ML021550214

Petition of the County of San Luis Obispo for Leave to Intervene and Request for Hearing

ML021550214
Person / Time
Site:	Diablo Canyon
Issue date:	05/10/2002
From:	Temple R San Luis Obispo County, CA
To:	Office of Nuclear Reactor Regulation
Byrdsong A T
References
+adjud/rulemjr200506, 50-275-LT, 50-323-LT, RAS 4489
Download: ML021550214 (32)

Text

-1R45 L4L[35 SDOC 0 KETED USNRC UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION 2602 JUN -3 PM 4: 09

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.Y RULr:IAr;iNGS AND ADJUDICATIONS STAFF In the Matter of

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Pacific Gas and Electric Company

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Consideration of Approval of Transfer

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of Facility Operating Licenses and Conforming

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Docket Nos. 50-275 & 50-323 Amendments

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(Diablo Canyon Nuclear Power Plant, Units 1 & 2))

PETITION OF THE COUNTY OF SAN LUIS OBISPO FOR LEAVE TO INTERVENE AND REQUEST FOR HEARING I. INTRODUCTION The County of San Luis Obispo and its elected Board of Supervisors ("San Luis Obispo,"

"County" or "Petitioner") are seeking to intervene in this proceeding and participate in evidentiary hearings to raise and address health and safety issues relevant to this proceeding and the citizens of this County.

The County has substantial interests in the outcome of the proceeding that must be recognized and protected. Although the County's request to intervene comes late, the Commission will find that the necessity for intervention has only recently come about due to developments in the PG&E bankruptcy proceeding.

This proceeding involves the request by Pacific Gas and Electric Company ("PG&E")

(hereinafter "Application") for U.S. Nuclear Regulatory Commission ("NRC" or the "Commission") authorization to transfer the authority to possess, use and operate Diablo Canyon Nuclear Power Plant Unit 1 ("Unit 1") and Unit 2 ("Unit 2") (collectively, "Diablo Canyon")

from PG&E to Electric Generation, LLC ("Gen"), which would operate Diablo Canyon and lease ee-::Vý

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it from its wholly owned subsidiary, Diablo Canyon, LLC ("Nuclear"), which would own the facility (collectively "Applicants"). These aspects of the proposed license transfer are essential components of the NRC's notice in Pacific Gas and Electric Company, Diablo Canyon Nuclear Power Plant, Unit Nos. 1 and 2; Notice of Consideration of Approval of Transfer of Facility Operating Licenses and Conforming Amendments and Opportunity for a Hearing, 67 Federal Register 2455 (Jan. 17, 2002).

The notice, and PG&E's Application, were based on a new PG&E corporate structure proposed in its bankruptcy proceeding in which two new corporations would be created to own and operate Diablo Canyon. The County's delay in filing this intervention request is supported by good cause because intervention was necessitated by recent actions of the Bankruptcy Court permitting a distinctly different alternate plan for reorganization of PW'&E to be submitted by the California Public Utilities Commission ("CPUC").

Intervention is also warranted because San Luis Obispo County's its interests are not represented by any other party and its participation would aid in the development of a complete record. In addition, granting the County leave to intervene would also serve to answer the questions posed by the Commission in Order CLI-02-12. 't is the position of the County that the NRC should terminate these proceedings because the recent developments in the Bankruptcy Court have rendered the notice inadequate. In the alternative, these proceedings should be held in abeyance pending the Bankruptcy Court's ruling on the competing reorganization plans.

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Should the NRC continue its evaluation of the Application, the NRC should also grant the County's request for a hearing on the important issues of whether the proposed licensees are financially qualified to own and operate Diablo and whether the licensee has adequately demonstrated the availability of off-site power.

Therefore, the County is seeking leave to intervene in this matter and is specifically requesting that the NRC terminate its review of this Application and issue a new notice accurately reflecting the alternative corporate structures that could result from the Bankruptcy Court's ruling. In the alternative, the County requests that this Commission hold this matter in abeyance until the bankruptcy proceeding has been concluded. If the Commission proceeds with its review of this Application, the County requests a hearing on the issues of importance to the County as raised herein.

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II. INTERVENTION A. San Luis Obispo County is a Proper Party to This License Transfer Proceeding San Luis Obispo County has standing to intervene in this license transfer proceeding pursuant to the Atomic Energy Act and the NRC's implementing decisions and regulations.

"[W]hen the Commission institutes a proceeding for the granting or amending of a license, 'the Commission shall grant a hearing upon the request of any person whose interest shall be affected by the proceeding, and shall admit any such person as a party to such proceeding."' Envirocare, Inc v. NRC, 194 F.3d 72, 75 (D.C. Cir. 1999), quoting 42 U.S.C. § 2239(a)(1)(A).

The NRC's implementing regulations for license transfers mirror the statutory requirement by providing for intervention, as a matter of right, where the petitioner demonstrates that its "interest may be affected by the proceeding."

North Atlantic Energy Service Corp.

(Seabrook Station, Unit 1), CLI-99-06, 49 N.R.C. 201, 214 (1999). The criteria for standing, enumerated in 10 C.F.R. § 2.1308(a), have been interpreted by the NRC to require that the petitioner allege a concrete and particularized injury, actual or threatened, which is fairly traceable to and may be affected by the challenged action and is likely to be redressed by a favorable decision such that it can be characterized as being within the "zone of interests" protected by the governing statute.

(North Atlantic, 49 N.R.C. at 214-225.)

In making a standing determination the Presiding Officer must "construe the [intervention] petition in favor of the petitioner." (Georgia Institute of Technology (Georgia Tech Research Reactor, Atlanta, Georgia) CLI-95-12, 42NRC 111, 115 (1995).

