-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LDwSyl/nUvKb15qMzx5yqbDUviBMYKAjQ33TRKKOtHD5SHnYYctetQVcHlAgceGu XpdYR7ILLI5I7/QdWzx0EA== 0000950120-05-000718.txt : 20051027 0000950120-05-000718.hdr.sgml : 20051027 20051027152058 ACCESSION NUMBER: 0000950120-05-000718 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20051027 DATE AS OF CHANGE: 20051027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTENERGY CORP CENTRAL INDEX KEY: 0001031296 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 341843785 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1/A SEC ACT: 1935 Act SEC FILE NUMBER: 070-10322 FILM NUMBER: 051159966 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 BUSINESS PHONE: 3303845100 MAIL ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 U-1/A 1 d202722.txt AMENDMENT NO. 1 (As filed with the Securities and Exchange Commission on October 27, 2005) File No. 70-10322 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------------------------------------- FORM U-1/A AMENDMENT NO. 1 TO APPLICATION/DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 FirstEnergy Corp. Ohio Edison Company The Cleveland Electric Illuminating Company The Toledo Edison Company Pennsylvania Power Company FirstEnergy Nuclear Generation Corp. 76 South Main Street Akron, Ohio 44308 (Names of companies filing this statement and address of principal executive offices) ---------------------------------------------------------------------- FIRSTENERGY CORP. (Name of top registered holding company parent of applicants) ----------------------------------------------------------------------- Leila L. Vespoli Douglas E. Davidson, Esq. Senior Vice President and Thelen Reid & Priest LLP General Counsel 875 Third Avenue FirstEnergy Corp. New York, New York 10022 76 South Main Street Akron, Ohio 44308 (Names and addresses of agents for service) ----------------------------------------------------------------------- The Application-Declaration filed in this proceeding on July 18, 2005 is hereby amended and restated in its entirety to read as follows: ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS ------------------------------------ 1.1 Introduction. ------------ FirstEnergy Corp., an Ohio corporation ("FirstEnergy"), is a registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act")./1/ FirstEnergy directly owns all of the outstanding common stock of Ohio Edison Company ("Ohio Edison"), The Cleveland Electric Illuminating Company ("Cleveland Electric"), and The Toledo Edison Company ("Toledo Edison"), and indirectly through Ohio Edison owns all of the outstanding common stock of Pennsylvania Power Company ("Penn Power")./2/ Ohio Edison, Penn Power, Cleveland Electric and Toledo Edison are referred to herein as the "Utility Subsidiaries." When the transactions described below are completed, FirstEnergy will become the parent holding company of FirstEnergy Nuclear Generation Corp. ("FE Nuclear"), a newly organized Ohio corporation. FE Nuclear will be a non-exempt electric generation company subsidiary of FirstEnergy. FirstEnergy, the Utility Subsidiaries, and FE Nuclear are referred to herein as the "Applicants." 1.2 Description of Utility Subsidiaries' Operations. ----------------------------------------------- Ohio Edison was organized under the laws of the State of Ohio in 1930 and owns property and does business as an electric public utility in that state. Ohio Edison also has ownership interests in certain generating facilities located in the Commonwealth of Pennsylvania. Ohio Edison engages in the generation, distribution and sale of electric energy to communities in a 7,500 square mile area of central and northeastern Ohio having a population of approximately 2.8 million. Ohio Edison owns all of Penn Power's outstanding common stock. Penn Power was organized under the laws of the Commonwealth of Pennsylvania in 1930 and owns property and does business as an electric public utility in that state. - ---------- 1 See FirstEnergy Corp., Holding Co. Act Release No. 27459 (Oct. 29, 2001), as supplemented by Holding Co. Act Release No. 27463 (Nov. 8, 2001) (the "Merger Order"). 2 FirstEnergy's other public utility subsidiaries are Jersey Central Power & Light Company, Pennsylvania Electric Company, Metropolitan Edison Company, York Haven Power Company, The Waverly Electric Power & Light Company and American Transmission Systems, Incorporated. These companies are not applicants in this proceeding. 2 Penn Power engages in the generation, distribution and sale of electric energy in a 1,500 square mile-area of western Pennsylvania having a population of approximately 300,000. Penn Power is also authorized to do business and owns property in the State of Ohio. Cleveland Electric was organized under the laws of the State of Ohio in 1892 and does business as an electric public utility in that state. Cleveland Electric engages in the generation, distribution and sale of electric energy in an area of approximately 1,700 square miles in northeastern Ohio having a population of approximately 1.9 million. It also has ownership interests in certain generating facilities located in Pennsylvania. Toledo Edison was organized under the laws of the State of Ohio in 1901 and does business as an electric public utility in that state. Toledo Edison engages in the generation, distribution and sale of electric energy in an area of approximately 2,500 square miles in northwestern Ohio having a population of approximately 800,000. It also has interests in certain generating facilities located in Pennsylvania. Filed herewith as Exhibit H is a table showing the components of consolidated capitalization as of June 30, 2005, of FirstEnergy, Ohio Edison, Penn Power, Cleveland Electric and Toledo Edison. The Utility Subsidiaries are requesting authorization herein to transfer ownership of their respective interests in certain nuclear generating plants and related assets and liabilities to FE Nuclear. These asset transfers are in furtherance of FirstEnergy's Ohio and Pennsylvania corporate separation plans, which were described in FirstEnergy's Application/Declaration for authorization to merge with GPU, Inc. ("GPU"). In addition, FirstEnergy and FE Nuclear are requesting authorization to engage in financing and other related transactions for the period commencing on the effective of the order issued in this proceeding and ending on February 8, 2006 (the "Authorization Period"). 1.3 Transfer of Nuclear Generating Plants to FE Nuclear. --------------------------------------------------- The Utility Subsidiaries own, as tenants in common, interests in the following nuclear generating plants:
Plant Location MW Ownership % - ---------------- ----------------------- ------------- ------------------------- Beaver Valley 1 Shippingport, PA 821 Ohio Edison 35% Penn Power 65% - ---------------- ----------------------- ------------- ------------------------- Beaver Valley 2 Shippingport, PA 831 Ohio Edison 20.22% Penn Power 13.74% Cleveland Electric 24.47% Toledo Edison 1.65% - ---------------- ----------------------- ------------- ------------------------- Davis-Besse Oak Harbor, OH 883 Cleveland Electric 51.38% Toledo Edison 48.62% - ---------------- ----------------------- ------------- ------------------------- 3 - ---------------- ----------------------- ------------- ------------------------- Perry North Perry Village, OH 1,260 OES Nuclear 17.42% Penn Power 5.245% Toledo Edison 19.91% Cleveland Electric 44.85% - ---------------- ----------------------- ------------- -------------------------
The Utility Subsidiaries propose to sell or otherwise transfer their respective ownership interests in the nuclear plants to FE Nuclear by means of the following transactions, all of which will be carried out concurrently:/3/ Transfer of Nuclear Plants by Penn Power. Initially, pursuant to the terms of a Subscription and Capital Contribution Agreement ("Penn Power Contribution Agreement"), filed herewith as Exhibit B-1, Penn Power will acquire 100 shares of common stock of FE Nuclear in consideration for Penn Power's contribution to FE Nuclear of its undivided interests in the two Beaver Valley units and Beaver Valley common facilities and its undivided interest in Perry Unit 1, together with associated decommissioning funds. In connection with such contribution, FE Nuclear will assume Penn Power's obligations in respect of $64 million aggregate principal amount of pollution control revenue bonds ("PCRBs") and certain other liabilities associated with the transferred units. The parties to the Penn Power Contribution Agreement have agreed that the value of the contributed assets will be the net book value thereof as of the end of the fiscal quarter immediately preceding the closing. Simultaneously, Penn Power will receive from FE Nuclear a promissory note in the form of Exhibit B-5 hereto ("FE Nuclear Note") in respect of the book value of certain related assets, including construction work in progress, nuclear fuel, inventories and spare parts and accounts receivable, determined as of the end of the quarter immediately preceding the closing. The FE Nuclear Note will bear interest at a rate equal to Penn Power's weighted average cost of long-term debt, determined as shown in Exhibit I hereto, will mature 20 years after its date of issuance, and will be prepayable at any time, in whole or in part, by FE Nuclear. Following the contribution to FE Nuclear, Penn Power will distribute the stock of FE Nuclear as a dividend to its parent, Ohio Edison, such that FE Nuclear will become, momentarily, a direct wholly-owned subsidiary of Ohio Edison. If the transactions described in the previous paragraph had occurred on March 31, 2005, Penn Power's cost basis for the stock of FE Nuclear would have been equal to the net book value of the transferred interests in the Beaver Valley and Perry units and associated assets (approximately $542 million), less the PCRB obligations ($64 million) and agreed upon value of other liabilities assumed by FE Nuclear (approximately $401 million), and the distribution of the stock of FE Nuclear to Ohio Edison would have resulted in a charge to Penn Power's retained earnings of $77 million. - ---------- 3 The Utility Subsidiaries do not propose to transfer to FE Nuclear their remaining percentage ownership interests in certain of the nuclear facilities that are currently subject to sale and leaseback arrangements with third parties. 4 Transfer of Nuclear Plants by Ohio Edison. Pursuant to the terms of a Capital Contribution Agreement ("Ohio Edison Contribution Agreement"), filed as Exhibit B-2 hereto, Ohio Edison will contribute its undivided interests in the two Beaver Valley units and Beaver Valley common facilities and the common stock of OES Nuclear Incorporated ("OES Nuclear"), a wholly-owned subsidiary of Ohio Edison, which holds an undivided interest in Perry Unit 1, together with associated decommissioning funds and its interests in other assets, inventories, fuel, spare parts, equipment, supplies and contract rights relating to the transferred units, to FE Nuclear as an additional capital contribution to FE Nuclear. In connection with such transfer, FE Nuclear will initially assume Ohio Edison's obligations in respect of $116 million aggregate principal amount of PCRB obligations and certain other liabilities associated with the transferred units. An additional $295 million of Ohio Edison's PCRBs are expected to be assumed by FE Nuclear after the distribution described in the next paragraph. The parties to the Ohio Edison Contribution Agreement have agreed that the value of the contributed assets will be the net book value thereof as of the end of the fiscal quarter immediately preceding the closing. Following the transfer of Ohio Edison's nuclear assets to FE Nuclear, it is anticipated that OES Nuclear will be merged with and into FE Nuclear, and Ohio Edison will distribute the stock of FE Nuclear as a dividend to its parent, FirstEnergy, such that FE Nuclear will become a direct wholly-owned subsidiary of FirstEnergy. If the transactions described above had occurred on March 31, 2005, Ohio Edison's cost basis for the stock of FE Nuclear would have been equal to the net book value of the transferred interests in the Beaver Valley and Perry units and associated assets (approximately $712 million), less the initial PCRB obligations to be assumed ($116 million) and the agreed upon value of other liabilities assumed by FE Nuclear (approximately $596 million), resulting in no charge to Ohio Edison's retained earnings. Sale of Nuclear Plants by Cleveland Electric and Toledo Edison. Cleveland Electric and Toledo Edison have each entered into a Nuclear Purchase and Sale Agreement with FE Nuclear ("Nuclear PSA"), filed herewith as Exhibits B-3 and B-4, respectively, under which FE Nuclear has agreed to purchase Cleveland Electric's and Toledo Edison's respective undivided ownership interests in Beaver Valley Unit 2, Perry Unit 1 and Davis-Besse for a purchase price equal to the net book value thereof, determined as of the end of the fiscal quarter immediately preceding the closing, together with the respective interests of Cleveland Electric and Toledo Edison in nuclear decommissioning trust funds associated with those plants and their respective right, title and interest in and to all contracts, fuel, spare parts, inventories, equipment, supplies and other assets associated with each transferred unit, less the amount of obligations of Cleveland Electric and Toledo Edison under PCRBs associated with the transferred units ($367 million and $284 million, respectively, at March 31, 2005), and the agreed upon value of certain other liabilities associated with the transferred units. At closing, FE Nuclear will pay the purchase price, determined as described in the previous paragraph, by delivering to Cleveland Electric and Toledo Edison FE Nuclear Notes, in the form of Exhibit B-5 hereto, secured by a lien on the transferred assets. Each FE Nuclear Note will bear interest at a rate per annum based on the average weighted cost of long-term debt of Cleveland Electric and Toledo Edison, as the case may be, determined as shown in Exhibit I 5 hereto, will mature 20 years after the date of issuance, and will be prepayable at any time, in whole or in part, at the option of FE Nuclear, without penalty. If the transactions described above had been consummated at March 31, 2005, the principal amounts of the FE Nuclear Notes delivered to Cleveland Electric and Toledo Edison would have been approximately $469 million and $307 million, respectively. Repurchases of Common Stock of Cleveland Electric, Toledo Edison and Penn Power. In connection with the transfer of the nuclear plants to FE Nuclear, FirstEnergy intends to make a cash capital contribution to FE Nuclear of up to $711 million. FE Nuclear will use the proceeds of this investment at or subsequent to closing to prepay a like amount of the FE Nuclear Notes delivered at closing to Penn Power, Cleveland Electric and Toledo Edison. In turn, Penn Power, Cleveland Electric and Toledo Edison will apply the proceeds of such prepayment of the FE Nuclear Notes, first, to repay outstanding borrowings under the FirstEnergy System Utility Money Pool ("Money Pool")/4/ and, second, to the extent that there are any remaining prepayment proceeds, to repurchase shares of common stock of Cleveland Electric and Toledo Edison that are held by FirstEnergy and shares of common stock of Penn Power that are held by Ohio Edison. The purpose of these transactions is to adjust (i.e., reduce) the equity and debt capitalization of Cleveland Electric, Toledo Edison and Penn Power to mirror their smaller asset base after the transfer of their undivided interests in the nuclear plants to FE Nuclear. On a pro forma basis, taking into account the transfer of the nuclear plants to FE Nuclear and the related intercompany financing transactions, common equity as a percentage of total capitalization of Cleveland Electric, Toledo Edison, and Penn Power as of March 31, 2005 will equal 46%, 56% and 56%, respectively./5/ On a pro forma basis, assuming completion of the transactions described above, the $711 million capital contribution by FirstEnergy, and FE Nuclear's repayment of the FE Nuclear Notes, common equity as a percentage of FE Nuclear's total capitalization as of December 31, 2005 would equal approximately 36%. 1.4 External Debt Financing by FE Nuclear. ------------------------------------- As indicated, upon completion of the transactions described in Item 1.3 above, FE Nuclear will become a direct public-utility subsidiary of FirstEnergy. It is contemplated that FE Nuclear's requirements for additional common equity (including the $711 million equity infusion by FirstEnergy at - ---------- 4 The Commission has previously authorized FirstEnergy and the Utility Subsidiaries to participate in the Utility Money Pool. See FirstEnergy Corp., et al., Holding Co. Act Release No. 27694 (June 30, 2003) (the "2003 Financing Order"). At March 31, 2005, outstanding borrowings under the Utility Money Pool by Cleveland Electric, Toledo Edison and Penn Power totaled $457.2 million, $395.5 million, and $10.5 million, respectively. 5 See pro forma balance sheets of Penn Power, Cleveland Electric and Toledo Edison, filed herewith as Exhibits FS-12, FS-13 and FS-14, respectively. Since the aggregate of Money Pool borrowings by Penn Power, Cleveland Electric and Toledo Edison exceeds $711 million at March 31, 2005, the pro formas do not reflect any stock repurchases. 6 closing) will be satisfied by capital contributions by FirstEnergy pursuant to Rule 45(b)(4). FE Nuclear herein requests authorization to issue and sell to unaffiliated lenders, from time to time during the Authorization Period, long-term debt securities having maturities of up to 50 years ("Long-term Debt") and short-term debt securities having maturities of less than one year ("Short-term Debt") in an aggregate amount at any time outstanding not to exceed $1.5 billion (the "FE Nuclear Debt Limit"). The following general terms will be applicable where appropriate to Long-term Debt and Short-term Debt of FE Nuclear: Effective Cost of Money. The effective cost of capital (i.e., the aggregate of all payments, including interest, dividend distributions and other periodic payments) in respect of Long-term Debt and Short-term Debt of FE Nuclear will not exceed competitive market rates available at the time of issuance for securities having the same or reasonably similar terms and conditions issued by similar companies of reasonably comparable credit quality; provided that, in no event will the effective cost of capital (i) on Long-term Debt exceed at the time of issuance 500 basis points over the yield to maturity of comparable-term U.S. Treasury securities if the interest rate on such Long-term Debt securities is a fixed rate or, if the rate on such Long-term Debt securities is a floating rate, 500 basis points over the London Interbank Offered Rate ("LIBOR") for maturities of less than one year; and (ii) on Short-term Debt exceed at the time of issuance, (A) in the case of commercial paper or any other short-term borrowing that is not tied to a reference rate, 300 basis points over LIBOR, and (B) in the case of any short-term borrowing that is tied to a reference rate, either (1) 300 basis points over LIBOR, (2) 50 basis points over the prime rate, as announced from time to time by CitiBank, or any successor thereto, or (3) 100 basis points over the Federal Funds Rate, whichever reference rate is applicable. Issuance Expenses. The underwriting fees, commissions or other similar remuneration paid in connection with the non-competitive issue, sale or distribution of a security pursuant to this Application/Declaration (not including any original issue discount) will not exceed 5% of the principal or total amount of the security being issued. Use of Proceeds. The proceeds from the sale of securities in external financing transactions will be used for general corporate purposes, including financing, in part, of the capital expenditures of FE Nuclear, financing of working capital requirements of FE Nuclear, the acquisition, retirement or redemption of securities (including PCRB obligations) previously issued by or on behalf FE Nuclear, and other lawful purposes. The Applicants represent that no such financing proceeds will be used to acquire the securities of any new subsidiary unless such acquisition is consummated in accordance with an order of the Commission (including the order issued in this proceeding) or an available exemption under the Act or rules thereunder. Common Equity Ratio. FE Nuclear and each of the Utility Subsidiaries commits that it will maintain common equity as a percentage of consolidated capitalization (common stock equity, long-term debt and short-term debt, 7 including current maturities of long-term debt) at 30% or higher. Ratings Event. With respect to the securities issuance authority proposed in this Application/Declaration: (a) within four business days after the occurrence of a Ratings Event,/6/ Applicants will notify the Commission of its occurrence (by means of a letter, via fax, email or overnight mail to the Office of Public Utility Regulation), and (b) within 30 days after the occurrence of a Ratings Event, Applicants will submit a post-effective amendment to this Application/Declaration explaining the material facts and circumstances relating to that Ratings Event (including the basis on which, taking into account the interests of investors, consumers and the public as well as other applicable criteria under the Act, it remains appropriate for FE Nuclear to issue the securities for which authorization has been requested in this Application/Declaration, so long as FE Nuclear continues to comply with the other applicable terms and conditions specified in the Commission's order authorizing the transactions requested in this Application/Declaration). Furthermore, except in accordance with a further order of the Commission, no securities authorized as a result of this Application/Declaration will be issued following the 60th day after a Ratings Event (other than Short-term Debt) if the downgraded rating(s) has or have not been upgraded to investment grade. Applicants request that the Commission reserve jurisdiction, through the remainder of the Authorization Period, over the issuance of any securities (other than Short-term Debt) that FE Nuclear is prohibited from issuing as a result of the occurrence of a Ratings Event if no revised rating reflecting an investment grade rating has been issued. 1.5 Description of Specific Types of External Debt Securities of FE Nuclear. -------------------------------------- All debt securities issued by FE Nuclear in accordance with the authorization requested herein, including, without limitation, securities issued for the purpose of refunding or retiring outstanding securities, will comply with the applicable parameters set forth in Item 1.4 above. 1.5.1. Long-term Debt. Each series of Long-term Debt would have such designation, aggregate principal amount, maturity, interest rate(s) or methods of determining the same, terms of payment of interest, redemption provisions, sinking fund terms and other terms and conditions as FE Nuclear may determine at the time of issuance. Any Long-term Debt (a) may be secured or unsecured, (b) may be senior or subordinated, (c) will have maturities ranging from one to 50 years, (d) may be subject to optional and/or mandatory redemption, in whole or in part, at par or at various premiums above the - ---------- 6 A "Ratings Event" will be deemed to have occurred if, during the Authorization Period, (i) any security issued by FirstEnergy or FE Nuclear upon original issuance, if rated, is rated below investment grade, or (ii) any outstanding security of FirstEnergy or FE Nuclear that is rated is downgraded below investment grade. For purposes of this provision, a security will be deemed "investment grade" if it is rated investment grade by at least one nationally recognized statistical rating organization, as that term is used in paragraphs (c)(2)(vi)(E), (F) and (H) of rule 15c3-1 of the Securities Exchange Act of 1934, as amended). 