ML100830511
| ML100830511 | |
| Person / Time | |
|---|---|
| Site: | Prairie Island  |
| Issue date: | 04/30/2009 |
| From: | Hallock M Red Wing, MN |
| To: | Northern States Power Co, Office of Nuclear Reactor Regulation |
| References | |
| 7-2500-19797-2, E-002/CN-08-510, E-002/GS-08-690, E-022/CN-08-509 | |
| Download: ML100830511 (15) | |
Text
Before the Minnesota Public Utilities Commission State of Minnesota In the Matter of the Application of Northern States Power Company d/b/a/ Xcel Energy for a Certificate of Need Authorizing and Extended Power Uprate and Additional Dry Cask Storage at the Prairie Island Nuclear Generating Plant MPUC Docket Nos. E-022/CN-08-509 E-002/CN-08-510 E-002/GS-08-690 OAH Docket No. 7-2500-19797-2 Direct Testimony of Marshall Hallock on behalf of the City of Red Wing, Minnesota April 30, 2009 EXHIBIT
- 1. Introduction and qualifications 2
3 Q:
Please state your name, occupation, and business address.
4 5
A:
My name is Marshall Hallock. I am the Finance Director for the City of Red Wing, 6
Minnesota. My business address is 315 West Fourth Street, Red Wing, Minnesota, 7
55066.
8 9
Q:
On whose behalf are you providing this testimony?
10 11 A:
I provide this testimony on behalf of Red Wing, Minnesota (the "City") in support of 12 its intervention into the proceedings before the Minnesota Public Utilities 13 Commission ("PUC").
14 15 Q:
Can you please describe your education, training and professional background?
16 17 A:
I graduated from the University of Minnesota Carlson School of Management in 18 1996 with a Bachelor of Science Degree in Business. In 1998, I became a Certified 19 Public Accountant.
From approximately 1996 through 1999, 1 worked for the 20 Minnesota Office of State Auditor, In my job with the State Auditor, I was 21 responsible for both municipal and county audits. In 2000, I became the Finance 22 Director for the City of Red Wing.
23 24 Q:
Can you please describe your duties and responsibilities as the Finance Director?
25 26 A:
As the Finance Director I am primarily concerned and responsible for directing the 27 financial activities of the City.
This includes providing leadership, guidance, 28 technical expertise, and team coordination to support implementation of the City's 29 legislative and strategic fiscal initiatives in the areas of fiscal initiatives in the areas 30 of fiscal management, budget analysis, financial reporting control, and auditing.
I
I Q:
What is the purpose of your testimony?
2 3
A:
The purpose of my testimony is to provide background information and facts related 4
to the City of Red Wing's financial position in regards to the Certificates of Need 5
applied for on behalf of Xcel Energy for the Prairie Island Nuclear Generating Power 6
Plant (PINGP). Specially, as the host community to a dual reactor nuclear power 7
plant, Red Wing has distinct and unique public health, safety, welfare and financial 8
interests and concerns that require consideration by the "PUC" in determining 9
whether any conditions should be imposed on the pending Certificates of Need.
10 These translate, in part, to a responsibility that the City has to its citizens in general S1I and Xcel Energy in particular to maintain and provide effective police, emergency 12 management, ambulance and fire services to respond to any incidents at the plant.
13 As addressed later in this testimony, the City is the first and primary responder to any 14 incident at the Plant under any emergency scenario.
15 16 Q:
What are the City of Red Wing's goals in regards to Xcel's Application for the 17 Certificates of Need pending before the PUC?
18 19 A:
While the City of Red Wing remains committed to assisting Xcel in maintaining its 20 operation and employment based within the Community, it needs to balance that 21 interest with the interests of the community as a whole. This also needs to balance 22 with the true costs associated with the operation of the PINGP facility. The City's 23 ultimate goal is to ensure that the environmental, social and economic impacts of the 24 proposed Uprate and Additional Dry Cask Storage on the community's residents and 25 Xcel's rate payers be appropriately considered and addressed.