San Luis Obispo County has numerous interests at stake in this proceeding. Any one of these interests is sufficient to allow standing to intervene. First, because Diablo Canyon is located in the unincorporated part of San Luis Obispo County, the County has a vital public

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safety interest in its safe operation and eventual decommissioning. These interests fall squarely within the "zone of interests" protected by the Atomic Energy Act. When considering matters concerning commercial nuclear power plants, the NRC has generally found local government agencies have interests that allow standing. (See Ohio Edison Co. (Perry Nuclear Plant, Unit 1),

and Cleveland Electric Illuminating Co. and Toledo Edison Co. (Perry Nuclear Power Plant, Unit 1; Davis Bessie Nuclear Station, Unit 1), LBP-92-19, 36 NRC 98, 103-104 (1992) (granting a local municipal government standing where that government's future reliance on existing antitrust provisions was at stake).

In addition to the County's fundamental interests in the safe operation of Diablo Canyon, the County has a substantial interest in the financial qualifications of the proposed licensees to meet their obligation safely operate the plant and to ensure the adequacy of off-site power to Diablo Canyon should the proposed license transfer be approved. The Application does not evidence the requisite financial qualifications of the proposed licensees to own and operate Diablo Canyon, as required by 10 C.F.R. § 50.33(f). Of principal concern to the County is the potential for these limited liability entities to default on their requirements with respect to operational funding.

If, for example, the proposed licensees proved unable to finance an extended outage or safe shutdown at Diablo Canyon, unsafe conditions threatening the health and safety of the citizens of San Luis Obispo County could result.

Under Section 184 of the Atomic Energy Act and 10 C.F.R. § 50.80, the Applicants have the burden of demonstrating that the new proposed licensees, "Gen" and "Nuclear," are financially and technically qualified to be licensed to own and operate the Diablo Canyon 5

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facility. The NRC, in turn, is charged with reviewing the qualifications of the proposed new licensees to ensure that the public health and safety will be adequately protected. The NRC's comprehensive review is particularly important in this case since the proposed new licensees are two newly formed entities organized as limited liability companies.

The transfer of PG&E's transmission facilities is included in PG&E's Reorganization Plan. These transmission facilities are necessary to provide off-site power required for long-term safe shutdown of Diablo Canyon. Under PG&E's proposed corporate restructuring as reflected in its Application, transmission assets would be transferred to a Gen affiliate, yet another limited liability company, E Trans LLC ("E Trans"). The license transfer application does not provide adequate assurance that E Trans will have the resources to maintain its transmission equipment and the financial strength to provide reliable off-site power. The availability of such power under all circumstances is critical to public health and safety because a nuclear plant, unlike other facilities, cannot simply be shut down. The plant must be actively maintained to continue cooling the reactor core even after power operation has ceased. Again, it is the health and safety of the public in the surrounding communities in San Luis Obispo County which are put at risk if the NRC fails to obtain adequate assurance that the E Trans will make paramount its duty to provide emergency power to Diablo Canyon.

Finally, San Luis Obispo County plays an integral role in carrying out Diablo Canyon's emergency plan. The County is legitimately concerned with its ability to fulfill its role in carrying out Diablo Canyon's emergency plan should the NRC authorize a license transfer to limited liability companies which may have inadequate resources. If the NRC were to approve a

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license transfer to an undercapitalized limited liability company, the ability of the licensees to safely operate Diablo Canyon could be compromised. Any such compromise would directly affect the safety of the County and its residents.

San Luis Obispo County is subject to suffering a "concrete and particularized injury" which would be directly traceable to the proposed license transfer should the licensees turn out to be under-funded. It is this type of distinct palpable harm which constitutes an injury which can be redressed by the NRC's decision. These adverse impacts could be avoided by the NRC's disapproval of the transfer as proposed, or by its imposition of appropriate license conditions.

See North Atlantic, CLI-99-06, 49 N.R.C. at 215 ("The threatened injury is fairly traceable to the challenged action [here the grant of the license transfer application] because the alleged increase in risk associated with Little Bay taking over Montaup's interest could not occur without Commission approval of the application; Quivara Mining Corp. (Ambrosia Lake Facility Grants, New Mexico), LBP-97-20, 46 NRC 257, 262 (1997), affd CLI-98-11, 48 NRC 1 (1998), affd sub nom. Envirocare Inc. v. NRC, 194 F.3d 72 (D.C. Cir. 1999).

B. This Commission Should Grant San Luis Obispo County's Request to Intervene The NRC has traditionally relied on several factors to determine whether to accept a late filed intervention request: (1) whether good cause exists for failure to timely file an intervention request; (2) the availability of other means to protect the petitioner's interests; (3) the extent to which participation by the petitioner will aid in development of a record in the proceeding; (4) the extent to which the petitioner's interests will be represented by the existing parties; and (5) the extent to which petitioner's participation will broaden issues or delay proceedings. Puget 7

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Sound Power & Light Co. (Skagit/Hanford Nuclear Power Project, Units 1 & 2), LBP-82-74, 16 NRC 981, 984 (1982).

The NRC's rules of practice with respect to late-filed intervention requests in license transfer proceedings suggest that the NRC consider "(1) the availability of other means by which the... petitioner's interest will be protected or represented by other participants in a hearing; and (2) the extent to which issues will be broadened or final action on the application delayed [by granting the intervention requested in a late-filed petition]." 10 C.F.R. § 2.1308(b).

Good cause exists for the County's delay in seeking intervention because intervention was necessitated by recent actions of the Bankruptcy Court. These actions occurred subsequent to the deadline for filing intervention requests.