8 principal amount thereof, (e) may be entitled to mandatory or optional sinking fund provisions, (f) may provide for reset of the coupon pursuant to a remarketing arrangement, (g) may be subject to tender or the obligation of the issuer to repurchase at the election of the holder or upon the occurrence of a specified event, (h) may be called from existing investors by a third party, and (i) may be entitled to the benefit of affirmative or negative financial or other covenants. Long-term Debt may also be in the form of agreements between FE Nuclear and one or more industrial development authorities ("IDAs") pursuant to which an IDA agrees to issue PCRBs for the purpose of financing or refinancing pollution control revenue facilities relating to FE Nuclear's nuclear power plants./7/ Under the terms of any such agreement, payments to the issuing IDA would be designed to match payments of principal of and interest on the PCRBs to which such agreement relates. As security for FE Nuclear's obligations under any agreement relating to any series of PCRBs, FE Nuclear requests authority to (1) issue its promissory note or notes to evidence the loan to FE Nuclear of the proceeds of the PCRBs by the issuing IDA, (2) acquire and deliver a letter of credit ("LOC") guaranteeing payment of the PCRBs and enter into reimbursement agreements with respect to any such LOC, (3) acquire insurance policies guaranteeing payment of the PCRBs, and/or (4) pledge its first mortgage bonds as collateral for its obligations to the issuing IDA, any trustee, LOC bank or PCRB insurer./8/ To avoid double counting, it is proposed that the amount of any note or notes issued by FE Nuclear to evidence the loan to FE Nuclear of the proceeds of any PCRBs or first mortgage bonds issued by FE Nuclear as collateral security for PCRB obligations not count against the FE Nuclear Debt Limit. The maturity date and interest rate and the redemption, sinking fund, tender or repurchase features, if any, with respect to Long-term Debt of a particular series (including any PCRBs), as well as any associated placement, underwriting or selling agent fees, commissions and discounts, if any, will be established by negotiation or competitive bidding. 1.5.2. Short-term Debt. Short-term Debt of FE Nuclear may be in the form of commercial paper, promissory notes and/or other forms of unsecured short-term indebtedness. FE Nuclear may establish from time to time new committed bank lines of credit, provided that only the principal amount of any borrowings outstanding thereunder will be counted against the proposed FE Nuclear Debt Limit. Credit lines may be set up for use by FE Nuclear for general - ---------- 7 As described in Item 1.3 above, in connection with the transfer of the nuclear plants to FE Nuclear, FE Nuclear will assume approximately $1.1 billion of PCRB obligations of the Utility Subsidiaries. FE Nuclear proposes to enter into agreements with the issuing IDAs to refinance these outstanding PCRBs. 8 FirstEnergy may also guarantee PCRB obligations of FE Nuclear pursuant to the authority previously granted under the 2003 Financing Order or any subsequent order issued by the Commission that authorizes FirstEnergy to guarantee obligations of its subsidiaries. 9 corporate purposes in addition to credit lines to support commercial paper as described in this subsection. FE Nuclear will borrow and repay under such lines of credit, from time to time, as it is deemed appropriate or necessary. FE Nuclear may also engage in other types of short-term financing, including borrowings under uncommitted lines, generally available to borrowers with comparable credit ratings as it may deem appropriate in light of its needs and market conditions at the time of issuance. Commercial paper would be sold in established domestic or European commercial paper markets from time to time. Such commercial paper would be sold to dealers at the discount rate or the coupon rate per annum prevailing at the date of issuance for commercial paper of comparable quality and maturities sold to commercial paper dealers generally. It is expected that the dealers acquiring commercial paper from FE Nuclear will reoffer such paper at a discount to corporate, institutional and, with respect to European commercial paper, individual investors. Institutional investors are expected to include commercial banks, insurance companies, pension funds, investment trusts, foundations, colleges and universities and finance companies. 1.6 Intrasystem Financing Transactions. ---------------------------------- FE Nuclear further requests authorization to make direct long-term and short-term borrowings from FirstEnergy ("Direct Borrowings"). All such Direct Borrowings would be evidenced by FE Nuclear's promissory notes and would be prepayable at any time without premium or penalty at FE Nuclear's option. The aggregate principal amount of Direct Borrowings by FE Nuclear at any time outstanding will be counted against and will in no event exceed the FE Nuclear Debt Limit. The interest rate and maturity of any Direct Borrowings will be designed to parallel the terms (i.e, effective cost of funds and maturity) of similar debt securities issued by FirstEnergy, as authorized by the Commission in a separate proceeding./9/ In addition, FE Nuclear requests authorization to become a participant in and to make borrowings under the FirstEnergy System Non-Utility Money Pool Agreement ("Non-Utility Money Pool") subject to terms and conditions previously approved by the Commission./10/ FE Nuclear requests authorization to borrow up to $1 billion at any time outstanding under the Non-Utility Money Pool. Borrowings by FE Nuclear under the Non-Utility Money Pool would also be counted against the proposed FE Nuclear Debt Limit. - ---------- 9 Under the 2003 Financing Order, FirstEnergy is authorized to issue long-term and short-term debt securities, subject to various restrictions and limitations, from time to time through December 31, 2005. FirstEnergy has filed a post-effective amendment in File No. 70-10122 to request an extension to the authorization period under the 2003 Financing Order through February 8, 2006. 10 Under the 2003 Financing Order, FirstEnergy is currently authorized to maintain and make loans to its non-utility subsidiaries through the Non-Utility Money Pool. Although FE Nuclear will be an "electric utility company" for purposes of the Act, it will not be a state-regulated utility and therefore will be considered to be on the non-regulated side of FirstEnergy's business. 10 ITEM 2. FEES, COMMISSIONS AND EXPENSES ------------------------------ The fees, commissions and expenses incurred or to be incurred in connection with the preparation and filing of this Application/Declaration are not expected to exceed $35,000. ITEM 3. APPLICABLE STATUTORY PROVISIONS ------------------------------- 3.1 General. ------- Sections 9(a) and 10 of the Act are applicable to Penn Power's acquisition of the common stock of FE Nuclear, and Sections 9(a), 10, and 12(b) of the Act and Rule 45 thereunder are applicable to the proposed acquisition by Cleveland Electric, Toledo Edison and Penn Power of the FE Nuclear Notes. Sections 12(d) and 12(f) of the Act and Rules 43 and 44 thereunder are applicable to the transfer by the Utility Subsidiaries of their respective interests in the nuclear plants to FE Nuclear, and Section 12(b) of the Act and Rule 45 thereunder are applicable to FE Nuclear's assumption of PCRB obligations and other liabilities of the Utility Subsidiaries related to the transferred nuclear plants. Sections 9(a), 10 and 12(c) of the Act are applicable to the proposed acquisition by Cleveland Electric and Toledo Edison of shares of their common stock held by FirstEnergy and to the proposed acquisition by Penn Power of shares of its common stock held by Ohio Edison. Section 12(c) of the Act and Rule 46 thereunder are applicable to the transfer, by in-kind dividend, of the common stock of FE Nuclear by Penn Power to Ohio Edison and of the common stock of FE Nuclear by Ohio Edison to FirstEnergy. However, in each case, the dividend distribution will be charged to retained earnings and not to capital or unearned surplus and, therefore, should not require separate authorization by the Commission. Sections 6(a) and 7 of the Act are applicable to FE Nuclear's issuance of Long-term Debt and Short-term Debt. Sections 6(a), 7, 9, 10, and 12(b) of the Act are or may be applicable to agreements FE Nuclear enters into with respect to PCRBs and to the intrasystem financing transactions described herein. 3.2 Rules 53 and 54. --------------- Under Rule 53(a), the Commission shall not make certain specified findings under Sections 7 and 12 in connection with a proposal by a holding company to issue securities for the purpose of acquiring the securities of or other interest in any "exempt wholesale generator" ("EWG"), or to guarantee the securities of any EWG, if each of the conditions in paragraphs (a)(1) through (a)(4) thereof are met, provided that none of the conditions specified in paragraphs (b)(1) through (b)(3) of Rule 53 exists. Rule 54 provides that the Commission shall not consider the effect of the capitalization or earnings of subsidiaries of a registered holding company that are EWGs or "foreign utility companies" ("FUCOs") in determining whether to approve other transactions if Rule 53(a), (b) and (c) are satisfied. FirstEnergy currently meets all of the conditions of Rule 53(a), except for clause (1). Under the Merger Order and 2003 Financing Order, the Commission, among other things, authorized FirstEnergy to invest in EWGs and 11 FUCOs so long as FirstEnergy's "aggregate investment," as defined in Rule 53(a)(1), in EWGs and FUCOs does not exceed $5 billion, which $5 billion amount is greater than the amount which would be permitted by clause (1) of Rule 53(a) which, based on FirstEnergy's "consolidated retained earning," also as defined in Rule 53(a)(1), of $1.9 billion as of June 30, 2005, would be $950 million. The Merger Order and 2003 Financing Order also specify that this $5 billion amount may include amounts invested in EWGs and FUCOs by FirstEnergy and GPU at the time of the Merger Order ("Current Investments") and amounts relating to possible transfers to EWGs of certain generating facilities owned by certain of FirstEnergy's operating utilities ("GenCo Investments"). FirstEnergy has made the commitment that through December 31, 2005, its aggregate investment in EWGs and FUCOs other than the Current Investments and GenCo Investments ("Other Investments") will not exceed $1.5 billion (the "Modified Rule 53 Test"). Under the Merger Order and 2003 Financing Order, the Commission reserved jurisdiction over Other Investments that exceed such $1.5 billion amount. As of June 30, 2005, FirstEnergy's aggregate investment in EWGs and FUCOs was approximately $1 billion,/11/ an amount significantly below the $5 billion amount authorized in the Merger Order and 2003 Financing Order. Additionally, as of June 30, 2005, FirstEnergy's consolidated retained earnings were $1.9 billion. By way of comparison, FirstEnergy's consolidated retained earnings as of December 31, 2001 were $1.52 billion. In any event, even taking into account the capitalization of and earnings from EWGs and FUCOs in which FirstEnergy currently has an interest, there would be no basis for the Commission to withhold approval of the transactions proposed herein. With respect to capitalization, since the date of the Merger Order, there has been no material adverse impact on FirstEnergy's consolidated capitalization resulting from FirstEnergy's investments in EWGs and FUCOs. As of June 30, 2005, FirstEnergy's consolidated capitalization consisted of 43.3% common equity, 1.1% cumulative preferred stock, 52.8% long-term debt and 2.8% notes payable. As of December 31, 2001, those ratios were as follows: 30.3% common equity, 3.1% cumulative preferred stock, 2.2% subsidiary-obligated mandatorily redeemable preferred securities, 60.9% long term debt and 3.5% notes payable. Additionally, the proposed transactions will not have any impact on FirstEnergy's consolidated capitalization. Further, since the date of the Merger Order, FirstEnergy's investments in EWGs and FUCOs have contributed positively to its level of earnings, other than for the negative impact on earnings due to FirstEnergy's writedowns of its investments in Avon Energy Partners Holdings ("Avon") and GPU Empresa Distribuidora Electrica Regional S.A. ("Emdersa")./12/ - ---------- 11 This $1 billion amount represents Current Investments only. As of June 30, 2005, FirstEnergy had no GenCo Investments. 12 At the time of the Merger Order, FirstEnergy identified certain former GPU EWG and FUCO investments for divestiture within one year. Among those identified were Avon, a holding company for Midlands Electricity plc, an electric distribution business in the United Kingdom and Emdersa and affiliates, an electric distribution business in Argentina. In May 2002, FirstEnergy sold 79.9% of its interest in Avon, and in the fourth quarter of 2002, recorded a $50 million charge ($32.5 million net of tax) to reduce the carrying value of its remaining 20.1% interest. The remaining 20.1% interest in Avon was sold on January 16, 2004. Through 2002, FirstEnergy was unsuccessful in divesting GPU's former Argentina operations and made the decision to abandon its interest in Emdersa in early 2003. On April 18, 2003, FirstEnergy divested its ownership in Emdersa through the abandonment of its shares in Emdersa's parent company. FirstEnergy included in discontinued operations Emdersa's net income of $7 million and a $67 million charge for the abandonment in the second quarter of 2003. An after-tax loss of $87 million (including $109 million in currency transaction losses arising principally from U.S. dollar denominated debt) was included in discontinued operations in 2002. In December 2003, Emdersa Guaracachi S. A. ("EGSA"), GPU Power's Bolivia subsidiary, was sold to Bolivia Integrated Energy Limited. FirstEnergy included in discontinued operations a $33 million loss on the sale of EGSA in the fourth quarter of 2003 and an operating loss for the year of $2 million. On January 30, 2004, FirstEnergy sold its 28.67% interest in Termobarranquilla S. A., Empresa de Servicios Publicos ("TEBSA") for $12 million. An impairment loss of $26 million related to TEBSA was recorded in December 2003 in Other Operating Expenses on the consolidated statement of income and no gain or loss was recognized upon the sale in 2004. 12 The domestic public utility subsidiaries of FirstEnergy are financially sound companies as indicated by their investment grade ratings from the nationally recognized rating agencies for their senior secured debt. The following chart includes a breakdown of the senior, secured credit ratings for those utility subsidiaries that currently have ratings for senior, secured debt:
- ------------------------- ----------------------- -------------- --------------- Subsidiary Standard & Poors/13/ Moody's/14/ Fitch/15 - ------------------------- ----------------------- -------------- --------------- Cleveland Electric BBB Baa2 BBB- Toledo Edison BBB Baa2 BBB- Penn Power BBB+ Baa1 BBB+ Jersey Central Power BBB+ Baa1 BBB+ Metropolitan Edison Co. BBB+ Baa1 BBB+ - ------------------------- ----------------------- -------------- ---------------
Ohio Edison and Pennsylvania Electric Company no longer have ratings for the senior secured debt category. However, Ohio Edison's senior unsecured debt is rated BBB- by S&P, Baa2 by Moodys and BBB by Fitch; and Pennsylvania Electric Company's senior unsecured debt is rated BBB by S&P, Baa2 by Moodys and BBB by Fitch. FirstEnergy satisfies all of the other conditions of paragraphs (a) and (b) of Rule 53. With respect to Rule 53(a)(2), FirstEnergy maintains books and records in conformity with, and otherwise adheres to, the requirements thereof. With respect to Rule 53(a)(3), no more than 2% of the employees of FirstEnergy's domestic public utility companies render services, at any one time, directly or indirectly, to EWGs or FUCOs in which FirstEnergy directly or indirectly holds an interest. With respect to Rule 53(a)(4), FirstEnergy will continue to provide a copy of each application and certificate relating to EWGs and FUCOs and relevant portions of its Form U5S to each regulator referred to therein, and will otherwise comply with the requirements thereof concerning the - ---------- 13 Standard & Poor's Rating Services 14 Moody's Investors Service, Inc. 15 Fitch, Inc. 13 furnishing of information. With respect to Rule 53(b), none of the circumstances enumerated in subparagraphs (1), (2) and (3) thereunder have occurred. ITEM 4. REGULATORY APPROVALS -------------------- The transfer of the Utility Subsidiaries' interests in the nuclear power plants to FE Nuclear has been approved by the Federal Energy Regulatory Commission ("FERC"). (See Exhibit D-4.) The proposed transaction is also subject to approval by the Nuclear Regulatory Commission ("NRC"). The Utility Subsidiaries have filed applications with the NRC. (See Exhibits D-5(a) and D-5(b).) In addition, Penn Power has obtained approval from the Pennsylvania Public Utility Commission ("PPUC") for the proposed transactions under Pennsylvania's affiliated interest statute. (See Exhibit D-2.) No other state or federal commission or agency, other than this Commission, has jurisdiction over the transactions for which authorization is sought in this Application/Declaration. ITEM 5. PROCEDURE --------- It is requested that the Commission issue a notice of filing of this Application/Declaration as soon as practicable and an order approving the proposed transactions proposed herein as soon as the Commission's rules allow following the end of the notice period, but in any event, no later than November 15, 2005. The Applicants further request that there be no 30-day waiting period between the issuance of the Commission's order and the date on which it is to become effective. The Applicants submit that a recommended decision by a hearing or other responsible officer of the Commission is not needed with respect to the proposed transactions and that the Division of Investment Management may assist with the preparation of the Commission's decision and/or order in this matter unless the Division of Investment Management opposes the matters covered hereby. ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS --------------------------------- (A) EXHIBITS. -------- A Articles of Incorporation of FirstEnergy Nuclear Generation Corp. (to be filed by amendment). B-1 Nuclear Subscription and Capital Contribution Agreement by and between Pennsylvania Power Company and FirstEnergy Nuclear Generation Corp. (previously filed). B-2 Nuclear Capital Contribution Agreement by and between Ohio Edison Company and FirstEnergy Nuclear Generation Corp. (previously filed). B-3 Nuclear Purchase and Sale Agreement by and between The Cleveland Electric Illuminating Company, as Seller, and FirstEnergy Nuclear Generation Corp., as Purchaser (previously filed). 14 B-4 Nuclear Purchase and Sale Agreement by and between The Toledo Edison Company, as Seller, and FirstEnergy Nuclear Generation Corp., as Purchaser (previously filed). B-5 Form of FE Nuclear Note (previously filed). C Not applicable. D-1 Application of Penn Power to Pennsylvania Public Utility Commission for Approval of Affiliated Interest Agreements (previously filed). D-2 Order of the Pennsylvania Public Utility Commission Approving Affiliated Interest Agreements (filed herewith). D-3 Application filed with the Federal Energy Regulatory Commission (previously filed). D-4 Order of the Federal Energy Regulatory Commission (filed herewith). D-5(a) Application filed with the Nuclear Regulatory Commission by Ohio Utility Applicants (filed herewith). D-5(b) Application filed with the Nuclear Regulatory Commission by Penn Power (filed herewith). D-6(a) Order of the Nuclear Regulatory Commission - Ohio Utility Applicants (to be filed by amendment). D-6(b) Order of the Nuclear Regulatory Commission - Penn Power (to be filed by amendment). E Not applicable. F Opinions of counsel (to be filed by amendment). G Form of Federal Register Notice (previously filed). H Consolidated Capitalization Ratios of FirstEnergy, Ohio Edison, Penn Power, Cleveland Electric and Toledo Edison as of June 30, 2005 (filed herewith). I Average Weighted Cost of Long-term Debt of Utility Subsidiaries as of September 30, 2005 (filed herewith). (B) FINANCIAL STATEMENTS. -------------------- FS-1 FirstEnergy Corp. Consolidated Balance Sheets as of December 31, 2004, and Consolidated Statements of Income, Statement of Retained Earnings, and Consolidated Statements of Cash Flows for the year ended December 31, 2004. (Incorporated by 15 reference to FirstEnergy Form 10-K for the period ended December 31, 2004) (File No. 333-21011). FS-2 Ohio Edison Company Consolidated Balance Sheet as of December 31, 2004, and Consolidated Statements of Income, Statement of Retained Earnings and Consolidated Condensed Statements of Cash Flows for the year ended December 31, 2004. (Incorporated by reference to Ohio Edison Company Form 10-K for the period ended December 31, 2004) (File No. 1-2578). FS-3 The Cleveland Electric Illuminating Company Consolidated Balance Sheet as of December 31, 2004, and Consolidated Statements of Income, Statement of Retained Earnings and Consolidated Condensed Statements of Cash Flows for the year ended December 31, 2004. (Incorporated by reference to The Cleveland Electric Illuminating Company Form 10-K for the period ended December 31, 2004) (File No. 1-2323). FS-4 The Toledo Edison Company Consolidated Balance Sheet as of December 31, 2004, and Consolidated Statements of Income, Statement of Retained Earnings and Consolidated Condensed Statements of Cash Flows for the year ended December 31, 2004. (Incorporated by reference to The Toledo Edison Company Form 10-K for the period ended December 31, 2004) (File No. 1-3583). FS-5 Pennsylvania Power Company Consolidated Balance Sheet as of December 31, 2004, and Consolidated Statements of Income, Statement of Retained Earnings, and Consolidated Condensed Statements of Cash Flows for the year ended December 31, 2004. (Incorporated by reference to Pennsylvania Power Company Form 10-K for the period ended December 31, 2004) (File No. 1-3491). FS-6 FirstEnergy Corp. Consolidated Balance Sheets as of June 30, 2005, and Consolidated Statements of Income, Statement of Retained Earnings, and Consolidated Statements of Cash Flows for the six months ended June 30, 2005. (Incorporated by reference to FirstEnergy Form 10-Q for the period ended June 30, 2005) (File No. 333-21011). FS-7 Ohio Edison Company Consolidated Balance Sheet as of June 30, 2005, and Consolidated Statements of Income, Statement of Retained Earnings and Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2005. (Incorporated by reference to Ohio Edison Company Form 10-Q for the period ended June 30, 2005) (File No. 1-2578). FS-8 The Cleveland Electric Illuminating Company Consolidated Balance Sheet as of June 30, 2005, and Consolidated Statements of Income, Statement of Retained Earnings and Consolidated Condensed Statements of Cash Flows for the six 16 months ended June 30, 2005. (Incorporated by reference to The Cleveland Electric Illuminating Company Form 10-Q for the period ended June 30, 2005) (File No. 1-2323). FS-9 The Toledo Edison Company Consolidated Balance Sheet as of June 30, 2005, and Consolidated Statements of Income, Statement of Retained Earnings and Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2005. (Incorporated by reference to The Toledo Edison Company Form 10-Q for the period ended June 30, 2005) (File No. 1-3583). FS-10 Pennsylvania Power Company Consolidated Balance Sheet as of June 30, 2005, and Consolidated Statements of Income, Statement of Retained Earnings, and Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2005. (Incorporated by reference to Pennsylvania Power Company Form 10-Q for the period ended June 30, 2005) (File No. 1-3491). FS-11 Pro forma Balance Sheet of Ohio Edison Company, together with journal entries (previously filed). FS-12 Pro forma Balance Sheet of Pennsylvania Power Company, together with journal entries (previously filed). FS-13 Pro forma Balance Sheet of Cleveland Electric Illuminating Company, together with journal entries (previously filed). FS-14 Pro forma Balance Sheet of Toledo Edison Company, together with journal entries (previously filed). FS-15 Pro forma Balance Sheet of FirstEnergy Corp. (stand-alone), together with journal entries(previously filed). FS-16 Pro forma Balance Sheet of FirstEnergy Nuclear Generation Corp. (previously filed). There have been no material changes, not in the ordinary course of business, to the aforementioned balance sheets from June 30, 2005, to the date of this Application/Declaration. ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS --------------------------------------- The proposed transactions do not involve "major federal actions significantly affecting the quality of the human environment" as set forth in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C. Sec. 4321 et seq. Consummation of the proposed transactions will not result in changes in the operations of the Applicants that would have any impact on the environment. 17 No federal agency is preparing an environmental impact statement with respect to this matter. SIGNATURES Pursuant to the requirements of the 1935 Act, the undersigned companies have duly caused this amended Application/Declaration to be signed on their behalves by the undersigned thereunto duly authorized. FirstEnergy Corp. Ohio Edison Company The Cleveland Electric Illuminating Company The Toledo Edison Company Pennsylvania Power Company By: /s/ Harvey L. Wagner -------------------- Name: Harvey L. Wagner Title: Vice President and Controller FirstEnergy Nuclear Generation Corp. By: /s/ John J. Luecken, Jr. ------------------------ Name: John J. Luecken, Jr Title: Sole Incorporator Date: October 27, 2005 18 EX-99 2 exh_d2.txt EXHIBIT D-2 EXHIBIT D-2 PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg, PA 17105-3265 Public Meeting held September 9, 2005 Commissioners Present: Wendell F. Holland, Chairman James H. Cawley, Vice Chairman Bill Shane Kim Pizzingrilli Terrance J. Fitzpatrick Petition of Pennsylvania Power Company Seeking a Specific Determination Allowing Certain Fossil Fuel Generating Assets To Be Docket No. P-00052165 Eligible Facilities Pursuant to Section 32 Of the Public Utility Holding Company Act Of 1935 Petition of Pennsylvania Power Company Seeking a Specific Determination Allowing Certain Nuclear Assets To Be Docket No. P-00052166 Eligible Facilities Pursuant to Section 32 Of the Public Utility Holding Company Act Of 1935 Approval of Affiliated Interest Agreements between Pennsylvania Power Company and Docket No. G-00051111 First Energy Nuclear Generating Corporation Approval of Affiliated Interest Agreements between Pennsylvania Power Company and Docket No. G-00051112 First Energy Nuclear Generating Corporation FINAL OPINION AND ORDER BY THE COMMISSION: Before the Commission for disposition are the Petitions of Pennsylvania Power Company ("Penn Power") for the issuance of determinations under Section 32(c) of the Public Utility Holding Company Act (PUHCA) of 1935, 15 U.S.C. ss.79z-5a(a) (Section 32(c) Petitions). Additionally, Penn Power seeks approval of two affiliated interest agreements (Section 2102 Agreements) filed under Chapter 21 of the Pennsylvania Public Utility Code, 66 Pa. C.S. ss.ss.2101, et seq. By Secretarial Letter dated June 6, 2005, the Commission extended the 30-day statutory consideration period for the Section 2102 Agreements until further notice as provided in Chapter 21 of the Public Utility Code. The Section 32(c) Petitions and the Section 2102 Agreements involve Penn Power's nuclear facilities (Nuclear Assets) and fossil fuel facilities (Fossil Assets) identified in the Section 32(c) Petitions and Section 2102 Agreements. The Section 32(c) Petitions and the Section 2102 Agreements were served on the Office of Trial Staff, the Office of Consumer Advocate, and the Office of the Small Business Advocate. HISTORY OF THE PROCEEDING On May 19, 2005, Penn Power filed the Section 32(c) Petitions and the Section 2102 Agreements concerning Penn Power's ownership interests and affiliated interests related to Penn Power's fossil and nuclear generating facilities. 2 Penn Power is a direct, wholly owned electric public utility subsidiary of Ohio Edison Company ("Ohio Edison") and its affiliates, Cleveland Electric Illuminating Company (CEI), Toledo Edison Company (Toledo Edison), Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec) (collectively, the "First Energy Operating Companies" or "FE Operating Companies"). The FE Operating Companies are electric public utilities and direct, wholly owned subsidiaries of First Energy Corporation ("FE Corporation"), a public utility holding company registered under PUHCA. Penelec, Med-Ed and Penn Power are regulated utilities that provide electric service to customers within the Commonwealth of Pennsylvania. CEI, Toledo Edison, and Ohio Edison provide electric service to customers within the State of Ohio and are subject to regulation by the Public Utilities Commission of Ohio ("PUCO"). Penelec, as lessee of property of the Waverly Electric Light & Power Company, also provides electric service in the State of New York and is subject to regulation by the New York Public Service Commission. On June 8, 2005, the Office of Consumer Advocate (OCA) filed Notices of Intervention in the Section 32(c) Petitions and the Section 2102 Agreements. On June 28, 2005, Penn Power filed a Reply to the Answer of the Office of the Consumer Advocate (the Penn Power Answer) on behalf of itself and FE Corporation. The Penn Power answer addresses concerns of the OCA regarding the Section 32(c) Petitions and the Section 2102 Agreements. In the Penn Power answer, Penn Power and FE Corporation agree that ratepayers will not incur any tax effects from the spin-off or transfer transactions. FE Corporation and Penn Power also agree that ratepayers will not be required to pay or fund any transaction costs. In addition, FE Corporation and Penn Power agree that that these transactions are not intended to nor will they increase Penn Power's distribution rates from capital structure and cost of capital effects resulting from these transactions. Finally, FE Corporation and Penn Power agree on a right to examine these issues in any request by Penn Power to increase its distribution rates and to recommend any adjustments deemed necessary. 3 There are no formal protests or challenges to the Section 32(c) Petitions or the Section 2102 Agreements. DISCUSSION I. THE SECTION 32(C) FOSSIL FUEL PETITION AND RELATED AFFILIATED INTEREST AGREEMENT. The Section 32(c) Petition for Penn Power's Assets at Docket No. P-00052165 (the "First Section 32(c) Petition") seeks "eligible facility" status under Section 32 of the Public Utility Holding Company Act of 1935 for the Fossil Assets located in Ohio and Pennsylvania. The Fossil Assets subject to the First Section 32(c) Petition are as follows: 1. The Astabula Generating Station Unit 5 in Ashtabula, Ohio; 2. The Bayshore Generating Station Units 1-4 and the Bayshore Peaking Facility in Toledo, Ohio; 3. The R.E. Burger Generating Station Units 3-5 and the R.E. Burger Peaking Facility in Shadyside, Ohio; 4. The Eastlake Generating Station Units 1-5 and the Eastlake Peaking Facility in Eastlake, Ohio; 5. The Edgewater Peaking Facility in Lorain, Ohio; 6. The Lake Shore Generating Station Unit 18 and the Lake Shore Peaking Facility in Cleveland, Ohio; 7. The Mad River Peaking Facility in Springfield, Ohio, 4 8. The Bruce Mansfield Generating Station Units 1-3 in Shippingport, Pennsylvania; 9. The Richland Peaking Facility Units 1-3 in Defiance, Ohio; 10. The W.H. Sammis Generating Station Units 1-7 and the W.H. Sammis Peaking Facility in Stratton, Ohio; 11. The Stryker Peaking Facility in Springfield, Ohio; 12. The West Lorain Peaking Facility Unit 1 in Lorain, Ohio, and 13. The Seneca Pumped Storage Generating Station in Warren, Pennsylvania. FE Corporation seeks Commission approval in order to proceed with a series of intra-system asset transfers at the conclusion of which First Energy Generation Company ("FE Genco"), an existing wholly owned subsidiary of FE Corporation, will own the Fossil Assets. Currently, FE Corporation complies with the restructuring obligations of Pennsylvania and Ohio law through a previously approved Master Lease that separates FE Corporation's generation assets from its regulated delivery business. Penn Power and FE Corporation desire that FE Genco qualify as an exempt wholesale generator ("EWG") in order to exempt FE Genco from all provisions of PUHCA./1/ The Penn Power and FE Corporation Fossil Assets must be found to be eligible facilities under Section 32(a) of PUHCA in order for FE Genco to be accorded EWG status. Every state commission with jurisdiction over the retail rates pertaining to the Fossil Assets must determine that the proposed transactions will benefit consumers, are in the public interest, and do not violate State law. This is necessary because the rates for electricity produced by the Fossil Assets were regulated by PUCO and the Commission on the date of enactment of Section 32. - ---------- 1 Some of these facilities were granted Section 32(c) status by a prior Commission Order. See Footnote 5. Today's approval is no way detracts from that approval. We reiterate our approval in order to provide legal certainty as to the facility's treatment in Pennsylvania in light of the recent federal legislation and to provide the FE Corporation and Penn Power with the certainty they seek in light of recent federal legislation. 5 Penn Power and FE Genco seek approval for several reasons. There are no market power concerns arising from the contemplated transactions because there is no net change to FE Corporation's existing owned generation resources and thus competition among suppliers is not directly affected. First Energy Solutions Corporation ("FE Solutions"), a power marketing affiliate of Penn Power, is buying and will continue to buy all the electricity available from the Fossil Assets. The contemplated transactions will not adversely affect either the reliability or availability of electric supply to Penn Power's customers or any other electricity customer. In addition, the contemplated transactions are consistent with the goals of the Commission's Competitive Safeguards/Code of Conduct regulations set forth at 52 Pa.Code ss.ss.54.121 et seq. Penn Power and FE Corporation also identified several benefits stemming from Commission approval of the First Section 32(c) Petition. Separation of functions enhances the separation of individuals employed in each of FE Corporation's operations. FE Corporation's conducting of its generation business separate from its other operations effectively shields customers from the potential volatility of its competitive operations. The obligation to operate legally distinct entities facilitates increased internal accountability and management. The separation also allows the use of financing techniques better suited to the requirements, characteristics, and risks of non-utility operations without affecting Penn Power's creditworthiness/2/. On February 21, 2001, at P-00011869, the Commission approved a Master Facility Lease (Lease Agreement) whereby FE Genco operates the interests in the Mansfield and Sammis power plants along with certain peaking units (collectively Fossil Plant) owned by Penn Power. Under the Lease Agreement, FE Genco has an option to purchase the Fossil Plant at values set forth in the Lease Agreement. - ---------- 2 Standard & Poor's has stated that because the transfer of generating assets involves the reclassification of debt and other liabilities among the FirstEnergy subsidiaries, they will review the ratings on certain debt classes at Penn Power. However, Penn Power's debt ratings from Standard & Poor's reflects the consolidated creditworthiness of FirstEnergy Corporation, and that `in the absence of regulatory or structural insulation', Penn Power will be rated the same as its consolidated Parent, FirstEnergy Corp. 6 Penn Power now seeks Commission approval of a Purchase and Sale Agreement (P&S Agreement) docketed at G-00051112, whereby FE Genco exercises its option to purchase the fossil and hydroelectric generating facilities, referred to in the P&S Agreement as "Purchased Assets". Under the P&S Agreement, FE Genco will purchase acquire, and accept from Penn Power all of Penn Power's right, title, and interest into and under the Purchase Assets. The purchase price as set in the Lease Agreement is $125,411,440. The proposed P&S Agreement outlines the terms whereby FE Genco assumes and agrees to discharge when due, without recourse to Penn Power, all of the liabilities and obligations of Penn Power, direct or indirect, known or unknown, absolute or contingent, directly relating to the Purchase Assets and arising from FE Genco's ownership from and after the Closing Date. In addition to the proposed P&S Agreement, the filing contains an Assignment and Assumption Agreement, a Bill of Sale, the necessary Form of Deeds, a Promissory Note, and a Security Agreement. The attached Bill of Sale conveys the Purchase Assets to FE Genco. There are three Forms of Deeds to accomplish the transfer. The Promissory Note outlines the method of payment whereby FE Genco will pay Penn Power under the terms of the proposed P&S Agreement. Finally, a Security Agreement conveys, assigns, transfers, and grants to Penn Power a security interest in the Collateral to secure FE Genco's performance of the obligations set forth in Section 4 of the Security Agreement. 7 II. THE SECTION 32(C) NUCLEAR FACILITIES PETITION FOR EXEMPT WHOLESALE GENERATOR (EWG) STATUS AND AFFILIATED INTEREST AGREEMENT. The Section 32(c) Petition at P-00052166 (Second Section 32(c) Petition) seeks "eligible facility" status under Section 32 of the Public Utility Holding Company Act of 1935 for multiple nuclear fuel generating power plants located in Ohio and Pennsylvania (collectively, the "Nuclear Assets"). The Nuclear Assets subject to this Section 32(c) Petition are as follows: 1. The Beaver Valley Nuclear Power Plant Units 1 and 2 in Shippingport, Pennsylvania; 2. The Davis-Besse Nuclear Power Plan in Oak Harbor, Ohio, and 3. The Perry Nuclear Power Plant in North Perry Village, Ohio Penn Power and FE Corporation seek Section 32(c) designation as part of a plan to proceed with a series on intra-system asset transfers at the conclusion of which First Energy Nuclear Generation Corporation (FE Nuclear), a newly formed wholly owned, indirect subsidiary of FirstEnergy Corporation, will own the Nuclear Assets. FE Corporation is separating generation assets from its regulated delivery business as part of a compliance effort aimed at implementing restructuring decisions of the PUCO and the PUC. Penn Power and FE Corporation also seek approval because Section 32(c) determinations are consistent with the state and federal commitment to using market forces instead of government regulation to advance security goals, encourage investment in generation, and to protect consumers. Penn Power and FE Corporation state that there is no market power concerns raised by the transactions and designations because the electricity available from the Nuclear Assets is and will continue to be sold to FE Solutions. 8 The affiliated interest agreement filed at Docket No. G-00051111 seeks Commission approval of a Subscription and Contribution Agreement ("S&C Agreement") between Penn Power and one of its affiliates, FE Nuclear. The applicants assert that the purpose of the agreement is the structural separation of Penn Power's electric generation from its energy delivery functions. Under the S&C Agreement, FE Nuclear receives Penn Power's ownership interests in the Beaver Valley Nuclear Power Plans Unit 1, Unit 2 and Common Facilities, Perry Nuclear Power Plant, and associated assets and rights (collectively Nuclear Plant Interests). Under the proposal, Penn Power would transfer the Nuclear Plant Interests and related assets, together with approximately $62 million of related outstanding Pollution Control Revenue Bond debt, to FE Nuclear as a capital contribution. Penn Power would receive in return 100 shares of FE Nuclear's common stock and FE Nuclear would become a wholly owned subsidiary of Penn Power. Penn Power would then declare and pay a dividend to its parent, Ohio Edison consisting of the FE Nuclear common stock. Ohio Edison, in turn, would dividend that common stock up to FE Corporation so that FE Nuclear would then become a wholly owned subsidiary of FE Corporation. Ultimately, the FE Nuclear and FE Genco interests become wholly owned subsidiaries of FE Solutions. The dividend transactions will be accomplished in a general manner such that no taxes would be payable by Penn Power. There will be no deferred tax liability with respect to these transfers as well. ANALYSIS THE SECTION 32(C) "ELIGIBLE FACILITIES" PETITIONS. Upon consideration, we grant the Section 32(c) Petitions for the reasons discussed below. We take this action to provide FE Corporation and its Pennsylvania subsidiaries the 9 certainty they seek concerning our treatment of these facilities. They seek this certainty in response to the enactment of recent federal energy legislation repealing PUHCA/3/ and establishing a state's right of access to books and records./4/ We also take this action to provide certainty consistent with our prior approval of FE Corporation's request for Section 32(c) approval for some of the facilities/5/ listed in these Section 32(c) Petitions reflecting, as they did, the Energy Policy Act of 1992./6/ Under PUHCA, the Securities and Exchange Commission (SEC) is required to approve the acquisition of the securities of an electric utility company. 15 U.S.C. ss.79i(a)(2). Without status as an EWG, FE Nuclear would be considered an electric utility company under Section 2(a)(3) of PUHCA. 15 U.S.C. ss.79b(a)(3). Establishing EWG status for the Fossil Assets and the Nuclear Assets effectively removes these assets from the definition of electric utility company and eliminates the requirement of obtaining SEC approval. To establish EWG status, FERC must determine that the Nuclear and Fossil Asset operations are engaged "exclusively in the business of owning or operating, all or part of one or more eligible facilities and selling electric energy at wholesale." 15 U.S.C. ss.79z-5a(a)(1). As a precursor to the FERC - ---------- 3 Energy Policy Act of 2005, ss. 1263. This legislative provision regarding state access to books and records of a holding company or any associate company or affiliate thereof indicates that the Section 32(c) Petitions and the Section 2102 Affiliated Interest Agreement petitions come within these provisions. A determination on our part is appropriate in order to remove any uncertainty regarding our current view of these facilities and agreements in light of that authority. 4 Energy Policy Act of 2005, ss. 1265. 5 Application of Pennsylvania Power Company for (1) Approval, Pursuant to Chapter 21 of the Public Utility Code, of the Lease of Certain Power Production Facilities to FirstEnergy Generation Corporation and (2) Issuance of Findings Required by the Public Utility Holding Company Act to Enable FirstEnergy Generation Corporation to Obtain Exempt Wholesale Generator Status, Docket No. P-00011869 (Order entered February 21, 2001). Today's action is consistent with and in no way detracts from our prior action. 6 August 26, 1935, c. 687, Title I, ss. 32, as added October 24, 1992, Pub.L. 102-486, Title VII, ss. 711, 106 Stat. 2905. 10 determination, facilities that were under state regulation as of October 24, 1992, must receive from the jurisdictional state regulatory commission a "specific determination that allowing such facility to be an `eligible facility' (1) will benefit consumers, (2) is in the public interest, and (3) does not violate State law. . . ." 15 U.S.C. ss.79z-5a(c). We agree that the Section 32(c) Petitions should be granted for the reasons set forth below. We do so because the required specific determinations demonstrate that the transactions set forth in the Section 32(c) Petitions benefit consumers, are consistent with the public interest, and do not violate state law. We find that there are consumer benefits sufficient to justify granting the Section 32(c) Petitions. The benefit to consumers is evident in Penn Power's statements and commitments to the OCA. We adopt those commitments and make them binding on FE Corporation and Penn Power. First, FE Corporation and Penn Power agree that ratepayers will not incur any tax effects from the spin-off or transfer transactions. Second, FE Corporation and Penn Power also agree that ratepayers are not required to pay or fund any transaction costs. In addition, FE Corporation and Penn Power agree that these transactions are not intended to nor will they increase Penn Power's distribution rates from capital structure and cost of capital effects resulting from these transactions. Finally, FE Corporation and Penn Power agree that a party has the right to examine these issues in any request in a proceeding by Penn Power to increase its distribution rates and to recommend any adjustments deemed necessary. We also find that the Section 32(c) Petitions are consistent with state law as required by 15 U.S.C. 79z-5a(c). We agree with FE Corporation and Penn Power that the proposed transactions envision a transfer of the generation assets consistent with FE Corporation's restructuring under state law. We also agree that there is no indirect or direct harm to other competitive generation supplies or competition in the market. The fact that the electricity is and will 11 remain within the purview of FE Corporation is an important consideration as well. We also find that the Section 32(c) Petitions meet the public interest determination required by 15 U.S.C. ss.79z-5a(c) for the Fossil Assets and the Nuclear Assets is also based on several considerations. There will be no decrease in the number of competitors or the level of competition in the wholesale market. There is no evidence of any violation of state law such as harm to consumers due to developments that undermine competition or otherwise harm consumers. Finally, there are no adverse impacts sufficient to deny or reconsider our determinations regarding consumer benefits, compliance with state law, or the public interest. We also make our Section 79z-5a(c) determinations for the Fossil Assets and the Nuclear Assets for other reasons under state and federal law. Restructuring provides for structural separation that builds upon the functional separation attained under the current Master Lease agreement. A more competitive electric utility industry in Pennsylvania is in the public interest and consistent with state law. See PaPUC v. West Penn Power Co. and AYP Capital, Inc., Docket No. G-00960476 (June 6, 1996). The Commission already approved Section 32(c) requests involving the transfer of generating facilities by other Pennsylvania electric utilities after determining that no legal impediment exists. See, eg., Appl. of UGI Development Co., Docket No. P-00991693 (August 26, 1999); Appl's of Metropolitan Edison Co. and Pennsylvania Electric Co., Docket Nos. R-00974008 and R-00974009 (October 20, 1998). That approach is appropriate here. Our approval promotes the divestiture plans of FE Corporation and Penn Power without untoward harm to the public interest or the operation of the Fossil Assets or the Nuclear Assets. Divestiture of the Nuclear Assets will be accomplished through a transfer of ownership by a spin-off to a separate corporate subsidiary. The current functional separation of the Master Lease 12 agreement is transformed into a structural separation through a sale at the corporate level. There are no apparent market power considerations sufficient to deny or reconsider this request. That is because there will be no net change to FirstEnergy System's existing owned generation resources. Competition among suppliers will not be adversely affected by our approval of the Section 32(c) Petitions. There is no demonstrable adverse impact upon the availability or reliability of the electricity from Fossil Assets or the Nuclear Assets to Penn Power's customer or any electricity customer sufficient to deny or reconsider this request at this time. All the electricity available from the Fossil Assets and the Nuclear Assets is and will continue to be sold to FirstEnergy Solutions Corporation, a power marketing affiliate of Penn Power. Approval allows the company to transfer the Fossil Assets and the Nuclear Assets from regulated utilities to separate, competitive entities. The transfer promotes compliance with the goals and requirements of the Commission's Competitive Safeguards/Code of Conduct set forth at 52 Pa.Code ss.ss.54.121 et seq. Approval also transfers the individuals involved with the Fossil Assets and the Nuclear Assets in a way that enhances compliance with these goals and requirements by identifying specific entities and individuals responsible for competitive operations. Penn Power and FE Corporation intend to conduct their competitive generation operations, including the financing activities, through separate legal subsidiaries as opposed to functional divisions