Red Wing shares 26 numerous common concerns with Xcel that both parties must continue to work 27 collaboratively on to address and resolve. As the Finance Director, at the forefront 28 on these issues is ensuring that the actual and potential economic costs to the City of 29 Red Wing are considered by the PUC in connection with the pending Applications 30 for Certificates of Need. As is set out, numerous and significant costs are being 31 placed exclusively upon the City instead of the rate payers or others that benefit from 2
I PINGP's continued operations. These considerations must also be properly evaluated 2
through the response plan that Xcel Energy has in place to determine if this satisfies 3
its obligations. The City of Red Wing is committed to protecting the environment as 4
well as the social and economic interests of Red Wing's residents, visitors, those who 5
work in the community, and all who benefit from the Plant's continued operations.
6 7
I. Public safety services provided by the City of Red Wing for the Prairie 8
Island Nuclear Plant.
9 10 Q:
Does the City of Red Wing provide public safety services for the Prairie Island 11 Nuclear Plant?
12 13 A:
Yes.
14 15 Q:
Can you please give a general description of the nature of the public services 16 provided by the City of Red Wing?
17 18 A:
The City of Red Wing has invested the resources into and developed the necessary 19 public services to respond to the ordinary and routine emergency needs.
This 20 includes police, emergency management, fire, ambulance or other emergency 21 services. With Xcel Energy, these public services do not fall into a normal or routine 22 response. Rather, they involve a response capacity necessary for an incident that 23 may include a release from one of the two reactors (or both), the storage systems on-24 site (pool or dry cask), radiation of the workers on-site and other unique risks 25 associated with a nuclear power generating facility. The City's duties also include 26 securing the site and containing any fire, release or other incident. These critical 27 duties and obligations present unique an entirely different scenarios for our 28 emergency response teams.
29 30 In light on these unique circumstances associated with a nuclear power generating 31 facility, the City has agreed, via a Letter of Agreement dated September 22, 2008 3
I (the "Agreement"), to provide certain services at the PINGP in accordance with 2
Northern States Power Company's - Minnesota Emergency Plan.
A copy of the 3
Agreement is attached hereto as Exhibit I (MII-1).
According to the Agreement, 4
City services include ambulances from the fire department so that patients exposed to 5
radiological contamination can be transported to area hospitals.
Under the 6
Agreement the City has also agreed to provide fire, rescue and other non-firefighting 7
services in the PINGP's emergency planning zone.
This includes such other 8
additional non-firefighting tasks such as spraying radioactive releases and pumping 9
water into the PINGP for refilling and cooling purposes.
10 11 Q:
Has the City of Red Wing created a plan to respond to an emergency situation at the 12 Prairie Island Nuclear Generating Plant?
13 14 A:
Yes.
The City of Red Wing has assisted in the preparation of the City of Red 15 Wing/Goodhue County Emergency Response Plan for the Prairie Island Nuclear 16 Generating Plant (the "Emergency Response Plan").
A copy of the Emergency 17 Response Plan is attached here to as Exhibit 2 (MH-2). According to the Emergency 18 Response Plan, the City of Red Wing has agreed to provide, and is responsible for, 19 "the primary responsibility for meeting the immediate health and safety needs of its 20 citizens in the event of a major emergency/disaster." In all instances, except for the 21 assistance of the Goodhue County Sherriff's Department, the City is primarily 22 responsible for any firefighting or ambulance services that are to be provided -
23 regardless of the severity or nature of the incident.
24 25 Q:
How does the Emergency Response Plan fit in with the Agreement or other plans that 26 Xcel Energy has relative to an incident at the Plant?
27 28 A:
The Emergency Response Plan is coordinate with Minnesota's Emergency Plan and 29 is coordinate with the NRC's guidelines regarding a response to an incident at that 30 Plant. For each of these plans, it is my understanding that the City is, in all instances, 31 the first responder. As such, the City's firefighters and other public safety personnel 4
1 are required to provide suppression and support services at the PINGP in the event of 2
an incident. The ambulance crews are required to evacuate any individuals who have 3
been contaminated as a result of any incident. In order to support the Plant, the City 4
will at great expense be required to continue to have the necessary human resources, 5
special equipment and specific training to support an incident at the Plant.
As 6
requested by Xcel Energy, this support will have to continue for another twenty years 7
of operations and up to sixty years after that time. Even then, according to the EOS, 8
the spent fuel more than likely will be stored on a temporary long-term basis 9
requiring the City to maintain, at great expense, the necessary human and capital 10 resources, as well as the necessary training for an indeterminate amount of time.
