SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27682;70-9793)
FirstEnergy Corp., et al
Supplemental Order Authorizing Extension of Time; Reservation of Jurisdiction
FirstEnergy Corp., ("FirstEnergy") and FirstEnergy's two service company subsidiaries, FirstEnergy Service Company ("ServeCo") and GPU Service, Inc. ("GPU Service"), all located in Akron, Ohio (collectively, "Applicants"), have filed with the Securities and Exchange Commission ("Commission") a post-effective amendment, under section 13(b) of the Public Utility Holding Company Act, as amended ("Act") and rules 54, 88, 90, and 91 under the Act, to a previously filed application ("Application"). The Commission issued a notice of the underlying Application on August 31, 2001 (HCAR No. 27435).
By order dated October 29, 2001 (HCAR No. 27459) ("Merger Order"), as supplemented by orders dated November 8, 2001 (HCAR No. 27483) and December 23, 2002 (HCAR No. 27628), the Commission authorized the merger between FirstEnergy Corp. ("FirstEnergy"), an Ohio corporation, and GPU, Inc. ("GPU"), a Pennsylvania corporation ("Merger"). The Merger became effective on November 7, 2001, with FirstEnergy as the surviving entity, and FirstEnergy registered under the Act as a holding company on the same day. As a result of the Merger, FirstEnergy directly or indirectly owns all of the outstanding common stock of ten electric utility subsidiaries ("Utility Subsidiaries") which provide gas distribution and transportation service to approximately 5,000 customers in central and northeast Ohio.1
FirstEnergy also directly owns all of the issued and outstanding common stock of ServeCo, an Ohio corporation, which was organized in 2001 in order to become a new service company subsidiary of FirstEnergy, and GPU Service, a Pennsylvania corporation, which was formerly a direct service company subsidiary of GPU. FirstEnergy also directly or indirectly holds investments in numerous nonutility subsidiaries that are engaged in a variety of energy-related, exempt, or otherwise functionally related nonutility businesses ("Nonutility Subsidiaries" and together, with the Utility Subsidiaries, "Subsidiaries").
Under the Merger Order, the Commission granted FirstEnergy a temporary exemption until such time as all of the service functions performed by FirstEnergy and GPU Service have been consolidated in ServeCo. The order enabled FirstEnergy to continue to provide certain common corporate services2 to the Subsidiaries that FirstEnergy held before the Merger. The Merger Order specified that ServeCo would begin at least minimal operations within ninety days following closing of the merger, and that all service functions of FirstEnergy and GPU Service would be transferred to ServeCo not later than February 1, 2003. Employees of FirstEnergy were transferred to ServeCo by January 1, 2002 and employees of GPU Service were transferred to ServCo by January 1, 2003. GPU Service and FirstEnergy no longer have any employees and no longer provide any services. Applicants further requested that the Commission authorize a three-month extension of the original February 1, 2003 date for full compliance of the above service company activities to June 1, 2003.
Applicants now request an additional one-month extension of the June 1, 2003 deadline to June 30, 2003. Applicants request this additional extension in order to continue its service company activities while the Commission considers its application requesting approval of its proposed service company policies and procedures.
In addition, Applicants request authorization to consolidate all common corporate services provided during the pre-merger period to associate companies in the FirstEnergy system by FirstEnergy and GPU Service in ServeCo. Applicants request authority for ServeCo to institute policies and procedures and to enter into a service agreement ("ServCo Service Agreement"), including cost allocation methods, with FirstEnergy and each Subsidiary that requests services. In addition, Applicants request authorization to adopt a separate service agreement between certain of FirstEnergy's Ohio Utility Subsidiaries and Pennsylvania Power Company ("Separate Service Agreement").3 Applicants request that the Commission reserve jurisdiction over the approval of the ServCo policies and procedures, the ServCo Service Agreement, and the Separate Service Agreement until the record is complete.
FirstEnergy estimates that the total fees, commissions and expenses to be incurred in connection with the transaction as a whole will not exceed $25,000. Applicants state that, other than as discussed above, no state commission and no federal commission, other than this Commission, has jurisdiction over the proposed transaction.
Due notice of the filing of the Application has been given in the manner prescribed in rule 23 under the Act, and no hearing has been requested of, or ordered by, the Commission. On the basis of the facts, it is found that, except as to those matters over which jurisdiction has been reserved, the applicable standards of the Act and rules under the Act are satisfied, and that no adverse findings are necessary.
IT IS ORDERED, under the applicable provisions of the Act and rules under the
Act, that, except as to those matters over which jurisdiction has been reserved, the post-effective amendment, as amended, be permitted to become effective immediately, subject to the terms and conditions contained in rule 24 under the Act.
IT IS FURTHER ORDERED, that jurisdiction be reserved over Applicants' requests for (i) authority to consolidate FirstEnergy's service company functions into ServCo, (ii) approval of ServCo's procedures and procedures, (iii) approval of the ServCo Service Agreement, and (iv) approval of the Separate Services Agreement, pending completion of the record.
For the Commission, by the Division of Investment Management, under delegated authority.
1 The Utility Subsidiaries consist of: Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, American Transmission Systems, Incorporated, Jersey Central Power & Light Company, Pennsylvania Electric Company, Metropolitan Edison Company, Pennsylvania Power Company, York Haven Power Company, and The Waverly Electric Power & Light Company, which together provide service to approximately 4,300,000 retail and wholesale electric customers in a 37,200 square-mile area in Ohio, New Jersey, New York and Pennsylvania; and one gas utility subsidiary, Northeast Ohio Natural Gas Corp. Applicants state that the New Jersey Board of Public Utilities and the Pennsylvania Pubic Utility Commission have jurisdiction under their respective state affiliate interests statutes over the proposed Service Agreement and Separate Service Agreement, as they relate to the Utility Subsidiaries that are subject to regulation by those commissions.
2 These services include: (i) energy supply management of the bulk power and natural gas supply, fuel procurement, coordination of gas and electric systems, maintenance, construction and engineering work; (ii) customer billing; (iii) materials management; (iv) facilities management; (v) human resources; (vi) finance; (vii) accounting; (viii) internal auditing; (ix) information systems; (x) corporate planning and research; (xi) public affairs; (xii) legal; (xiii) environmental matters; and (xiv) executive services.
3 Applicants have filed with the Commission as exhibits in this file, the proposed ServCo policies and procedures, ServCo Service Agreement, and the Separate Service Agreement.