely achieves the objectives of the provisions of the Order quoted in paragraphs 1 and 2 above and that it provides a potential for achieving some cost savings for them at a much earlier date, and with greater certainty, than they could achieve by filing a petition with FERC. The GPU Companies believe that they have demonstrated that they have attempted in good faith to comply with t!.e subject directives of the Order and respectfully request that the Commission issue a Declaratory Order determining that acceptance by Met-Ed and Penelec of the PJM Proposal will constitute appropriate compliance with the directives of paragraph 7 of the Commission's Order.

11526 113

       ~

WilicRE FORE , nespondents pray that the Colaittission issue a declaratory order finding that their proceeding on the basis of the PJM Proposal satisfies the aforesaid directives of the Commission's Order entered June 19, 1979 at I-790/.0308. METROPOLITid1 EDISOIl COMPAliY PENNSYLVA111A ELECTRIC COMPANY By U? E,$ ., Chairman f the Board STATE OF NEW JERSEY )

ss.

COUNTY OF MORRIS ) W. G. KUHNS, being duly suorn according to law, deposes and says that he is Chairman of the Doard of Metropolitan Edison Company and Pennsylvania Electric Company; that he is authorized to and dots make this affidavit for these companies; and that the facts set forth above are true and correct to the best of his knowledge, information and belief.

                                                              ,/,,;<j .9//

y%.e/.-.. / W G. Kuhns Sworn to and subscribed before me thin 77 4 day of October, 1979.

                  < V .1.f n.               2Ls!"         -

CDR.T ty.or IOIf CY Pl!DIIC 0; ;;;g,r gg3;y f4 L,w.naica [y,! es hu S. !933 1326 114'

                               ==..             . _ -

25. CERTIFICATE OF SERVICE I hereby certify that I have this day served the fore-going document upon all parties of record in this proceeding in accordance with the requirements of 1 Pa. Code 33.32 (relating to service by a participant). Dated at this day of October, 1979.

                                              /s/ Samuel B. Russell Ryan, Russel & McConaghy Attorneys for Metropolitan Edison Company and    .

Pennsylvania Electric Company 1326 115

Wuham G. Kuhns APPENDIX A Chamun

             ~

GENERAL 260 Cherry Hdi Road 7 ~i '- ~ v- , PUBLIC Parsippany New Jersey 070 J 4 2012Gm00

     .g        {~j W'            UTILITIES CORPORATION June'22, 1979 IDENTICAL LETTERS WERE ALSO SENT TO THE FOLLOWING INDIVIDUALS:

R. I. Smith E. T. Cox Mr. Robert F. Gilkeson J. F. Betz J. L. Everett Chairman of the Board R. K. Campbell J. D. Feehan Philadelphia Electric Company C. E. Utermohle, Jr. R. D. Weimer 2301 Market Street B. C. Trueschler A. E. Bone Philadelphia, Pa. 19101 W. R. Thompson J. K. Busby

Dear Bob:

As I am sure you appreciate, the GPU System has been undergoing traumatic experiences on all fronts in the twelve weeks since the TMI-2 accident. Our first priority necessarily was devoted to achieving and maintaining control of the accident and bringing TMI-2 to a cold shutdown status without injury to the public health and safety. The assistance we received from al1 segments of the industry - including your Companies - was outstanding, as we have sought to make clear in all forums . that we had an opportunity to address. Our second priority was to maintain service to our customers. This, of course, would not have been possible without the massive amounts of power you made available to us. I should not wish you to consider the balance of this letter as reflecting any lack of appreciation on our part for the response of your Companies in providing such power to us. The way in which the PJM Interconnection handled in stride the severe test presented by this outcge of 1,700 MW of base load capacity is a tribute to the sound planning and structure involved in PJM. 1326 .116 Jersey Centrat Power & Licnt Comp.iny/ t.tetropohtan fd. .on Comp.iny/ Pennsylvania E!cctnc Company

2.

 ,j.   -.

The ' financial aspects of the accident and its af-termath have also been most demanding. We have b'een experi-encing replacement power costs on the order of $24 million a , month in excess of those provided for in our current charges . to customers and, at the same time, have not been receiving base rates to cover the capital and operating costs of TMI-2. The financial survival of the GPU System has been dependent upon our ability to obtain prompt tariff revisions to provide for the recovery within a reasonable period of the bulk of those replacement power costs and this, in turn, has been heavily dependent upon .our ability to demonstrate to the regulatory agencies that we were making every effort to mini-mize those replacement power costs. It has been within this context that since shortly after the accident, we have been discussing with you the question of whether your Companies would be willing to provide to us at cost (e.g., without . an " adder" for " split-savings") the energy and operating capacity which we are pucchasing from you to replace the energy which would have been provided to the GPU System by the two TMI units. We have also been attempting to negotiate spe'cial purcP ce power arrangements with your Companies. and other neighboring utilities to mitigate these replacement power costs. We have had some limited success in these efforts and they will be continued. Specifically, PP&L has

                                                                            ~

1326 117 .

            . offered to sell the GPU Companies, for the balance of         .

1979, at cost as determined in accordance with the normal PJM accounting practices, the energy produced by up to 200 MW of Martins Creek Units 3 and 4 when those units are operating on the PJM economic dispatch and we have gratefully accepted that offer. Implementation of that agreement has been approved by the PaPUC and is subject to acceptance by FERC. Philadelphia Electric has offered to sell us, at 95% of the PJM running rate, energy equivalent to the Philadelphia Electric share of Salem No. 2 output and we have accepted

    .        that offer. Implementation of this sal.e and purchase will not begin until Salem No. 2 commences operation which must await the issuance of the NRC operating license. We have also previously announced that we are purchasing short-term power a.s available from and through APS and we expect to continue such purchases. We anticipate that we may be.able to effect additional purchases from other sources and we will periodically advise your Companies of our progress' on that score.

On June 15, 1979, the PaPUC issued an ort 2r to Met-Ed and Penelec permitting them to implement levelized energy adjustment clauses which provide ~ for recovery of a portion of the replacement power costs and, on June 18, 1979, the NJDPU issued a similar order to Jersey Central. In . the case of both the PaPUC and NJDPU orders, the level-ized energy clauses are premised on our ability to achieve 1326 118

4. savings in replacement power costs in addition to those achievable under the arrangements with PP&L, Phi.ladelphia Electric and APS. The PaPUC order sets forth the PaPUC's view . that the split savings pricing of interchange sales during emergency conditions such as those which we are experiencing is not in the public interest and directs Met-Ed and Penelec to petition FERC and to negotiate with your Com-panies for the pricing of the replacement power at cost. (The relevant excerpt from that Order is annexed as Appendix A.) Although stated in somewhat dif ferent terms, the NJBPU order expresses the same point of view. (The relevant excerpt from that Order and from thy transcript of the discussion by the members of the NJBPU during the course of approva.1 bf that Ord,er is annexed as Appendix B.) . At the meeting of the PJM Chief Executive Officers and Management Committee on May 5, 1979, the Management Committee was given the assignment of analyzing the impact on each of the FJM participants of the loss.of ~ major base load generation such as TMI. It is my under-standing that these studies are nearing completion. I suggest an early meeting of the PJM Chief Execut'ive Officers (and, if appropriate, of representatives of the Commissions that regulate the PJM Companics) to consider G 4 e 1326Il9-

5.

      ?
              -'this matter.      I shall call you in the next few days in an ef: ort to schedule such a meeting at an early date.