11 12 Q:
Can you generally describe some of the training that the City of Red Wing must 13 provide in connection with these services?
14 15 A:
The City of Red Wing participates in an annual exercise demonstrating emergency 16 preparedness for responding to potential incidents at the Prairie Island Nuclear 17 Generating Plant. This requires significant ongoing human resources which has 18 resulted in consistently high grades on emergency preparedness evaluations done by 19 the Nuclear Regulatory Agency.- These exercises help Red Wing in being prepared 20 for a wide variety of emergencies and is funded, in part, by Xcel Energy.
21 22 Q:
Can you describe some of the additional training required by the City of Red Wing's 23 public safety services?
24 25 A:
As part of the training, we, as a City, are required to mobilize under the Emergency 26 Response Plan as if there was an emergency.
27 28 Q:
Can you quantify the cost to the City of Red Wing for training?
29 30 A:
The training is, to the extent not covered by the City's budget, covered by Xcel 31 Energy. However, the vast majority of the true costs are not in the training but in the 5
1 maintenance of the necessary human and capital resources required to respond in the 2
event of an incident at the plant. The City currently faces critical budgetary issues 3
that threaten, by 2010, the loss of significant public safety resources including 5 full-4 time sworn police officers and 3 firefighter-paramedic positions. These are not the 5
type of costs directly covered by Xcel Energy.
6 7
III. The City of Red Wing's current budget considerations and issues.
8 9
Q:
Can you please provide a brief overview of the history of the source of funding for 10 the public services provided by Red Wing?
11 12 A:
Red Wing, like many Minnesota cities, has relied upon a variety of revenue sources 13 to meet its obligation to provide and maintain public services.
For Red Wing in 14 particular it is relied upon property taxes, state-paid local government aids and other 15 fees and miscellaneous revenues.
16 17 However, unlike most Minnesota cities, Red Wing has a wide variety of unique and 18 special obligations, risks and exposures due to the fact that the PINGP, with its two 19 nuclear reactors, are within the city limits. As a result, the public services have been 20 more robust and comprehensive than would normally be expected.
21 22 In the past, Xcel Energy has paid its proportional share of the property taxes.
23 However, and as described in my subsequent testimony, Xcel Energy has 24 implemented and successfully executed actions whereby Xcel has drastically reduced 25 the proportional share of property taxes paid by the PINGP. The result has been a 26 precipitous drop in the property taxes paid by Xcel Energy and received by local 27 taxing jurisdictions. From 1995 to current the property taxes paid on the Prairie 28 Island Nuclear Generating Plant to the local units of government has decrease from 29 approximately $23.5 million to $9.9 million. This is a $13.6 million decrease in the 30 annual property taxes paid on the PINGP facility.
31 6
I For Xcel Energy, the ability to reduce property taxes has been a significant and well 2
publicized accomplishment. Xcel Energy has specifically pointed out its success in 3
reducing property taxes and the increased return to its shareholders as a result of the 4
same. While the actions have benefited Xcel's shareholders it has come at the cost of 5
the citizens of Red Wing and the critical public services neccessary to support the 6
PINGP's operations. The significant erosion of the tax base and subsequent property 7
taxes paid on the PINGP facility has and will continue have a direct impact on the 8
City's ability to respond to any incident at the Plant and the City's ability to honor its 9
commitments to protecting the envirornent as well as the social and economic 10 interests of Red Wing's residents, visitors, those who work in the community.
11 12 Q:
As a result in this drop of revenue, has Xcel Energy offered any additionally revenue 13 replacement or sources to the City?
14 15 A:
Yes.
In 2006 the Department of Revenue was amending its Rules governing 16 Valuation and Assessment of the Property of Utility Companies (chapter 8100).
17 These rule changes were estimated by the Department of Revenue to reduce the 18 valuation of electric utilities, including PINGP, by 26.9% and subsequently reduce its 19 property tax contribution to the local taxing jurisdictions.
