Allegheny Power 2010 Annual Report Download - page 134

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Regulation of Waste Disposal
Federal and state hazardous waste regulations have been promulgated as a result of the Resource Conservation and
Recovery Act of 1976, as amended, and the Toxic Substances Control Act of 1976. Certain fossil-fuel combustion
residuals, such as coal ash, were exempted from hazardous waste disposal requirements pending the EPA’s evaluation
of the need for future regulation. In February 2009, the EPA requested comments from the states on options for
regulating coal combustion residuals, including whether they should be regulated as hazardous or non-hazardous waste.
On December 30, 2009, in an advanced notice of public rulemaking, the EPA said that the large volumes of coal
combustion residuals produced by electric utilities pose significant financial risk to the industry. On May 4, 2010, the EPA
proposed two options for additional regulation of coal combustion residuals, including the option of regulation as a special
waste under the EPA’s hazardous waste management program which could have a significant impact on the
management, beneficial use and disposal of coal combustion residuals. FGCO’s future cost of compliance with any coal
combustion residuals regulations which may be promulgated could be substantial and would depend, in part, on the
regulatory action taken by the EPA and implementation by the EPA or the states.
The Utilities have been named as potentially responsible parties at waste disposal sites, which may require cleanup
under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. Allegations of disposal of
hazardous substances at historical sites and the liability involved are often unsubstantiated and subject to dispute;
however, federal law provides that all potentially responsible parties for a particular site may be liable on a joint and
several basis. Environmental liabilities that are considered probable have been recognized on the consolidated balance
sheet as of December 31, 2010, based on estimates of the total costs of cleanup, the Utilities' proportionate responsibility
for such costs and the financial ability of other unaffiliated entities to pay. Total liabilities of approximately $104 million
(JCP&L - $69 million, TE - $1 million, CEI - $1 million, FGCO - $1 million and FirstEnergy - $32 million) have been
accrued through December 31, 2010. Included in the total are accrued liabilities of approximately $64 million for
environmental remediation of former MGPs and gas holder facilities in New Jersey, which are being recovered by JCP&L
through a non-bypassable SBC.
(D) OTHER LEGAL PROCEEDINGS
Power Outages and Related Litigation
In July 1999, the Mid-Atlantic States experienced a severe heat wave, which resulted in power outages throughout the
service territories of many electric utilities, including JCP&L's territory. Two class action lawsuits (subsequently
consolidated into a single proceeding) were filed in New Jersey Superior Court in July 1999 against JCP&L, GPU and
other GPU companies, seeking compensatory and punitive damages due to the outages. After various motions, rulings
and appeals, the Plaintiffs' claims for consumer fraud, common law fraud, negligent misrepresentation, strict product
liability and punitive damages were dismissed, leaving only the negligence and breach of contract causes of actions. On
July 29, 2010, the Appellate Division upheld the trial court’s decision decertifying the class. Plaintiffs have filed, and
JCP&L has opposed, a motion for leave to appeal to the New Jersey Supreme Court. JCP&L is waiting for the Court’s
decision.
Litigation Relating to the Proposed Allegheny Merger
In connection with the proposed merger (Note 22), purported shareholders of Allegheny have filed putative shareholder
class action and/or derivative lawsuits against Allegheny and its directors and certain officers, referred to as the
Allegheny Energy defendants, FirstEnergy and Merger Sub. Four putative class action and derivative lawsuits were filed
in the Circuit Court for Baltimore City, Maryland (Maryland Court). One was withdrawn. The Maryland Court has
consolidated the remaining three cases under the caption: In re Allegheny Energy Shareholder and Derivative Litigation,
C.A. No. 24-C-10-1301. Three shareholder lawsuits were filed in the Court of Common Pleas of Westmoreland County,
Pennsylvania and the court has consolidated these actions under the caption: In re Allegheny Energy, Inc. Shareholder
Class and Derivative, Litigation, Lead Case No. 1101 of 2010. One putative shareholder class action was filed in the U.S.
District Court for the Western District of Pennsylvania and is captioned Louisiana Municipal Police Employees’
Retirement System v. Evanson, et al., C.A. No. 10-319 NBF. In summary, the lawsuits allege, among other things, that
the Allegheny Energy directors breached their fiduciary duties by approving the merger agreement, and that Allegheny,
FirstEnergy and Merger Sub aided and abetted in these alleged breaches of fiduciary duty. The complaints seek, among
other things, jury trials, money damages and injunctive relief. While FirstEnergy believes the lawsuits are without merit
and has defended vigorously against the claims, in order to avoid the costs associated with the litigation, the defendants
have agreed to the terms of a disclosure-based settlement of all these shareholder lawsuits and have reached
agreement with counsel for all of the plaintiffs concerning fee applications. Under the terms of the settlement, no
payments are being made by FirstEnergy or Merger Sub. A formal stipulation of settlement was filed with the Maryland
Court on October 18, 2010 and it was approved and became final on January 12, 2011. The separate Pennsylvania
federal and state proceedings were dismissed on January 14, 2011 and January 18, 2011, respectively. The above
shareholder actions have been fully and finally resolved.