in order to better shield customers from the potential earnings volatility of its competitive business operation. Legally distinct entities at the subsidiary level allows the use of financing techniques better suited to the requirements, characteristics, and risks of non-utility operations in a manner that does not undermine Penn Power's creditworthiness. Subsidiaries increase internal accountability while enabling 13 management to evaluate the success of existing and new businesses. This result enhances, rather than detracts from, customer benefits. Finally, this form of organization is consistent with business segment reporting now required under Securities and Energy Commission ("SEC") and financial accounting rules. We realize that FE Corporation recently withdrew its request for Section 32(c) Petition for approval of the nuclear assets from the Ohio Public Utility Commission (OPUC). Pennsylvania and Ohio contain the Nuclear Assets that are the subject of the Second Section 32(c) Petition addressed in today's Opinion and Order. FE Corporation explains that this action should not affect Commission approval because FE Corporation eventually plans to seek EWG status or some other status for the Nuclear Assets and that this action provides FE Corporation with flexibility regarding its generation assets. We recognize that FE Corporation's actions in Ohio strongly suggest that this Commission not act on the Second Section 32(c) Petition and related affiliated interest agreement concerning the Nuclear Assets unless and until FE Corporation seeks approval from the OPUC. The incongruity of seeking approval in one state while withdrawing a request for that same approval in another state is not lost on the Commission. Nevertheless, upon consideration, we grant the Section 32(c) Petitions including the Second Section 32(c) Petition involving the Nuclear Assets. We can approve the Second Section 32(c) Petition along with the First Section 32(c) Petition for the reasons set forth above as well as the considerations below. Approval means that we fully expect FE Corporation to obtain all necessary approvals from the OPUC and to keep the Commission informed of all developments in the other approving states. The Commission could reconsider and possibly rescind this approval if FE Corporation fails to provide the Commission with timely notice. This approach reconciles the incongruity of seeking EWG 14 approval in one state while withdrawing a request for the same approval in another state. We see no reason to unnecessarily delay or prevent the structural separation envisioned in the 32(c) Petitions and the related Section 2102 Affiliated Interest agreements. That separation, as well as the debt transfer and the non-recourse provisions of the transactions, improves the ring-fencing of Penn Power as it relates to the generation assets and operation of FE Corporation. Additionally, we expect FE Corporation management to consider further steps that can be taken to improve the protection of their Pennsylvania utilities through ring-fencing. Based on these considerations, we grant the Section 32(c) Petitions. The generation assets designated in the First and Second Section 32(c) petitions are declared to "eligible facilities" as the overall evidence supports a specific determination regarding consumer benefit, consistency with the public interest, and the lack of any state law violations at this time. THE AFFILIATED INTEREST AGREEMENTS. The first Affiliated Interest Agreement covers Penn Power and First Energy Corporation's Fossil Assets. The second Affiliated Interest Agreement covers Penn Power and First Energy's Nuclear Assets. The First Affiliated Interest Agreement builds upon the Commission's prior approval of a Lease Agreement between Penn Power and FE Genco set forth at Docket No. P-00011869. The Lease Agreement leased Penn Power's interest in the Mansfield and Sammis power plants and certain peaking facilities to FE Genco for 20 years. That same order designated the facilities as "eligible facilities" under PUHCA. As mentioned above, the Lease Agreement gave FE Genco an option to purchase the plants listed in that agreement. Penn Power seeks Commission approval to execute the P&S Agreement between Penn Power and FE Genco pursuant to that purchase option. 15 The Second Affiliated Interest Agreement concerns Penn Power's Nuclear Assets. Penn Power seeks Commission approval of the S & C Agreement between Penn Power and FE Nuclear. The S & C Agreement would result in the structural separation of Penn Power's electric generation from its energy delivery functions. In a letter dated July 11, 2005, staff requested that the applicants provide pro forma accounting entries that would be required on the books of Penn Power, FE Genco and FE Nuclear in order for Penn Power to complete the P&S Agreement with FE Genco and the S&C Agreement with FE Nuclear. Additionally, staff requested before and after organization charts of FE Corporation and the affiliates involved in the proposed transaction. The applicants provided the data in a letter dated July 19, 2005. In approving this order, we request that upon completion of the proposed transactions the applicants file final accounting entries with the Commission. The applicants must file copies of the finalized P&S Agreement and the S&C Agreement. Upon consideration of the filings and the prior decision regarding a request for Section 32(c) relief, we approve these affiliated interest agreements. We do so in light of the considerations set forth regarding the Section 32(c) relief and in order to give Penn Power, FE Genco, FE Corporation and FE Nuclear the ability to proceed and finalize the complete separation of its generation ownership interest from its utility operations. We also do so in reliance on our discussion of the Section 32(c) Petitions as well. CONCLUSION Upon review of the Section 32(c) Petitions, the supplemental pleadings, and the affiliated interest agreements, we grant the Section 32(c) Petitions and approve the Section 2102 Affiliated Interest agreements. The generation assets 16 designated in the First and Second Section 32(c) petitions should be declared "eligible facilities" because the overall evidence supports specific determinations regarding consumer benefits, consistency with the public interest, and the absence of any violation of state law at this time. The Commission has examined the affiliated interest agreements needed to accomplish this structural separation and has determined that they appear to be reasonable and consistent with the public interest; however, approval of these agreements does not preclude the Commission from investigating during any formal proceeding, the reasonableness of any charges under the agreements; THEREFORE, IT IS ORDERED: 1. That the Affiliated Interest Agreement between Pennsylvania Power Company and FirstEnergy Generation Corporation be, and hereby is, approved consistent with this Opinion and Order. 2. That the Affiliated Interest Agreement between Pennsylvania Power Company and FirstEnergy Nuclear Generation Corporation be, and hereby is, approved consistent with this Opinion and Order. 3. That Pennsylvania Power Company shall file with the Commission a copy of the final Purchase and Sale Agreement between itself and FirstEnergy Generation Corporation. Additionally, Pennsylvania Power Company shall file with the Commission a copy of all final accounting entries required to complete the proposed transaction. 4. That Pennsylvania Power Company shall file with the Commission a copy of the final Subscription and Contribution Agreement between itself and FirstEnergy Nuclear Generation Corporation. Additionally, Pennsylvania Power Company shall file with the Commission a copy of all final accounting entries required to complete the proposed transaction. 17 5. That FE Corporation and its subsidiary Pennsylvania Power Company shall not require ratepayers to incur any tax effects from any spin-off or other transactions. 6. That FE Corporation and its subsidiary Pennsylvania Power Company shall not require ratepayers to fund or pay any transaction costs. 7. That FE Corporation and its subsidiary Pennsylvania Power Company agree that these transactions are not intended to increase Pennsylvania Power Company's distribution rates from capital structure and cost of capital effects that may result from these financial transactions. 8. That FE Corporation and its subsidiary Pennsylvania Power Company agree that all parties interested in matters related to the transactions expressly have the right to examine those issues in any request by Penn Power to increase its distribution rates and to recommend any adjustments they find necessary. 9. That FE Corporation and its subsidiary Pennsylvania Power Company agree that ratepayer obligations regarding nuclear decommissioning costs will remain as specified in the Commission's prior Order regarding Pennsylvania Power Company's Restructuring Plan and its further order approving the Joint Petition for Full Settlement of Pennsylvania Power Company's Restructuring Plan and Related Court Proceedings set forth in Application of Pennsylvania Power Company for Approval of Restructuring Plan Under Section 3806 of the Public Utility Code, Docket No. R-00974149 (Restructuring Order entered July 22, 1998) and (Tentative Order on Settlement entered April 1, 1999). 18 10. That FirstEnergy Corporation and its subsidiary Pennsylvania Power Company shall abide by the additional requirements or obligations set forth in today's Opinion and Order regarding filing and updating the Commission concerning developments in the Ohio Public Utility Commission and the other states where approval is necessary. 11. That this approval shall be effective as of the date of entry of this Opinion and Order. BY THE COMMISSION, James J. McNulty Secretary (SEAL) ORDER ADOPTED: September 9, 2005 ORDER ENTERED: September 9, 2005 19 EX-99 3 exh_d4.txt EXHIBIT D-4 EXHIBIT D-4 112 FERC P. 61,243 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead Brownell, and Suedeen G. Kelly. FirstEnergy Corp. Docket No. EC05-84-000 ORDER AUTHORIZING DISPOSITION AND ACQUISITION OF JURISDICTIONAL FACILITIES (Issued September 1, 2005) I. INTRODUCTION ------------ 1. On May 19, 2005, the Applicants, which are: FirstEnergy Corp. (FirstEnergy) on behalf of The Cleveland Electric Illuminating Company (CEI), Ohio Edison Company (Ohio Edison), Pennsylvania Power Company (Penn Power), and The Toledo Edison Company (Toledo Edison) (collectively, FirstEnergy Operating Companies); FirstEnergy Solutions Corp. (Solutions); and FirstEnergy Nuclear Generation Corp. (Nuclear Genco) filed an application under section 203 of the Federal Power Act (FPA)/1/ requesting authorization for the disposition and acquisition of jurisdictional facilities through the transfer of FirstEnergy Operating Companies' ownership interests in certain Nuclear Assets/2/ to Nuclear Genco. The jurisdictional facilities are generator step-up transformers and interconnection facilities associated with the Nuclear Assets. The Applicants further request authorization under section 203 for Solutions to acquire the stock of Nuclear Genco, which initially will be owned by Penn Power, after the asset transfers have occurred, so that Nuclear Genco will become a direct, wholly-owned subsidiary of Solutions. This is an internal corporate restructuring. - ---------- 1 16 U.S.C. ss. 824b (2000) [new citation pending]. 2 The Nuclear Assets are Units 1 and 2 of the Beaver Valley Nuclear Generating Station, the Davis-Besse Nuclear Generating Station, and the Perry Nuclear Generating Station. Docket No. EC05-84-000 -2- 2. The Commission has reviewed the proposed transaction under the Commission's Merger Policy Statement./3/ We will authorize the proposed transaction, as we find that it will not have an adverse effect on competition, rates or regulation and is thus consistent with the public interest. II. BACKGROUND ---------- A. DESCRIPTION OF THE PARTIES -------------------------- 3. FirstEnergy Corp. is a registered public utility holding company under the Public Utility Holding Company Act of 1935 (PUHCA)./4/ The FirstEnergy Operating Companies are engaged in the generation, transmission and distribution of electricity to wholesale and retail customers in the Eastern Interconnection. Penn Power is a subsidiary of Ohio Edison. 4. Solutions is an electricity and natural gas marketing subsidiary of FirstEnergy that does not directly own or operate any generation or transmission facilities. The company markets electricity and natural gas service to business and residential customers in thirteen states, including areas served by the Midwest Independent System Operator, the New York Independent System Operator, and PJM Interconnection, LLC. Solutions has one subsidiary, FirstEnergy Generation Corp. (Generation), which was formed in 2001 to own and/or operate fossil-fueled and hydro-electric generating facilities of the FirstEnergy Operating Companies. 5. Nuclear Genco will be a newly-formed generation company incorporated under the laws of the State of Ohio that will acquire all of the Nuclear Assets. Nuclear Genco will initially be a wholly-owned subsidiary of Penn Power. After a series of transfers of the common stock of Nuclear Genco, Nuclear Genco will become a second subsidiary of Solutions. - ---------- 3 See Inquiry Concerning the Commission's Merger Policy Under the Federal Power Act: Policy Statement, Order No. 592, 61 Fed. Reg. 68,595 (Dec. 19, 1996), FERC Stats. & Regs. P. 31,044 (1996), reconsideration denied, Order No. 592-A, 79 FERC P. 61,321 (1997) (Merger Policy Statement); see also Revised Filing Requirements Under Part 33 of the Commission's Regulations, Order No. 642, 65 Fed. Reg. 70,983 (Nov. 28, 2000), FERC Stats. & Regs. P. 31,111 (2000), order on reh'g, Order No.642-A, 94 FERC P. 61,289 (2001) (Merger Filing Requirements). 4 15 U.S.C. ss. 79 (2000). Docket No. EC05-84-000 -3- 6. The Applicants and their affiliates own 13,387 megawatts (MW) of generating capacity and 16,067 pole miles of overhead and underground transmission facilities. The FirstEnergy Operating Companies own approximately 3,326 MW of generation capacity from the Nuclear Assets. B. THE PROPOSED TRANSACTION 7. Applicants say that the proposed transaction is being implemented in accordance with restructuring of the electric industry in Pennsylvania and Ohio. In 1996, the Pennsylvania legislature enacted legislation to restructure the state's electric industry by creating retail access to a competitive market for the generation of electricity. Applicants say that similar legislation that was enacted in Ohio in 1999 required each electric utility in Ohio that was proposing to offer both competitive retail electric service and non-competitive service operate under a corporate separation plan approved by the Public Utilities Commission of Ohio. Pursuant to that corporate separation plan, operational control over the fossil and hydro-electric generating stations of the FirstEnergy Operating Companies was transferred to Generation./5/ 8. In order to achieve the corporate separation of nuclear generation facilities owned by FirstEnergy Operating Companies, responsibility for operation of those facilities was given to FirstEnergy Nuclear Operating Company. However, due to restrictive financial covenants, the FirstEnergy Operating Companies retained their ownership interests in their nuclear generating units at the time of the restructuring. The authorization will allow each of the FirstEnergy Operating Companies to complete the process of achieving a full divestiture of all of its owned generating capacity. 9. Under the proposed transaction, Nuclear Genco will initially be a wholly-owned subsidiary of Penn Power. After all necessary regulatory approvals are obtained, Penn Power will transfer its ownership interest in the Beaver Valley and Perry generating stations to Nuclear Genco under a Subscription and Capital Contribution Agreement based on the net book value of the assets being transferred. In return, Nuclear Genco will assume $63,650,000 of outstanding Pollution Control Revenue Bonds of Penn Power and certain other liabilities associated with the units being transferred, and will issue 100 shares of common stock to Penn Power. Penn Power will also contribute specified nuclear plant-related assets to Nuclear Genco and will acquire a promissory note from Nuclear Genco in the amount of the net book value of such assets. After Penn Power has transferred its interests in the Nuclear Assets to Nuclear Genco and has acquired the common stock of Nuclear Genco, Penn Power will declare and pay a dividend to its parent, Ohio Edison, consisting of all of its Nuclear Genco common stock. As a result, Nuclear Genco will momentarily become a wholly-owned subsidiary of Ohio Edison. - ---------- 5 The Commission approved the transfer of operational control to Generation in FirstEnergy Corp., 94 FERC P. 61,179 (2001). Docket No. EC05-84-000 -4- 10. Ohio Edison will then transfer its ownership interests in the Nuclear Assets to Nuclear Genco by a contribution to Nuclear Genco pursuant to another Capital Contribution Agreement. After the transfer, Nuclear Genco will also assume from time to time Ohio Edison's obligations in respect to Pollution Control Bonds and certain other liabilities. 11. CEI and Toledo Edison will sell their interests in the Nuclear Assets to Nuclear Genco under Purchase and Sales Agreements. Ohio Edison will then distribute all of the common stock of Nuclear Genco to FirstEnergy as a dividend to its parent so that Nuclear Genco will become, momentarily, a direct wholly-owned subsidiary of FirstEnergy. Finally, FirstEnergy will make a capital contribution to Solutions consisting of all of the Nuclear Genco common stock. Therefore, when the transaction is completed, both Generation and Nuclear Genco will be wholly-owned subsidiaries of Solutions, and will be selling all of the output from the generating stations that they own to Solutions. III. NOTICE OF FILING AND RESPONSIVE PLEADINGS ----------------------------------------- 12. Notice of this filing was published in the Federal Register, 70 Fed. Reg. 32,316 (2005), with comments, protests or interventions due on or before June 9, 2005. On June 8, 2005, American Municipal Power-Ohio, Inc. (AMP-Ohio) and the City of Cleveland, Ohio (Cleveland) filed an intervention and comments. On June 21, 2005, FirstEnergy filed an answer. On June 27, 2005, AMP-Ohio and Cleveland filed a motion for leave to reply. On June 30, 2005, FirstEnergy filed an additional answer. IV. DISCUSSION ---------- A. PROCEDURAL MATTERS ------------------ 13. Pursuant to Rule 214 of the Commission's Rules of Practice and Procedure, 18 C.F.R. ss. 385.214 (2005), the timely, unopposed motions to intervene serve to make the entities that filed them parties to this proceeding. Rule 213(a)(2) of the Commission's Rules of Practice and Procedure, 18 C.F.R. ss. 385.213(a)(2) (2005), prohibits an answer to a protest unless otherwise ordered by the decisional authority. We will accept the answers(6) filed in this proceeding because they have provided information that assisted us in our decision-making process. - ---------- 6 We consider AMP-Ohio and Cleveland's motion for leave to reply to be an answer, and treat it as such. Docket No. EC05-84-000 -5- B. CONSISTENCY WITH THE PUBLIC INTEREST ------------------------------------ 14. Section 203(a) of the FPA provides that the Commission must approve a disposition of facilities if it finds that the disposition "will be consistent with the public interest." The Commission's analysis of whether a disposition is consistent with the public interest generally involves consideration of three factors: (1) the effect on competition; (2) the effect on rates; and (3) the effect on regulation. As discussed below, we find that the proposed transaction is consistent with the public interest and will not adversely affect competition, rates, or regulation. 1. EFFECT ON COMPETITION --------------------- 15. Applicants state that the proposed transaction will not adversely affect competition. It is an internal company reorganization that will have no effect on the overall amount of generation capacity within the FirstEnergy corporate family. They contend that an internal reorganization cannot have an effect on competition because such a transaction does not involve the acquisition or disposition by the organization of any assets. We find that the proposed transaction will not adversely affect competition. 2. EFFECT ON RATES --------------- 16. Applicants state that the proposed transaction will have no effect on the rates of wholesale customers. They state that all of the electricity available to the FirstEnergy Operating Companies from the Nuclear Assets is now being sold to Solutions for resale. Applicants state that after the transaction has been consummated, all of the electricity available from that capacity will continue to be sold to Solutions for resale. Applicants state that if the power is sold by Solutions to affiliated public utilities with retail native load responsibilities, such sales will be subject to Commission review and approval. We agree with the Applicants that the proposed transaction will not adversely affect rates. 3. EFFECT ON REGULATION -------------------- 17. As explained in the Merger Policy Statement and the Merger Filing Requirements, the Commission's primary concern with the effect on regulation of a transaction involves possible changes in the Commission's jurisdiction when a registered holding company is formed, thus invoking the jurisdiction of the Securities and Exchange Commission. Applicants state that after the proposed transaction is consummated, Nuclear Genco will be a public utility subject to the Commission's jurisdiction under Parts II and III of the FPA. Applicants state that Commission's jurisdiction will be unaffected by the transaction, and that the proposed transaction will have no effect on state regulatory jurisdiction. Docket No. EC05-84-000 -6- 18. We note that no party has raised concerns about the proposed transaction's effect on state or federal regulation. Also, no state has indicated that it lacks jurisdiction to consider the transactions' effect on retail rates. In addition, Applicants have already stated in a prior proceeding that FirstEnergy is a registered holding company under PUHCA and have committed to waive the Ohio Power immunity from Commission regulation of intra-affiliate transactions involving non-power goods and services./7/ Accordingly, we conclude that federal and state regulation would not be impaired. 4. THE NRC LICENSING CONDITIONS ---------------------------- 19. AMP-Ohio and Cleveland argue that it is unclear what effect the proposed transaction will have on certain antitrust licensing conditions (Licensing Conditions) imposed by the Nuclear Regulatory Commission (NRC). They request that the Commission condition the authorization of the proposed transaction on the continuing application of the Licensing Conditions, which are contained in the operating licenses for the Nuclear Generating Stations issued to each of the FirstEnergy Operating Companies. AMP-Ohio explains that the Licensing Conditions rose out of an antitrust investigation by the NRC, and were intended to prevent anti-competitive conduct by the FirstEnergy Operating Companies. AMP-Ohio and Cleveland argue that it is not clear that the Licensing Conditions are being transferred to Nuclear Genco in the proposed transaction. In addition, they express concern that if the Licensing Conditions are to apply only to Nuclear Genco, Nuclear Genco may not be in a position to ensure ongoing compliance with Licensing Conditions related to transmission. AMP-Ohio adds that FirstEnergy's filing does not indicate that FirstEnergy is attempting to eliminate or change antitrust conditions contained in the NRC licenses. 20. AMP-Ohio and Cleveland argue that the Licensing Conditions are important because they help ensure that the First Energy Operating Companies do not discriminate against or engage in anticompetitive conduct directed toward municipalities. They request that the Commission require that the Licensing Conditions continue to remain viable as to FirstEnergy and all of its subsidiaries and affiliate companies after the proposed transaction is consummated. They argue that such conditional authorization will merely preserve the status quo and will require no change in the licenses. 