ML18040B106

Responds to Item 3 or Rev 1 to IE Bulletin 79-26.Computer Code Developed to Calculate Control Blade Depletion.No Control Blades Will Exceed 34% B-10 Depletion Averaged Over Upper 1/4 of Blade Before End of Second Cycle

ML18040B106
Person / Time
Site:	Susquehanna
Issue date:	06/18/1985
From:	Curtis N PENNSYLVANIA POWER & LIGHT CO.
To:	Butler W Office of Nuclear Reactor Regulation
References
IEB-79-26, PLA-2476, NUDOCS 8506210258
Download: ML18040B106 (19)

Text

REGULATOR'FORMATION DISTRIBUTION' EM (RIDS)

ACCESSION NBRi8506100276 OOC+DATEe85/06/05 NOTARIZED: NO ,

DOCKET FACILi50 387 Susquehanna Steam Electr)c Stations Unit 1~ Pennsylva 05000387 50 388 Susquehanna Steam Electric Stations Unit 2'i Pennsylva 05000388 AUTH INANE. AUTHOR AFFlLIATION CURTISiN ~

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~ Pennsylvania. Power>> 8 Light" Co ~

RECIP ~ NAME RECIPIENT AFFILIATION DENTONiH,RR Of f ice of Nuclear Reactor Regul atf onr Dir ector SUBJECT; Forwards audited -financial statements L other financial info DISTRIBUTION TITLE,i Annual for Nov 1983 CODE'o MOOED Oct 1984'~in accordance. w/10CFR50 ~ 71, COPIES RECEIVED t LTR Financial Reports" NCL>>

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Pennsylvania Power 8 Light Company Two North Ninth Street ~ Allentown, PA 18101 ~ 215 / 770-5151 Norman W. Curtis Vice President-Engineering 8 Construction-Nuclear 21 5/770-7501 Mr. Harold R. Denton, Director Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, DC 20555 SUSQUEHANNA STEAM ELECTRIC STATION ANNUAL FINANCIAL REPORT ER 100450 FILE 841 Docket Nos. 50-387 PLA-2485 50-388

Dear Mr. Denton:

In accordance with 10CFR50.71(b), attached are ten copies of the 1984 annual financial report including certified financial statements for Allegheny Electric Cooperative, Inc. The attached reports cover the period November 1, 1983 through October 31, 1984. The 1984 annual report for Pennsylvania Power

& Light Co. was forwarded on March 21, 1985 (PLA-2437).

Very truly yours, N. W. Curtis Vice President-Engineering & Construction-Nuclear Attachments cc: Mr. R. H. Jacobs USNRC Ms. M. J. Campagnone USNRC

()0 850bi0027b 850b05 PDR ADOCK 05000387 I PDR

Audited Financial Statements and Other Financial Information ALLEGHENY ELECTRIC COOPERATIVE, INC.

October 31, 1984 Audited Financial Statements Auditors Report.............................. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 1 Balance Sheets................................ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 2 Statements of, Operations and Patronage Capital ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 4 Statements of Changes in Financial Position... ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 5 Notes to,Financial Statements................. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 6 Other Financial Information Auditors'eport on Other Financial Information...................... 12 Schedules of Nonoperating Rental Income (Expense).................... 13 Schedules of Administrative and General Expenses..................... 14

Ernst &Whinney 300 Locust Court 212 Locust Street Harrisburg, Pennsylvania 17101 717/232-7575 Board of Directors Allegheny Electric Cooperative, Inc.

Harrisburg, Pennsylvania We have examined the balance sheets of Allegheny Electric Cooperative, Inc.

as of October 31, 1984 and 1983, and the related statements of operations and pat:ronage capital and changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the financial statements referred to above present fairly the financial position of Allegheny Electric Cooperative, Inc. at October 31, 1984 and 1983, and the results of its operations and changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

Harrisburg, Pennsylvania January 31, 1985

BALANCE SHEETS ALLEGHENY ELECTRIC COOPERATIVE, INC.