Sincerely, - 9 4 8 e 6 0 e 4 e

   *4 0

O e o G S 4 e 0 e B e 1326 120

              *                %                                        0     4

Excerpt from Order approved June 15, 1979

       . ~

and entered June 19, 1979 in the matter of Pennsylvania Public Utility Commission v. Metropolitan Edison Company and Pennsylvania Electric Company, Docket No. I-79040308 Pricing of Wholesale Purchases of Power

• In accordance with typical agreements between inter-connected electric utilities, economy dispatched energy is sold at a price midway between the cost of generation of the selling utility and the alternative generation cost to the buying utility -

thereby " splitting" the savings between the buyer and the seller.. Although the price at which electricity is sold at wholesale is. subject to the jurisdiction of the Federal Energy Regulatory

 '                        Commission ("FERC"), the cost of purchased power impacts directly on retail rates and therefore is of concern to this Commission.

Under conditions approaching an equilibrium where electric utilities each buy and sell roughly equivalent amounts of energy annually, the split-savings. method of pricing economy sales seems to result in an equitable distribution of the bene-fits of shared generation. One utility is not significantly better or worse off than another. However, when one or two utilities are forced to buy massive amounts of power from other utilities with large amounts of available generation, such as

                       ?d uring the coal strike of 1977-78, an inequitable imbalance occurs.

The cost of purchases of power during that emergency by utilities in Western Pennsylvania imposed a considerable burden on those utilities, while the utilities in Eastern Pennsylvania received

                         ' unexpected revenues.

The loss of generation at Three Mile Island has created a similar imbalance. Metropolitan Edison Company and Pennsylvania Electric Company will incur higher purchased power costs, while the selling companies will generate unexpected revenues. The Commission is of the opinion that the split savings pricing of interchange sales during emergency conditions is not in the public interest. We will direct Met Ed and Penelec to peti-tion FERC and to negotiate with the other members of the PJM power pool to eliminate split savings during emergency conditions and to price such power at cost. Cf. , Order adopted June 7, 1979 at Docket No. P-79060181 (Petition of Pennsylvania Power & Light Com-pany for Declaratory Order). As an incentive to pursue this elimination of split savings during emergencies, the Commission will consider the efforts of Respondents in this respect in determining whether to allow the amortization of such energy costs dcCerred during the 18 month period in which their energy clauses are levelized.

'l326 121

   ***HM                                           e-
       +aN Md- k. - - - - - -    -

w = - *" ' ' ' * **

Appendix A - p. 2 l' - '

7. That Metropolitan Edit 'n Company .nd Penn-sylvania Electric Company shall undertake in good faith to petition the Federal Energy Regulatory Commission, and to negotiate Interconnection, Maryland with other members of the Pennsylvania-New Jersey-for the pricing of purchases of energy during emergency conditions at cost, consistent with the findings of the commission, and shall report monthly on its efforts. ~

O G e e e e e e S e e e 0 e e 9 8 1326 122

ARPendix B

   '             Excerpt from Order, dated June 18, 1979 of the              -

Board of' Public Otilities of the State of New Jersey in the matter of Jersey Central Power & Light Company, Docket No. 795-427 The Board h-o also had discussions with the Federal Energy Regulatory Commission and the PJM interchange on the possibility of supplying JCP&L with replacement energy at cost, rather than through the current split savings pricing mechanism. We direct JCP&L to continue these discussions and would hope that tlantic City Electrtic and PSE&G join in their effort. Extract from pages 35, 42-43 and 54 transcript of meeting the of the Board of Public Utilities of the State of New Jersey in.the matter of Jersey Central Power & Light Company, Docket No. 795-427 Commissioner Hynes (at page 35) I would also like to include in this Order the following idea subject to a concurrence by my two commis-sioners. One is GPU shall have as part of this Order the responsibility to continue negotiations with other members of the PJM system in an effort to waive the split savings which is burdensome both to the company and to the ratepayer. I would now like to go en record as having stated that Chairman Kuhns has been most aggressive in attempting to do just that, to save the ratepayers millions of dollars in the split savings costs. However, I think it's wise for the Commission to go on record ordering him to do so, to appeal to PERC to waive the split savings in emergency sicuations like this. And, I might add that we, in the State of New Jersey, have, as members of the PJM system, Atlantic City Electric as well as Public Service Electric and Gas, and I would publicly ask them at this point to support Chairman Kuhns request to waive the split savings costs. 1326 123

Appendix B, p.2 5 - -

                ~ President Barbour:      (at pages 42-43)

During the course of these proceeding.s, but not as part of them, the three commissioners -- myself, Com-missioner McGlynn and Commissioner Hynes, met in Philadelphia with the members of the Public Utility Commissions of Dela- ' ware, Pennsylvania, Maryland, District of Columbia, and discussed -- and, incidentally, at this meeting were the electric utility of ficials from all of the companies in that

                . area -- where we discussed with the PJM official this ques-tion of doing away with the split savings and also the question of whether a penalty of lack of capacity would be appropriate in this situation.

There was considerable resistance by the PJM representative at that meeting and there was not an indica-tion of position by the electric utility official at that meeting other than Jersey Central and Metropolitan Ed.ison and Penelec, and we as Commi.nsioner Hynes had indicateo want to purr,t3 that vigcrously and we want Jersey Central to pursue it vigorousl,r. We feel it's time to have a change in that policy, particularly for an emergent situation as we have today. So, in the day to day operation maybe that is something that should still be continued, and maybe it isn' t something that would be continued, but certainly it should not be in place for a situation such as this. And, there is an inquiry as to the split savings methodology before the Federal Energy Regulatory Commission at this present time. President Barbour (at page 54) Commissioner McGlynn has suggested with respect to the split savings that perhaps that ought not to be an ordering part of our decision but that is a matter which both the Board and the utility should tackle jointly, so that is the method that is the framework that we set up in the Order. e 1326 124

GPU DitAFT 10/8/79 ~ . * . Federal Energy Regulatory Commission 825 North Capitol Street, N. E. Washington, D. C. 20426 Attention: Mr. Kenneth F. Plumb, Secretary Gentlemen: There are filed herewith, to become ef fective on the date filed, interim modifications to present Schedules 6.03 and 7.01 and new Schedule 10.01 to the Pennsylvania-New Jersey-Maryland Interconnection (PJM) Agreement dated September 26, 1956, as supplemented, which is on file with the Commission and is identified by the Rate Schedule Number shown for each of the follow-ing companies which are the parties to the said Agreement. Company Rate Schedule Public Service Electric and Gas Company FERC No. 23 Philadelphia Electric Company 21 Pennsylvania Power & Light Company 21 Baltimore Gas and Electric Company 9 Jersey Central Power & Light Company

• 7 Metropolitan Edison Company
• 7 Pennsylvania Electric Company
• 24

           *(Referred to collectively as GPU)

Potomac Electric Power Company 19 All of the Parties to the Agreement have approved this filing and have received copics thereof. This filing is made on behalf of such Parties by the cadersigned in accordance with the authorization contained in Article 3.3 (vi) of the Agreement. The following doc. .:nts are submitted herewith in connection with this filing:

1. Six (6) copics of this letter.

2. Sixteen (16) copics of the interim modification to Schedule 6.G3.

3. Sixteen (16) copies of the interim modification to Schedule 7.01.

4. Sixteen (16) copics of the new Schedule 10.01.

[3 h .

