[Federal Register Volume 69, Number 46 (Tuesday, March 9, 2004)]
[Notices]
[Page 11056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5210]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27806]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

March 3, 2004.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission under provisions of the Act and rules 
promulgated under the Act. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendment(s) is/are available for public 
inspection through the Commission's Branch of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by March 26, 2004, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in the case of an attorney at law, 
by certificate) should be filed with the request. Any request for 
hearing should identify specifically the issues of facts or law that 
are disputed. A person who so requests will be notified of any hearing, 
if ordered, and will receive a copy of any notice or order issued in 
the matter. After March 26, 2004, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Jersey Central Power & Light Company (70-10191)

    Jersey Central Power & Light Company (``JCP&L''), 76 South Main 
Street, Akron, Ohio, 44308, a direct, wholly-owned public-utility 
subsidiary of FirstEnergy Corp. (``FirstEnergy''), a registered holding 
company, has filed a declaration under section 13(b) of the Act and 
rules 54, 90 and 91 under the Act. JCP&L seeks an exemption from the 
``at cost'' requirements of the Act in regard to a service agreement 
that it will enter into with a wholly-owned subsidiary (``Special 
Purpose Issuer'') in connection with its proposed issuance of 
transition bonds.\1\ The proceeds from the transition bonds will allow 
JCP&L to recover certain costs associated with electric restructuring 
in New Jersey.
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    \1\ The formation of the Special Purpose Issuer by JCP&L and 
JCP&L's acquisition of the common stock of the Special Purpose 
Issuer, along with the Special Purpose Issuer's issuance of the 
transition bonds and, if necessary, related hedge agreements was 
authorized by an order of the Commission dated June 30, 2003. See 
Holding Company Act Rel. 35-27694.
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    Beginning in 1999, New Jersey has enacted several laws aimed at 
restructuring its electric and natural gas industries. The 
restructuring legislation required JCP&L to unbundle electric services 
into separate charges for, among other things, metering and billing, 
distribution, transmission and generation. The legislation also 
authorizes the recovery, through securitization, of a number of costs 
incurred by electric utilities, including costs associated with the 
purchase of power in connection with a utility's ``provider of last 
resort'' responsibilities incurred during the transition period of 
electric utility restructuring. Utilities must apply to the New Jersey 
Board of Public Utilities (``BPU'') for a bondable stranded costs rate 
order, authorizing the issuance of transition bonds and approving the 
amount of the initial transition bond charge (``TBC'') to be imposed on 
all retail electric distribution customers. The TBC is a separate, non-
bypassable charge that will be assessed against all retail electric 
distribution customers, regardless of whether they continue to purchase 
electricity from the distribution utility.
    JCP&L has filed a petition with the BPU requesting that the BPU 
issue a bondable stranded costs rate order authorizing the issuance of 
up to $277 million of transition bonds by the Special Purpose 
Issuer.\2\ The transition bonds will be secured by the TBC revenue 
stream and the bondable transition property (``BTP''), which is the 
statutory and regulatory right to collect the TBC. JCP&L will transfer 
its interest in the BTP to the Special Purpose Issuer in exchange for 
the net proceeds from the issuance of the transition bonds. The 
transfer will be treated as a true sale, and the Special Purpose Issuer 
will be structured as a bankruptcy remote assignee. As a result, the 
TBC and BTP will be isolated from any credit risk associated with 
JCP&L. The transition bonds will constitute a debt only of the Special 
Purpose Issuer. Neither the state of New Jersey nor JCP&L will have any 
liability with regard to the transition bonds.
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    \2\ JCP&L has reserved the right to appeal any decision of the 
BPU regarding the amount of costs it is allowed to recover. As a 
result, the initial principal balance of the transition bonds that 
may be issued by the Special Purpose Issuer may be as high as $400 
million.
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    JCP&L will act as the servicer of the TBC revenue stream and in 
this capacity will, among other things: (1) Bill customers and make 
collections on behalf of the Special Purpose Issuer, and (2) file with 
the BPU for periodic adjustments to the TBC to achieve a level which 
allows for payment of all debt service and full recovery of amounts 
authorized by the BPU. JCP&L may, subject to certain conditions, 
subcontract with other companies to carry out some of its servicing 
responsibilities. JCP&L expects that the servicing agreement will 
remain in effect until the legal final maturity of the transition 
bonds, which will not exceed seventeen years.
    JCP&L will receive a servicing fee for its servicing activities and 
reimbursement for certain of its expenses. JCP&L's servicing fee will 
be set at an amount equal to no more than 0.125% of the initial 
principal amount of the transition bonds. This fee may not reflect 
JCP&L's actual costs of providing the services and may not meet the 
``at cost'' requirements of the Act. JCP&L states that the rating 
agencies will require that the servicing fee be set at a level 
comparable to one negotiated at arm's-length and which would be 
reasonable and sufficient for a similarly situated third party 
performing similar services. JCP&L maintains that to do otherwise would 
most likely lower the credit rating of the transition bonds. This arm's 
length fee assures that the Special Purpose Issuer would be able to 
operate independently and strengthens the position that it is a 
bankruptcy remote entity.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-5210 Filed 3-8-04; 8:45 am]
BILLING CODE 8010-01-P