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) August 23, 2002
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
----------- ----------------------------------- ------------------
333-21011 FIRSTENERGY CORP. 34-1843785
(An Ohio Corporation)
76 South Main Street
Akron, Ohio 44308
Telephone (800)736-3402
1-2323 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY 34-0150020
(An Ohio Corporation) c/o FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
1-3583 THE TOLEDO EDISON COMPANY 34-4375005
(An Ohio Corporation)
c/o FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
Item 9. Regulation FD Disclosure
On August 23, 2002, FirstEnergy Corp. updated the investment
community on activities associated with efforts to return the Davis-Besse
Nuclear Power Station to service in a safe and reliable manner.
Nuclear Regulatory Commission (NRC) Inspection Manual Chapter (IMC) 0350 Restart
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Process - August 20, 2002 Public Meeting
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The NRC's IMC 0350 panel held one of its monthly status meetings on
the Davis-Besse restart efforts in Oak Harbor, Ohio on August 20, 2002. During
the public meeting, the NRC reviewed the status of current NRC inspection
activities at the plant, including the status of the NRC's follow-up inspection
to the Augmented Inspection Team (AIT) investigation.
NRC inspection activities currently underway or planned for the near
term include:
o New reactor vessel head and code data package
o Opening and closing of the Davis-Besse containment building
o Program compliance building block
o Management and human performance building block
o Systems health building block
The NRC mentioned that the AIT follow-up inspectors reviewed their
findings with Davis-Besse management on August 9, 2002. The NRC indicated that
the inspection identified apparent violations in the following five areas:
o Technical specifications related to pressure boundary leakage
o Adequacy of corrective actions
o Adhering to procedures
o Adequacy of procedures
o Completeness and accuracy of documentation
The results of the inspection will be published in the upcoming NRC
Report 02-08. The apparent violations will remain as unresolved items until the
NRC completes its significance determination of the degradation of the reactor
vessel head. Additionally, the NRC stated that another NRC inspection of
implementation of Davis-Besse's containment health assurance plan had identified
two violations involving inspector qualifications and acceptance criteria for
inspection, and that Davis-Besse is in the process of re-performing the
containment health assurance inspections using appropriately qualified
inspectors and criteria.
FirstEnergy Nuclear Operating Company (FENOC) management reviewed the
results of FirstEnergy's Root Cause Analysis Report that was provided to the NRC
on August 15, 2002 (see Root Cause Analysis Report section below). The overview
included a description of the root causes and planned corrective actions.
FENOC management also provided updates on Davis-Besse's return to
service plan including progress on restart action milestones and towards meeting
the improved expectations for safe and reliable operations. Progress on some of
the key restart action milestones include:
o Completion of system health assurance walkdowns
o Near completion of containment building inspections
o Completion of containment shield building cutting
o Initiated containment building painting
o Began containment polar crane modifications
o Began containment air cooler refurbishment
o Prepared existing reactor head for removal
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o Prepared reactor head service structure for installation on
replacement reactor head
o Initiated inspections under the containment vessel
o Established independent oversight review panel of industry
experts to provide advice and recommendations in FirstEnergy's
restart efforts
o Established performance indicators to track progress on building
block plans, NRC 0350 Panel restart issues, and new management
and human performance improvement initiatives
o Finalized and provided FirstEnergy's Root Cause Analysis Report to
the NRC on August 15, 2002.
The NRC representatives assured the public that they will be
conducting thorough reviews during their inspection activity to ensure that
performance improvements are being made and that the proper nuclear safety focus
has been established. The NRC representatives indicated that they believe that
the management and human performance improvement plan would likely be the
"pacing issue" for restart.
Root Cause Analysis Report -Provided to NRC on August 15, 2002
--------------------------------------------------------------
A significant restart milestone was recently achieved with the
finalizing of FirstEnergy's Root Cause Analysis Report, which addresses the
management and organizational issues that contributed to the reactor head
corrosion problem. This report, which was provided to the NRC on August 15, 2002
and formally filed with the NRC the following week, was the subject of an NRC
public meeting held at the NRC's Region III headquarters on August 15, 2002. The
report, authored by a team of nuclear experts, provided a self-critical
evaluation of the human performance and management factors that contributed to
missed opportunities for earlier detection and prevention of the reactor head
corrosion problem. The report states, among other things, that plant management
and personnel:
o Did an inadequate job of implementing the Corrective Action
Program, which is designed to promptly identify and resolve
problems like those leading to the corrosion
o Did not integrate key industry information and site knowledge and
experience, nor adequately compare new information with
baseline knowledge
o Failed to comply with the plant's existing Boric Acid Corrosion
Control program.
