SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 18, 2003
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
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333-21011 FIRSTENERGY CORP. 34-1843785
(An Ohio Corporation)
76 South Main Street
Akron, Ohio 44308
Telephone (800)736-3402
1-3141 JERSEY CENTRAL POWER & LIGHT COMPANY 21-0485010
(A New Jersey Corporation)
c/o FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
Item 5. Other Events
The New Jersey Board of Public Utilities (Board) ordered an audit of the
restructuring-related deferred balances of New Jersey's four electric utilities,
including Jersey Central Power & Light Company (JCP&L), a wholly owned
subsidiary of FirstEnergy Corp. On March 18, 2003, a Phase I report was
transmitted to the Office of Administrative Law, where JCP&L's rate case is
being heard. Phase I of the audit covers the deferred balances for the first
three years of the transition period (August 1, 1999 through July 31, 2002) and
Phase II covers the final transition period year of August 1, 2002 through July
31, 2003.
The objective of the audit is to provide the Board with a certified opinion as
to whether the state's utilities' deferred balances are accurately calculated,
correctly recorded, fairly stated in all material respects and in compliance
with Board Orders. Additionally, for utilities like JCP&L that have divested
their generation assets, the audit includes a prudence review of the utility's
Basic Generation Service (BGS) procurement practices for the transition period.
The audit also examines the utilities' mitigation efforts with respect to the
above-market Non-Utility Generation (NUG) contract costs during the transition
period.
With respect to energy procurement approach and management, the Phase I report
found that JCP&L's "strategy for meeting its BGS procurement responsibilities
was informed and reasonable in light of the Company's prior experience in
meeting supply procurement requirements." The report also found that JCP&L
"appropriately supplemented its expertise through the use of external
consultants who assisted in developing and shaping JCP&L's BGS procurement
strategy, training employees on procurement risk management issues, developing
planning and management tools, and developing risk management policies and
procedures." The report states that JCP&L "developed a reasonable strategic
framework for meeting BGS procurement needs."
With respect to NUG mitigation efforts, the report found that "in general, JCP&L
maintained a reasonable and prudent program for NUG mitigation well before the
transition period and committed substantial corporate resources to mitigating
the costs of its NUG contracts."
The Phase I report made two specific findings of potential disallowances of
deferred balance recovery:
o Because the auditors could not find an adequate explanation for why JCP&L
deviated from a hedge procurement target during the spring and summer of
2001, they estimated that the incremental cost of the hedge deviations was
$11.7 million.
o Because the auditors believe that JCP&L was not as aggressive in the
pursuit of mitigation opportunities for its smaller NUG contracts as it was
for its larger NUG contracts, they estimate that $5.6 million of mitigation
savings may have been foregone.
Although JCP&L disagrees with the report's findings of $17.3 million of
potential disallowances, it is pleased with the report's major conclusions and
overall tone. The Phase I audit period subjected $436 million of deferred costs
to a retrospective prudence review during a period of extreme price uncertainty
and volatility in the energy markets. JCP&L believes the auditors' overall
conclusion that its energy procurement strategy and process was reasonable and
prudent is a correct one.
JCP&L will have an opportunity to conduct discovery on the Phase I report,
cross-examine the auditing firms and submit rebuttal testimony.
This Form 8-K 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,
legislative and regulatory changes (including revised environmental
requirements), the availability and cost of capital, ability to accomplish or
realize anticipated benefits from strategic initiatives and other similar
factors.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, each Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
March 18, 2003
FIRSTENERGY CORP.
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Registrant
JERSEY CENTRAL POWER & LIGHT COMPANY
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Registrant
Harvey L. Wagner
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Harvey L. Wagner
Vice President, Controller
and Chief Accounting Officer