The NRC has previously found that new regulatory developments governing a proceeding provide justification for the late filing of an intervention request. Cincinnati Gas and Electric Co. (William H. Zimmer Nuclear Station)

LBP-80-14, 11 NRC 570, 572-73 (1980).

On April 6, 2001, PG&E filed a petition for relief pursuant to Chapter 11 of the Bankruptcy Code. In Bankruptcy Court, PG&E also filed a Reorganization Plan and Disclosure Statement which describe the proposed restructuring of the corporation. PG&E's reorganization plan includes a proposal to disaggregate PG&E's assets which has the effect of transferring regulation from the California Public Utilities Commission ("CPUC") to the Federal Energy Regulatory Commission ("FERC").

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The Bankruptcy Code provides for an exclusivity period during which only the debtor is permitted to submit a reorganization plan for consideration by the court. Accordingly, for a period of time PG&E's plan was the only Plan before the Bankruptcy Court. During that time period, there was substantial public involvement in the process with objections to the original reorganization plan filed by a number of parties, including the California Public Utilities Commission and San Luis Obispo County.

Ultimately, the CPUC requested and was granted leave of the Bankruptcy Court to file an alternate reorganization plan in an Order filed March 3, 2002. (Order Terminating Exclusivity with Respect to the California Public Utilities Commission and Authorizing the California Public Utilities Commission to File an Alternate Plan of Reorganization, Case No. 01-30923DM, dated February 27, 2002, included here as Attachment A. The two Reorganization Plans are quite different in their treatment of Diablo Canyon. PG&E's Plan is dependent upon NRC approval of the license transfer application because it includes the transfer of Diablo Canyon to other corporate utilities. In stark contrast, the CPUC plan does not contemplate any transfer of ownership or operation of Diablo Canyon.

The end result of this process is that instead of having one reorganization plan under consideration, as was the case when PG&E filed its license transfer application, the Bankruptcy Court is now reviewing two distinctly different reorganization plans which could dramatically affect the status, structure, and financial strength of the proposed licensees. Here, as in the Cincinnati Gas and Electric case, the Bankruptcy Court's rulings made after the close of the

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intervention period governing issues which are critical to this license transfer proceeding provide reasonable justification for San Luis Obispo's late-filed intervention request.

Petitioner's participation in this proceeding will also aid in development of the record.

Because PG&E is in bankruptcy, and the Bankruptcy Court is considering competing reorganization plans, the proposed transfer of the Diablo Canyon's operating licenses to Gen and Nuclear presents a number of fundamental policy questions, some of which are matters of first impression for the NRC. These policy questions include NRC consideration of: (1) the impact of designating two limited liability companies as the licensed facility owner and operator where their predecessor in interest is currently the subject of bankruptcy proceedings; (2) the financial and technical wherewithal of the successor licensees and affiliates under two different currently proposed comprehensive Plans of Bankruptcy Reorganization ("reorganization plans"); and (3) public policy and decision-making in those collateral proceedings.

In addition, because the bankruptcy proceeding is pending, this proposed license transfer is significantly different from the transfer of commercial nuclear power plant licenses to other holding companies that have been previously reviewed and approved by the NRC. Unlike other license transfers, the Bankruptcy Court for the Northern District of California (the "Bankruptcy Court") has exclusive jurisdiction over the current licensee's assets.

Accordingly, the Bankruptcy Court will ultimately decide what financial resources would be available to the proposed licensees to safely operate and to ultimately decommission Diablo Canyon. (See In re Pacific Gas and Electric Co. Case No. 01-30923DM (Bankr.N.D. Cal., filed April 6, 2001.) The County of San Luis Obispo's input on these matters of first impression will help to ensure that a

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complete record is made without resulting in significantly broadening the scope of the proceedings because they are directly related to issues currently before the NRC and subject to the NRC's jurisdiction.

Petitioner's interest cannot be adequately represented by the four parties that have already filed for intervention. None of the parties are governmental agencies charged with protecting the health and safety of the public living around Diablo Canyon. The interests of San Luis Obispo County are unique in this regard. As previously discussed, San Luis Obispo's interests include the County's participation in emergency response operations, the fundamental geographic interests in the safe operation of Diablo Canyon, as well as the financial qualifications of Gen and Nuclear to meet their obligation to ensure the adequacy of off-site power to Diablo Canyon.

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III. ISSUES RAISED BY CLI-02-12 In CLI-02-12, the NRC asked the Parties to brief the two questions that follow:

1. What is the Commission's authority under the Atomic Energy Act to approve the proposed license transfers and related license amendments where the current licensee (PG&E) as well as a company engaged solely in transmission activities would not, after the transfer, be engaged in activities at Diablo Canyon requiring a license, yet would remain or become named licensees on the Diablo Canyon licenses?

2.

Have recent filings and developments in PG&E's bankruptcy proceeding had any effect on the pending motions to hold this license transfer proceeding in abeyance?

The Petitioner offers its perspective on these issues because of their significant role in the NRC's deliberations and for completeness should the NRC admit the County as a Party to this proceeding.

A. It is the NRC's Obig~ation to ensure that license conditions are imposed consistent with the NRC's statutory authority With respect to the first question raised in CLI-02-12, the short answer is that as long as entities are named as licensees they are subject to the NRC's jurisdiction independent of their activities. Therefore, it is the NRC's obligation under the Atomic Energy Act to ensure that license conditions are imposed consistent with the NRC's statutory authority, i.e., to protect the public health and safety, common defense and security, and the environment. The NRC has the authority to issue license provisions to govern non-licensees which have a past relationship with licensees where the non-licensed entity has emerged from a formerly licensed entity and where any continuing liability or obligation is consistent and proportional with the non-licensed entity's liabilities or obligations when it was licensed.

