8-KOther EventsExhibits & Filings

FIRSTENERGY CORP 8-K Report, Corporate Update (May 26, 2005)

Filed May 26, 2005For Securities:FE

Summary

This Form 8-K filing by FIRSTENERGY CORP. (FE) and its subsidiary JERSEY CENTRAL POWER & LIGHT COMPANY (JCP&L) reports on significant regulatory approvals received on May 25, 2005, from the New Jersey Board of Public Utilities (NJBPU). These approvals stem from two stipulated settlement agreements that resolve outstanding issues related to JCP&L's Phase I and Phase II regulatory proceedings. The settlements are expected to positively impact JCP&L's financial performance and FirstEnergy's overall earnings guidance for 2005. Key financial implications include an aggregate annual increase of $59 million in JCP&L's distribution revenues, effective June 1, 2005, partially offset by an $8 million annual reduction related to securitization of deferred balances. Additionally, JCP&L's authorized return on common equity has been adjusted upwards. These favorable regulatory outcomes, combined with positive developments in Ohio regarding transmission cost deferrals, are projected to help FirstEnergy achieve earnings per share towards the higher end of its previously issued 2005 guidance range of $2.70 to $2.85.

Key Highlights

  • 1JCP&L received NJBPU approval for two stipulated settlement agreements resolving Phase I reconsideration and Phase II proceedings.
  • 2An aggregate annual increase of $59 million in JCP&L's distribution revenues is effective June 1, 2005.
  • 3An annual reduction of $8 million in rates and amortization expense is effective June 1, 2005, related to securitization of deferred balances.
  • 4JCP&L's authorized return on common equity increased from 9.5% to 9.75%.
  • 5A customer service reliability target is included, with potential adjustments to the authorized return on equity based on performance.
  • 6FirstEnergy expects these settlements, along with Ohio regulatory approvals, to support achieving 2005 earnings per share at the top end of its $2.70-$2.85 guidance.

Frequently Asked Questions

The settlements will result in a net annual increase of $51 million in JCP&L's distribution revenues ($23 million from Phase I reconsideration + $36 million from Phase II - $8 million reduction from securitization). This is expected to contribute to FirstEnergy achieving its 2005 earnings per share guidance at the higher end of the range.

JCP&L's authorized return on common equity has been increased from 9.5% to 9.75%. However, this is tied to a customer service reliability target. Failure to meet this target for two consecutive quarters will result in the return reverting to 9.5%, with restoration to 9.75% upon meeting the target for two consecutive quarters.

While the settlements are generally positive, the filing includes a standard forward-looking statement disclaimer listing various risks. Specifically related to JCP&L, the customer service reliability target introduces a variable that could impact future authorized returns if not met.

Besides the JCP&L settlements, the filing also mentions approval in Ohio to defer certain transmission-related costs. These positive developments are seen as offsetting negative impacts from events like the Perry plant forced outage.