21. FirstEnergy responds that the condition proposed by AMP-Ohio and Cleveland is unwarranted and beyond the scope of this proceeding. It argues that the Commission's review of the transfer of the Nuclear Assets is governed only by the factors set forth in the Merger Policy Statement. FirstEnergy states that neither AMP-Ohio nor Cleveland alleges that the proposed transaction will - ---------- 7 See FirstEnergy Corp., 105 FERC P. 62,199 (citing Ohio Power Co. v. FERC, 954 F.2d 779 (D.C. Cir. 1992), cert. denied, FERC v. Ohio Power, 506 U.S. 981 (1992) (Ohio Power). Docket No. EC05-84-000 -7- adversely affect competition, rates, or regulation. It also states that the Commission has previously rejected efforts by Cleveland to have the Licensing Conditions incorporated into required approvals./8/ 22. FirstEnergy further argues that conditional acceptance of its application is unjustified because there is no evidence that the transfer of the Nuclear Assets will somehow affect the Licensing Conditions. In addition, FirstEnergy states that the applications filed with the NRC propose that the affected licenses be amended to make the Licensing Conditions expressly applicable to Nuclear Genco. Finally, in response to Cleveland's apparent concern that the transfer will allow avoidance of a merger settlement commitment/9/ to apply the Licensing Conditions to all dealings between the FirstEnergy Operating Companies and Cleveland, and to notify Cleveland before seeking to modify the terms of the Licensing Conditions, FirstEnergy clarifies that the compliance commitment will continue to apply to all FirstEnergy affiliates until the License Conditions are changed or revoked by the NRC. 23. In their answer, AMP-Ohio and Cleveland assert that the proposed transaction would create an opportunity for FirstEnergy to evade at least a portion of its obligation under the License Conditions. They argue that FirstEnergy seeks to shift its NRC license condition obligations to a new Nuclear Genco, thus either weakening or eliminating its obligations. They argue that FirstEnergy should not be prevented from creating a nuclear generation subsidiary, but that it should be prohibited from doing so in a way that affects competition and the ability of the Commission and the NRC to enforce license conditions imposed on FirstEnergy. 24. We reject the request of AMP-Ohio and Cleveland that we impose a condition on our approval of FirstEnergy's application. We are considering here only the transaction proposed in the application, and approve the proposed transaction simply because we find that it satisfies section 203(a) of the FPA. AMP-Ohio and Cleveland have provided no evidence that the proposed transaction is not consistent with the public interest or that it will adversely affect competition, rates, or regulation. Accordingly, their concern is outside the scope of this proceeding. AMP-Ohio notes that the Licensing Conditions are - ---------- 8 Answer of FirstEnergy at 3 (citing American Electric Power Company, 78 FERC P. 61,070 at 61,276 (1997)). 9 The merger settlement agreement was approved by the Commission in Ohio Edison Co., 81 FERC P. 61,110 at 61,407-08 (1997). Docket No. EC05-84-000 -8- also at issue in a filing currently before the NRC./10/ Because the Licensing Conditions were imposed by the NRC, it would be more appropriate to discuss their future applicability in that forum./11/ The Commission orders: - --------------------- (A) The transaction is authorized upon the terms and conditions and for the purposes set forth in the application. (B) The foregoing authorization is without prejudice to the authority of the Commission or any other regulatory body with respect to rates, service, accounts, valuation, estimates or determinations of costs, or any other matter whatsoever new pending or which may come before this Commission. (C) Nothing in this order shall be construed to imply acquiescence in any estimate or determination of cost or any valuation of property claimed or asserted. (D) The Commission retains authority under sections 203(b) and 309 of the FPA to issue supplemental orders as appropriate. (E) CEI, Ohio Edison, Penn Power, and Toledo Edison shall account for the transfer of the facilities in accordance with Electric Plant Instruction No. 5 and Account 102, Electric Plant Purchased or Sold, of the Uniform System of Accounts. The companies must also file their proposed accounting within six months of the date that the transfers are consummated. (F) Applicants shall notify the Commission within 10 days of the date of the disposition and acquisition of jurisdictional facilities has been consummated. By the Commission. ( S E A L ) Magalie R. Salas, Secretary. - -------- 10 AMP-Ohio Motion to Intervene and Comments at 4. 11 See Otter Tail Power Co., 97 FERC P. 61,226 at 62,033 (2001), order on reh'g, 98 FERC P. 61,112 (2002). EX-99 4 exh_d5a.txt EXHIBIT D-5(A) EXHIBIT D-5(A) June 1, 2005 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L 10 CFR 50.80 10 CFR 50.90 10 CFR 2.1315 10 CFR 2.390 10 CFR 9.17 U.S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, D.C. 20555 Re: Beaver Valley Power Station, Unit Nos. 1 & 2, Docket Nos. 50-334 & 50-412 Davis-Besse Nuclear Power Station, Unit No. 1, Docket No. 50-346 Perry Nuclear Power Plant, Unit No. 1, Docket No. 50-440 Application for Order Consenting to Transfer of Licenses and Approving Conforming License Amendments --------------------------------------------------------------------------- Pursuant to Section 184 of the Atomic Energy Act of 1954, as amended ("AEA"), and 10 CFR 50.80, FirstEnergy Nuclear Operating Company ("FENOC") acting as agent for and on behalf of FirstEnergy Nuclear Generation Corp. ("FENGenCo"), Ohio Edison Company ("Ohio Edison"), OES Nuclear, Inc. ("OES Nuclear"), The Cleveland Electric Illuminating Company ("Cleveland Electric"), and The Toledo Edison Company ("Toledo Edison"), [Ohio Edison, OES Nuclear, Cleveland Electric, and Toledo Edison together, the "Ohio Companies"] hereby submits the enclosed application to the Nuclear Regulatory Commission ("NRC") requesting consent to the transfer of ownership interests involving Beaver Valley Power Station, Unit No. 1 ("BVPS 1"), Beaver Valley Power Station, Unit No. 2 ("BVPS 2," together with BVPS 1, "BVPS"), Perry Nuclear Power Plant, Unit No. 1 ("Perry"), and Davis-Besse Nuclear Power Station, Unit No. 1 ("Davis-Besse"). FENOC requests an order consenting to the following transfers from the Ohio Companies to FENGenCo: 1. Ohio Edison's 35 percent undivided ownership interest in BVPS 1 and 20.22 percent undivided ownership interest in BVPS 2; 2. OES Nuclear's 17.42 percent undivided ownership interest in Perry; 3. Cleveland Electric's 24.47 percent undivided ownership interest in BVPS 2, 44.85 percent undivided ownership interest in Perry, and 51.38 percent undivided ownership interest in Davis-Besse; and June 1, 2005 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 2 4. Toledo Edison's 1.65 percent undivided ownership interest in BVPS 2, 19.91 percent undivided ownership interest in Perry, and 48.62 percent undivided ownership interest in Davis-Besse. No transfer or other change is requested with respect to Ohio Edison's license to possess its 21.66 percent leased interest in BVPS 2 and 12.58 percent leased interest in Perry, nor with respect to Toledo Edison's license to possess its 18.26 percent leased interest in BVPS 2. Ohio Edison and Toledo Edison will remain responsible for their respective obligations under the licenses for these leased interests. This application also requests conforming administrative amendments to the BVPS, Perry, and Davis-Besse licenses to: 1. Reflect the proposed transfer of ownership interests in BVPS, Perry, and Davis-Besse from the Ohio Companies to FENGenCo. 2. Delete the Ohio Companies from the licenses, except for Ohio Edison's remaining leased interests in BVPS 2 and Perry, and Toledo Edison's remaining leased interest in BVPS 2, and 3. Authorize FENGenCo to possess the respective ownership interests in BVPS, Perry, and Davis-Besse being transferred by the Ohio Companies. FENOC previously submitted an application seeking NRC consent to the transfer of Pennsylvania Power Company's ("Penn Power") interests in BVPS and Perry to FENGenCo. This application represents the second phase in a reorganization to consolidate the ownership of BVPS, Perry and Davis-Besse in FENGenCo, except for interests subject to third party lease obligations. FENOC expects that the transfer of the Penn Power interests to FENGenCo will occur prior to the transfer of the interests of the Ohio Companies that are the subject of this application. However, each application includes the required financial and other information (with the exception of the marked up Operating License pages) to support NRC's approval independent from the other, and therefore, approval of neither application should be dependent upon approval of the other. In the event that NRC approval of the Ohio Company interests precedes NRC approval of the Penn Power interests, FENOC will supplement the applications with the appropriate amended conforming Operating License pages. FENGenCo will be a direct, wholly owned subsidiary of FirstEnergy Solutions Corp. ("FE Solutions"), which, in turn, is a direct, wholly owned subsidiary of FirstEnergy Corp. ("FirstEnergy"). FirstEnergy's seven electric utility operating companies comprise the nation's fifth largest investor-owned electric system, serving 4.4 million customers within 36,100 square miles of Ohio, Pennsylvania, New Jersey, and New York. Certain financial information included in Exhibits H and I of the attached license transfer application is confidential commercial information which FENOC requests be withheld from public disclosure pursuant to 10 CFR 2.390 and 9.17(a)(4). Redacted versions of Exhibits H and I are provided in the June 1, 2005 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 3 non-proprietary version of this application. Confidential versions of Exhibits H and I are provided in a separate Addendum to this application. An affidavit supporting the request for withholding the Addendum from public disclosure is provided with the sworn affirmations appended to the application. The information contained in this application demonstrates that FENGenCo possesses the requisite qualifications to own the Ohio Companies' existing undivided ownership interests in BVPS, Perry, and Davis-Besse (not including the leased interests held by Ohio Edison and Toledo Edison). The proposed transfer of control of the Ohio Companies' interests will not result in any change in the role of FENOC as the licensed operator of the facilities, including budget responsibilities and operating authority. Finally, this request for transfer of control of licenses does not involve any entities that are owned, controlled, or dominated by a foreign entity. In summary, the proposed transfers will be consistent with the requirements set forth in the AEA, NRC regulations, and the relevant NRC licenses and orders. No physical changes will be made to BVPS, Perry, or Davis-Besse, and there will be no changes in the day-to-day operation of those plants as a result of these transfers. The proposed transfers will not have any adverse impact on the public health and safety, nor will these transfers be inimical to the common defense and security. The application solely requests approval for the transfer of ownership interests within the same FirstEnergy family of companies. FENOC respectfully requests that the NRC consent to the transfers of control in accordance with 10 CFR 50.80 and approve the conforming license amendments. FENOC requests that the NRC review this application on a schedule that will permit the issuance of NRC consent to the transfers of control and conforming license amendments as soon as possible, and are prepared to work closely with the NRC Staff to help expedite the application's review. Approval is requested by no later than November 1, 2005. Such consent should be immediately effective upon issuance and should permit the transfers at any time prior to December 31, 2006. FENOC will inform the NRC of any significant changes in the status of any other required approvals or any other developments that have an impact on the schedule. Service upon FENOC of comments, hearing requests, intervention petitions or other pleadings should be made to David W. Jenkins, Esq., FirstEnergy Corp., 76 South Main Street, Mail Stop A-Go-18, Akron, OH 44308, tel: (330) 384-5037, and email: djenkins@firstenergycorp.com. June 1, 2005 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 4 If the NRC requires additional information concerning this application, please contact Mr. Gregory H. Halnon, FENOC Director, Regulatory Affairs, FirstEnergy Nuclear Operating Company, 395 Ghent Road, A-Ghe-315, Akron, OH 44333, tel: (330) 315-7500, and email: ghalnon@firstenergycorp.com. Sincerely, /S/ for Gary R. Leidich President and Chief Nuclear Officer FirstEnergy Nuclear Operating Company Enclosures: 1. Application with Exhibits 2. Regulatory Commitments 3. Proprietary Addendum cc: Director, NRR NRC Region 1 Administrator NRC Region 3 Administrator Beaver Valley NRC Project Manager Davis-Besse NRC Project Manager Perry NRC Project Manager Beaver Valley NRC Senior Resident Inspector Davis-Besse NRC Senior Resident Inspector Perry NRC Senior Resident Inspector D.A. Allard, Director BRP/DEP L.E. Ryan, BRP/DEP N. Dragani, Executive Director, Ohio Emergency Management Agency, State of Ohio (NRC Liason) Utility Radiological Review Board Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 1 APPLICATION FOR ORDER CONSENTING TO TRANSFER OF LICENSES AND APPROVING CONFORMING LICENSE AMENDMENTS JUNE 1, 2005 submitted by FIRSTENERGY NUCLEAR OPERATING COMPANY on behalf of FIRSTENERGY NUCLEAR GENERATION CORP. and OHIO EDISON COMPANY and OES NUCLEAR, INC. and THE CLEVELAND ELECTRIC ILLUMINATING COMPANY and THE TOLEDO EDISON COMPANY Beaver Valley Power Station, Unit Nos. 1 & 2, Docket Nos. 50-334 & 50-412, Davis-Besse Nuclear Power Station, Unit No. 1, Docket No. 50-346, and Perry Nuclear Power Plant, Unit No. 1, Docket No. 50-440 Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 2 APPLICATION FOR ORDER CONSENTING -------------------------------- TO TRANSFER OF LICENSES AND APPROVING CONFORMING LICENSE AMENDMENTS ------------------------------------------------------------------- TABLE OF CONTENTS ----------------- SECTION PAGE NO. - ------- -------- I. Introduction 4 II. Statement of Purpose of the Transfer and Nature of the Transaction Making the Transfer Necessary or Desirable 8 III. Supporting Information 10 A. Name of New Licensee 10 B. Address 10 C. Description of Business or Occupation 10 D. Corporate Information 10 1. State of Incorporation and Place of Business 10 2. Directors and Principal Officers 10 3. No Foreign Ownership or Control 11 4. No Agency 11 E. Technical Qualifications 12 F. Financial Qualifications 13 ` G. Decommissioning Funding 17 H. No Antitrust Considerations 19 I. Nuclear Insurance 20 J. Standard Contract for Disposal of Spent Nuclear Fuel 20 K. Agreement to Limit Access to Restricted Data 21 L. Environmental Review 21 IV. Effective Date and other Regulatory Approvals 21 V. Conclusion 22 Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 3 LIST OF EXHIBITS Affirmation of Joseph J. Hagan Affidavit of Joseph J. Hagan Exhibit A Proposed Changes to the Facility Operating License and Technical Specifications Associated with the Proposed Transfer of BVPS 1 & 2, Perry and Davis-Besse to FENGenCo Exhibit B No Significant Hazards Consideration Determination Exhibit C Simplified Corporate Ownership Structure Before Transfer Exhibit D Simplified Corporate Ownership Structure After Transfer Exhibit E SEC Form 13G Filing Exhibit F 2004 Annual Report of FirstEnergy Corp. Exhibit G Form of Support Agreement Between FirstEnergy Corp. and FirstEnergy Nuclear Generation Corp. Exhibit H Pro Forma Income Statements (Non-Proprietary Version) Exhibit I Pro Forma Opening Balance Sheet (Non-Proprietary Version) Exhibit J Form of Nuclear Decommissioning Trust Agreement Exhibit K Decommissioning Funding Worksheets for BVPS 1 & 2, Perry, and Davis-Besse Addendum Proprietary Versions of Exhibits H and I I. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 4 I. INTRODUCTION Pursuant to Section 184 of the Atomic Energy Act of 1954, as amended ("AEA"), and 10 CFR 50.80, FirstEnergy Nuclear Operating Company ("FENOC") acting as agent for and on behalf of FirstEnergy Nuclear Generation Corp. ("FENGenCo"), Ohio Edison Company ("Ohio Edison"), OES Nuclear, Inc. ("OES Nuclear"), The Cleveland Electric Illuminating Company ("Cleveland Electric"), and The Toledo Edison Company ("Toledo Edison"), hereby submits the enclosed application to the Nuclear Regulatory Commission ("NRC") requesting consent to the transfer of ownership interests involving Beaver Valley Power Station, Unit No. 1 ("BVPS 1"), Beaver Valley Power Station, Unit No. 2 ("BVPS 2," together with BVPS 1, "BVPS"), Perry Nuclear Power Plant, Unit No. 1 ("Perry"), and Davis-Besse Nuclear Power Station, Unit No. 1 ("Davis-Besse"). FENOC requests an order consenting to the following transfers from Ohio Edison, OES Nuclear, Cleveland Electric and Toledo Edison (together, the "Ohio Companies" or "Transferors") to FENGenCo: 1. Ohio Edison's 35 percent undivided ownership interest in BVPS 1 and 20.22 percent undivided ownership interest in BVPS 2; 2. OES Nuclear's 17.42 percent undivided ownership interest in Perry; 3. Cleveland Electric's 24.47 percent undivided ownership interest in BVPS 2, 44.85 percent undivided ownership interest in Perry, and 51.38 percent undivided ownership interest in Davis-Besse; and Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 5 4. Toledo Edison's 1.65 percent undivided ownership interest in BVPS 2, 19.91 percent undivided ownership interest in Perry, and 48.62 percent undivided ownership interest in Davis-Besse. No transfer or other change is requested with respect to Ohio Edison's license to possess its 21.66 percent leased interest in BVPS 2 and 12.58 percent leased interest in Perry, nor with respect to Toledo Edison's license to possess its 18.26 percent leased interest in BVPS 2. Ohio Edison and Toledo Edison will remain responsible for their respective obligations under the licenses for these leased interests. This application also requests conforming administrative amendments to the BVPS, Perry, and Davis-Besse licenses to: 1. Reflect the proposed transfer of ownership interests in BVPS, Perry, and Davis-Besse from the Ohio Companies to FENGenCo, 2. Delete the Ohio Companies from the licenses, except for Ohio Edison's remaining leased interests in BVPS 2 and Perry, and Toledo Edison's remaining leased interest in BVPS 2, and 3. Authorize FENGenCo to possess the respective ownership interests in BVPS, Perry, and Davis-Besse being transferred by the Ohio Companies. Marked-up and typed pages showing the conforming changes to the licenses are provided as Exhibit A to this application. Exhibit B is an evaluation showing that these changes raise no significant hazards consideration. FENOC previously submitted an application seeking NRC consent to the transfer of Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 6 Pennsylvania Power Company's ("Penn Power") interests in BVPS and Perry to FENGenCo. This application represents the second phase in a reorganization to consolidate the ownership of BVPS, Perry and Davis-Besse in FENGenCo, except for interests subject to third party lease obligations. FENOC expects that the transfer of the Penn Power interests to FENGenCo will occur prior to the transfer of the interests of the Ohio Companies that are the subject of this application. However, each application includes the required financial and other information. (with the exception of the marked up Operating License pages) to support NRC's approval independent from the other, and therefore, approval of neither application should be dependent upon approval of the other. The enclosed marked up Operating License pages include not only this transfer, but the Penn Power transfer as well. In the event that NRC approval of the Ohio Company interests precedes NRC approval of the Penn Power interests, FENOC will supplement the applications with the appropriate amended conforming Operating License pages. FirstEnergy Corp. ("FirstEnergy") is a registered utility holding company headquartered in Akron, Ohio. FirstEnergy and its affiliates are engaged in the generation, transmission, and distribution of electricity to wholesale and retail customers in the Eastern Interconnection. Its seven electric utility operating companies comprise the nation's fifth largest investor-owned electric system, serving 4.4 million customers within 36,100 square miles of Ohio, Pennsylvania, New Jersey, and New York. Subsidiaries of FirstEnergy - Penn Power, Cleveland Electric, Ohio Edison, OES Nuclear, FENGenCo, and Toledo Edison - - collectively own or lease the BVPS, Davis-Besse, and Perry nuclear power plants in varying percentages. FENOC is the licensed operator for these plants. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 7 FENGenCo will be a direct, wholly owned subsidiary of FirstEnergy Solutions Corp. ("FE Solutions"), which, in turn is a direct, wholly owned subsidiary of FirstEnergy. FENGenCo will become an Exempt Wholesale Generator ("EWG") and will sell the output of its interest in the nuclear plants to FE Solutions. The contract for this sale ("Power Supply Agreement") is subject to review and approval by the Federal Energy Regulatory Commission ("FERC"). Subject to FERC approval, this Power Supply Agreement will be designed to ensure that FENGenCo will recover its costs to own and fund the operation of the units from FE Solutions. FENOC is the licensed operator for BVPS, Perry, and Davis-Besse. This application does not request, or involve any change to FENOC's continued operation of BVPS, Perry, or Davis-Besse. This application does not request approval of any physical changes in the plant, or any changes to the conduct of operations at BVPS, Perry, or Davis-Besse. After transfer of the BVPS, Perry, and Davis-Besse licenses, FENOC will continue to operate and maintain each plant in accordance with its respective licensing basis. FENGenCo will assume the ownership obligations of the Ohio Companies under the FENOC operating agreements, except that Ohio Edison and Toledo Edison, will retain their lease interests in Perry and BVPS 2, and they will remain responsible for their share of costs attributable to those interests. Ohio Edison will continue to be licensed to possess its 21.66 percent leased interest in BVPS 2 and 12.58 percent leased interest in Perry. Toledo Edison will continue to be licensed to possess its 18.26 percent leased interest in BVPS 2. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 8 The ownership interests in BVPS, Perry, and Davis-Besse are held by or leased by wholly owned subsidiaries of FirstEnergy. Following the transfers as proposed in this application, as well as the transfers of Penn Power's interests that are the subject of a separate application, FENGenCo will acquire licensed ownership of all of the non-leasehold interests in these plants within the FirstEnergy corporate family. Diagrams depicting a simplified pre- and post-transfer corporate structure showing the corporate entities holding the licensed interests in the BVPS, Perry and Davis-Besse are included as Exhibits C and D. II. STATEMENT OF PURPOSE OF THE TRANSFER AND NATURE OF THE TRANSACTION MAKING THE TRANSFER NECESSARY OR DESIRABLE In 1992, Congress passed the Energy Policy Act to promote competition in the electric energy market for wholesale power. The Energy Policy Act also amended the Public Utility Holding Company Act ("PUHCA") to create a new class of independent power producers and amended the Federal Power Act ("FPA") to provide open access to electric transmission systems for wholesale transactions. In addition, in December 1996 the Electric Generation Customer Choice and Competition Act ("Competition Act") was enacted in Pennsylvania to restructure the state's electric utility industry by creating retail access to a competitive market for the generation of electricity. Similar legislation was enacted in Ohio, which included the requirement to establish a structural separation between the competitive generation portion of the electric business and the regulated "wires" portion of this business. These transfers are being undertaken to further implement the restructuring of FirstEnergy's electric utility operations and enhance the ability of FirstEnergy and its subsidiaries to compete in the electric energy markets. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 9 As part of this corporate restructuring, FirstEnergy established FE Solutions as the affiliate responsible for the purchase and sale of electricity in competitive markets. A wholly owned subsidiary of FE Solutions - FirstEnergy Fossil Generation Corp. ("Fossil GenCo") - was created to own and operate the fossil and hydro generation facilities formerly owned and operated by the regulated wires companies. Fossil GenCo is an EWG, and sells the output of its portfolio of generation to FE Solutions pursuant to a Purchased Power Contract approved by the FERC. FE Solutions, in turn, sells its power into competitive wholesale and retail markets at market based rates. FENGenCo will perform the same function as Fossil GenCo for the nuclear facilities owned by the FirstEnergy subsidiaries. FENOC will continue to perform its role as the licensed operator for these plants. FENGenCo will become an EWG, and will sell the output of its plants to FE Solutions under a cost-based wholesale contract approved by the FERC. Thus, these requested plant transfers are being undertaken to further implement the restructuring of FirstEnergy's electric utility operations and to enhance the ability of FirstEnergy and its subsidiaries to compete in electric energy markets. FENOC's previous application sought approval for the transfer of Penn Power's ownership interests in BVPS and Perry to FENGenCo (the "Penn Power Transfers"), and this application seeks approval for the transfer of interests in BVPS, Perry and Davis-Besse from the Ohio Companies to FENGenCo (the "Transfers from the Ohio Companies"). Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 10 III. SUPPORTING INFORMATION A. NAME OF NEW LICENSEE FirstEnergy Nuclear Generation Corp. B. ADDRESS 76 South Main Street Akron, OH 44308 C. DESCRIPTION OF BUSINESS OR OCCUPATION FENGenCo is a newly-formed corporation established to own FirstEnergy's nuclear merchant generation assets. FENGenCo will be an EWG and will sell the output of its plants to FE Solutions pursuant to a Power Agreement approved by the FERC. D. CORPORATE INFORMATION 1. STATE OF INCORPORATION AND PLACE OF BUSINESS FENGenCo has been formed as a corporation established under the laws of the State of Ohio. FENGenCo's principal place of business is Akron, Ohio. 2. DIRECTORS AND PRINCIPAL OFFICERS FirstEnergy, a registered holding company, may require approval from the Securities and Exchange Commission ("SEC") before acquiring the stock of FENGenCo. FENOC will provide the names and business addresses of the directors and principal officers of FENGenCo, all of whom will be U.S. citizens, once those individuals are identified. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 11 3. NO FOREIGN OWNERSHIP OR CONTROL FENGenCo will be a wholly owned subsidiary of FE Solutions. FE Solutions is a wholly owned subsidiary of FirstEnergy. The shares of common stock of FirstEnergy are publicly traded on the New York Stock Exchange and are widely held. All of the directors and principal officers of FE Solutions and FirstEnergy are U.S. citizens, and the directors and principal officers of FENGenCo will be U.S. citizens. Section 13 of the Securities and Exchange Act of 1934, as amended, 15 U.S.C. 78m(d), requires that a person or entity that owns or controls more than 5% of the stock of a company must file notice with the SEC. Based upon its review of the relevant filings with the SEC, FENOC is not aware of any alien, foreign corporation, or foreign government that holds more than 5% of the common stock of FirstEnergy. FENOC has identified that, when considering ownership shares of their affiliates, Capital Research and Management Company, State Street Corporation and Barclays Global Investors, NA (Barclays), each have ownership or beneficial ownership of less than 10% but more than 5% of the common stock of FirstEnergy. These entities are U.S. entities, but Barclays is a subsidiary of Barclays PLC, a United Kingdom corporation. A copy of the Barclays' SEC Form 13G Filing is provided in Exhibit E. Nevertheless, Barclays does not have a controlling interest in FirstEnergy and does not exercise domination or control over the affairs of FirstEnergy. As such, FENGenCo will not be owned, controlled or dominated by an alien, a foreign corporation, or a foreign government. 4. NO AGENCY In seeking to become the licensed owner of interests in BVPS, Perry, and Davis-Besse, FENGenCo is not acting as the agent or representative of any other person or entity. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 12 E. TECHNICAL QUALIFICATIONS The technical qualifications of FENOC are not affected by the proposed transfers of control of the Transferors' ownership interest in BVPS, Perry, and Davis-Besse to FENGenCo. There will be no physical changes to BVPS, Perry, or Davis-Besse and no changes in the day-to-day operations of FENOC in connection with the transfers of control of the Ohio Companies' interests in BVPS, Perry, or Davis-Besse. FENOC will at all times remain the licensed operator of BVPS, Perry, and Davis-Besse, and there will be no changes in the FENOC senior management team resulting from the proposed license transfers. FENGenCo will assume the obligations of the Ohio Companies to FENOC under the FENOC Operating Agreement and other arrangements relating to the transferred interests in BVPS, Perry, and Davis-Besse. In particular, FENGenCo will assume the related obligations of the Ohio Companies to pay the applicable share of the operating costs for the transferred interests, BVPS, Perry, and Davis-Besse, and FENOC will continue to recover its costs under the existing arrangements. As discussed above, however, Ohio Edison and Toledo Edison will continue to lease portions of BVPS 2 and Perry. Accordingly Ohio Edison and Toledo Edison will continue to maintain the pro rata share of their obligations to FENOC associated with their leased interests. The obligations of the Ohio Companies for the transferred interests in BVPS, Perry, and Davis-Besse are addressed in the BVPS "Operating Agreement," dated May 24, 1976, as amended; the Perry "Operating Agreement," dated March 10, 1987, as amended; and the Davis-Besse "Operating Agreement," dated November 21, 1977. The amended agreements each provide that costs and expenses associated with the operation and maintenance of the units are shared by the companies Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 13 owning interests in each of the respective units. Pursuant to the operating agreements, annual budgets are prepared, and the companies are billed for their respective shares of the costs. Accordingly, FENGenCo will assume all of these obligations related to the assets being transferred from the Ohio Companies. F. FINANCIAL QUALIFICATIONS General information regarding FirstEnergy is provided in its 2004 Annual Report, which is provided as Exhibit F. FirstEnergy will enter into a financial support agreement with FENGenCo in the total amount of $400 million to provide assurance that adequate funds will be available to fund ongoing operations and maintenance expenses with respect to all of its interests in BVPS, Perry and Davis-Besse (including those to be transferred from Penn Power pursuant to a separate pending application). A form of this agreement is provided as Exhibit G. FirstEnergy committed to put in place a funding agreement with a limit of $80 million to support the Penn Power Transfers. With this application, FENOC seeks NRC approval to substitute this broader agreement with a limit of $400 million and to revoke and rescind the $80 million agreement, if that agreement is executed prior to the execution of this $400 million agreement. If the Penn Power Transfers take place contemporaneously with or after the transfers from the Ohio Companies, FENOC seeks to rely on this $400 million to support the Penn Power Transfers (in lieu of the $80 million agreement). In accordance with 10 CFR 50.33(f) and the Standard Review Plan on Power Reactor Licensee Financial Qualifications and Decommissioning Funding Assurance (NUREG-1577, Rev. 1) ("Standard Review Plan"), FENGenCo's Pro Forma Income Statements for the five-year period from January 1, 2006 until December 31, 2010 Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 14 are provided in Exhibit H. Exhibit I provides FENGenCo's pro forma opening balance sheet showing its anticipated assets, liabilities and capital structure expected as of the transfer date. Exhibits H and I are proprietary and are therefore provided in a separately bound Addendum, and FENOC requests that this Addendum be withheld from public disclosure. An affidavit supporting the request for withholding the Addendum from public disclosure is provided with the sworn affirmations appended to this application. Redacted versions of the Exhibits, suitable for public disclosure, are included with this application. FENGenCo and FE Solutions will enter into a Power Supply Agreement/1/ for a period of at least five years through which FENGenCo will recover its operating, maintenance, and capital costs associated with the interests transferred from the Ohio Companies. The terms of that agreement have not been made final, but once the terms have been finalized, a form of the agreement will be submitted to NRC or made available for inspection upon request. The Power Supply Agreement is subject to FERC jurisdiction and will be filed for review and approval by FERC later this year. The Pro Forma Income Statements on page 2 of Exhibit H show the expected operating revenues of FENGenCo from the sale of capacity and energy received under the Power Supply Agreement with respect to the Transfers from the Ohio Companies, and FENGenCo's estimated annual operating costs, for the five calendar years 2006 through 2010, attributable to those interests. In addition, - ---------- 1 FENGenCo anticipates that it will have a single Power Supply Agreement with FE Solutions to govern its sales of capacity and energy from its generation sources. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 15 FENGenCo will purchase the entitlements to capacity and energy for the lease interests in BVPS 2 and Perry held by Ohio Edison and Toledo Edison/2/, and it will receive revenue from the sale of these entitlements to FE Solutions. This statement reflects results based upon the current business plan for operating BVPS, Perry, and Davis-Besse. Page 3 of Exhibit H provides a pro forma sensitivity analysis of estimated revenues generated from the sales of the output from the portions of BVPS, Perry, and Davis-Besse transferred from the Ohio Companies at market rates, as well as sales at market rates of the portions of BVPS, Perry, and Davis-Besse attributable to the sale-leaseback interests in those units. This demonstrates that FE Solutions will generate sufficient revenue from such sales to cover its obligations to FENGenCo pursuant to the Power Supply Agreement. These pro forma statements show that the anticipated income from the sales of energy and capacity from BVPS, Perry, and Davis-Besse (from the Ohio Companies Transfers) provide reasonable assurance of an adequate source of funds to meet FENGenCo's anticipated liabilities during the five-year period covered by the pro forma statements. FENGenCo will have access to additional capital from its affiliated companies on an as-needed basis. First, the Power Supply Agreements will be designed to include a "formula rate" provision permitting FENGenCo to recover increases in its capital expenditures and operating expenses that exceed its base demand and energy charges during the contract term. Secondly, FirstEnergy has presented a form of Support Agreement that provides assurance that FENGenCo - ---------- 2 FENOC will recover its costs with respect to these interests directly from Ohio Edison and Toledo Edison. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 16 will have access to funds sufficient to pay its pro rata share of the fixed operating and maintenance (O&M) costs in the event of an unanticipated plant shutdown. Pursuant to this agreement, FirstEnergy will make up to $400 million in funding available to FENGenCo to meet its obligations relating to the interests being transferred by both Penn Power and the Ohio Companies. This level of funding exceeds the approximate amount of the fixed O&M costs (approximately $200 Million) that FENGenCo would expect to incur for its proportionate share of the four units (including the transfers from both Penn Power and the Ohio Companies) during simultaneous six-month outages at Perry, Davis-Besse, and both BVPS units. In fact, the proposed support agreement of $400 million would be sufficient to fund FENGenCo's share of the fixed O&M costs (approximately $401 million) for a simultaneous one-year outage of BVPS (approximately $151 million)/3/, Davis-Besse ($128 million), and Perry ($122 million)./4/ This support agreement would also be sufficent to fund FENGenCo's share of costs for a two-year outage at Davis-Besse, Perry, or BVPS (both units), as well as eighteen-month outages of any two units. Thus, the proposed support agreement would provide funding that significantly exceeds the six-month period suggested by the NRC's Standard Review Plan, and it provides assurance that FENGenCo will be financially qualified to conduct licensed activities at BVPS, Perry, and Davis-Besse in the event that any or all of these plants fail to operate as anticipated. Finally, FENGENCo notes that it does not expect to - ---------- 3 This amount excludes approximately $38 million in costs that would be born by Ohio Edison and Toledo Edison for their respective leased shares of BVPS 2. 4 This amount excludes approximately $17.5 million costs that would be born by Ohio Edison for its leased share of Perry. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 17 need to request funding under this formal agreement, as it expects that FirstEnergy will assure that it has adequate funds to support safe operation of the Perry, Davis-Besse, and BVPS units. Moreover, consistent with prior NRC orders, FENGenCo understands that a license condition will require it to provide written notice to the NRC if it ever draws upon the formal agreement. Therefore, the NRC can expect to have advance warning before the funds available under this formal agreement might be exhausted. G. DECOMMISSIONING FUNDING At the time of the transfer, all of the Nuclear Decommissioning Trust ("NDT") balances held by the Ohio Companies (excluding those relating to leased interests being retained by Ohio Edison and Toledo Edison) will be transferred to FENGenCo. Ohio Edison and Toledo Edison will retain NDT balances (including earnings and 2005 contributions) attributable to the leased interests in BVPS 2 and Perry for which they will remain NRC owner licensees. The NDT funds attributable to the interests being transferred from the Ohio Companies had a market value of approximately $831 million as of December 31, 2004, and additional contributions of approximately $69 million (attributable to the transferred interests) are planned for 2005. Thus, it is expected that approximately $900 million in NDT balances and any related earnings will be transferred to FENGenCo's NDTs. The FENGenCo NDTs will be held in external trust funds segregated from FENGenCo's assets and outside its administrative control. The funds will be governed by a Master NDT Agreement with Mellon Bank, N.A. as Trustee, and the terms of that agreement will comply with the requirements of 10 CFR 50.75(h)(1). A form of the "Master Nuclear Decommissioning Trust Agreement" incorporating the terms required by 10 CFR 50.75(h)(1) is provided as Exhibit J. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 18 The NRC minimum amounts of decommissioning funding assurance required for BVPS, Perry, and Davis-Besse calculated pursuant to 10 CFR 50.75(c) (the "formula amount"), are provided for each unit in Exhibit K, Attachments 1, 2, 3, and 4. The NRC minimum decommissioning funding amounts for the interests being transferred from the Ohio Companies total $1.026 billion, and when earnings are credited in accordance with NRC rules, the pre-paid balances required to use the "prepayment method" under NRC's rules for the interests being transferred from the Ohio Companies is $690.8 million. The current trust fund balances of $831 million and anticipated contributions from the Ohio Companies of an additional $69 million for 2005, with credit for earnings taken into account using a 2 percent real rate of return, are sufficient to be considered fully "prepaid" for purposes of using the "prepayment" method specified in 10 CFR 50.75(e)(1)(i). In fact, the current balances are sufficient to be considered pre-paid for BVPS 1, Perry and Davis-Besse. The current balances for BVPS 2 are slightly below the required amounts, but exceed the required funding levels when planned contributions for 2005 are taken into account. Below is a table summarizing for the interests in each unit being transferred from the Ohio Companies to FENGenCo: (1) the ownership interest being transferred to FENGenCo from the Ohio Companies; (2) the current trust fund balances attributable to these interests and being transferred to FENGenCo; (3) planned 2005 contributions attributable to the interests being transferred by the Ohio Companies; (4) the amount required (when earnings are credited using a 2% real rate of return) to be considered fully "prepaid;" and (5) FENGenCo's Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 19 pro rata share of the NRC minimum decommissioning amount for the interests in each unit being transferred from the Ohio Companies. Notably, the following table does not reflect decommissioning funding assurance related to the interests to be transferred from Penn Power. Financial assurances for those interests, including prepaid balances and parental guarantee are addressed separately in the application for the Penn Power transfers.
DECOMMISSIONING FUNDING SUMMARY ($ IN MILLIONS) Ohio Trust Balance 2005 Pre-Paid Amount FENGenCo Companies (12/31/2004) Contributions Required Share of Plant (Credit for NRC Min. Share Earnings - -------------------------------------------------------------------------------- BVPS 1 35% $93.8 $6.6 $93.8 $124.8 BVPS 2 46.34% $98.2 $9.7 $100.0 $165.3 Perry 82.18% $290.6 $24.1 $235.5 $381.3 Davis- 100% $348.3 $29.0 $261.5 $354.7 Besse Total - $830.9 $69.4 $690.8 $1,026.1
H. NO ANTITRUST CONSIDERATIONS In accordance with the Commission's decision in Kansas Gas and Electric Company (Wolf Creek Generating Station, Unit 1), CLI-99-19, 49 N.R.C. 441 (1999), antitrust reviews of license transfer applications after initial licensing are not required by the AEA. The existing antitrust conditions in the licenses will continue in effect. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 20 I. NUCLEAR INSURANCE In accordance with Art. IV.2 of the NRC Price-Anderson Indemnity Agreement for BVPS, Perry, and Davis-Besse, FENOC requests NRC approval of the assignment and transfer of the transferors' applicable interest in the Price Anderson Indemnity Agreement for BVPS, Perry, and Davis-Besse to FENGenCo in connection with the proposed license transfer. FENGenCo's Pro Forma Income Statements and financial arrangements with FirstEnergy provide adequate assurance that FENGenCo will be able to pay its share of the annual retrospective premium for BVPS, Perry, and Davis-Besse pursuant to 10 CFR 140.21(e)-(f). Prior to the license transfer, FENOC will provide proof that FENGenCo will have all required nuclear property damage insurance pursuant to 10 CFR 50.54(w) and nuclear energy liability insurance pursuant to Section 170 of the AEA and 10 CFR Part 140. J. STANDARD CONTRACT FOR DISPOSAL OF SPENT NUCLEAR FUEL Upon transfer, FENGenCo will assume title to and responsibility for the storage and disposal of the Transferors' transferred pro rata share of spent nuclear fuel at BVPS, Perry, and Davis-Besse. The Transferors will assign, and FENGenCo will assume, the transferors' rights and duties (excluding those rights and duties associated with the leased interest) under the Standard Contracts with the Department of Energy. The Transferors will remain liable to FENGenCo for any fees associated with spent nuclear fuel used to generate electricity prior to the transfer. Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 21 K. AGREEMENT TO LIMIT ACCESS TO RESTRICTED DATA This application does not involve any Restricted Data or other classified defense information. Furthermore, it is not expected that any such information will be raised or required by the licensed activities at BVPS, Perry, or Davis-Besse. In the event that licensed activities do involve Restricted Data in the future, FENGenCo agrees that it will appropriately safeguard such information. In compliance with Section 145a of the AEA, FENGenCo agrees that restricted or classified defense information will not be provided to any individual until the Office of Personnel Management investigates and reports to the NRC on the character, associations, and loyalty of such individual, and the NRC determines that permitting such person to have access to Restricted Data will not endanger the common defense and security of the United States. L. ENVIRONMENTAL REVIEW The proposed transfer will not result in any change in the types, or any increase in the amounts, of any effluents that may be released off-site, and will not cause any increase in individual or cumulative occupational radiation exposure. Further, the NRC has determined in 10 CFR 51.22(c)(21) that license transfers are categorically exempt from further environmental review. Accordingly, the license transfer will involve no significant environmental impact. IV. EFFECTIVE DATE AND OTHER REGULATORY APPROVALS FENOC requests that the NRC review this application on a schedule that will permit issuance of an order consenting to the requested license transfer as promptly as possible, and in any event, approval is requested by no later than November 1, 2005. Such consent should be immediately effective upon issuance and Enclosure 1 L-05-100 Serial Number 3156 PY-CEI/NRR-2886L Page 22 should permit the transfers at any time prior to December 31, 2006. The proposed transfer of the BVPS, Perry, and Davis-Besse interests from the Transferors to FENGenCo also requires approvals or actions from other agencies, including, but not limited to, the FERC, Pennsylvania Public Utility Commission, the Public Utilities Commission of Ohio, New Jersey Board of Public Utilities, New York State Public Service Commission, SEC, and the Internal Revenue Service. FENOC will inform the NRC Staff as to the status of other necessary approvals and will notify the NRC Staff when they are ready for the conforming license amendment to be issued. V. CONCLUSION For the reasons stated above, FENOC respectfully submits that the proposed transfer of the Transferors' ownership interests in BVPS, Perry, and Davis-Besse to FENGenCo is consistent with the requirements set forth in the AEA, NRC regulations, and the relevant NRC licenses and orders. FENOC therefore respectfully requests that, in accordance with Section 184 of the AEA and 10 CFR 50.80 and 50.92, the NRC consent to the transfer of the BVPS, Perry, and Davis-Besse licenses to FENGenCo and approve the conforming administrative amendments associated with this transfer. EX-99 5 exh_d5b.txt EXHIBIT D-5(B) EXHIBIT D-5(B) May 18, 2005 L-05-080 PY-CEI/NRR-2880L 10 CFR 50.80 10 CFR 50.92 10 CFR 2.1315 U.S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, D.C. 20555 Re: Beaver Valley Power Station, Unit Nos. 1 & 2 and Perry Nuclear Power Plant, Unit No. 1 Docket Nos. 50-334 & 50-440, and 50-412 Application for Order Consenting to Transfer of Licenses and Approving Conforming License Amendments ---------------------------------------------------- Pursuant to Section 184 of the Atomic Energy Act of 1954, as amended ("AEA"), and 10 CFR 50.80, FirstEnergy Nuclear Operating Company ("FENOC" or the "Applicant") acting as agent for and on behalf of FirstEnergy Nuclear Generation Corp. ("FENGenCo") and Pennsylvania Power Company ("Penn Power"), hereby submits the enclosed application to the Nuclear Regulatory Commission ("NRC"). The Applicant requests an order consenting to the transfer of Penn Power's 65 percent undivided ownership interest in Beaver Valley Power Station, Unit No. 1 ("BVPS 1"), 13.74 percent undivided ownership interest in Beaver Valley Power Station, Unit No. 2 ("BVPS 2";together with BVPS 1, "BVPS"), and 5.24 percent undivided ownership