This reduction was 20 estimated by the DOR to result in an 11% decrease in the City's total tax capacity 21 and create another tax shift onto residential properties increasing residential property 22 taxes by 6.7%. It should be noted that these changes, which were implemented in 23 2007, have a three year phase-in. The effect is that the full impact of these will not 24 be felt by the City until 2010. As a result of the proposed rule change and the 25 negative consequences aforementioned Xcel Energy and the City negotiated and 26 entered into an agreement generally referred to as a stabilization agreement (the 27 "Stabilization Agreement") whereby Xcel Energy would provide certain funds to 28 make up for the loss of property tax revenue due to the rule change.
29 30 Q:
What is the current status of the Stabilization Agreement?
31 7
I A:
That Stabilization Agreement was terminated in 2008.
Termination of the 2
Stabilization Agreement occurred when the State created the Utility Transition Aid 3
Program to provide funding for cities host to base-load power plants to make up for 4
the loss of property tax revenues stemming from the Department of Revenue's rule 5
change. However, the State currently has a multi-billion dollar deficit. Actions and 6
proposals to address the deficit by both the governor and the legislature eliminate the 7
City's receipt of Utility Transition Aid, Local Goverrunent Aid and reduce other 8
state-paid local government aids to the City.
With the proposed elimination of the 9
state funding for the Utility Transition Aid, the City will have no means by which to 10 make up the deficit created by Xcel's Energy's ability to successfully reduce its real 11 estate taxes.
12 13 Q:
Can you explain the current considerations and issues facing the City of Red Wing in 14 regards to its budget?
15 16 A:
Due to the current budget crisis, all aspects of City operations, like all cities 7
throughout the State, are being evaluated for reduction or outright elimination.
18 Public safety services currently provided by the City of Red Wing include police, 19 emergency management fire, ambulance and other ancillary services.
These 20 departments work directly with Red Wing's larger manufacturing and industrial 21 companies, such as Xcel Energy, to proactively plan for and respond to emergencies.
22 As previously explained, Xcel Energy's emergency plan and related response are 23 unique and impose special costs to the City. In contrast, Xcel Energy, is the one of 24 the largest employers in the City and owns a plant that has a taxable market value in 25 excess of $384 million. This value is nowhere near what PINGP would be sold for 26 on the open market or the values attached to it as part of these proceedings.
Given 27 the current uncertainty regarding the City's revenue sources due to the state budget 28 issues it's not certain that it can continue to finance the public safety services 29 necessary to adequately respond to an incident at the PINGP.
30 31 Q:
Please describe the Prairie Island Nuclear Generating Power Plant's contribution to 8
I the tax base for the City of Red Wing?
2 3
A:
The Prairie Island Nuclear Generating Power Plant's contribution to the Red Wing's 4
tax base has decreased from over 70 percent of Red Wing's tax capacity in the 5
1990's to 34 percent in 2009.
6 7
Q:
Can you explain the history of the tax base decrease?
8 9
A:
Decades ago, utility companies came to an agreement with Becker, Granite Falls, 10 Oak Park Heights, Cohasset, Hoyt Lakes, Monticello, and Red Wing. In exchange 11 for giving these investor owned utilities authority to build and operate the power 12 plants in their cormnunities, these Minnesota cities were promised that the property 13 taxes generated by the electric power plants would more than offset the 14 complications and special considerations of hosting the plants. For many years, the 15 arrangement worked well. However, in recent years, the utility companies (including 16 Xcel Energy), have sought to maximize their profits by minimizing their property 17 taxes.
18 19 Q:
Can you explain how the utility companies have been able to decrease the tax base?
20 21 A:
Over the last decade, the utility companies have aggressively lobbied the state 22 legislature to significantly reduce their property taxes. Since 2001, property tax cuts 23 have totaled more than 82 million dollars annually.
This reduction has created a 24 significant shift in the property tax burden from the utility properties to residential 25 and other commercial and industrial properties in the communities that host power 26 plants and other utility properties. Attached hereto as Exhibits 3 (MH-3) and 4 27 (MH-4) are summaries of the shift in property taxes within the City of Red Wing.
28 29 Exhibits 3 and 4 illustrate the significant shift in property taxes from utility 30 properties to the residential, commercial, industrial and other properties in the City.