Just as current and former co-tenants are

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potentially subject to joint and several liability under current NRC policy,' the NRC can impose liability on former licensees to ensure that decommissioning funding obligations are met, North Atlantic, CLI-99-06, 49 N.R.C. 201 (1999). In the absence of special conditions imposed by the NRC, the corporate structure of Gen and Nuclear, as limited liability companies, results in the entities realizing a financial gain without accepting any of the related financial risks. This corporate restructuring creates a situation in which the citizens of San Luis Obispo could be forced to compensate for financial shortfalls which Gen or Nuclear might experience.

At a minimum, the transfer should be conditioned on the proposed licensees obtaining written consent by its parent companies to be subject to potential joint and several liability to the same extent as any of its limited liability subsidiaries.

B. The License Transfer Proceedings Should be Held in Abeyance With respect to the second question raised in CLI-02-12, it is San Luis Obispo County's position that this proceeding should be terminated because the published notice was rendered inadequate by subsequent developments in the Bankruptcy Court which were beyond the NRC's control. For a notice to be legally sufficient it must give adequate notice of what the agency is proposing to authorize. See Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950)

(notice must be reasonably calculated to inform parties of proceedings which may directly and adversely affect their legally protected interests). Since the Bankruptcy Court will determine the structure of the company that will emerge from bankruptcy, and therefore, the structure of the 1

The NRC's Policy Statement on Restructuring provides that the NRC "reserves the right, in highly unusual situations where adequate protection of public health and safety would be compromised if such action were not taken, to consider imposing joint and several liability on co-owners of more than de minimis shares when one or more co-owners have defaulted." 62 Fed. Reg. at 44,074, 44,077 (Aug. 19, 1997).

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successor licensees, until the Bankruptcy Court acts to determine that statute, the NRC cannot give the legally required adequate notice. Should the Bankruptcy Court adopt a reorganization plan that is different from the one on which the NRC's notice was based, the issues before the NRC in determining whether to authorize a license transfer may be very different from the issues presented by the Application on which the notice was based. For this reason, this proceeding must be terminated and a new notice must be issued after the Bankruptcy Court has acted.

At a minimum, these license transfer proceedings should be held in abeyance.

As previously discussed, the Bankruptcy Court is currently reviewing two distinctly different reorganization plans that could dramatically affect the status, structure, and financial strength of the proposed licensees. The PG&E Reorganization Plan, in so far as it relates to Diablo Canyon, is dependent upon NRC approval of the license transfer application. Because the Bankruptcy Court has yet to decide the structure and relationship of the corporate entities that will emerge from Bankruptcy, and whether the FERC or CPUC will have jurisdiction over rates set for energy capacity and production from Diablo Canyon, the assertions in the Application relative to the future financial health of Gen, Nuclear or PG&E are currently in flux. While the NRC does not traditionally withhold its reviews to await collateral proceedings in other forums,2 this case is unique because the Bankruptcy Court has jurisdiction to decide issues that are essential elements of the Application. These issues must be decided by the bankruptcy court before the NRC can make a determination as to whether the Applicants have made the necessary showing of 2

Power Authority of the State of N.Y. (James A. FitzPatrick Nuclear Plant, Indian Point 3), CLI-00-22, 52 NRC 289 (2000); Niagara Mohawk Corp. (Nine Mile Point Nuclear Station, Units 1 & 2), CLI-99-30, 50 NRC 333, 343-44 (1999); Consolidated Edison Co. of N.Y. (Indian Point Units 1 & 2), CLI-01-08, 53 NRC 223, 228-30 (2001).

The NRC has, however, demonstrated sensitivity in other cases to whether its decisions, if rendered, could improperly influence the outcome of reviews in other forums.

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conformance with NRC regulations.

Therefore, the PG&E bankruptcy proceeding must be concluded before the NRC can make an informed ruling on the Applicant's requests.

Moreover, because the CPUC plan does not contemplate any transfer of ownership or operation of Diablo Canyon, if the CPUC plan is 'the Plan' which is ultimately adopted by the Bankruptcy Court, the issue before the NRC regarding a license transfer may well be moot.

Until the Bankruptcy Court has completed its review and selected the reorganization plan it will implement, it is premature for the NRC to act on the Application. If the NRC stays the present proceedings, it will conserve its resources until such time as this application is ripe for NRC review.

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IV. ISSUES FOR HEARING Section 184 of the Atomic Energy Act and 10 C.F.R. § 50.80 provides that no license shall be transferred unless the Commission consents in writing. In order to approve the transfer of an operating license pursuant to 10 C.F.R. § 50.80, the NRC must determine that the proposed transferee is qualified to be the holder of the license, and that the transfer is otherwise consistent with applicable provisions of law, regulations, and orders issued by the Commission. 10 C.F.R.

§ 50.80(c)(1) and (2). The Commission has described the scope of its review of a proposed license transfer as follows:

The NRC will continue to review transfers to determine their potential impact on the licensee's ability to maintain adequate technical qualifications and organizational control and authority over the facility and to provide adequate funds for safe operation and decommissioning. Such consent is clearly required when a corporate entity seeks to transfer a license it holds to a different corporate entity.

Final Policy Statement on the Restructuring and Economic Deregulation of the Electric Utility Industry, 62 Fed.

Reg.

44071, 44077 (August 19, 1997)(hereinafter cited as "Policy Statement on Restructuring").

