Allegheny Power 2010 Annual Report Download - page 66

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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 One was withdrawn.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.
Nuclear Plant Matters
During a planned refueling outage that began on February 28, 2010, FENOC conducted a non destructive examination
and testing of the CRDM nozzles of the Davis-Besse reactor pressure vessel head. FENOC identified flaws in CRDM
nozzles that required modification. The NRC was notified of these findings, along with federal, state and local officials.
On March 17, 2010, the NRC sent a special inspection team to Davis-Besse to assess the adequacy of FENOC’s
identification, analyses and resolution of the CRDM nozzle flaws and to ensure acceptable modifications were made prior
to placing the RPV head back in service. After successfully completing the modifications, FENOC committed to take a
number of corrective actions including strengthening leakage monitoring procedures and shutting Davis-Besse down no
later than October 1, 2011, to replace the reactor pressure vessel head with nozzles made of material less susceptible to
primary water stress corrosion cracking, further enhancing the safe and reliable operations of the plant. On June 29,
2010, FENOC returned Davis-Besse to service. On September 9, 2010, the NRC held a public exit meeting describing
the results of the NRC special inspection team inspection of FENOC’s identification of the CRDM nozzles with flaws and
the modifications to those nozzles. On October 22, 2010, the NRC issued its final report of the special inspection. The
report contained three findings characterized as very low safety significance that were promptly corrected prior to plant
operation.
On April 5, 2010, the Union of Concerned Scientists (UCS) requested that the NRC issue a Show Cause Order, or
otherwise delay the restart of the Davis-Besse Nuclear Power Station until the NRC determines that adequate protection
standards have been met and reasonable assurance exists that these standards will continue to be met after the plant’s
operation is resumed. By a letter dated July 13, 2010, the NRC denied UCS’s request for immediate action because “the
NRC has conducted rigorous and independent assessments of returning the Davis-Besse reactor vessel head to service
and its continued operation, and determined that it was safe for the plant to restart.” The UCS petition was referred to a
petition manager for further review. What additional actions, if any, that the NRC takes in response to the UCS request
have not been determined.