Federal Energy Regulatory Commision GPU DRAFT

       ,             Page 2                                                                 1./8/79

5. Six (6) copics of a fonn o' Notice af Agreement suitable for publi-cation in the Federal Regiscer.

6. A check covering the filing fee.

Present Schedules 6.03 at.d 7.01 set forth accounting precedures for the interchange of energy and operating capacity among , Parties to the PJM Agreement. The basic premise of these procedures is that receivers and sup-pliers share equally in the savings resulting from the transactions. The final debits or credits for interchange generally are included in each Party's retail fuel clauses. The non-availability to GPU of generation from the Three Mile Island Generating Station (TMI) as a result of the TMI accident and the orders, dated July 2, 1979 and August 9, 1979, has resulted in the need for exceptionally large and continuing receipts of energy by GPU, the owner of the units. Such receipts are the result of economic dis-patch on the Interconnection which avoids the use of GPU's remaining high cost oil-fired generation. The continued application of present accounting procedures for such extraordinary receipts and the ultimate inclusion of the results in retail fuel clause calculations would result in burdensome costs to GPU customers and unexpected cost reductions to the customers of the selling companies. The intent of the modifications to Schedule 6.03 and 7.01 is to provide relief to GPU's customers. The Parties to the Agreement have estimated the cost impact on GPU of the additional receipts of energy and operating capacity to replace the output of both TMI Units in 1980. The Parties have developed an interim accounting procedure applicable only until the end of 1980 or until TMI Unit #1 resumes generation on a continuing basis, whichever occurs first, which is expected to reduce the payment by GPU for tha extraordinary energy receipts by approxi-mately $32 million for the year 1980, while assuring the return of all incre- . mental costs to the suppliers. The application of this extraordinary pro-cedure will be limited to GPU energy receipts of up to 1100 MW each hour and 7 million megawatthours in 1980. These limits reflect the estimated impact on GP'J receipts caused by the lack of availability of generation from both TMI units. These extraordinary procedures arc filed herewith as interim modifica-tions to Schedule 6.03 and 7.01. During the period in which these interim accounting procedures are in effect, GPU has agreed to a special billing procedure wherein GPU will make weekly payments to the Billing Agent whenever its estimated bill for PJM transactions in the preceding week is a not debit. This procedure is set forth in new Schedule 10.01 filed herewith. , Attached Exhibit 1 presents the results of the estimates referred to above and is submitted in response to Section 35.13(b)(1) of the Commission's Regulations. I' hose estimates were based on the best data available on many variables including fuel costs, the availability of generating units, load 1cvels, and load shape. 1326 126

   ~ '

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                ,,*~                 L- om   -

Federal Energy Regulatory Commision GPU DRAFT

        ,.       Page 3 10/8/79 These interim accounting and billing procedures are a negotiated settlement predicated on the ascumption that they will become effective on the date of filing; hence, the Schedules becoming effective in their entirety on the date of filing, without suspension, is a condition precedent to this Agree-ment. If the Commission does not accep! this settlement and permit the Schedules to become effective on the date of filing without suspension, then the schedule modifications and a .iew schedule are null and void and without any effect whatsoever.       Fur the rmore , as stated in each of the documents filed herewith, these schedule modifications and neu schedule are null, void and without any effect whatsoever in the event any regulatory commission having jurisdiction over the rates charged to customers of any Party Hereto proposes to negate or modify the normal means by which Interchange results are reflected in rates and/or proposes to adjust cost of service for rate-making purposes in any manner adverse to a Party Hereto as a direct or indirect result of this filing.

In view of the potential relief available to GPU in the cost of energy and operating capacity the Commission is hereby respectfully requested to take the following action. (a) accept for filing the settlement rates, terms and conditions, the Agreement, end permit them to become effective without suspension on October __, 1979 until 12:01 AM January 1,1981 or until Three Mile Island Unit No. I resumes the generation of electric energy on a continuing basis, whichever occurs first; and (b) waive the requirements of part 35 of the Commission's Regulations under the Federal Power Act to the extent that such waiver may be necessary to permit the relef through this filing. , Copies of this letter and its enclosures are being furnished concurrently to the Regulatory Commission of Pennsylvania, New Jersey, Maryland, Delaware, Virginia, and the District of Columbia for their information. A check in the amount of $1,200.00 is enclosed pursuant to Section 36.2(f) of the Comminsion's Regulatiens to cover the filing fee determined as follows: $500.00 for a moderately complex rate schedule for one Party and $700.00 for concurrence by the other Parties. Very truly yours, I Wilmer S. Kleinbach Manager 1326 127 y - m ,,,

GPU DRAFT 10/8/79 Pennsylvania-New Jersey-Ilaryland Interconnection (PJM) Agreement INTERIM MODIFICATION TO SCllEDULE 6.03 ACCOUNTING FOR OPERATING CAPCACITY In recognition of the extraordinary circumstances resulting from the current lack of generation from Three Mile Island Units Nos. 1 and 2, the following section is an interim addendum to Schedule 6.03: (j) Until the Three Mile Island Unit #1 resumes the generation of electric energy on a countinuing basis or the end of 1980, whichever occurs first, operating capacity received by GPU Group from THE INTERCONNECTION of up to 1100 megawatts in each peak period, less any amount of operating capacity pur-chased by GPU Group from other Parties Hereto under bilateral agreements except the PE-JC Agreement dated July 13, 1979, shall not be accounted for in accordance with the procedures set forth in foregoing sections (d) (g) and (h) but instead shall be allocated among the Parties Hereto supplying operat-ing capacity to THE INTERCONNECTION in proportion to amounts supplied by each and in the accounting each shall be credit-ed for its allocated share of such supply at a rate per kilowatt equal to its average cost of operating capacity supplied to THE INTERCONNECTION increased by 10% and GPU Group shall be debited an amount equal to the sum of such credits. This procedure will no longer be applicable in the event the cumulative total of GPU Group energy receipts in 1980 exceeds the limit set forth in the Inter,im Modifi-cation to Schedule 7.01 issued October 1, 1979. GPU Grr ap receipts of operating capacity from THE INTERCONNECTION in excess of the aforementioned limits shall be accounted for in' accordance with the other sections of Schedule 6.03. This interim accounting procedure is null and void and with-out any effect whatsoever in the event any regulatory com-mission having jurisdiction over the rates charged to custo-mers or any Party Hereto proposes to negate or modify the normal means by which interchange results are reflected in rates and/or proposes to adjust costs of cervice for rate-making purposes in any manner adverse to a Party Hereto as a direct or indirect result of this filing.