In reviewing a proposed license transfer, the NRC considers (1) the financial qualifications of the proposed transferee related to both funding for plant operations and decommissioning funding assurance; (2) the technical qualifications of the proposed transferee; (3) the organizational control and authority over the facility; and (4) other technical issues such as the provision of off-site power to the facility, emergency planning support, exclusion area control, and insurance coverage. See 10 C.F.R. §§ 50.33(f) and 50.34.1 3

Until recently, the NRC also performed an antitrust review in connection with proposed transfers of operating licenses that had been issued under Section 103 of the Atomic Energy Act. In Kansas Gas and Electric Co., et al (Wolf Creek Nuclear Station),

CLI-99-19, 49 NRC 441, 446 (1999), the NRC ruled that it would no longer conduct general post-operating license antitrust reviews in connection with proposed license transfers. The NRC has determined, however, that unique license-specific anti-trust questions raise issues regarding the Commission's authority over non-licensees that

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Pursuant to 10 C.F.R. § 2.1306(b)(2), San Luis Obispo requests that the issues described below be set for hearing.4 In brief, these issues are as follows:

1. Whether Gen and Nuclear or any alternative corporate structure which may be adopted by the Bankruptcy Court will have adequate financial qualifications to ensure safe operation of Diablo Canyon.

2. Whether adequate provisions have been made for ensuring an available source of off site power to the facility.

3. Whether the NRC should stay its review of the license transfer application while PG&E's bankruptcy proceeding is on going.

Each of these issues is within the scope of the proceeding on a license transfer application as defined by the Commission, and each is relevant to the determination the NRC must make to approve the transfer under 10 C.F.R. § 50.80. In accordance with 10 C.F.R. § 2.1306(b)(2), each of the issues is set forth below. A concise statement is provided of the alleged facts or expert opinions which support the County's position and on which County intends to rely at hearing, together with references to supporting sources and documents.

Issue 1: Financial Qualifications for Operations Under 10 C.F.R. § 50.80, Gen and Nuclear are required to demonstrate that they are financially qualified to be licensed to own and operate Diablo Canyon. In the Application, Gen does not claim that it qualifies for exemption from financial qualification review as an "electric must be reviewed.

See In the Matter of Pacific Gas and Electric Co. (Diablo Canyon Nuclear Station, Units 1 and 2), CLI-02-12 (2002). The Petitioner's perspective on this issue is addressed below.

4 In the interest of promptly submitting this Motion, the Petitioners have not yet had their experts prepare testimony and supporting affidavits. The County has, however, had experts perform a review of the Application and they support the contentions raised herein.

The Petitioner will supplement this intervention request with the required expert testimony well in advance of any hearing.

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utility" within the NRC's definition of that term in 10 C.F.R. § 50.2. See Application at 8. Thus, in accordance with 10 C.F.R. §§ 50.80 and 50.33(f)(2), Gen and Nuclear must submit information which demonstrates that they possess or have reasonable assurance of obtaining the funds necessary to cover estimated operation costs for the period of the licenses for Diablo Canyon I and 2. In addition, they must submit estimated total annual operating costs for the first five years of operation and indicate the source of funds to cover these costs.'

As newly-formed entities organized for the primary purpose of operating a facility, Gen and Nuclear are further required to submit information showing: (1) the legal and financial relationships they have with or propose to have with their owners; (2) their financial ability to meet any contractual obligation to their owners which they have incurred or propose to incur; and (3) any other information considered necessary by the Commiss ion to enable it to determine Gen's and Nuclear's financial qualifications. 10 C.F.R. § 50.33(f)(3).

In several respects, Gen and Nuclear have failed to demonstrate the requisite financial qualifications to own and operate Diablo Canyon as required by 10 C.F.R. § 50.33(f):

A. The Application does not provide sufficient information to demonstrate that Gen and Nuclear have adequate funding to ensure safe operation of Diablo Canyon during the licensing period. Contrary to 10 C.F.R. § 50.33(f)(2), Gen and Nuclear have no basis for providing a projected income statement or other projection of costs and revenues for the five year period s

Additional guidance on the information necessary to establish financial qualifications is presented in Appendix C to 10 C.F.R. Part 50.

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following the transfer because the bankruptcy court has not approved a plan, therefore, there are no rate-setting directions from either the FERC or CPUC to make such projections possible.

B. The Application fails to provide an adequate cost/revenue projection in accordance with the NRC's "Standard Review Plan on Financial Qualifications and Decommissioning Funding Assurance," NUREG-1577, Rev. 1. Under the Standard Review Plan ("SRP"), new entities such as Gen and Nuclear which do not qualify as "electric utilities" are required to provide a five-year cost/revenue projection to demonstrate reasonable assurance of sufficient funds to cover the costs of safe operation. The projections contained in Enclosure 8 of the Application appear deficient because the projected revenues appear to be based on above market-price Power Purchase Agreements ("PPA"). It is not clear that these rates would be approved by the FERC or CPUC.

The margins considered in these rates are particularly significant because non-regulated entities with no transmission or distribution assets or other continuing source of revenues, Gen and Nuclear are particularly susceptible to financial difficulty in the event of poor operational performance of the generating units.

