ML050470522
| ML050470522 | |
| Person / Time | |
|---|---|
| Site: | Trojan File:Portland General Electric icon.png |
| Issue date: | 10/03/2004 |
| From: | Beeson K City of Eugene, OR, Water & Electric Board |
| To: | Annette Vietti-Cook NRC/SECY |
| Julian E | |
| References | |
| 50-344, 72-017, RAS 9376 | |
| Download: ML050470522 (4) | |
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Eugene Water & Electric Board
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RECEIVED USNRC 500 East 4.hAvenue I Post Office Box 10148
- Eugene, Oregon 97440-2148 541-484-2411 Fax 541-484-3762 October 14, 2004 (3:30pm)
OFFICE OF SECRETARY RULEMAKINGS AND ADJUDICATIONS STAFF EWEB October 13, 2004 Secretary Annette L. Vietti-Cook U.S. Nuclear Regulatory Commission Washington, D.C. 20555-0001 Attn: Rulemakings and Adjudications Staff Re:
Comments of the Eugene Water & Electric Board on Portland General Electric's Application For Consent To Indirect Transfer Of Facility Licenses
Dear Ms. Vietti-Cook:
Pursuant to the notice issued by the Nuclear Regulatory Commission ("Commission") on September 7,2004, the Eugene Water & Electric Board ("EWEB") submits the following comments with respect to the Application for Consent to Indirect Transfer of Facility Licenses
("Application") submitted by Portland General Electric ("PGE") on June 14,2004.1 The application seeks the Commission's approval of the proposed transfer by PGE of the licenses for the Trojan Nuclear Power Plant ("Trojan") and the Trojan Independent Spent Fuel Storage Installation ("Trojan ISFSI") (the licenses for Trojan and the Trojan ISFSI are collectively referred to herein as the "Trojan License") to the Oregon Electric Utility Company, LLC
("OEUC"). EWEB's comments address the affect of the proposed license transfer and underlying transaction on PGE's qualifications to meet both expected and unexpected financial obligations with respect to the Trojan License.
EWEB is a municipal utility organized and existing under the constitution and laws of the State of Oregon and the Charter of the City of Eugene, Oregon. EWEB serves a retail load of83,000 customers in and around the City of Eugene. EWEB is a co-owner and co-license of Trojan.
Under the Trojan project agreements, PGE is the majority owner and lead operating entity, holding a sixty seven and one half percent (67.5%) ownership interest in Trojan. EWEB is a thirty percent (30%) owner and co-licensee.2
.EWER'S COMMENTS ON THE APPLICATION EWEB submits these comments to make the Commission aware of the possibility that PGE's financial stability may be degraded, rather than enhanced, as a result ofthe acquisition ofPGE's stock by OEUC. One of the criteria applicable to the indirect transfer of the Trojan license is I EWEB submitted substantially similar comments to the Commission on or about July 14, 2004. PGE responded to such comments through a letter to the Commission on July 28,2004, VPN-043-2004 ("July 28 Letter").
2 Theremainingtwoandonehalfpercent(2.5%)of Trojanis ownedby PacifiCorp.
that the underlying transaction that will effectuate the transfer shall not affect the qualifications ofPGE to hold the license. See 10 CFR § 50.80(c)(1). Those qualifications expressly include both technical andfinancial qualifications. See 10 CFR § 50.80(b). An indispensable part of PGE's qualifications to hold the Trojan License include its ability to meet the financial obligations associated with holding such License.
As EWEB understands the situation, the purpose for the Application is to allow Enron to transfer ownership of the PGE stock to OEUC ("Transaction"). Upon completion ofthe Transaction, nearly 80% of the ownership ofOUEC will be held, in turn, by entities affiliated with the Texas Pacific Group ("TPG Partners"). Although the TPG Partners will not have direct control over.
OEUC, it will hold certain "consent rights" with respect to OEUC's "Managing Member."
The Transaction will result in a heavily leveraged consolidated balance sheet ofPGE and OEUC.
Under the terms of the proposed acquisition, $240 million in cash will be used to fund the purchase price through a dividend payment from PGE to OEUC. OEUC proposes to maintain only $10 million in cash on hand, which is significantly lower than the cash reserves currently maintained by PGE. OEUC proposes to supplant the cash reserves with revolving credit facilities. These revolving credit facilities are expected, however, to be terminable if OEUC or PGE experiences financial difficulty. At least one credit rating agency has already put PGE's corporate credit rating and all issue ratings on CreditWatch with negative implications as a result of the proposed acquisition by OEUC.
PGE is also concurrently seeking to reduce its obligation to maintain financial protection for Trojan and the Trojan ISFSI from $100 Million to $25 Million.3 PGE currently maintains a Nuclear Facility Form Liability insurance policy covering Trojan in the amount of $100 Million.