                                                                                  .I326 128
                 - ~ -

   *

• gI L GPU DRAFT 10/8/79 Pennsylvania-New Jersey-Maryland Interconnection (PJM) Agreement INTERJM MODIFICATION TO SCllEDULE 7.03 ACCOUNTING FOR INTERCHANGE OF ENERGY Issued: October 1, 1979 Effective: (Date of filing)

In recognition o.t the extraordinary circumstances resulting from the current lack of generation f rom Three Mile Island Units Nos. 1 and 2, the following subsection is an interim addendum to section (c) or Schedule 7.01: (6) Until Three Mile Island Unit No. I resumes the generation of electric energy on a continuing basis or the end of 1980, whichever occurs first, energy received by GPU Group from TEE INTERC0tPJECTION of up to 1100 megawatthours each hour, less any amount of energy purchased by GPU Group from other Parties Hareto in bilateral agreements, except the PE-JC . Agreement dated July 13, 1979, shall not be accounted for in accordance with the procedures set forth in foregoing sec-tions (a) and (e) (1) through (5) but instead shall be al-located each hour among the Parties Hereto supplying energy to THE INTERCONNECTIOS during that hour in proportion to the amounts supplied by each and in the accounting each shall be credited for its allocated share of such supply at a rate per kilowatthour equal to its average cost of energy supplied to THE INTERCONNECTION during that hour increased by 10% and GPU Group shall be debited an amount equal to the sum of such credits. The cumulative total of GPb Grcup energy receipts from THE INTERCCNNECTION ac-counted for by this proceaure shall not exceed 7 million megawatthours in 1980. GPU Group receipts of energy from THE INTERCONNECTION in excess of the aforementioned limits shall be accounted for in accordance with other subsections of Schedule 7.01 (e). This interim accounting procedure is null and void and without any effect whatsoever in the event any regulatory commission having jurisdiction over the rates charged to custcmers of any Party Hereto proposes to negate or modify the normal means by which interchange results are reflected in rates and/or proposes to adjust cost of service for ratemaking purposes in any manner adverse to a Party Hereto as a direct or indirect result of this filing. 1326 129

      ~

GPU DRAFT 10/8/79 Pennsylvania-Neu Jersey-Maryland Interconnection (PJM) Agrecuent SCIIEDULE 10.01 SPECIAL BILLING PROCEDUMES DURING PERIOD WHEN INTERIM MODIFICATIONS TO SCHEDULES 6.03 AND 7.01 ARE IN EFFECT Issued: October 1, 1979 Ef fective: (Date of filing) (a) In association with the special accounting procedures set forth in the interim modifications to Schedule 6.03 and 7.01 issued October 1, 1979 which recognize the current lack of generation from Three Mile ', land Units Nos. 1 and 2, the following special billing procedures shall apply until Three Mile Island Unit No. 1 resumes the generatien of electric energy on a continuing basis or the end of 1980, whichever occurs first. (b) By the second working day after the end of each week, the office of THE INTERCONNECTION shall estimate the amount of GPU Group's debits and credits for that week for interchange of Operating Capacity and Energy, and for any allocated share of such transactions with others not party to this AGREEMENT, and when GPU Group's net balance for a week is a debit, the Office shall render an interim bill to GPU Group. This bill shall be due and payable to PE, as agent for THE INTERCONNECTION, on the fifth banking day esemon to PE and GPU Group after the day it is rendered. Payments by UPU Group shall be made by wire transfer of immediate available funds to the Billing Agent. The balances of such interim payments may be invested in short-term money market obligations as authorized by GPU Group subject to PE concurrence. PE, as agent, shall apply funds accumulated in the interim payment account in payment of GPU Group's net .conthly bill as determined in accordance with Sec-tion 11.1 of the AGREEMENT and concurrently shall disburse to GPU Group any remaining balance in the interim payment account for that month. (c) GPU Group shall be considered in default in the event payment of such interim bill is not made on or before the sixth banking day common to PE and GPU Group after the day it is rendered and so long as GPU Group remains in default, GPU Group shall not have a vote in PJM matters and the other Parties Hereto may refrain from rendering PJM benefits to GPU Group. (d) These special billing procedures are null and void and wi..iout any effect whatsoever in the event any regulatory commission having jurisdiction over the rates charned to customers of any Party Hereto proposes to ne-gate or modify the normal means by which interchange results are re-flected in rates and/or proposes to adjust cost of service for ratemah-ing purposes in any manner adverse to a Party Hereto as a direct or in-direct result of this filing. 1326 130

- ', / , GPU DRAFT 10/S/79 . PJM STUDY OF Tile EFFECT OF TilREC MILE ISLAND UNIT OUTAGES During September 1979, the PJM Production Cost Task Force conducted a study to determine the effect the Three Mile Island (TMI) Nuclear Plant outage on the production costs and interchange of the PJM member companies during the year 1980. The base case (Case A) determined the forecast production costs and inter-change values of the member companies during the study period with TMI Units 1 and 2 producing electric energy. The maintenance schedules used reflected the outages planned with both the TMI units producing electric energy during the study period. Case B is the same as Case A except the TMI Units 1 and 2 are removed from service during the study period and the maintenance schedule moaified to reflect that assumption. The forecast production costs and interchange values of the member companies were determined for these conditions. A 200 Mw energy-capacity transaction betueen GPU and external systems was in-cluded in the study in Case B. The result of the study is summarized in Table 1 and shown as a difference from the base case for each PJM member company or member company group. The following assumptions were used in the study:

1. Normal Pool-to-Pool transactions were neglected.

2. The most recent data representing the PJM load shape were used in the model.

3. The most recent unit forced outage data were used in the model.

4. Estimated fuel costs for the 1980 period were included in the study.

5. No limits were placed on any type of fuel availability nor were any units converted to alternate fuels.

Table II demonstrates the effect on a forecast basis on the total production costs of the member PJM companics, as a result of the member companies selling operating period. capacity and energy to GPU at a reduced rate during the 1980 study The magnitude of such sales to GPU at a reduced rate was limited to approximated 7,000,000 Mull. The payments made by CPU for such purchases are intended to assure the return to each seller his incremental cost of energy and operating capacity sold to GPU. l'326'13I aut * .7 *u*Wa +*m e em g e==. em m.e .anmann ew sme w e.. sogn.e ae...ee % .

t . I i, TABLE I , . 9 PJM STUDY OF THE EFFECT OF THREE MILE ISLAND UNIT OUTAGES YEAR 1980 I l l (1) (2) (3) (4) (5) (6) Total Total Purchased Billing For Billing; Production Gen. Cost Energy Purchases Sales For Sales Costs Co. Sx 106 Mwh x 1000 $x 10 6 Mwh x 1000 $x 10 6 Sx 10 6 PS 81.2 -1,451 -51.9 339 17.2 12.1 . PC 105.4 -2,050 -60.9 418 25.2 19.3 PPL 43.6 - 70 - 2.0 1,227 57.0 -15.4 BC 42.1 - 247 - 7.9 799 42.4 - 8.2 GPU 25.0 5,784 273.3 -2,138 -47.0 345.3* PEP 44.9 - 311 - 7.0 1,010 48.8 -10.9 TOTALS 342.2 1,655 143.6 1,655 143.6 342.2

• Demand charge for GPU's external purchase not included (1) Cost of fuel and variable operation and maintenance expenses incurred by each company.

(2) Anount of energy purchased by each company. (3) Dollars paid by each company for energy purchased. (4) Amount of energy sold by each company. (5)' Dollars received by each company for energy sold. w

       ~.