C. The Application fails to demonstrate that Gen and Nuclear possess adequate resources to cover the costs of an extended outage at Diablo Canyon or meet other obligations for the facility. For newly formed non-utilities such as Gen and Nuclear, the NRC's SRP on financial qualifications requires a demonstration of available cash or cash equivalents which would be sufficient to pay fixed operating costs during an outage of at least six months. SRP at section 111.1.b (emphasis added). In the absence of a specific ruling by the Federal Bankruptcy Court, it is unclear how Gen and Nuclear, or their parent company, can make such a commitment. In addition, the Application and PG&E's reorganization plan fail to show how the new licensees

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will fund construction and operation of an independent spent fuel storage installation that PG&E has committed to build.6 D. Gen's and Nuclear's corporate structures, as limited liability companies, are not sufficiently explained or documented to demonstrate the requisite financial qualifications of the new entities to be licensed to own and operate Diablo Canyon. Under 10 C.F.R. § 50.33(f)(3),

Gen and Nuclear must submit information showing the legal and financial relationships with their owners. See also Appendix C of 10 CFR Part 50. In the absence of a ruling from the Bankruptcy Court, Gen and Nuclear cannot submit sufficient information as to their proposed financial and legal relationships with their owners to demonstrate that their corporate structure would provide adequate protection of public health and safety in the event of a radiological accident or premature shutdown.

Gen and Nuclear, as limited liability companies, have a corporate structure which presumptively cannot be breached in the event of financial problems or bankruptcy.

The Application fails to provide adequate assurances that Gen's and Nuclear's parent would be financially responsible for covering any shortfall in resources needed to ensure the safety of the plant or adequate funds for decommissioning in the event of premature shutdown. Section 50.33(f)(4) specifies that the NRC may request additional financial assurance information when necessary.

Accordingly, should the NRC decide to rule in favor of the Application before a decision from the Bankruptcy Court, the NRC should impose a condition should requiring Gen and Nuclear to obtain guarantees from its parent company, in a form acceptable to the NRC, that in all events, the parent will be financially responsible for providing whatever funds are necessary to provide reasonable assurance of public health and safety.

6 According to PG&E's estimates, 'The total cost of building and operating the Diablo Canyon ISFSI for the first period, from now to 2025, is estimated to be $132 million." PG&E Independent Spent Fuel Storage Installation License Application, p. 4 (Dec. 21, 2001).

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Issue 2: Provision of Off-Site Power NRC regulations require adequate assurance of the availability of off-site power and grid stability. Specifically, an applicant for transfer of an operating license must demonstrate that adequate provisions for off-site power are made to satisfy General Design Criterion 17 ("GDC 17") of 10 C.F.R. Part 50, Appendix A and the NRC's station blackout rule, 10 C.F.R. § 50.63.

The Application notes that the license transfer will not result in a change to the physical interconnections for off-site power and that the special provisions for nuclear facilities will remain in effect for PG&E and for the California Independent System Operator ("CAL ISO").

Application at page 15. The Application, however, does not provide sufficient information to demonstrate compliance with the applicable requirements, based on the lack of reliable detail on the financial strength of E-Trans and assets which will be available for E Trans to maintain transmission lines and facilities necessary to reliably supply off-site power to Diablo Canyon.7 Issue 3: Stay Pending Outcome of Bankruptcy Proceedings NRC regulations require adequate assurance of the availability of off-site power and financial assurance for safe plant operation. In the absence of a predictable corporate structure, it is impossible to determine whether the proposed licensees and their affiliates will be adequately funded and backed as required to carry out their duties under the NRC license. This is one of the reasons why San Luis Obispo requests that the NRC proceedings should be stayed pending the outcome of the bankruptcy proceeding.

7 Prior experience at Diablo Canyon makes this issue of particular concern to local residents. See NRC Information Notice 2000-06, Off-site Power Voltage Inadequacies.

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V. SERVICE FOR PLEADINGS RESULTING FROM INTERVENTION Pursuant to 10 C.F.R. § 2.708(e) and 2.1306(b)(1), the following are designated as the persons on whom service of the pleadings and other papers in this proceeding should be made:

Robert K. Temple, Esq.

James B. Lindholm, Jr.

2524 N. Maplewood Avenue County Counsel for the County of Chicago, Illinois 60647 San Luis Obispo (773) 551-0703 County Government Center, Rm 386 (773) 292-0497 (facsimile)

San Luis Obispo, California 93408 nuclaw@mindspring.com (e-mail)

(805) 781-5400 (805) 781-4221 (facsimile) jlindholm@co. slo.ca.us (e-mail)

- 22 RKT SLO 5-9-2002

VI. CONCLUSION The proposed transfer of the Diablo Canyon operating license to entities which may be created as a result of reorganization raises a host of significant issues which deserve full and deliberate consideration. Petitioner has requested intervention, identified the request standing and identified through its experts critical issues that must be addressed in this proceeding.

Petitioner has also demonstrated why Petitioner's late-filed requests should be granted.

This license transfer proceeding should be delayed until the details of the bankruptcy reorganization are known and that the NRC can give adequate notice of its hearings. In the alternative, bcause the federal Bankruptcy Court will be thoroughly examining many of the issues of concern to the NRC, and its decision could significantly affect the corporate entity permitted to emerge from bankruptcy, the Commission should conserve the resources of the agency and the public and defer the hearing in this case until completion of the Bankruptcy Court's review. Finally, if such a deferral is not ordered, the Commission should grant this request for hearing and authorize the County of San Luis Obispo to participate as a party in the license transfer hearings.

Respectfully submitted, Robert K. Temple, Esq.

2524 N. Maplewood Avenue Chicago, Illinois 60647 Attorney for the County of San Luis Obispo James B. Lindholm, Jr., Esq.

Stacy Millich, Esq.

Office of the County Counsel for the County of San Luis Obispo

- 23 RKT SLO 5-9-2002

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of

) )

Pacific Gas and Electric Company

)

Consideration of Approval of Transfer

)

of Facility Operating Licenses and Conforming

)

Amendments

)

(Diablo Canyon Nuclear Power Plant, Units 1 & 2)) )

Docket Nos. 50-275 & 50-323 CERTIFICATE OF SERVICE I HEREBY CERTIFY that true and correct copies of the foregoing MOTION OF THE COUNTY OF SAN LUIS OBISPO FOR LEAVE TO INTERVENE AND A HEARING were served upon the following persons by e-mail delivery, with a follow-on copy with exhibits by regular mail, in accordance with the requirements of 10 C.F.R. § 2.1313:

David A. Repka, Esq.