In the July 28 Letter, PGE asserted that such insurance may be reduced "given the absence of spent nuclear fuel in a Spent Fuel Pool and/or significant radioactivity remaining on the TNP site." EWEB remains unconvinced by this argument. First, the scope of coverage provided by the Nuclear Facility Form Liability is broader than that implied by PGE. The coverage provides protection against third party claims alleging bodily injury or property damage caused by radiological, toxic or explosive property of nuclear material. It is not limited to nuclear fuel in a Spent Fuel Pool, but includes any nuclear materials at the Trojan site or in transit for repair, processing or disposal. A significant amount of spent nuclear fuel will remain on the Trojan site in the ISFSI until a final federal repository is constructed. In fact, in a recent response to an EWEB data request, a copy of which is attached hereto as Exhibit A, PGE admitted that this insurance is "the most essential of all policies for operators and ex-operators of nuclear sites."
(emphasis added). PGE further states that "[t]his form should be kept in place for some time following final decommissioning due to the latent nature of some radiological injuries."
Additionally, the insurance amount has already been reduced by half, from $200 Million to $100 Million.
3On February 28, 2003, PGE sent a letter to this Commission requesting the Commission to reduce "the primary financial protection requirement currently applied to the Trojan Nuclear Plant ITom$100 million to $25 million."
See "Request for Further Exemption ITomthe Financial Protection Requirements of 10 CFR 140.11(a)(4) and Related Amendment to Indemnity Agreement No. B-78," p. I.
In its July 28 Letter, PGE criticized EWEB for not providing the Commission a more detailed analysis of how the Transaction would adversely affect PGE's financial condition. EWEB is not submitting these comments to make the case that the Transaction will be harmful to PGE. As the applicant in this proceeding, PGE bears the burden of proving that its financial qualifications will not be significantly weakened by the Transaction. As the co-owner and co-licensee of the facility, EWEB simply requests that the Commission exercise all due diligence before concluding that PGE's financial condition will remain unharmed by the Transactions.
EWEB understands that the Commission may conduct its own investigation into these matters.
The Atomic Energy Act of 1954, as amended ("AEA"), requires the Commission to perform an independent review of the Application. This requires the Commission to investigate whether PGE's financial qualifications as a Trojan licensee will be impaired by the Transaction. As part of that review, the Commission should also examine whether the proposed further reduction in insurance is appropriate at this time.
Alternatively, the Commission could await the results of a similar investigation already being undertaken by the Oregon Public Utility Commission ("OPUC,,).4 The OPUC is in the midst of an exhaustive examination of the proposed Transaction in OPUC Docket No. UM 1121. A final OPUC decision regarding the Transaction is expected within a few months. A number of entities other than EWEB have intervened in the OPUC proceeding and have questioned whether the proposed acquisition will decrease, rather than increase, the financial strength and stability of PGE. The OPUC will undoubtedly develop useful information regarding the Transaction that may bear on any final Commission decision on the License transfer Application.
CONCLUSION EWEB does not oppose either the Application or the underlying Transaction, so long as PGE demonstrates in both instances that it meets all of the relevant criteria. Further Commission scrutiny of the Transaction should be undertaken to best ensure that PGE will continue to have the financial qualifications and insurance to pay its share of all expected and unexpected Trojan costs. The OPUC is already undertaking a substantially similar review of the Transaction.
EWEB suggests that the Commission analyze the data currently being collected by the OPUC prior to making a decision on the Application. EWEB stands prepared to provide any additional information to the Commission that will be helpful in such its evaluation.
Finally, EWEB rejects PGE's assertion in its July 28 Letter that the Commission can and should "disregard" EWEB's comments.s As the co-owner and co-licensee of Trojan, EWEB has a responsibility to its ratepayers to ensure that Trojan's majority owner and lead operating entity is fully qualified and able to meet its license obligations. EWEB is cognizant of the fact that this 4Contrary to PGE's arguments in its July 28 Letter, EWEB is not asserting that the Commission is somehow legally required to stay or suspend its investigation pending completion of the OPUC review. Nor is EWEB implicitly seeking to impede the Commissions completion of its analysis of the Application. Quite the contrary, EWEB is simply suggesting that it may be easier, more accurate andfaster for the Commission to use the data already being gathered by the OPuc than for the Commission to now begin its own investigation into the financial qualifications ofPGE after the Transaction.
SIn closing the July 28 Letter, PGE requests "that the NRC disregard EWEB's suggestion that the NRC review should be suspended."
Commission has reserved the right "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. ~44071, 44077 (August 19, 1997). Faced with the potential for such liability, however remote, EWEB cannot agree that its legitimate concerns regarding PGE's financial qualifications should be disregarded by the Commission.
Very truly yours, L
Kenneth D. Beeson Energy Resource Projects Manager Eugene Water & Electric Board CC:
Steven B. Nichols, General Manager, Trojan