U' R N (6) Total production cost equals total generation cost plus purchase billing minus sale billing, E and does not include all billing for operating capacity transactions between PJM members. U i - N i

10/8/79 - < .ra . , TABLE II FORECAST PRODUCTION COSTS WITII AND WIT 110UT GPU's SPECIAL TRANSACTIONS YEAR 1980 DOLLARS'106 Increased Total Change In Increased Total Production Cost Billing Due To Production Cost fgt. Normal Accounting Special Accounting Special Accounting PS 12 1 13 PE 19 1 20 PPL -15 14 _3 BC -8 7 _1 GPU 345 -32 313 PEP -11 9 -2 TOTAL 342 342 e O O z' 1326 133

APPENDIX C , i - 1980 Differential Production Cost for -

  =

g- PJM Cornpanies

                       .g 400 E

l 2 350 - - 1b gi 300 - m O O 250 - - C O p 200 - O a B 150 - g 100 - g .- l- 50 - 0 "'U M - Eb- - Mia - amm- ag - - - - - - -- e f -50 . . l' 5 PS PE PL BC PEP GPU t M Differential between TMI Available and TMI Not Available -

                     &             with NormalInterchange Accounting h             Differential with PJM Proposal

APPENDIX D

 ,                                                                                                                                                        3 ESTIMATES OF " ACTUAL" COST OF D!I REPLACE:!ENT ENERGY

• j APRIL,- AUGUST 1979 & FORECAST 1980 .;

h - j , ($ MILLIONS) a AVC. f 1979 ALLOWED FORECAST

APRIL MAY- JUNE JULY AUGUST IN ORDER 1980

                   .. r..-ED i

Estir.atcd cost of TMI replacement energy before perenasce pc::er offsets (" gross" Dil replace-m u r. t ccst) $10.7 $10.4 $10.5 $14.3 $14.2 $10.0 $12.8 ti (Less): Estinated energy cost savings from shcrt-tera power purchases - (0.6) (0.6) (3.0) (3.0)(P) (2.5) (2.2)

'D                         :.a t D:I rep!r. cement energy cost                   $10.7    $ 9.8)   $ 9.9   $11.3    $11.2        $ 7.5         $10.6 r mc Estimated cost of T:!I replacement energy before M                purchased power offsets (" gross" TMI replace-g                 ne::t cost)                                                $ 4.1    $ 4.5    $ 4.6   $ 6.6    $ 4.1        $ 3.8         $ 6.2

'd ('_e s :) : a:tirated energy cost savings from W  :.imr:-tera u.rer purchases - (0.1) (0.1) (0.4) (0.4)(P) (0.9 ) (0.8) S 4.1 $ 4.4 $ 4.5 $ 6.2 $ 3.7 $ 2.9 $ 5.4 g 2.e :. T:!I replaccnent energy cost U J:T.4EY CENTIU.L Estir.ted cost of DII replacement energy before pu. chased poster of f sets (" gross" D11 replace-c.cr.c cost) $ 8.1 $ 6.8 $ 7.8 $ 8.6 $ 6.9 $10.2 $13.3

           ,        (I.e s s ) :  Estinnted energy cost savings from shcrt-tern power purchases                                      -

(0.5) (0.4) (2.1) (2.1) (P) (2. 5 ) (2.7)

c. t DII replacement energy cost S 8.1 $ 6.3 $ 7.4 $ 6.5 $ 4.8 $ 7.7 $11.1 r?u Estin nel cost of DfI replacement energy before purchased power offsets (" gross" TMI replace-me:u cost) $22.9 $21.7 $22.9 $29.5 $25.2 $24.0 $32.3

                    .(Las s ) :   Estin.ated er.ergy cost savings from W          sharr-tera power purchases                                       -

(1.2) (1,1) (5.5) (5.5)(P) (5.9) (5.7)

,e t D:I replacceent energy cost .$22.9 $20.5 $21.8 $24.0 S19.7 $18.1 $27.1 W

             '. u (p) I'reliminary - presumed the same as July.

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m. 5 r*a M/ 3 260 Cherry Hdiibud L_ j U aJ e A* Parcippany New Jersey 07054 (201) 263-6500 October 18, 1979 Mr. William P. Thierfelder, Secretary Pennsylvania Public Utility Commission P. O. Box 3265 Harrisburg, Pennsylvania 17120 Re: Metropolitan Edison Company and Pennsylvania Electric Company Docket No. I-7';040308

Dear Mr. Thierfelder:

On October 10, 1979, Metropolitan Edison Company (" Mot-Ed") and Pennsylvania Clectric Company ("Penelec") filed with the Commission a Petition for a Declaratory Order deter-mining that acceptancc by Met-Ed and Penelce of a proposal of the other members of the Pennsylvania-itew Jersey-Maryland Interconnection ( " PJ M" ) with respect to the sale by them of power to replace that not available to Met-Ed, Penelee and Jersey Central Power & Light Company (the "GPU Ccapanies") from the Three Mile Island nuclear generating station woa3d constitute appropriate compliance with the directive of your Commission in Clause 7 of its Order enrered June 19, 1979 in this proceeding. Essentially that PJM proposal would substitute (1) average incremental cost plus 10% for (2) average incremontal cost plus split-savings as the basis of the pricing to'the GPU Companies of PJM interchange sales to replace TMI generation. Certain studies were made by the PJM Production Cost Task Force to indicate the order of magnitude changes in payments in 1980 resulting from the PJM proposal. I uas asked by your Commission's staff to indicate the consequences if certain variations were made in the assumptions employed in the PJM study and this letter reports the results. For clarity, I have indicated first the assumption employed in the PJM study and then the variations which I have inve st i-gated. ~ G N$ 4 k ,ok If k M7 k 4 j l . , 'l e fg h

t 2

1. The PJM Production Cost Task Force Study assump-tions included assumptions that (a) fuel costs for PJM uould be, on average, in 1930 approximately 9% above the level existing in August, 1979, and (b) commercial generatica from Salem Unit No. 2 would be available for the last six months of 1980. Based upon these and the other assumptions, it was estimated by the Task Force that the PJM proposal would produce energy cost savings for the GPU companies during 1980 of approximately $32 million as against the energy costs to the GPU Companies for interchange purchases from PJM on the basis of average incremental cost plus split-savings.

We stated that a different rate of escalation of fuel costs or the non-availability to PJM of one or more large base load generating units (beyond the non-availability resulting from the forced outage rate data used in the PJM study) were among the many factors that could cause the estimated savings to be greater or lesser than the S32 million estimate. The Staff requested that we indicate an order of magnitude of the change tnat would result if different fuel cost escalatien and forced outage rate assumptions were used. We have made a GPU study in response to that request which assumes that (a) fuel cost escalation would be 15% (rather than 9%) and (b) in addition to the forced outages involved in the PJM study, the Salem Unit No. 2 would not be available during the last half of 1980. (We are not making any predic-tions with respect to Salem, as such, but it was a relatively simple way of illustrating the impact of the additional non-availability to PJM of a large base load nuclear unit.) Based on these two modified assumptions, the 1980 savings to the

          .GPU Companies resulting from the PJM proposal would increase by $2 million, i.e., from the $32 million referred to above to S34 million. We have not made a study of the impact of fuel cost escalation in excess of 15% and/or an additional loss to PJM of base load generation, but we believe that the further increase in GPU 1980 savings resulting from such factors would be similarly modest.

We have not made an estimate of the potential impact on savings to the GPU Companies from the PJM proposal if fuel cost escalation were to be less than 9%, but the recent actions of foreign fuci suppliers make an escalation rate of less than 9% extre .ly unlikely.

2. The PJM proposal assumed that the GPU Companies would purchase 200 MW per hour from suppliers outside PJM.

We stated that the policy of the GPU Companies would be to 1326 13T

r . 3 continue purchases from outside PJM whenever such purchases were economically advantageous to the GPU Companies (i.e., would produce greater savings to the GPU Companics than pur-chases under the PJM proposal). The Staff requested that we indicate the order of magnitude impact on the savings under the PJM proposal if the purchases from outside PJM were larger. We have made two studies in response to that request. First, we assumed that purchases from outside PJM would continue at the level of such purchases in July, August and September, when the GPU Companies were net sellers of interchange to PJM. (Most of the GPU sales of interchange to PJM during those months were off-peak with purchases from PJM being predominantly on-peak.) On that basis, we estimate that the 1980 savings to the GPU Companies from the PJM pro-posal would be approximately $10 million, rather than the

          $32 million resulting from the PJM study. Under those circumstances, the impact of the PJM Proposal on the selling PJM Companies will be correspondingly reduced, since they will not be foregoing unexpected revenues (in the form of split savings) on sales that they would not be making in any event.