Winston & Strawn 1400 L Street, N.W.

Washington, D.C. 20005 drepka@winston.com Richard F. Locke, Esq.

Pacific Gas & Electric Company 77 Beale Street, B30A San Francisco, CA 94105 rfl6@pge.com Secretary of the Commission Attn: Rulemaking and Adjudications Staff U.S. Nuclear Regulatory Commission Washington, D.C. 20555-0001 secy@nrc.gov General Counsel U.S. Nuclear Regulatory Commission Washington, D.C. 20555 ogclt@nrc.gov Dated at Chicago, Illinois, this 10h day of May, 2002 Robert K. Temple, Esq.

2524 N. Maplewood Avenue Chicago, IL 60647 nuclaw(,mindspring. corn

UNITED STATES OF AMERICA NUCLEAR REGULATORY {COMMISSION In the Matter of

) )

Pacific Gas and Electric Company

)

Consideration of Approval of Transfer

)

of Facility Operating Licenses and Conforming

)

Docket Nos. 50-275 & 50-323 Amendments

)

(Diablo Canyon Nuclear Power Plant, Units 1 & 2))

NOTICE OF APPEARANCE The following notice of appearance, for Robert K. Temple, Esq., is filed in the above-captioned matter in compliance with the requirements of 10 C.F.R. § 2.713(b):

I, Robert K. Temple, Esq., have been retained to represent the County of San Luis Obispo in the above-captioned matter. I am an attorney-at-law in good standing licensed to practice in the District of Columbia and in the State of Illinois. My business contact information is as follows:

Robert K. Temple, Esq.

2524 N. Maplewood Avenue Chicago, Illinois 60647 (773) 551-0703 (office) (773) 292-0497 (facsimile) nu~l\\\\

a'n~coii;,

(e-mail)

My client's business contact information is as follows:

James B. Lindholm, Jr., Esq.

County Counsel for San Luis Obispo County County Government Center 1050 Monterey Avenue, Room 386 San Luis Obispo, California 93408 (805) 781-5400 (office) (805) 781-4221 (facsimile)

~n dh ol m'dc =sicg Cs (e-mail)

Dated at Chicago, Illinois, this 10 th day of May, 2002 Robert K. Temple', Esq.

May-08-02 08:36A county counsel O1 40 1

2 3

F II!ED R? PARII AM11:2

.*St.BANKRUPTCY COURT

-NORTHERN DIST. OF CA.

.5 d FRtANCISCO. CA.

ALAN W. KORN'BERG BRIAN S. HERMANN PAUL, WEISS, RIFKIND, WHARTON & GARRISON 1285 Avenue of the Amenricas New York, New York 10019-6064 Telephone: (212) 373-3000 Facsimile: (212) 757-3990 Attorneys for the California Public Utilities Conunission UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION 5

6 7

8 9

10 11 12 13 14 15 16 17 iS 19 20 21 22 23 24 25 26 27 PACIFIC GAS AND ELECTRIC COMPANY, a California corporation,

Dcbtor, Federal I.D. No. 94-0742640 Case No. 01-30923 DM Chapter 11 Case Date:

Time:

Place:

February 27, 2002 1:30 p.m.

235 Pine Street, 2 2"' Floor San Francisco, California ORDER TERMINATING EXCLUSIVITY WITH RESPECT TO THE CALIFORNIA PUBLIC UTILITIES COMMISSION AND AUTHORIZING THE CALIFORNIA PUBLIC UTILITIES COMMISSION TO FILE AN ALTERNATE PLAN OF REORGANIZATION At the date and time set forth above, the Court held a second hearing on the Motion for Order Further Extending Exclusivity Period for Plan of Reorganization (the "Motion") subinittc(

by Pacific Gas and Electric Company, the debtor and debtor in possession in the above-captione, chapter I I case ("PG&E"). Appearances were as noted in the record.

I

)ocI NYb: 163043.1 Ordcr Tenniaiing E lxclusivi 01-30923 )

Cs;lcc GARY M. COHEN, SBN 117215 AROCLES AGUILAR, SBN 94753 MICHAEL M. EDSON, SBN 177858 CALIFORNIA PUBLIC UTILITIES.S M

)LSS 505 Van Ness Avenue San Francisco, California 94102 Telephone: (415) 703-2015 Facsimile: (415) 703-2262 41 In re 281 805 781 S411 P.

04

May-08-02 O8:

1 2

3 41 5

6 7

8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 37A county counsel 0

0 The Court, having considered the Motion, thcio*ppt.*sition submitted to the Motion, the Proposed Term Sheet for Alternate Plan of Reorganization (the "Term Sheet") submitted by the California Public Utilities Commission (the "CPUC"), and the responses thereto, the record in this case, and any admissible evidence and argument presented to the Court, hereby finds as follows:

A.

Adequate notice of this proceeding was given to the parties in interest as appropriate under the circumstances.

B.

The CPUC has complied with paragraph 3 of the Order Further Extending Exclusivity Period for Plan of Reorganization entered February 2, 2002.

C.

PG&E has failed to demonstrate "cause," as it is required to under section 1121(c of the Bankruptcy Code for an extension of exclusivity with respect to the CPUC.

Based on the foregoing, IT IS HEREBY ORDERED, that:

I.