The report concludes that the underlying root cause was the focus on
production, combined with minimum actions to meet regulatory requirements, which
resulted in the acceptance of degraded conditions.
Other observations by the team include a need for improving training
for those personnel conducting boric acid inspections, increasing management
involvement and oversight of field activities, and realigning the incentive pay
program to increase emphasis on safety.
The NRC stated that FENOC's root cause analysis appears to address
all of the NRC's issues. Additionally, at the August 20, 2002 public meeting,
the NRC stated that FENOC's planned corrective actions provide a good road map
for going forward, and that the NRC was looking forward to receiving FENOC's
detailed management improvement plan.
Davis-Besse Restart Timing and Outage Cost Impact
-------------------------------------------------
FirstEnergy continues to project that replacement of the Davis-Besse
reactor vessel head and other ancillary maintenance work can be completed on a
schedule to support restart of the plant by year-end, recognizing however, that
the NRC must approve resumption of operations at the unit under their IMC 0350
restart process.
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The estimated incremental cost impacts for the identified work scope,
as previously communicated, are:
o $55 million to $75 million of mostly capital expenditures to
replace the reactor vessel head
o $50 million to $70 million of mostly O&M expenditures for
additional maintenance, including the acceleration of various
programs/projects
o $10 million - $15 million per month for replacement power for the
non-summer months
o $20 million per month for replacement power in the summer months
of July and August.
Davis-Besse Replacement Energy Status
-------------------------------------
FirstEnergy is fully hedged for its 850 megawatts of on-peak
replacement energy supply for Davis-Besse through the end of 2002, and although
it expects the plant will be ready to return to service before year-end,
FirstEnergy also made some on-peak power purchases for the early months of 2003.
Updates on Other Items
----------------------
FirstEnergy continues to execute the key elements of its business
plans for 2002:
o On August 8, 2002, FirstEnergy canceled the sale of four
coal-fired power plants (Lake Plants) to NRG Able Acquisition
LLC because of an anticipatory breach of certain obligations in
the agreement. While reserving FirstEnergy's right to pursue
legal action against NRG, its affiliate, and its parent Xcel
Energy for damages, FirstEnergy has begun scheduling management
presentations and plant site visits with numerous parties that
have expressed interest in acquiring the Lake Plants.
o FirstEnergy is also proceeding with efforts to divest its
remaining 20.1% ownership position in Avon Energy Partners
Holdings.
o Although the actual timing for completion of the asset sales is
slightly behind FirstEnergy's desired schedule, FirstEnergy
nonetheless continues to demonstrate substantial progress on its
debt reduction objectives. With the sale of a 79.9% interest in
Avon Energy Partners Holdings and free cash flow, FirstEnergy
will reduce debt and preferred equity by approximately $3.0
billion by year-end. This will reduce its consolidated debt
ratio from the 66% level at December 31, 2001 to the low-60%
level by the end of 2002. In addition, with the anticipated
increase in free cash flow, along with asset sale proceeds,
FirstEnergy expects to continue to significantly reduce leverage
in 2003.
o FirstEnergy continues to make progress on capturing cost savings
associated with its merger with the former GPU, Inc. and from
new cost reduction initiatives undertaken this year. For the
year, FirstEnergy's earnings guidance remains at $3.30 to $3.45
per share, excluding the effect of the Davis-Besse extended
outage and any potential adjustments related to Emdersa,
FirstEnergy's Argentine distribution asset, should it be unable
to enter into a definitive sale agreement by November 6, 2002.
Looking ahead to 2003, FirstEnergy's earnings target will be in
the range of $3.70 to $3.90, which reflects 7% - 8% growth from
its original 2002 earnings guidance of $3.45 to $3.65.
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.
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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.
August 23, 2002
FIRSTENERGY CORP.
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Registrant
THE CLEVELAND ELECTRIC
----------------------
ILLUMINATING COMPANY
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Registrant
THE TOLEDO EDISON COMPANY
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Registrant
/s/ Harvey L. Wagner
--------------------------------------
Harvey L. Wagner
Vice President, Controller
and Chief Accounting Officer
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