Alternatively, we assumed that, in addition to the 200 MN purchases per hour assumed in the PJM stual, the GPU Companies would purchase an additional 240 Mu per hour from external sources, i.e., a total of 440 MW per hour. On that basis, our study indicates that the 1980 savings to the GPU Companies under the PJM proposal would be approximately S30 million, rather than $32 million. The reason that the purchase by the GPU Companies of an additional 240 MU per hour from outside PJM has only a limited impact on the savings of the GPU Companies from the PJM proposal is that the GPU Companies expect to be purchasing in 1980 an average total of about 1100 MW per hour of power from other suppliers including PJM. Consequently, the purchase of an aggregate of 440 MW per hour from outside PJM will not reduce the pur-chases from PJM by the GPU Companies significantly below the 7,000 GWH per year level covered by the PJM proposal. As we have sought to make clear, the estimate of S32 million of savings to the GPU Companies which results from the PJM Proposal is not a direct addition to the sa~vings which the GPU Companies have realized during the last three months as a result of their purchases from sources outside PJM . It is, instead, for the most part, an alternative to the savings to the GPU Companies from such cutside purchases - i.e., the GPU Companies would have no need for both the purchases outside 1326 138

S

. 4 PJM and the level of interchange purchaces assumed in the PJM studies. The PJM proposal is, however, significant to the GPU Companies in two respects: (a) It provides come assurance of lower energy costs than those resulting from pricing on a split-savings basis if the outside purchases should not be available (because the outside suppliers could not make eco-nomically advantageous energy available for GPU, as a conse-quence of outages of generating capacity or for other reasons);

and (b) It would provide 1980 savings to the GPU' Companies' of approximately $10 million, even if~the GPU Companies' purchases from outside PJM were as large as they were in July, August and 3eptember. Our best estimate is that, apart from the factors referred to in the next paragraph, the PJM proposal will result in 1930 savings to the GPU Companies of between

            $10 million and $30 million, as against the energy costs which would prevail if PJM sales to the GPU companies were priced on the average incremental cost plus split savings basis. Stated in a different way, we expect that the pur-chases of the GPU Companies from outside PJM will be in excess of the 200 MW per hour ascumed in the PJM proposal, but will be less than such purchases made during the July-September 1979 period.

3. It has not been feasible in either the PJM study or the GPU studies to quantify the potential impact on the 1980 savings resulting from the PJM Proposal of either (a) reductions in customer consumption within PJM and the GPU companies resulting from either a down-turn in regional economic conditions or the response to increased energy costs, or (b) reductions in customer consumption in the service areas of companies outside PJM from cuch factors, which could have the consequence of making outside supplies more available or lower in price. However, under those conditions, the PJM Proposal would still be advantageous to the GPU Companies as against pricing of interchange purchases by the GPU Companies from PJM on the basis of average incremental coct plus split-savings. On balance, it ap-pears likely that these factorc would reduce the quantity of savings resulting from the PJM Proposal but that they would still be within the S10 million to $30 million range.

4. The Staff has also requested that we furnish the data concerning the impact that the PJM Proposal would have had on the GPU Companies if it had been in effect

, during the first cix months of 1979. The following tabula-tion provides such data, on a month-by-month basic, for 1326 139

5 those six months and also for July, August and September: Savings to GPU Companies from PJM Proposal as Against Pricing on Existing Basis Scvings Month (in millions of dollars) January $ 2.7 February 2.0 March 2.8 April 3.9 May 4.1 June 2.2 July 0.7 August 0.7 September 0.7 Total $19.8 In reviewing such data, it should be noted that (a) the first three months were prior to the TMI-2 accident but included the refueling outage of THI-l during February 16, 1979-March 28, 1979, (b) the second three months werc after the THI-2 accident and prior to the initiation of substantial purchases from outside PJM and-(c) the last three months were periods of substantial purchases from out-side PJII. Under the terms of the PJM proposal, it would not have been applicable to the circumstances existing during the January-March 1979 period when one TMI unit (namely, TMI-2) was operating and the other TMI unit (namely, TMI-1) was down for a normal refuel outage.

5. Neither the PJM studies nor the variants resulting from the GPU studies referred to above have sought to determine the absolate level of energy costs for the GPJ Companies or any of the other PJM companies. In-stead, they have been confined to an examination, based upon reasonable assumptions, of the order of magnitude of-feet.resulting from the PJM proposal as against the pricing of all interchange purchases from PJM on the existing split-savings basis. Consequently, the GPU Companies are not asking the Commission by the subject Petition to make any determination at this time of the reasonableness of their energy costs or the rate at which such costs should be recovered from customers. Those matters will be adressed in other proceedings. The purpose of the Petition is limited, as stated therein, to seeking a determination that acceptance of the PJM Proposal reasonably satisfies the Commission's directives in Clause 7 of the Order ap-proved June 19, 1979.

1326 140

Je

      -                                6

6. As everyone who has worked with the forecasting of interchange transactions realizes, it is inherently not susceptible to precise determinations. Even under normal conditions, the variables are so numerous and their inter-relationships are so complex that changes in actual condi-tions produce significant departures from forecasts. At the present time, the volatile fuel market, uncertainties con-corning economic conditions in the Nation and the region, uncertainties concerning the impact and timing of environ-mental requirements and the like increase these difficulties of forecasting. We, therefore, cannot and do not represent that the data submitted are precise predictions of what will happen. We do believe that the orders of magnitude presented are reasonable and that, whether the actual results are greater or lesser than those forecast, the result of the PJM Proposal is a significant step in accomplishing the objectives contemplat.ed by the directives of the Commission.

I believe that the foregoing responds to the Staff's request. If desired, this letter may be included in the record in these proceedings. Ver truly,yours,

                                                ,Yf
                                                       ,+ m              .

H. Sims Vice President

                                                               ~1326 141

SECURITIESANDEXCHANGECOMMIShION WASHINGTON, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 11, 1979 GENERAL PUBLIC UTILITIES CORPORATION (Exact name of registrant as specified in charter) Pennsylvania 1-3292 13-5516989 (State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No.) 260 Cherry Hill Road, Parsippany, New Jersey 07054 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (201) 263-4900 METROPOLITAN EDISON COMPANY (Exact name of registrant as specified in charter) Pennsylvania 1-446 23-0870160 (State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No.) 2800 Pottsville Pike, Muhlenberg Twp., Berks County, Pa. 19604 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 929-3601 PENNSYLVANIA ELECTRIC COMPANY (Exact name of registrant as specified in charter) Pennsylvania 1-3522 25-0718085 (State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No. 1001 Broad Street, Johnstown, Pa. 15907 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (814) 536-6611 JERSEY CENTRAL PCWER & LIGHT COMPANY (Exact name of registrant as specified in charter) New Jersey 1-3141 21-0485010 (State of Incorporation) (Ccmmission File No.) (I.R.S. Employer Identification No. Madison Avenue at Punch Bowl Rd . , Morristown. N'.J. 07960 (Address ot principal executive offices; (Zip Coce) Registrant's telephone number, including area code 01 4 5-8200

e Item 5. Other Materially Important Events.

