June 26, 2003

Stephen M. Cutler, Director of Enforcement
Division of Enforcement
Securities and Exchange Commission
450 Fifth Street NW
Washington, D.C. 20549-0213

Re: Petition for Enforcement under the Securities Acts and Rules against FirstEnergy Corp, 76 S. Main St, Akron, OH 44308

Dear Mr. Cutler:

Ohio Citizen Action submits this petition for enforcement under the Securities Acts against FirstEnergy Corp. (FirstEnergy) and its management. Ohio Citizen Action is a statewide environmental organization, with 100,000 dues paying members. We submit this petition for enforcement on behalf of our members and to promote the interest of all FirstEnergy shareholders in fair disclosure of issues relevant and material to their investments.

The Davis-Besse nuclear power plant, located in Oak Harbor, Ohio, closed in February 2002 to conduct a government mandated inspection and to refuel. During the inspection, the company identified serious corrosion of the reactor pressure vessel. The plant has been closed ever since.

Ohio Citizen Action alleges FirstEnergy management omitted material information from shareholders and financial analysts regarding degradation of the Davis-Besse reactor vessel head in 2000 and 2001.

In addition, Ohio Citizen Action alleges that the management repeatedly misled stockholders about Davis-Besse’s readiness for restart.

Ohio Citizen Action alleges violation of SEC rules regarding disclosure of matters relating to the Davis-Besse nuclear power plant. Specifically—

1. Regulation S-K Item 101 requires "appropriate disclosure also shall be made as to the material effects that compliance with Federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, may have upon the capital expenditures, earnings and competitive position of the registrant and its subsidiaries."

2. Regulation S-K Item 303 requires Management Discussion and Analysis, "where a trend, demand, commitment, event or uncertainty is both presently known to management and reasonably likely to have material effects on the registrant’s financial condition or results of operation."


1. On March 6, 2002, Davis-Besse employees discovered a 5-by-7-inch cavity on the reactor pressure vessel head. Boric acid had leaked through cracks in control rod drive mechanisms (pipes) and eaten through six inches of carbon steel, leaving only three-eighths of an inch of a stainless steel cladding to seal the reactor. Tests show that the stainless steel was cracked and warped from the 2,000 pounds per square inch of pressure coming from the reactor pressure vessel.

2. The Nuclear Regulatory Commission (NRC) has since estimated that had the cavity gone undiscovered, a rupture would have taken place within one or two years (NRC Inspection Report 50-346/2003-16).

3. The non-profit, public interest group Union of Concerned Scientists has compiled compelling evidence outlining the half-truths and misleading statements made by FirstEnergy to the NRC regarding the condition of the Davis-Besse reactor (attached).

In summary—
In the fall of 2001, the NRC issued Bulletin 2001-01, a safety notice, asking 12 plant owners to close their plants and look for highly suspected nozzle cracking by December 31, 2001. Ten of the plants complied with this order. D.C. Cook, owned by Indiana Michigan Power Co., provided evidence to regulators proving it had already completed the inspection work prior to the NRC’s order. FirstEnergy launched a campaign to persuade the NRC that Davis-Besse was safe to operate through March 2002.

Between September and November 2001, FirstEnergy made the case in writing and in person to the NRC that it had thoroughly inspected the head of the reactor and was confident that the reactor was not in jeopardy of cracking or leakage.
Facts show that FirstEnergy employees could not and did not thoroughly inspect the reactor head because there were significant structural impediments to the visibility of the head making a thorough inspection impossible. For example, during the February 2002 inspections, company workers found 900 pounds of boric acid deposits on the reactor pressure vessel head.

4. In December 2001, after FirstEnergy had convinced NRC officials to postpone an inspection of Davis-Besse and three months prior to the announcement of the degradation, FirstEnergy ordered a new lid for the Davis-Besse reactor.

5. On February 16, 2002, FirstEnergy closed Davis-Besse for refueling and the mandated inspection.

6. On March 7, 2002, FirstEnergy announced the discovery of the cavity on the reactor pressure vessel.

7. Among many investigations subsequent to the discovery of the corrosion, the Nuclear Regulatory Commission's Office of Investigations is currently conducting a investigation into whether or not FirstEnergy acted criminally when it withheld information from the NRC and operated the plant with an unacceptable margin of safety.

8. The cost so far to shareholders is approximately $450 million for repairs and replacement power through June 2003, with a firm restart date not yet known.

Failure to report material information

1. In 1999, Davis-Besse workers started identifying boric acid particles clogging the air filters in the reactor vessel containment building. The boric acid forced workers to change the air filters every other day. Normally, filters are changed every month.

2. In April 2000, Davis-Besse plant workers took a photograph of the reactor showing a virtual river of white boric acid and red rust from carbon steel corrosion flowing down the side of the troubled reactor vessel head (attached). This photo, known as the "red photo" gained prominence in August 2002 when the Cleveland Plain Dealer featured it in a story about Davis-Besse.

3. In fall 2001, FirstEnergy management misled the Nuclear Regulatory Commission and withheld vital information about the condition of the reactor by not reporting the clogged air filters and providing a copy of the "red" photograph.

4. By misleading and lying to the NRC in fall of 2001, FirstEnergy gave stockholders misleading information that Davis-Besse was in safe working condition. This misinformation put stockholders investments in jeopardy, because an accident at Davis-Besse would be disastrous financially.

5. Since the discovery of the cavity, FirstEnergy and the NRC have identified multiple "design" problems with the emergency cooling system. These are flaws that have existed since the plant was built and most assuredly guarantee that had the reactor pressure vessel burst, Davis-Besse would have suffered a Chernobyl-like meltdown.

Failure to provide realistic "restart" time frame

1. Since March 2002, FirstEnergy and the NRC developed a lengthy list of items that must be repaired prior to Davis-Besse being ready to restart.

2. Despite this lengthy list and the amount of work to be completed, FirstEnergy has thus far named 15 restart dates or time frames for restart since March 2002 (attached).

3. This misrepresentation of the facts has given stockholders and industry analysts unrealistic predictions for when or if this plant might ever be ready to start producing electricity again.

Request for Enforcement

Ohio Citizen Action requests the SEC to pursue a full investigation followed by civil and criminal prosecution of FirstEnergy Corp. and its officials for each violation identified by the agency under the Securities Acts and rules and regulations.

Respectfully submitted,

Amy K. Ryder
Cleveland Director

The Plain Dealer, December 1, 2002
The "red photo"

Union of Concerned Scientists Memorandum to U.S. Attorney for the Northern District of Ohio

Davis-Besse restart dates