interest in Perry Nuclear Power Plant, Unit No. 1 ("Perry") to FENGenCo. This application also requests conforming administrative amendments to the BVPS and Perry licenses to: 1. Reflect the proposed transfer of ownership of Penn Power's interests in BVPS and Perry to FENGenCo, 2. Delete the references to Penn Power in the licenses, and 3. Authorize FENGenCo to possess the respective ownership interests in BVPS and Perry. FENGenCo will be a direct, wholly owned subsidiary of FirstEnergy Solutions Corp. ("FE Solutions"), which, in turn, is a direct, wholly owned subsidiary of FirstEnergy Corp. ("FirstEnergy"). FirstEnergy's seven electric utility operating companies comprise the nation's fifth largest investor-owned electric system, serving 4.4 million customers within 36,100 square miles of Ohio, Pennsylvania, New Jersey, and New York. Certain financial information included in Exhibits H and I of the attached license transfer application is confidential commercial information which the Applicant requests be withheld from public disclosure pursuant to 10 CFR 2.390 May 18, 2005 L-05-080 PY-CEI/NRR-2880L Page 2 and 9.17(a)(4). Redacted versions of Exhibits H and I are provided in the non-proprietary version of this application. Confidential versions of Exhibits H and I are provided in a separate Addendum to this application. An affidavit supporting the request for withholding the Addendum from public disclosure is provided with the sworn affirmations appended to the application. The information contained in this application demonstrates that FENGenCo possesses the requisite qualifications to own Penn Power's existing undivided ownership interests in BVPS and Perry. The proposed transfer of control of Penn Power's interests will not result in any change in the role of FENOC as the licensed operator of the facilities, including budget responsibilities and operating authority. Finally, this request for transfer of control of licenses does not involve any entities that are owned, controlled, or dominated by a foreign entity. In summary, the proposed transfers will be consistent with the requirements set forth in the AEA, NRC regulations, and the relevant NRC licenses and orders. No physical changes will be made to BVPS or Perry, and there will be no changes in the day-to-day operation of those plants as a result of these transfers. The proposed transfers will not have any adverse impact on the public health and safety, or be inimical to the common defense and security. The application solely requests approval for the transfer of ownership interests within the same family of companies. The Applicant respectfully requests that the NRC consent to the transfers of control in accordance with 10 CFR 50.80 and approve the conforming license amendments. FENOC requests that the NRC review this application on a schedule that will permit the issuance of NRC consent to the transfers of control and conforming license amendments as soon as possible, and are prepared to work closely with the NRC Staff to help expedite the application's review. Approval is requested by no later than November 1, 2005. Such consent should be immediately effective upon issuance and should permit the transfers at any time prior to December 31, 2006. FENOC will inform the NRC of any significant changes in the status of any other required approvals or any other developments that have an impact on the schedule. Service upon the Applicant of comments, hearing requests, intervention petitions or other pleadings should be made to David W. Jenkins, Esq., FirstEnergy Corp., 76 South Main Street, Mail Stop A-Go-18, Akron, OH 44308, tel: (330) 384-5037, and email: djenkins@firstenergycorp.com. May 18, 2005 L-05-080 PY-CEI/NRR-2880L Page 3 If the NRC requires additional information concerning this application, please contact Mr. Gregory H. Halnon, FENOC Director, Regulatory Affairs, FirstEnergy Nuclear Operating Company, 395 Ghent Road, A-GHE-315, Akron, OH 44333, tel: (330) 315-7500, and email: ghalnon@firstenergycorp.com. Sincerely, /S/ Gary R. Leidich Gary R. Leidich President and Chief Nuclear Officer FirstEnergy Nuclear Operating Company Enclosures: 1. Application with Exhibits 2. Regulatory Commitments 3. Proprietary Addendum cc: NRC Region 1 Administrator NRC Region 3 Administrator Beaver Valley NRC Project Manager Perry NRC Project Manager Beaver Valley NRC Resident Perry NRC Resident State of Ohio D.A. Allard, Director BRP/DEP L.E. Ryan, BRP/DEP Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 1 APPLICATION FOR ORDER CONSENTING TO TRANSFER OF LICENSES AND APPROVING CONFORMING LICENSE AMENDMENTS MAY 18, 2005 submitted by FIRSTENERGY NUCLEAR OPERATING COMPANY on behalf of PENNSYLVANIA POWER COMPANY and FIRSTENERGY NUCLEAR GENERATION CORP. Beaver Valley Power Station, Unit Nos. 1 & 2, and Perry Nuclear Power Plant, Unit No. 1 Docket Nos. 50-334, 50-440, 50-412 Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 2 APPLICATION FOR ORDER CONSENTING TO TRANSFER OF LICENSES AND APPROVING CONFORMING LICENSE AMENDMENTS TABLE OF CONTENTS ----------------- SECTION PAGE NO. - ------- -------- I. Introduction 4 II. Statement of Purpose of the Transfer and Nature of the Transaction Making the Transfer Necessary or Desirable 6 III. Supporting Information 7 A. Name of New Licensee 7 B. Address 8 C. Description of Business or Occupation 8 D. Corporate Information 8 1. State of Incorporation and Place of Business 8 2. Directors and Principal Officers 8 3. No Foreign Ownership or Control 8 4. No Agency 9 E. Technical Qualifications 9 F. Financial Qualifications 10 G. Decommissioning Funding 13 H. No Antitrust Considerations 15 I. Nuclear Insurance 15 J. Standard Contract for Disposal of Spent Nuclear Fuel 16 K. Agreement to Limit Access to Restricted Data 16 L. Environmental Review 17 IV. Effective Date and other Regulatory Approvals 17 V. Conclusion 18 Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 3 LIST OF EXHIBITS Affirmation of Gary R. Leidich Affidavit of Gary R. Leidich Exhibit A Proposed Changes to the Facility Operating License and Technical Specifications Associated with the Proposed Transfer of BVPS 1 & 2 and Perry to FENGenCo Exhibit B No Significant Hazards Considerations Determination Exhibit C Simplified Corporate Ownership Structure Before Transfer Exhibit D Simplified Corporate Ownership Structure After Transfer Exhibit E SEC Form 13G Filings Exhibit F 2004 Annual Report of FirstEnergy Corp. Exhibit G Form of Support Agreement Between FirstEnergy Corp. and FirstEnergy Nuclear Generation Corp. Exhibit H Pro Forma Income Statements (Non-Proprietary Version) Exhibit I Pro Forma Opening Balance Sheet (Non-Proprietary Version) Exhibit J Form of Nuclear Decommissioning Trust Agreement Exhibit K Decommissioning Funding Worksheets for BVPS 1 & 2 and Perry Exhibit L NRC Financial Test for Parent Guarantees Exhibit M Form of Parent Guaranty Addendum Proprietary Versions of Exhibits H and I I. Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 4 I. INTRODUCTION Pursuant to Section 184 of the Atomic Energy Act of 1954, as amended ("AEA"), and 10 CFR Section 50.80, the FirstEnergy Nuclear Operating Company ("FENOC" or the "Applicant") acting as agent for and on behalf of FirstEnergy Nuclear Generation Corp. ("FENGenCo") and Pennsylvania Power Company ("Penn Power"), hereby submits the enclosed application to the Nuclear Regulatory Commission ("NRC"). The Applicant requests an order consenting to the transfer of Penn Power's 65 percent undivided ownership interest in Beaver Valley Power Station, Unit No. 1 ("BVPS 1"), 13.74 percent undivided ownership interest in Beaver Valley Power Station, Unit No. 2 ("BVPS 2"; together with BVPS 1, "BVPS"), and 5.24 percent undivided ownership interest in Perry Nuclear Power Plant, Unit No. 1 ("Perry") to FENGenCo. This transfer also includes Penn Power's undivided ownership interest in the Beaver Valley common facilities. This application also requests conforming amendments to the BVPS and Perry licenses to: 1. Reflect the proposed transfer of ownership of Penn Power's interests in BVPS and Perry to FENGenCo, 2. Delete references to Penn Power in the licenses, 3. Authorize FENGenCo to possess the respective ownership interests in BVPS and Perry, and to possess and use related licensed materials, under the same conditions and authorizations included in the current license unless provided for otherwise by virtue of statements and/or representations in this application. Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 5 FirstEnergy Corp. ("FirstEnergy") is a registered utility holding company headquartered in Akron, Ohio. FirstEnergy and its affiliates are engaged in the generation, transmission, and distribution of electricity to wholesale and retail customers in the Eastern Interconnection. Its seven electric utility operating companies comprise the nation's fifth largest investor-owned electric system, serving 4.4 million customers within 36,100 square miles of Ohio, Pennsylvania, New Jersey, and New York. Subsidiaries of FirstEnergy - The Cleveland Electric Illuminating Company, Ohio Edison Company, OES Nuclear, Inc., Penn Power, and The Toledo Edison Company - collectively own the BVPS, Davis-Besse, and Perry nuclear power plants in varying percentages. FENOC is the licensed operator for these plants. FENGenCo will be a direct, wholly owned subsidiary of FirstEnergy Solutions Corp. ("FE Solutions"), which, in turn is a direct, wholly owned subsidiary of FirstEnergy. FENGenCo will become an Exempt Wholesale Generator ("EWG") and will sell the output of its interest in the nuclear plants to FE Solutions. The contract for this sale ("Power Supply Agreement") is subject to review and approval by the Federal Energy Regulatory Commission ("FERC"). Subject to FERC approval, this Power Supply Agreement will be designed to ensure that FENGenCo will recover its costs to own and fund the operation of the units from FE Solutions. FENOC is the licensed operator for BVPS and Perry. This application does not request, or involve any change to FENOC's continued operation of BVPS or Perry. This application does not request approval of any physical changes in the plant, or any changes to the conduct of operations at BVPS or Perry. After transfer of the BVPS and Perry licenses FENOC will continue to operate and Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 6 maintain each plant in accordance with its respective licensing basis. FENGenCo will assume the obligations of Penn Power under the FENOC operating agreements. All of the ownership interests in BVPS Units and Perry are held by or leased by wholly owned subsidiaries of FirstEnergy. Diagrams depicting a simplified pre- and post- transfer corporate structure of the ownership of the interests proposed to be transferred are included as Exhibits C and D. Marked-up and typed pages showing the conforming changes to the Licenses are provided as Exhibit A to this application. Exhibit B is an evaluation showing that these changes raise no significant hazards considerations. II. STATEMENT OF PURPOSE OF THE TRANSFER AND NATURE OF THE TRANSACTION MAKING THE TRANSFER NECESSARY OR DESIRABLE In 1992, Congress passed the Energy Policy Act to promote competition in the electric energy market for wholesale power. The Energy Policy Act also amended the Public Utility Holding Company Act ("PUHCA") to create a new class of independent power producers and amended the Federal Power Act ("FPA") to provide open access to electric transmission systems for wholesale transactions. In addition, in December 1996 the Electric Generation Customer Choice and Competition Act ("Competition Act") was enacted in Pennsylvania to restructure the state's electric utility industry by creating retail access to a competitive market for the generation of electricity. These transfers are being undertaken to further implement the restructuring of FirstEnergy's electric utility operations and enhance the ability of FirstEnergy and its subsidiaries to compete in the electric energy markets. Similar legislation was enacted in Ohio, which included the requirement to establish a structural separation between the Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 7 competitive generation portion of the electric business and the regulated "wires" portion of this business. As part of this corporate restructuring, FirstEnergy established FE Solutions as the affiliate responsible for the purchase and sale of electricity in competitive markets. A wholly owned subsidiary of FE Solutions - FirstEnergy Generation Corp. ("Fossil GenCo") - was created to own and operate the fossil and hydro generation facilities formerly owned and operated by the regulated wires companies. Fossil GenCo is an EWG, and sells the output of its portfolio of generation to FE Solutions pursuant to a Purchased Power Contract approved by the FERC. FE Solutions, in turn, sells its power into competitive wholesale and retail markets at market based rates. FENGenCo will perform the same function as Fossil GenCo for the nuclear facilities owned by FirstEnergy subsidiaries, with the notable exception that FENOC will continue to perform its role as the licensed operator for these plants. FENGenCo will become an EWG, and will sell the output of its plants to FE Solutions under a cost-based wholesale contract approved by the FERC. Thus, these requested plant transfers are being undertaken to further implement the restructuring of FirstEnergy's electric utility operations and to enhance the ability of FirstEnergy and its subsidiaries to compete in electric energy markets. III. SUPPORTING INFORMATION A. NAME OF NEW LICENSEE FirstEnergy Nuclear Generation Corp. Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 8 B. ADDRESS 76 South Main Street Akron, OH 44308 C. DESCRIPTION OF BUSINESS OR OCCUPATION FENGenCo is a newly-formed corporation established to own FirstEnergy's nuclear merchant generation assets. FENGenCo will be an EWG and will sell the output of its plants to FE Solutions pursuant to a Power Agreement approved by the FERC. D. CORPORATE INFORMATION 1. STATE OF INCORPORATION AND PLACE OF BUSINESS FENGenCo has been formed as a corporation established under the laws of the State of Ohio. FENGenCo's principal place of business is Akron, Ohio. 2. DIRECTORS AND PRINCIPAL OFFICERS FirstEnergy, a registered holding company, may require approval from the Securities and Exchange Commission ("SEC") before acquiring the stock of FENGenCo. FENOC will provide the names and business addresses of the directors and principal officers of FENGenCo, all of whom will be U.S. citizens, once those individuals are identified. 3. NO FOREIGN OWNERSHIP OR CONTROL FENGenCo will be a wholly owned subsidiary of FE Solutions. FE Solutions is a wholly owned subsidiary of FirstEnergy. The shares of common stock of FirstEnergy are publicly traded on the New York Stock Exchange and are widely held. All of the directors and principal officers of FE Solutions and FirstEnergy are U.S. citizens, and the directors and principal officers of Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 9 FENGenCo will be U.S. citizens. Section 13 of the Securities and Exchange Act of 1934, as amended, 15 U.S.C. 78m(d), requires that a person or entity that owns or controls more than 5% of the stock of a company must file notice with the Securities and Exchange Commission (SEC). Based upon its review of the relevant filings with the SEC, FENOC is not aware of any alien, foreign corporation, or foreign government that holds more than 5% of the common stock of FirstEnergy. FENOC has identified that, when considering ownership shares of their affiliates, Capital Research and Management Company, State Street Corporation and Barclays Global Investors, NA (Barclays), each have ownership or beneficial ownership of less than 10% but more than 5% of the common stock of FirstEnergy. Copies of the relevant SEC Form 13G Filings are provided in Exhibit E. These entities are U.S. entities, but Barclays is a subsidiary of Barclays PLC, a United Kingdom corporation. Nevertheless, Barclays does not have a controlling interest in FirstEnergy and does not exercise domination or control over the affairs of FirstEnergy. As such, FENGenCo will not be owned, controlled or dominated by an alien, a foreign corporation, or a foreign government. 4. NO AGENCY In seeking to become the licensed owner of interests in BVPS and Perry, FENGenCo is not acting as the agent or representative of any other person or entity. E. TECHNICAL QUALIFICATIONS The technical qualifications of FENOC are not affected by the proposed transfers of control of Penn Power's ownership interest in BVPS and Perry to FENGenCo. There will be no physical changes to BVPS or Perry and no changes in the day-to-day operations of FENOC in connection with the transfers of control Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 10 of Penn Power's ownership interest in BVPS or Perry. FENOC will at all times remain the licensed operator of BVPS and Perry, and there will be no changes in the FENOC senior management team resulting from the proposed license transfers. FENGenCo will assume Penn Power's obligations to FENOC under the FENOC Operating Agreement and other arrangements relating to BVPS and Perry. In particular, FENGenCo will assume Penn Power's obligation to pay its share of the operating costs for BVPS and Perry, and FENOC will continue to recover its costs under the existing arrangements. Penn Power's obligations for its share of the costs of BVPS are addressed in the BVPS "Operating Agreement" dated May 24, 1976, as amended; and the obligations for its share of the costs for Perry are addressed in the Perry "Operating Agreement" dated March 10, 1987, as amended. The amended agreements each provide that "[a]ll costs and expenses ..., including overheads, directly or indirectly associated with the operation and maintenance of the Unit[s]" are shared by the companies owning interest in each of the respective units. Pursuant to the operating agreements, annual budgets are prepared, and the companies are then billed for their respective shares of the costs. F. FINANCIAL QUALIFICATIONS General information regarding FirstEnergy is provided in its 2004 Annual Report, which is provided as Exhibit F. FirstEnergy will enter into a financial support agreement with FENGenCo in the amount of $80 million, and a form of this agreement is provided as Exhibit G. In accordance with 10 CFR 50.33(f) and the Standard Review Plan on Power Reactor Licensee Financial Qualifications and Decommissioning Funding Assurance (NUREG-1577, Rev. 1) ("Standard Review Plan"), FENGenCo's Pro Forma Income Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 11 Statements for the five-year period from January 1, 2006 until December 31, 2010 are provided in Exhibit H. Exhibit I provides FENGenCo's pro forma opening balance sheet showing its anticipated assets, liabilities and capital structure expected as of the transfer date. Exhibits H and I are proprietary and are therefore provided in a separately bound Addendum, and FENOC requests that this Addendum be withheld from public disclosure. An affidavit supporting the request for withholding the Addendum from public disclosure is provided with the sworn affirmations appended to this application. Redacted versions of the Exhibits, suitable for public disclosure, are included with this application. FENGenCo and FE Solutions will enter into a Power Supply Agreement for a period of at least five years through which FENGenCo will recover its operating, maintenance, and capital costs associated with the transferred assets. The terms of that agreement have not been made final, but once the terms have been finalized, a form of the agreement will be submitted to NRC or made available for inspection upon request. The Power Supply Agreement is subject to FERC jurisdiction and will be filed for review and approval by FERC later this year. The Pro Forma Income Statements on page two of Exhibit H shows the expected operating revenues of FENGenCo from the sale of capacity and energy received under the Power Supply Agreement, and FENGenCo's estimated annual operating costs, for the five calendar years 2006 through 2010. This statement reflects results based upon the current business plan for operating BVPS and Perry. Page three of Exhibit H provides a pro forma sensitivity analysis of estimated revenues generated from the sales of the output from the transferred portions of BVPS and Perry at market rates, demonstrating that FE Solutions will generate Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 12 sufficient revenue from such sales to cover its obligations to FENGenCo pursuant to the Power Supply Agreement. These pro forma statements show that the anticipated income from the sales of energy and capacity from BVPS and Perry provide reasonable assurance of an adequate source of funds to meet FENGenCo's anticipated liabilities during the five-year period covered by the pro forma statements. FENGenCo will have access to additional capital from its affiliated companies on an as-needed basis. First, the Power Supply Agreement will be designed to include a "formula rate" provision permitting FENGenCo to recover increases in its capital expenditures and operating expenses that exceed its base demand and energy charges during the contract term. Secondly, FirstEnergy has presented a form of Support Agreement that provides assurance that FENGenCo will have access to funds sufficient to pay its pro rata share of the fixed operating and maintenance (O&M) costs in the event of an unanticipated plant shutdown. Pursuant to this agreement, FirstEnergy will make up to $80 million in funding available to FENGenCo. This level of funding exceeds the approximate amount of Penn Power's pro rata share of the fixed O&M costs that FENGenCo would expect to incur over a one year outage of both BVPS units. This estimate for one year, which exceeds the six month period suggested by the NRC's Standard Review Plan, provides assurance that FENGenCo will be financially qualified to conduct licensed activities at BVPS and Perry in the event these plants fail to operate as anticipated. Further, FENGenCo has a larger ownership percentage interest in BVPS than at Perry, and these units are expected to generate more revenue for FENGenCo than Perry. Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 13 Accordingly, the use of a dual unit outage of both BVPS units for one year as a benchmark for the funding agreement is an appropriate assumption for purposes of meeting the criteria in the Standard Review Plan. Finally, the remaining affiliate owners of the BVPS and Perry units remain responsible to provide their pro rata shares of capital and operating costs in the event of any such shutdown. G. DECOMMISSIONING FUNDING At the time of the transfer, all of the decommissioning funds in Penn Power's Nuclear Decommissioning Trusts ("NDTs") will be transferred to FENGenCo. These NDTs had a market value of approximately $143 million as of December 31, 2004, and additional contributions are planned for 2005. Therefore, FENOC expects that the market value of the NDTs will be at least $140 million at the time of the transfer. The FENGenCo NDTs will be held in external trust funds segregated from FENGenCo's assets and outside its administrative control. The funds will be governed by a Master NDT Agreement with Mellon Bank NA as Trustee, and the terms of that agreement will comply with the requirements of 10 CFR 50.75(h)(1). A form of the "Master Nuclear Decommissioning Trust Agreement" incorporating the terms required by 10 CFR 50.75(h)(1) is provided as Exhibit J. The NRC minimum amounts of decommissioning funding assurance required for BVPS and Perry, calculated pursuant to 10 CFR 50.75(c) (the "formula amount"), are provided for each unit in Exhibit K, Attachments 1, 2, and 3. The current trust fund balances and anticipated contributions for 2005, with credit for earnings taken into account using a 2 percent real rate of return, are insufficient to be considered fully "prepaid" for purposes of using the "prepayment" method specified in 10 CFR 50.75(e)(1)(i). Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 14 Below is a table summarizing for each plant the current: (1) Penn Power's ownership interest (being transferred to FENGenCo); (2) the current Penn Power trust fund balance (being transferred to FENGenCo); (3) the current shortfall; (4) the amount required (when earnings are credited using a 2% real rate of return) to be considered fully "prepaid;" and (5) FENGenCo's pro rata share of the NRC minimum decommissioning amount.