1. Rate Proceedings.

As earlier reported in the Current Report on Form 8-K dated July 5, 1979, the Pennsylvania Public Utility Commission ("PaPUC") in its June 15, 1979 rate orders for Metropolitan Edison Company (" Met-Ed") and Pennsylvania Electric Company ("Peneleed) determined that as a result the March 28, 1979 accident, Three Mile Island Unit No. 2 ("TMI-2") was not "used and useful property in the,public service" and therefore removed TMI-2 from the base rates of the companies. The June 15, 1979 order (a copy of which was filed as an exhibit to that Form 8-K report,also provided, among other things, that with respect to Three Mile Island Unit No. 1 ("TMI-1"), the unit not damaged by the accident, if start up was delayed beyond January 1, 1980, the PaPUC would require Met-Ed and Penelec to show cause why TMI-l is "used and useful" and why its associated costs should not be removed from customers rates. By order adopted September 20, 1979, the PaPUC has now di-rected Met-Ed and Penelec to show cause why TMI-l should be con-sidered used and useful in the public service and why the costs asscciated with the unit should not be removed frcm the base rates of the companies. The PaPUC action follows an August 9, 1979 order of the Nuclear Regulatory Commision ("NRC"). That NRC order (which was previously reported in, and filed as an exhibit to, the Quarterly Reports on Form 10-0, dated August 4, 1979, of GPU and each of its operating subsidiaries provides, among other things, 1 1326 143

for an extended hearing and decision making process before TMI-l can return to service, with the result that the unit could not resume operation until well beyond January 1, 1980. A copy of the PcPUC's order and the press release issued by GPU with restact thereto is annexed hereto as exhibits.

2. Declaration cf Quarterly Dividend.

On October 4, 1979, GPU's Board of Directors declared a quarterly dividend continuing the reduced rate of 25 cents per share. The dividend is payable on November 26, 1979 to shareholders of record on October 25, 1979.

3. Election of John O' Leary.

At its October 4, 1979 meeting, the GPU board elected John O' Leary as a director of GPU. In addition to the many posi-tions he has held in government and private industry, Mr. O' Leary had most recently been Deputy Secretary of the U.S. Department of Energy from October 1977 until September 1979.

4. Revolving Credit Agreement.

As previously reported in the Current Report on Form 8-K, dated July 5, 1979, on June 15, 1979 the GPU companies entered 1326 144

into a Revolving Credit Agreement (" Agreement") with a synhicate of commercial banks. Pursuant to the terms of the Agreement, the promissory notes issued to the banks by the GPU companies are to mature on October 1, 1979 and each six months thereafter, with a final maturity date of October 1, 1981. On October 1, 1979, pro-missory notes of the GPU companies outstanding under the Agreement aggregating $219,900,000 matured and the GPU companies issued to the banks new notes, in like aggregate principal amount, maturing on April 1, 1980.

5. Press Releases.

Subsequent to the Current Report on Form 8-K for August 1979, the GPU companies have issued additional press releases concerning the nuclear accident which occurred at TMI-2 and its aftermath. Copies of these press releases are annexed as exhibits to this report.

6. Investigation and Inquiries.

Investigations and inquiries into the nature, causes and consequences of the TMI-2 accident, commenced by various federal and state bodies, are continuing. GPU is unable to estimate the full scope and nature of these continuing investigations or the potential consequences tnereof to the investors in the securities of GPU and its subsidiaries. GPU is also unable to determine the impact, if any, the results of such investigations may have on the proceedings to return TMI-l to service. Item 7. Financial Statements and Exhibits. Exhibits: 5

1. Show Caure Order of the Pennsylvania Public

4-Utility Commission adopted September 20, 1979.

2. GPU news releases issued from September 11, 1979 through October 10, 1979.

e 1326 146

SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE UNDERSIGNED COMPANIES HAVE DULY CAUSED THIS STATEMENT TO BE SIGNED ON THEIR BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.

                                 '        GENERAL PUBLICAT.iTILITIES CORPORATION JERSEY CENTRAL POWER & LIGHT COMPANY METROPOLITAN EDISON COMPANY PENNSYLVANIA ELECTRIC COMPANY By:              w  N     /   !

W. G. uhns, Chairman Date: October 9, 1979

                                                                         .1326 147

PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg, PA 17120 Public Meeting held September 20, 1979 Commissioners Present: W. Wilson Goode, Chairman Louis J. Carter Michael Johnson Pen:c .'vania Public Utility Commission, et al. I-79040308 v. Metropolitan Edison Company and Pennsylvania Electric Company, Respondents ORDER TO SHOW CAUSE BY THE COMHISSION: The Commission, in its order adopted June 15, 1979 at this docket, stated in part:

                        ,'.'Three Mile Island, Unit No. 1 (TMI-1)

The parties have raised the issue of the used and useful status of THI; however, the Commission need not reach that issue at this time. Consistent with the principles discussed with respect to TMI-2, TMI-l is

                      . at present only experiencing an outage. TMI-l was out of service for a scheduled refueling when the incident at THI-2 occurred.         Its resumption has been delayed, and it is now experiencing an unscheduled outage. 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-1 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 Commission monthly on the progress in returning TMI-1 to service. If that start-up is delayed beyong January 1, 1980, the Commission will issue an order to show cause why TMI-1 should be considered used and useful in the public service." (footnote omitted) 1326 148

                                                                                             ~ ' ~ ~

N....$ N . .. . - - - . - - - - - - '--~~~~~'~~"~~~~- ^ ~ ' ~ ~ ~ ~ ~ ' The Commission hereby takes notice that TMI-l is noc operating and that the Nuclear Regulatory Commission ("NRC"), at NRC Docket No. 50-289, has suspended the license to operate THI-1 until after hearings before an Atomic Safety and Licensing Board and a decision of the NRC itself which will not take place until well beyond January 1, 1980. Therefore, the Commission hereby orders Metropolitan Edison Company and Pennsylvania Electric Company to show cause: (1) why TMI-l should be considered used and useful in the public service, and (2) why all of the costs associated with TMI-l should not be removed from their respective base rates. And THEREFORE: IT IS FURTHER ORDERED: .

                                                  ~

1. That Metropolitan Edison Company and Pennsylvania Electric Company shall answer this order to show cause as provided in 1 Pa,. Code _

535.37 within twenty (20) days af ter the date of entry.

2. '.That interested persons may request leave to intervene in this matter and may respond to this order to show cause within thirty (30) days af ter the date of entry.

3. That a copy of this order to show cause shall be served on respondents and all parties of record at Docket No. I-79040308.

BY THE COMMISSION

                                                     /                     }&
                                                     +f     .

William P. Thierfelder Secretary (SEAL) ORDER ADOPTED: September 20, 1979 ORDER ENTERED: SEP ^-211979 1326 149'

            ~

Mews ReBesee . General Public Utilities j oeu- z,;W Corporation d 260 Cherry Hill Road J r ry g Parseppany New Jersey 07054 [ d /g Kenneth C. McKee Further informaton: (201) 263-4900 N# 'd'ase- IMMEDIATELY Date: September 20, 1979 PARSIPPANY, N.J., September 20, -- General Public Utilities (GPU) Chairman William G. Kuhns commented today on the Pennsylvania Public Utilities Commission's (PUC) "show cause" orders for Metropolitan Edison Company and Pennsylvania Electric Company regarding Three Mile Island Unit-1.