The Motion is DENIED as provided herein.

2.

With respect to the CPUC, PG&E's exclusivity pursuant to Bankruptcy Code section 1121 (c)(3) is hcreby terminated, effective as of February 27, 2002.

3.

The CPUC is directed to file its alternate plan of reorganization and accompanying disclosure statement as contemplated by the Term Sheet by April 15, 2002.

DATED:

IMAR 1 1 2002 DENNIS MONTALI HONORABLE DENNIS MONTALI UNITED STATES BANKRUJPTCY JUDGE APPROVED AS TO FORM:

HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RARKIN, counsel to Pacific Gas & Electric Company

ýJ'MJAMS L. LOPES,ý UoceM NY6 163043 I Order Tcrminalnmg LC;lu$iv 01-30923 E 805 781 5411 P. 05

May-OS-02 08:36A county counsel JAMES L. LOPES (No. 63678)

JEFFREY L. SCHAFFER (No. 91404)

GARY M. KAPLAN (No. 155530)

HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A Professional Corporation Three Embarcadero Center, 7th Floor San Francisco, California 94111-4065 Telephone:

415/434-1600 Facsimile:

415/217-5910 Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY FILED 02 FEB -4 AM 9:42 U.S. 0-A4rPPTJp'(e COURT HORTHE04L )ISI OF CA.

?- U F Q NcJ),

CA.

1 2

3 4

5 6

7 8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In re PACIFIC GAS AND ELECTRIC COMPANY, a California corporation, Debtor.

F'-deral I.D. No. 94-0742640 Case No. 01-30923 DM Chapter 11 Case Date:

January 16, 2002 Time:

9:30 a.m.

Place:

235 Pine St., 22nd Floor San Francisco, California Judge:

Hon. Dennis Montali ORDER FOTHER EXTENDING EXCLUSIVITY At the date and time set forth above, the Court held a hearing on the Motion for Order Further Extending Exclusivity Period for Plan of Reorganization (the "Motion")

submitted by Pacific Gas and Electric Company, the debtor and debtor in possession in the above-captioned Chapter I I case ("PG&E"'). Appearances were as noted in the record.

The Court having considered the Motion, any objection submitted to the Motion, the record in this case, and any admissible evidence and argument presented to the Court, hereby finds as follows:

A.

Adequate notice of this proceeding was given to parties in interest as appropriate under the circumstances.

B.

Except as to the California Public Utilities Commission ("CPUC"'), as to ORDER FURTHER EXTENDING EXCLUSIVITY PERIOD FOR PLAN OF REORGANIZATION A6 HOARD RK1 ownvUN UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION E305 781 5411 P.

02

May-0J8-0 2

08:36A county coun sel 305 781 5411 P.03 1

which no finding regarding cause has been made, there is good cause for granting the 2

Motion.

3 Based on the foregoing, IT IS HEREBY ORDERED that:

4

1.

The Motion is GRANTED as provided herein.

5

2.

Except with respect to the CPUC, the period during which PG&E maintains plan 6

exclusivity pursuant to Section 1121 (c)(3) of the Bankruptcy Code is hereby extended until 7

June 30, 2002, or such later date as the Court hereafter may order based upon a subsequent 8

motion filed on or before June 30, 2002.

9

3.

With respect to the CPUC, the period during which PG&E maintains plan 10 exclusivity pursuant to Bankruptcy Code Section 1121(c)(3) is hereby extended until the 11 earlier of (i) June 30, 2002 or (ii) such time as the Court enters a further order on the Motion 12 with respect to the CPUC. The CPUC shall, by February 13, 2002, file with the Court and 13 serve upon appropriate parties (including PG&E, the Official Committee of Unsecured S14 Creditors and the Office of the United States Trustees) a term sheet regarding its 15 contemplated Chapter 11 plan. Such term sheet shall specify, inter alia, (i) the proposed 16 classification of all claims and interests, (ii) the proposed treatment of all claims and 17 interests, (iii) the proposed means for implementation of such plan (including, without 18 limitation, specificity regarding how particular claims will be satisfied, reinstated or 19 refinanced), and (iv) a timeline for proposing and seeking approval of the plan contemplated 20 by the CPUC. The Court will establish by separate order a deadline with respect to PG&E's 21 response to the CPUC term sheet, and hereby continues this matter accordingly.

22

4.

The CPUC's term sheet filing shall not in any way constitute a violation of, or 23 otherwise interfere with PG&E's present plan exclusivity.

24 DATED:

FEM Z 2002 25 26 DENNIS MONTALi 27 1HONORABLE DENNIS MONTALI UNITED STATES BANKRUPTCY JUDGE 28 ORDER FURTHER EXTENDING EXCLUSIVITY PERIOD FOR PLAN OF REORGANIZATION R 0 B E R T K. TE MPLE X A T T 0 R N J

F 1 P,.A, Licensed to Practice in:

District of Columbia Illinois 2524 NORTH MAP.EWOOD

-7ENJF_

CHICAGO, ILLINOis 60647-1929 TELEPHONE: (773) 551-0703 FACSIMILE- (773) 292-0497 EMAIL ADDRESS nitclaiNva inindspriiig.coni May 10, 2002 Secretary of the Commission Attn: Rulemaking and Adjudications Staff U.S. Nuclear Regulatory Commission Washington, D.C. 20555-0001

Dear Secretary:

Enclosed is the "Petition of the County of San Luis Obispo for Leave to Intervene and Request for Hearing" I filed today, electronically, on behalf of the County of San Luis Obispo.

Please contact me if you need any additional information about this matter.

Sincerely, JA&

Robert K. Temple, Esq.

E SQ.