31 Exhibit 3, illustrates the significant property tax shift from the PINGP to the other 9
I property classifications from 1996 to 2009. The exhibit illustrates that while the City 2
levy increased approximately $3.96 million over that time period the property taxes 3
paid by the PINGP decreased approximately $1.54 million and the property taxes on 4
the remaining properties increased approximately $5.5 million. Exhibit 4 illustrates 5
this shift as a percentage of all property taxes paid. While the total city levy increased 6
45.55% over that time period the property taxes paid by the PINGP decreased 7
26.61% and the property taxes on the remaining properties increased a staggering 8
188.37%. Because of the significant shift in property tax burdens from the utility 9
property to the other property classifications, the City's ability to raise revenue has 10 greatly decreased.
Coupled with the proposed elimination of the City's Utility 11 Transition Aid and Local Government Aid plus significant reductions to other state-12 paid local government aids the City is facing significant budget problems that will 13 only continue to grow.
14 15 In addition, the utility companies have also been working at the legislature, in courts 16 and at the Minnesota Department of Revenue, to exempt plants and major equipment 17 from property taxes and reduce their property valuations. Through the successful 18 reduction of their property values, the utility companies have received 34 million 19 dollars in property tax relief annually when the Department of Revenue approved 20 new utility valuation rules. The utility's success at reducing their property taxes has 21 resulted in a significant property tax shift onto the host cities other property 22 classifications including cormnercial and residential properties.
23 24 State wide from 2002 through 2008, residential property taxes have increased 82.4%,
25 commercial property taxes have increased 32.3% while utility property taxes have 26 decreased by 2.8%. More specifically, in Red Wing, from 2002 through 2009, the 27 City's property tax levy has increased 16.17% (2.31% on an annualized basis).
28 However, due to the property tax shifts, non-utility property taxes have increased 29 38.34% while property taxes for utility companies have decreased 11.87%. These 30 shifts have had an impact on a number of entities who rely on property taxes as a 31 primary revenue source not just the City of Red Wing. Attached hereto as Exhibits 5 10
I (MI1-5), 6 (MI-l-6), 7 (MH-7), and 8 (MH-8), are summaries that I prepared of the 2
property taxes paid by Prairie Island Nuclear Generating Plant to Goodhue County, 3
the City of Red Wing and the school district for years 1994 through 2008.
4 5
Q:
Are there any ramifications facing the City of Red Wing as a result of the decrease in 6
tax base and revenues?
7 8
A:
As 1 mentioned earlier, given the decrease in tax base and revenues, the City of Red 9
Wing is facing a reduction in all public services including public safety services. The 10 proposed reductions include the elimination of 5 police officers, 3 fire fighters-11 paramedics and other personnel. These reductions are the direct result of a loss of 12 revenue to the City. These reductions are proposed to be effective in 2010 as they 13 can not be sustained given proposed revenue reductions.
14 15 Recently, the City commissioned a study to examine the delivery of its public 16 services and particular, its fire and ambulance services. The study recommended the 17 construction of two new fire stations, including one that is much closer to the PINGP 18 located at the junction of State Highway 19 and Federal Highway 61. The purpose 19 behind this new firehouse, in particular, was to provide a shorter response time to to 20 incidents that may occur in the western portion of the City, including but not limited 21 to, the PINGP. Instead, the City currently has only half of the recommended number 22 of firemen needed to address the study recommendations and, within the next three 23 years, is looking at a reduction in the full time fire department personnel. It should 24 be noted that these personnel, together with paid-on-call firefighters (volunteers) are 25 the same individuals who operate the ambulance services in the City of Red Wing.
26 27 Q:
How does this impact the ability of the City to honor its obligations to provide public 28 services to its citizens?
29 30 A:
It greatly compromises the ability of the City to offer adequate critical public safety 31 services to its citizens.
The police, ambulance and fire departments will all be 11
I stretched to meet the needs of the citizens of the City of Red Wing.
2 3
Q:
How does this impact the City's ability to meet its obligations under the Agreement, 4
attached as Exhibit 1, and the Emergency Response Plan, attached as Exhibit 2?
5 6
A:
Under the current Certificate of Need Application before the Minnesota Public 7
Utilities Commission and the NRC, Xcel Energy is seeking to relicense the plant for 8
an additional twenty years of operation. In addition, it is seeking to uprate the power 9
production from the plant thereby putting additional pressures on an already aged 10 system. While the City has no doubt that Xcel Energy will do its best to operate the, 11 plant effectively, efficiently and safely; the risk of incidents happening will increase 12 and the City will be obligated to respond.