                        "The PUC's action is consistent with their rate order of June 15 for Met-Ed and Penelec which assumed Three Mile Island Unit-1 -- the unit not damaged by the accident -- would be re-turned to service January 1, 1980," said Kuhns.

At that time, the Commission stated investigations would be conducted if Unit-1 was not back on-line by the first of the year and that Met-Ed and Penelec would have to show cause why the Unit is "used and useful" and why the costs associated with Unit-1 should not be removed from customer rates.

                        " Subsequently," Kuhns explained, "The Nuclear Regulatory Commission (NRC) issued an order which calls for an extended period of time to hold public hearings before Unit-1 can be returned to operation. Quite simply, the NRC's announced schedule precludes our meeting ~ the service date establised by the Pennsylvania PUC and it is this which has prompted today's action.
                        "We believe that Unit-1 is indeed "used and useful." During
                                             ~

the 4 1/2 years of its operation before the Unit-2 accident, Unit-1 performed well above the national average. It has saved our customers over $300 million compared to aq alternative oil-fired plant. As soon as the plant is allowed to return to service, it will continue to provide the energy equivalent to 8 million barrels of oil each year. The 1979 increase in the price of this amount of oil exceeds the annual capital and operating costs, for that Unit." 1326 150

2-

            "We would hope that the PUC will recognize that the delay is a direct result of the NRC order and urge that the public hearings and decision making process be expedited to allow the safe return to service of Unit-1 as rapidly as possible," Kuhns concluded.
                                      - end -

e h

                                                             ! 1326   151

      ."            .      (814) '5'36-6611 IbEDIATF.                                                   Septernbar 21, 1979 reported that a routine inspection
                                             ~

Ponnsylvanic Electric Compat ' (penele Thurnday of the decommios'ioned Snxton Nuclear Plant revealed a amall nren of

                                          ~

contamination adjacent to the plant nite. "Ihe inspection was conducted by Karl Flum]ce of the ERC regional of fice, King of Prussia, pennnylvania. Inocroment readings of the small. nrea uithin the encioned property of the site registered 20 millireza per hour of radiation. - The radioactivity count regintered i only when instrumentat. ion was within inches of the soil in an area appror.imately nine feet in diameter.

  '.               Samples of the soil from the affected area are beinp, shipped to an independent
    ' laboratory for analysia.                 In addition, all contaminat ed soil will he renoved f rom
    ' the arca, placed in special containcra and cecured within a building located at the

Saxton site pending cumpletion of the Jaboratory analysis.

According. to a company spokesman, this is the first time that contanin.3tien , han been detected in the area by survey inspections ubich have been conducted on a quarterly basis since 1973. The spokesman pointed out that the public would not be ~affccted in nuy way by the contamination, inasmuch us the affected aren in bounded by a fenco maintained by pencice. o

-.l .. 3e.. S.ax.*.on !!uchat T.xp,criment.nl station was_operat ed under a license issued.

l . t the Saxton Nuclear Er.perimental Corporation (.Cp.C), a wholly owned subsidiary of General Public Utilities Corporation. It was in operation from 1962 to 1972

    .      I and decommiosioninr. van completed by 1973.                  At that time nuclear fuel was removed fro:t the site and sent to the Savannah River facility of the former AtoW.c Er. orgy Commission, now the Depirtment of Energy.

A representative of Flir.C innpects the decomminniened f acility on n quart erly l' basis and the HRC inspects it overy olhor year, SHr.C and the NRC are comitted to maintain the present ing;iect ien schedule, quarterly and tinnnually until the yenr 2000. "uder 1. resent ver.ulat ono.

             .                                                                                          '1326 152
            *                             .N.    ,,

4 Mews ReBeace General Public Utilities " f'G"'- ' f y)C5'4 Corporation , 260 Cherry Hill Road ' -' ' ' Parsippany New Jersey 07054 201 263 6

                                                   ,, 7.,

[/

                                                                  ;7 .. g3 4

Funher information: Kenneth C. McKee (201) 263-4900 For release. Date: IMMEDIATELY September 28, 1979 PARSIPPANY, N.J., September 28 -- General Public Utilities Corporation today announced its financial results for the first eight months of 1979 and for the 12 months ended August 31, 1979. The.following tables contain the information: " EIGHT MONTHS ENDED AUGUST 31 1979 1978  % Chance Sales of Electricity (Thousands of MWB) 21,725 20,916 4 Total Revenues (000) $ 971,237 $ 883,619 10 Revenues Other than Those Related to . Energy Costs (000) $ 654,500 $ 595,291 10 Net Income (000) S 73,502 S 90,692 '(19) Average Common Shares Outstanding (000) 61,195 59,979 2 Earnings per Average Share $1.20 $1.51 (21) TWELVE MONTHS ENDED AUGUST J 1 Sales of Electricity (Thousands of MWH) 32,080 30,760 4 Total Revenues (000) $1, 414, 262 S1,298,628 9 Revenues Other than Those Related to Energy Costs (000) S 956,728 $ 875,027 9 Net Income (000) S 121,584 S 141,295 (14) Average Common Shares Outstanding (000) 61,028 59,845 2 Earnings per Average Share $1.99 S2.36 (16) 1326 153

     ~

Mewe Re]eme Gweral Public Utilities .- u--rgg Corporation T ' 260 Cherry Kil Acad ?arsippany New Jersey 07054

                                                         ;

f "[W "}I 4 20i 263 4900 mWu . . Wh Funher informabon: Kenneth C. McKee (201) 263-4900 For release Immediately Date: October 4,1979 Released to wire services 10/4/79 PARSIPPANY, N.J., October 4 -- General Public Utilities Corporation (GPU), parent company of Metropolitan Edison Company, today announced the election of John F. O' Leary as a member of the Board of Directors. Mr. O' Leary was formerly Deputy Secretary of the U.S. Department of Energy. He assumed that position upon the creation of the Department in October 1977 and continued in that capacity through September of this year. Mr. O' Leary has devoted most of his career to the field of energy having served in various state and federal energy. posts as both an administrator and regulator. Prior to joining the Federal Energy Administration in early 1977 as Administrator, Mr. O' Leary had served as Administrator of the New Mexico Energy Resources Board. He had previously been technical director of energy resources and the environment division of the MITRE Corporation, a system analysis firm, and a private consultant on energy matters to government agencies and other organizations. From 1972 to 1974, Mr. O' Leary was Director of Licensing for the Atomic Energy Commission. He was self-employed as an energy consultant to firms in the petroleum, natural gas, and coal industries from 1970 to 1972.

                                                  -more-1326 154

 ~   +

GPU News Release Page 2 He served as Director of the Bureau of Mines from 1968 to 1970, and in 1967 and 1968 as Chief of the Bureau of Natural Gas of the Federal Power Comission. He held the position of Deputy Assistant Secretary for Mineral Resources in the Department of the Interior from 1962 to 1967. Between 1952 and 1962, Mr. O' Leary was an economist in the office of the Assistant Secretary of the Interior for Natural Resources. In the latter part of that period, he was a senior staff economist in that office. Mr. O' Leary was born June 23, 1926 and received an A.B. in economics from the George Washington University in 1950. The Board of Directors declared a quarterly dividend of 25 cents per share on the comon stock of the Corporation. The dividend is payable November 26, 192f . 1969, to stockholders ,of record October 25, 1979. 1326 155}}