Record Generation Output
FirstEnergy set a new year-to-date generation output record of 61.9 million megawatt-hours. The year-to-date output represented a 4.0% increase over the record established in the same period last year.
Beaver Valley Power Station Uprates
In August, Beaver Valley Unit 1 increased its net output capability from 821 megawatts to 846 megawatts. This three percent increase in output is the first phase of its overall eight percent power uprate recently approved by the NRC. The uprate was made possible by improvements to plant equipment and systems completed during its spring refueling outage. The remainder of the eight-percent power uprate is expected to be implemented by early 2007. Similar work is planned for Beaver Valley Unit 2. During its current refueling outage, which began October 2, several modifications will be completed to prepare Beaver Valley Unit 2 for its eight percent increase in generating capacity. After Beaver Valley Unit 2 returns to service, three percent of its uprate is expected to take effect. The balance of the eight percent power output increase is anticipated to be implemented during the next refueling in 2008. Beaver Valley Unit 2 is expected to return to service from its current refueling outage in early to mid-November, 2006.
Met-Ed and Penelec Rate Transition Plan Update
Evidentiary hearings in the Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec) Rate Transition Plan cases were held from August 24 through August 30. Parties to the proceedings filed their Main Briefs on September 22 and Reply Briefs on October 6. Met-Ed and Penelec anticipate an Administrative Law Judge Recommended Decision in these proceedings by November 8 and an Order from the Pennsylvania Public Utility Commission (PPUC) by January 12, 2007. As part of the transition of customers’ generation service toward market-based supply, Met-Ed and Penelec secured approximately 950 MW of Provider of Last Resort (POLR) supply under a competitive request for proposal (RFP) for the period December 1, 2006 through December 31, 2008. Recovery of the incremental costs of this supply is one of the components of the transition plan cases.
Competitive Electricity Supply for Penn Power
On October 19, the PPUC certified the RFP results for all customer classes reflecting the successful completion of the competitive RFP bidding process. The RFP was conducted to secure the POLR supply for the period January 1, 2007 through May 31, 2008 for those customers that do not choose alternative suppliers.
Ohio Competitive Bid Process Proposal
On September 29, FirstEnergy’s Ohio electric utility companies filed their proposal to establish a competitive bid process for market-based generation supply under which suppliers could submit prices to serve a portion of each Ohio Company’s customer load. This proposal was in response to a July 26 Public Utilities Commission of Ohio (PUCO) directive to file plans for a competitive retail electric service option. The PUCO directive resulted from a May 3 Ohio Supreme Court remand finding that Ohio restructuring law requires FirstEnergy to provide an alternative market-based offering to customers, even if the alternative is at a higher price than that offered through FirstEnergy’s Rate Stabilization Plan. If adopted, customers would have the opportunity to switch to alternative generation suppliers at prices established through the RFP program during 2007 and 2008.
JCP&L Non-Utility Generation Cost Request Case
An evidentiary hearing was held on September 20, and settlement conferences were held in October in the proceeding involving JCP&L’s request to recover $165 million of actual above-market NUG costs incurred from August 1, 2003 through December 31, 2005. If approved, this request would increase cash flow, but would be earnings neutral. Main briefs are scheduled to be filed on October 30, with reply briefs due on November 20. An order by the New Jersey Board of Public Utilities is expected in 2007.
Share Repurchase Program
On August 10, FirstEnergy repurchased 10.6 million shares, or approximately 3.2%, of its outstanding common stock through an accelerated repurchase program with an affiliate of J.P. Morgan Securities. The initial purchase price was $56.44 per share, or a total initial purchase price of $600 million. The final purchase price will be adjusted to reflect J.P. Morgan's ultimate cost to acquire the shares over a period of up to seven months. The share repurchase was funded with short-term debt. The share repurchase was completed under a June 20 Board of Directors’ authorization to repurchase up to 12 million shares of common stock.
Renewed and Upsized Credit Facility
On August 24, FirstEnergy and certain of its subsidiaries, including all of its operating utility subsidiaries, entered into a new five-year syndicated credit facility totaling $2.75 billion. The new facility replaces FirstEnergy’s prior $2 billion credit facility and provides a 10 basis point annual savings on facility related borrowing costs. Borrowings from the new facility were used to pay off the outstanding borrowings under the old facility. FirstEnergy may request an increase in the total commitments available under the new facility to a maximum of $3.25 billion. Commitments under the new facility will be available until August 24, 2011, unless the lenders agree, at the request of the Borrowers, to two additional one-year extensions. Generally, borrowings under the facility must be repaid within 364 days. Available amounts for each borrower are subject to a specified sublimit as well as applicable regulatory and other limitations.
Forward-looking Statements. This Consolidated Report to the Financial Community includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate," "potential," "expect," "believe," "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of our regulated utilities to collect transition and other charges or to recover increased transmission costs, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), and the legal and regulatory changes resulting from the implementation of the Energy Policy Act of 2005 (including, but not limited to, the repeal of the Public Utility Holding Company Act of 1935), the uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated) or levels of emission reductions related to the Consent Decree resolving the New Source Review litigation, adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits, fines or other enforcement actions and remedies) of governmental investigations and oversight, including by the Securities and Exchange Commission, the United States Attorney's Office, the Nuclear Regulatory Commission and the various state public utility commissions as disclosed in our Securities and Exchange Commission filings, generally, and with respect to the Davis-Besse Nuclear Power Station outage and heightened scrutiny at the Perry Nuclear Power Plant in particular, the timing and outcome of various proceedings before the Public Utilities Commission of Ohio (including, but not limited to, the successful resolution of the issues remanded to the PUCO by the Ohio Supreme Court regarding the RSP) and the Pennsylvania Public Utility Commission, including the transition rate plan filings for Met-Ed and Penelec, the continuing availability and operation of generating units, the ability of generating units to continue to operate at, or near full capacity, the inability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the anticipated benefits from voluntary pension plan contributions, the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the public securities and other capital markets and the cost of such capital, the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the August 14, 2003 regional power outage, the successful completion of the share repurchase program announced August 10, 2006, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, including our annual report on Form 10-K for the year ended December 31, 2005, and other similar factors. We expressly disclaim any current intention to update any forward- looking statements contained herein as a result of new information, future events, or otherwise.