DECOMMISSIONING FUNDING SUMMARY ($ IN MILLIONS) - -------------- ------------- ---------------------- ------------------- -------------------------- ------------------- Penn Trust Balance Current Shortfall Pre-Paid Amount Required FENGenCo Share of Power's (12/31/2004) (Credit for Earnings) NRC Min. Plant Share - -------------- ------------- ---------------------- ------------------- -------------------------- ------------------- BVPS 1 65% $108.1 $66.8 $174.9 $231.9 - -------------- ------------- ---------------------- ------------------- -------------------------- ------------------- BVPS 2 13.74% $25.3 $4.5 $29.8 $49.0 - -------------- ------------- ---------------------- ------------------- -------------------------- ------------------- Perry 5.24% $9.7 $5.5 $15.2 $24.3 - -------------- ------------- ---------------------- ------------------- -------------------------- ------------------- Total $143.1 $76.8 $219.9 $305.2 - -------------- ------------- ---------------------- ------------------- -------------------------- -------------------
The transferred balances of approximately $140 million are approximately $80 million less than the $220 million required to be considered fully pre-paid. Therefore, FENGenCo will provide additional decommissioning funding assurance by obtaining a parent guarantee, as permitted by 10 CFR 50.75(e)(1)(iii), from FirstEnergy in the initial amount of $80 million (in year 2005 dollars). FENGenCo will re-calculate the required decommissioning funding assurance levels each year, as required by 10 CFR 50.75(b)(2), and if necessary, each year it will either obtain an appropriate adjustment in the amount of the parent company guarantee or otherwise provide for decommissioning funding assurance in the amounts required. Exhibit L provides a worksheet demonstrating compliance with the NRC's financial test for parent guarantees, in accordance with 10 CFR 50.75(e)(1)(iii)(C) and 10 CFR Part 30, Appendix A. FENGenCo has chosen to Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 15 demonstrate compliance using the test in section II.A.2 of Appendix A. The form of the guarantee is provided as Exhibit M. In addition, FENGenCo expects to receive additional funding for decommissioning in the amount of $80 million from Penn Power and/or other affiliates within the next five years. FENGenCo will maintain these funds in its NDTs. In any event, the existing trust funds combined with the parent company guarantee in the amount of $80 million provide reasonable assurance that funds will be available to FENGenCo to pay for its share of the decommissioning costs attributable to the interests being transferred to it, in accordance with the requirements of 10 CFR 50.75. This provides the required financial assurance for the funding of FENGenCo's decommissioning obligations in connection with the transferred plant interests. It is expected that when FENGenCo's NDTs have achieved higher funding levels, from funds made available by Penn Power and other sources, as well as earnings and appreciation from NDT investments, the parent company guarantee will be reduced to a lower amount or eliminated, as appropriate. H. NO ANTITRUST CONSIDERATIONS In accordance with the Commission's decision in Kansas Gas and Electric Company (Wolf Creek Generating Station, Unit 1), CLI-99-19, 49 N.R.C. 441 (1999), antitrust reviews of license transfer applications after initial licensing are not required by the AEA. The existing antitrust conditions in the licenses will continue in effect. I. NUCLEAR INSURANCE In accordance with Art. IV.2 of the NRC Price-Anderson Indemnity Agreement for BVPS and Perry, the Applicant requests NRC approval of the assignment and transfer of Penn Power's interest in the Price Anderson Indemnity Agreement for Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 16 BVPS and Perry to FENGenCo in connection with the proposed license transfer. FENGenCo's Pro Forma Income Statements and financial arrangements with FirstEnergy provide adequate assurance that FENGenCo will be able to pay its share of the annual retrospective premium for BVPS and Perry pursuant to 10 CFR 140.21(e)-(f). Prior to the license transfer, FENOC will provide proof that FENGenCo will have all required nuclear property damage insurance pursuant to 10 CFR 50.54(w) and nuclear energy liability insurance pursuant to Section 170 of the AEA and 10 CFR Part 140. J. STANDARD CONTRACT FOR DISPOSAL OF SPENT NUCLEAR FUEL Upon transfer, FENGenCo will assume title to and responsibility for the storage and disposal of Penn Power's pro rata share of spent nuclear fuel at BVPS and Perry. Penn Power will assign, and FENGenCo will assume, all of Penn Power's rights and duties under the Standard Contract with the Department of Energy. Penn Power will remain liable to FENGenCo for any fees associated with spent nuclear fuel used to generate electricity prior to the transfer. K. AGREEMENT TO LIMIT ACCESS TO RESTRICTED DATA This application does not involve any Restricted Data or other classified defense information. Furthermore, it is not expected that any such information will be raised or required by the licensed activities at BVPS or Perry. In the event that licensed activities do involve Restricted Data in the future, FENGenCo agrees that it will appropriately safeguard such information. In compliance with Section 145a of the AEA, FENGenCo agrees that restricted or classified defense information will not be provided to any individual until the Office of Personnel Management investigates and reports to the NRC on the character, associations, and loyalty of such individual, and the NRC determines Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 17 that permitting such person to have access to Restricted Data will not endanger the common defense and security of the United States. L. ENVIRONMENTAL REVIEW The proposed transfer will not result in any change in the types, or any increase in the amounts, of any effluents that may be released off-site, and will not cause any increase in individual or cumulative occupational radiation exposure. Further, the NRC has determined in 10 CFR 51.22(c)(21) that license transfers are categorically exempt from further environmental review. Accordingly, the license transfer will involve no significant environmental impact. IV. EFFECTIVE DATE AND OTHER REGULATORY APPROVALS The Applicant requests that the NRC review this application on a schedule that will permit issuance of an order consenting to the requested license transfer as promptly as possible, and in any event on or before November 1, 2005. Such consent should be immediately effective upon issuance and should permit the transfer and the implementation date of the conforming amendment to occur any time prior to December 31, 2006. The proposed transfer of the BVPS and Perry interests from Penn Power to FENGenCo also requires approvals or actions from other agencies, including, but not limited to, the FERC, Pennsylvania Public Utility Commission, the Public Utilities Commission of Ohio, New Jersey Board of Public Utilities, New York State Public Service Commission, SEC, and the Internal Revenue Service. FENOC will inform the NRC Staff as to the status of other necessary approvals and will notify the NRC Staff when they are ready for the conforming license amendment to be issued. Enclosure 1 L-05-080 PY-CEI/NRR-2880L Page 18 V. CONCLUSION For the reasons stated above, the Applicant respectfully submits that the proposed transfer of Penn Power's ownership interests in BVPS and Perry to FENGenCo is consistent with the requirements set forth in the AEA, NRC regulations, and the relevant NRC licenses and orders. The Applicant therefore respectfully requests that, in accordance with Section 184 of the AEA and 10 CFR 50.80 and 50.92, the NRC consent to the transfer of the BVPS and Perry licenses to FENGenCo and approve the conforming administrative amendments associated with this transfer. EX-99 6 exh_h.txt EXHIBIT H EXHIBIT H
FirstEnergy Amount Ratio - ----------- ----------- ------- Common Equity $8,640,396 43.37% Preferred Stock 213,719 1.07% Long-Term Debt 10,512,694 52.77% Short-Term Debt 554,824 2.79% ------- ----- Total Capitalization $19,921,633 100.00% ----------- ------- Ohio Edison - ----------- Common Equity $2,409,698 58.71% Preferred Stock 75,070 1.83% Long-Term Debt 1,393,799 33.95% Short-Term Debt 226,301 5.51% ------- ----- Total Capitalization $4,104,868 100.00% ---------- ------- Cleveland Electric - ------------------ Common Equity $1,854,152 41.79% Preferred Stock - 0.00% Long-Term Debt 2,023,777 45.61% Short-Term Debt 559,290 12.60% ------- ------ Total Capitalization $4,437,219 100.00% ---------- ------- Toledo Edison - ------------- Common Equity $827,560 49.43% Preferred Stock 126,000 7.53% Long-Term Debt 387,432 23.14% Short-Term Debt 333,136 19.90% ------- ------ Total Capitalization $1,674,128 100.00% ---------- ------- Penn Power - ---------- Common Equity $349,059 62.81% Preferred Stock 14,105 2.54% Long-Term Debt 146,941 26.44% Short-Term Debt 45,597 8.21% ------ ----- Total Capitalization $555,702 100.00% -------- -------
EX-99 7 exh_i.txt EXHIBIT I EXHIBIT I OHIO EDISON Embedded Cost of Long Term Debt 9/30/2005
DATE OF DATE OF PRINCIPAL AMOUNT COST OF ANNUAL TITLE CUSIP # OFFERING MATURITY AMOUNT OUTSTANDING MONEY COST ----- ------- -------- -------- ------ ----------- ----- ---- POLLUTION CONTROL NOTES OAQDA 2000 Series C (3) * 677525NT0 Jun-00 Jun-23 50,000,000 50,000,000 2.8498% 1,424,893 OAQDA Series 1989 A (10) *** 677525RH1 Jan-88 Feb-15 50,000,000 50,000,000 3.3061% 1,653,058 OWDA 2000 Series A (6) ** 677660PC0 Apr-00 Oct-33 44,800,000 44,800,000 2.6266% 1,176,703 OAQDA 2000 Series A (7) ** 677525NQ6 Apr-00 Oct-33 12,300,000 12,300,000 2.6266% 323,068 OWDA 1988 Series B (2) * 677660DH2 Sep-00 Sep-18 33,000,000 33,000,000 3.0274% 999,031 OAQDA 1988 Series C (8) * 677525JC2 Sep-88 Sep-18 23,000,000 23,000,000 3.0274% 696,294 OAQDA 1989 Series A (1) *** 677525JG3 Feb-89 Feb-14 50,000,000 50,000,000 2.8120% 1,406,021 OWDA 1999 Series B 677660NY4 Dec-99 Jun-33 30,000,000 30,000,000 3.3761% 1,012,824 OWDA 1999 Series A 677660NT5 Jun-99 Jun-33 41,000,000 41,000,000 3.3761% 1,384,193 OAQDA 1999 Series B 677525MR5 Jun-99 Jun-33 9,000,000 9,000,000 3.3761% 303,847 OAQDA 1999 Series C (11) ** 677525NK9 Dec-99 Jun-16 47,725,000 47,725,000 2.4972% 1,191,769 BCIDA 1999 Series A (8A) ** 074876FM0 Sep-99 Sep-33 108,000,000 108,000,000 2.5292% 2,731,498 OAQDA 2000 Series B (5) ** 677525NR4 Apr-00 Apr-15 19,000,000 19,000,000 2.6182% 497,462 BCIDA 2001 Series A (9) ** 074876FC2 Jun-01 Jun-31 69,500,000 69,500,000 2.5740% 1,788,946 BCIDA 2000 Series A (4) ** 074876FB4 Apr-00 Apr-30 60,400,000 60,400,000 2.6489% 1,599,918 BCIDA 1993 Series A 074876DV2 Sep-93 Sep-33 14,800,000 14,800,000 5.5974% 828,414 OWDA 2005 Series A (12) ** 67766WHD7 Apr-05 Apr-29 6,450,000 6,450,000 2.7176% 175,286 OQWDA Series 2005 A (13) ** 677525QN0 Apr-05 Apr-29 100,000,000 100,000,000 2.6930% 2,693,026 OWDA 2005 Series B (14) ** 677660SS2 Jun-05 Jan-34 40,000,000 40,000,000 2.8005% 1,120,191 BCIDA 1995 Series 074876DW0 Sep-95 Oct-20 60,000,000 60,000,000 7.5405% 4,524,298 BCIDA 1998 Series A 07487UAA8 May-88 Jun-28 13,521,974 13,521,974 5.4352% 734,941 -------------- ------------ SUB-TOTAL PCN 882,496,974 28,265,679 SR. UNSECURED NOTES 4.000% Series 677347BZ8 Apr-03 May-08 175,000,000 175,000,000 4.0946% 7,165,618 5.450% Series 677347CA2 Apr-03 May-15 150,000,000 150,000,000 5.5330% 8,299,529 -------------- ------------ 325,000,000 15,465,146 OTHER 7.680% Pepco PEPCO001 Apr-94 Oct-05 200,000,000 5,293,333 7.7602% 410,776 -------------- ------------ 5,293,333 410,776 Total LOC & Insurance Credit Support Fees 4,182,666 * Daily Interest Rate TOTAL LONG-TERM DEBT OUTSTANDING 1,212,790,307 48,324,268 ** 35 day variable rate ============== ============ *** Weekly Interest rate ---------------------------- ---------------------- 3.9846% ----------------------
PENNPOWER Embedded Cost of Long Term Debt 9/30/2005
DATE OF DATE OF PRINCIPAL AMOUNT COST OF ANNUAL TITLE CUSIP # OFFERING MATURITY AMOUNT OUTSTANDING MONEY COST ----- ------- -------- -------- ------ ----------- ----- ---- FIRST MTG BONDS 9.740% Series 709068900 Nov-89 Nov-19 20,000,000 14,156,000 9.8584% 1,395,552 7.625% Series 709068AW0 Jul-93 Jul-23 40,000,000 6,500,000 7.8083% 507,537 ----------- --------- SUB-TOTAL FMB 20,656,000 1,903,089 POLLUTION CONTROL NOTES OWDA 1988 Series 677660HX8 May-88 May-18 13,300,000 13,300,000 6.4525% 858,176 OAQDA1988 Series 677525DE9 May-88 May-18 3,500,000 3,500,000 6.4525% 225,836 OAQDA 1997 Series (2) * 677525MF1 Jul-00 Jul-27 4,500,000 4,500,000 3.0735% 138,306 OWDA 1997 Series (1) * 677660LV2 Jul-00 Jul-27 5,800,000 5,800,000 3.0735% 178,261 OWDA 1999 Series A (5) 677660NX6 Dec-99 Jun-33 5,200,000 5,200,000 2.6293% 136,724 BCIDA 2001 Series A (4) ** 074876FD0 Jun-01 Sep-21 14,925,000 14,925,000 2.5000% 373,125 LCIDA 2001 Series A (3) ** 519833AH0 Jun-01 Mar-17 17,925,000 17,925,000 2.4379% 436,999 OAQDA 2002 Series A 677525PK7 Jul-02 Jan-29 14,500,000 14,500,000 3.8450% 557,529 BCIDA 1993 Series 074876DU4 Sep-93 Sep-28 6,950,000 6,950,000 5.7799% 401,705 LCIDA 1993 Series A 519833AF4 Sep-93 Sep-17 10,600,000 10,600,000 5.6901% 603,146 BCIDA 1993 Series 074873AB6 Oct-93 Oct-13 1,000,000 1,000,000 6.0918% 60,918 BCIDA 1998 Series A 07487UAA8 Jun-98 Jun-28 1,733,896 1,733,896 5.4352% 94,241 OWDA 1994 Series 677660HK1 Aug-94 Aug-23 11,200,000 11,200,000 6.6721% 747,280 OAQDA 1994 Series 677525LN5 Aug-94 Aug-23 1,500,000 1,500,000 6.6445% 99,667 BCIDA 1995 Series A 074876EE9 Sep-95 Sep-28 14,250,000 14,250,000 6.4484% 918,891 ----------- --------- SUB-TOTAL PCN 126,883,896 5,830,803 Total LOC & Insurance Credit Support Fees 214,030 - -------------------------- ----------- --------- * Weekly Interest Rate ** 35 day variable rate TOTAL LONG-TERM DEBT OUTSTANDING 147,539,896 7,947,923 - --------------------------- =========== ========= --------------------- 5.3870% ---------------------
CEI Embedded Cost of Long Term Debt 9/30/2005
DATE OF DATE OF PRINCIPAL AMOUNT COST OF ANNUAL TITLE CUSIP # OFFERING MATURITY AMOUNT OUTSTANDING MONEY COST ----- ------- -------- -------- ------ ----------- ----- ---- FIRST MTG BONDS 6.86% Series 1861086A2 9/29/1998 10/1/2008 125,000,000 125,000,000 7.2595% 9,074,421 7.88% Series Sec. Note (FMB) 186108BS4 11/1/1997 11/1/2017 300,000,000 300,000,000 7.8800% 23,640,000 7.43% Series Sec. Note (FMB) 186108BQ8 11/1/1997 11/1/2009 150,000,000 150,000,000 7.4300% 11,145,000 ------------- ----------- SUB-TOTAL FMB 575,000,000 43,859,421 SECURED TRUST NOTES 7.130% 186118AE5 6/11/1997 7/1/2007 120,000,000 120,000,000 7.2224% 8,666,871 5.65% Senior Notes 186108CC8 12/11/2003 1/1/2013 300,000,000 300,000,000 5.6981% 17,094,360 ------------- ----------- SUBTOTAL TRUST NOTES 420,000,000 25,761,231 PREFERRED $25 Par-Trust Preferred 186127205 12/19/2001 12/15/2031 100,000,000 100,000,000 9.3131% 9,313,146 ------------- ----------- SUBTOTAL PREFERRED 100,000,000 9,313,146 POLLUTION CONT. NOTES OAQDA 1998 Series B 677525MM6 10/6/1998 10/1/2030 12,085,000 12,085,000 3.7841% 457,303 OAQDA 2002 Series 677525PL5 7/1/2002 12/1/2013 78,700,000 78,700,000 6.9367% 5,459,184 OAQDA 2005 Series A (7)** 677525QQ3 7/1/2005 1/1/2034 2,900,000 2,900,000 2.2900% 66,410 OWDA Series 2005 A (6)** 677660ST0 7/1/2005 1/1/2034 40,900,000 40,900,000 2.6500% 1,083,850 BCIDA 2005 Series B (7)** 074876FR9 7/1/2005 7/15/2035 45,150,000 45,150,000 2.5721% 1,161,282 BCIDA 1998 Series 074876EJ8 10/6/1998 10/1/2030 46,300,000 46,300,000 3.8146% 1,766,167 OWDA 1998 Series A (4)** 677660NQ1 10/6/1998 10/1/2030 23,255,000 23,255,000 3.8347% 891,760 OWDA 1998 Series A 677660SL7 10/6/1998 10/1/2030 23,255,000 23,255,000 2.6553% 617,496 OWDA 1988 Series A 677660SE3 3/2/1988 3/1/2015 39,835,000 39,835,000 2.5655% 1,021,954 OAQDA 1988 Series B 677525PV3 3/2/1988 3/1/2018 72,795,000 72,795,000 2.5644% 1,866,752 OWDA 2004 Series A (5)** 67766OSJ2 9/2/2004 9/1/2033 46,100,000 46,100,000 2.7958% 1,288,881 OWDA 1999 Series A (2)* 677660SG8 7/7/1999 6/15/2033 27,700,000 27,700,000 2.4366% 674,939 OAQDA 2002 Series B (3)** 677525PT8 10/1/2002 9/1/2033 30,000,000 30,000,000 2.5792% 773,756 OAQDA 1997 Series 677525MH7 8/26/1997 8/1/2020 62,560,000 62,560,000 6.1224% 3,830,185 BCIDA 2005 Series A (8)** 074876DY6 5/1/1995 5/1/2025 53,900,000 53,900,000 2.6730% 1,440,755 OWDA 1997 Series 677660LX8 8/26/1997 8/1/2020 54,600,000 54,600,000 6.2235% 3,398,043 OAQDA 1997 Series 677525MG9 8/26/1997 8/1/2020 15,900,000 15,900,000 6.2235% 989,540 OWDA 1997 Series A (1) * 677660LW0 6/1/2000 6/1/2020 47,500,000 47,500,000 2.8792% 1,367,610 BCIDA 1998 Series A 07487UAA8 5/1/1998 6/1/2027 5,993,376 5,993,376 5.4788% 328,368 ------------- ----------- SUBTOTAL PCN 729,428,376 28,484,234 Total LOC & Insurance Credit Support Fees 1,863,641 -------------------------- ------------- ----------- * Weekly Variable Rate Total Long-Term Debt Outstanding 1,824,428,376 109,281,673 -------------------------- ============= =========== --------------------- 5.9899% ---------------------
TOLEDO EDISON Embedded Cost of Long Term Debt 930/2005
DATE OF DATE OF PRINCIPAL AMOUNT COST OF ANNUAL TITLE CUSIP # OFFERING MATURITY AMOUNT OUTSTANDING MONEY COST ----- ------- -------- -------- ------ ----------- ----- ---- SECURED TRUST NOTES BM Series A Sec 186118AE5 6/11/1997 7/1/2007 30,000,000 30,000,000 7.2224% 2,166,720 ----------- ---------- SUBTOTAL SECURED TRUST NOTES 30,000,000 2,166,720 POLLUTION CONTROL NOTES BCIDA 1999 Series A (1)*** 074876EL3 6/1/1999 6/1/2030 34,850,000 34,850,000 2.7814% 969,327 BCIDA 1998 Series A 07487UAA8 5/1/1998 6/1/2028 3,750,754 3,750,754 5.4353% 203,864 OWDA 1999 Series A (2)*** 677660NWO 6/15/1999 6/1/2033 18,800,000 18,800,000 2.8500% 535,796 OWDA 1999 Series 677660NW8 9/2/1999 9/1/2033 31,600,000 31,600,000 4.5290% 1,431,152 OAQDA 1999 Series A 677525NJ2 9/2/1999 9/1/2033 5,700,000 5,700,000 2.7705% 157,920 BCIDA 1995 Series 074876EB5 7/15/1995 5/1/2020 35,000,000 35,000,000 7.9088% 2,768,088 BCIDA 1995 Series 074876EC3 7/15/1995 5/1/2020 19,000,000 19,000,000 7.9081% 1,502,548 OWDA 2000 Series B (3)** 677660QZ8 9/20/2000 9/20/2033 30,900,000 30,900,000 2.8321% 875,104 OWDA 2004 Series A (7)** 677660HN5 9/28/1994 10/1/2023 30,500,000 30,500,000 2.8517% 869,764 OAQDA 2002 Series A (4)** 677525PS0 10/1/2002 9/1/2033 20,200,000 20,200,000 2.6076% 526,730 BCIDA 2005 Series A (8)** 074876DZ3 5/1/1995 5/1/2020 45,000,000 45,000,000 2.3520% 1,058,393 OAQDA 1997 Series 677525MJ3 8/27/1997 8/1/2027 10,100,000 10,100,000 6.3222% 638,538 OAQDA 2000 Series A (5)** 677525PY7 7/17/2003 4/1/2024 34,100,000 34,100,000 2.5500% 869,550 OWDA 2000 Series A (6)** 677660SF0 7/17/2003 4/1/2024 33,200,000 33,200,000 2.4000% 796,800 ----------- ---------- SUBTOTAL PCN 352,700,754 13,203,573 Total LOC & Insurance Credit Support Fees 1,399,927 ---------------------------- * Daily variable rate ----------- ---------- ** 35 day variable rate Total Long-Term Debt Outstanding 382,700,754 16,770,219 ----------------------------- =========== ========== --------------------- 4.3821% ---------------------
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