13 14 Given the current revenue projections of the City and, assuming that Xcel Energy's 15 Certificates and licensing requests are granted, the City will not be able to provide 16 public safety services at the level expected or required for the operation of a nuclear 17 power plant. For the City, it is not a matter of having Xcel's subsidize the special 18 training or providing the special equipment necessary to respond as is required under 19 the Agreement or the Emergency Response Plan. Rather, it is a matter of simple 20 maintenance: the City will not have sufficient funds to pay for either the basic capital 21 equipment (e.g. fire truck, ambulance) or requisite personnel to support the continued 22 operations of the plant.
23 24 It appears that Xcel is willing to simply shift the responsibility to the other taxpayers 25 of the City. The City, despite its best efforts, can simply no longer support the 26 necessary personnel and equipment to respond to an incident at the PINGP.
27 28 Q:
If the City is unable to respond, what do you envision the result to be?
29 30 A:
Under the Agreement and the Emergency Response Plan, there are other entities that
- 31.
have an obligation to provide support. However, it is the City's obligation to provide 12
I primary support and so any other entity would be required to step in and provide the 2
same. While the Emergency Response Plan is in conjunction with Goodhue County, 3
Goodhue Couity does not maintain a separate fire or ambulance service.
To my 4
knowledge, there are no other cities, other than perhaps Monticello, that train for the 5
type of incidents the City's ambulance crews and firefighters train for. As a result, 6
the secondary support will be provided through the state and federal government.
7 However, that support will take time and effort to muster andthere will not be an 8
immediate response to any incident. As a result, any incidents, whether that impact 9
the plant workers or the environment around the plant, will be one in which there will 10 be no immediate timely or appropriate response and the risk to those individuals and 11 environment will be greatly enhanced. The result will be that any event or incident 12 will have a greater chance in spreading and causing socioeconomical and 13 environmental damage.
14 15 Q:
How should this be addressed in these proceedings?
16 17 A:
As a condition of the Certificate of Need, Xcel Energy should be required to provide 18 adequate funding to the City to provide for the level of public safety services 19 necessary for the continued operations of the PINGP and the storage of the spent 20 nuclear fuel, including the duration of time the spent nuclear fuel remains on-site 21 after the PINGP's closure. This would, at a minimum, be equal to the amounts Xcel 22 Energy currently pays subject to its Settlement with Mdewakanton Dakota Tribal 23 Council at Prairie Island, to the Prairie Island Indian Community.
24 25 Q:
Does this conclude your testimony?
26 27 A:
Yes 28 29 30 31 13
C ity Y0f A M150<
RE NC 9/1012008 Northern States Power Company-Minnesota 1717 Wakonade Drive East Welch, MN 55089 Attn: Amy Hass Letter of Agreement The Red Wing Fire Department and Northern States Power Company-Minnesota reconfirm the ongoing understanding of the Department's services provided at the Prairie Island Nuclear Generating Plant located within the City of Red Wing's corporate limits, These services are in accordance with Northem States Power Company-Minnesota's emergency plan.
Ambulances from the Fire Department can transport radiological contaminated patients within the service's Minnesota and Wisconsin response areas to Fairview-Red Wing Medical Center.
Also, the Department can transport such patients to Regions Hospital in Saint Paul or to other medical facilities as directed by a physician.
In addition, the Department can provide fire, rescue and other non-fire fighting services in the Prairie Island Nuclear Generating Plant's emergency planning zone. The Red Wing Fire Department has various firefighting apparatus including pumpers and an aerial platform. All apparatus can perform both fighting, rescue and less traditional tasks.
Non-fire fighting tasks may include spraying radioactive releases and pumping water into the plant for refilling and cooling purposes. In all cases, such operations can begin once the radiological and security threats are mitigated to insure the safety of both plant personnel and fire fighters.
City of Red Wing By:
X ~(-
Mayor B Y:
Ka-,
By:
City Council President 10 Northern States Power Company-Minnesota rii CallanlEaergency Planning Manager
/--'rairie Island Nuclear Generating Plant Date:
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Of Date:
'I' V c
Date:
/
Date:
EXHIBIT MH - I