October 31 1984 1983 (In Thousands)

ASSETS ELECTRIC UTILITY PLANT Note C In service Note B 277,893 $ 269,499 Construction work in process 236,548 196,482 Nuclear fuel in process 32,668 25,812 547,109 491,793 Less accumulated depreciation and amortization 12,600 5,074 534,509 486,719 OTHER ASSETS AND INVESTMENTS Nonutility property, at cost (net of accumulated depreciation of $ 658 in 1984 and $ 635 in 1983) 5,925 6,224 Investments in associated organizations Note D 6,405 4,455 Construction advances 2,309 3,628 Other noncurrent assets 6,777 6,928 21,416 21,235 CURRENT ASSETS Cash and short-term investments of $ 25,660 in 1984 and $ 18,235 in 1983 25,396 18, 170 Accounts receivable from members 5,300 5,976 Other accounts receivable 3,179 2,361 Other 529 592 34,404 27,099

$ 590,329 $ 535,053

October 31 1984 1983 (In Thousands)

EQUITIES AND LIABILITIES EQUITIES Memberships 3 3 Donated capital 49 30 Patronage Capital 19,906 16,920 19,958 16,953 LONG-TERM DEBT, less current portion Note'F 475,791 459,928 CURRENT LIABILITIES Notes payable Note E 60,450 19,079 Current portion of long-term debt Note F 1,209 Accounts payable and accrued expenses 11,802 14,770 Accounts payable to members 921 3,992 74,382 37,841 DEFERRED CREDITS Deferred income tax benefits from safe harbor lease Note G ,16,375 16,813 Other 3,823 3,518 20;198 20,331 S 590,329 S 535,053 See notes to financial statements.

STATEMENTS OF OPERATIONS AND PATRONAGE CAPITAL ALLEGHENY ELECTRIC COOPERATIVE, INC.

Year Ended October 31 1984 1983 (In Thousands)

Operating revenue, including sales to members of $ 81,414 in 1984 and $ 65,496 in 1983 $ 109,733 $ 77,833 Operating expenses:

Purchased power 51,964 50,384 Transmission 6,579 5,450 Production 8,645 2,752 Fuel 4,209 2,647 Depreciation 3,247 1,301 Taxes 1,816 839 Administrative and general 3 553 2,024 80,013 65,397 OPERATING MARGIN BEFORE INTEREST AND OTHER DEDUCTIONS 29,720 12,436 Interest and other deductions:

Interest expense 55,604 51,322 Allowance for funds used during construction (25,733) , (38,942)

Other deductions (credits)-net (127) 385 29,744 12,765 OPERATING MARGIN (DEFICIT) (24) (329)

Nonoperating margins:

Net nonoperating rental expense (168) (210)

Interest income 2,660 1,400 2,492 1,190 MARGIN BEFORE INCOME TAXES 2,468 861 Deferred income tax benefits from safe harbor lease 518 378 NET MARGIN 2,986 1,239 Patronage capital at beginning of year 16,920 15,681 PATRONAGE CAPITAL AT END OF YEAR $ 19,906 $ 16,920 See notes to financial statements.

STATEMENTS OF CHANGES IN FINANCIAL POSITION ALLEGHENY ELECTRIC COOPERATIVE, INC.

Year Ended October 31 1984 1983 (In Thousands)

SOURCE OF WORKING CAPITAL Net margin $ 2,986 S 1,239 Charges (credits) to margin not affecting working capital:

Depreciation 3,413 1,467 Fuel amortization 3,649 3,642 Deferred income tax benefits from safe harbor lease (518) (378)

TOTAL FROM OPERATIONS 9,530 5,970 Additions to long-term debt 27,609 80,356 Proceeds from sale of income tax benefits from safe harbor lease 80 17,191 Decrease in construction advances 1,319 5,084 Other sources 475 382 39,013 108,983 APPLICATION"OF WORKING CAPITAL Additions to electric utility plant 54,553 99,527 Reduction of long-term debt 11,746 15,931 Other applications 1,950 4,489 68,249 119,947 DECREASE IN WORKING CAPITAL $ 29,236 $ 10,964 CHANGES IN COMPONENTS OF WORKING CAPITAL Increase (decrease) in current assets:

Cash and short-term investments 7,226 9,647 Accounts receivable from members (676) 1,398 Other accounts receivable 818 2 232 Other (63) 389 7,305 13,666 Increase (decrease) in current liabilities:

Notes payable 41,371 18,508 Current portion of long-term debt 1,209 Accounts payable and accrued expenses (2,968) 2,130 Accounts payable to members (3,071) 3,992 36,541 24,630 DECREASE IN WORKING CAPITAL S 29,236 $ 10,964 See notes to financial statements.

NOTES TO FINANCIAL STATEMENTS ALLEGHENY ELECTRIC COOPERATIVE, INC.

October 31, 1984, NOTE A

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES Allegheny Electric Cooperative, Inc. (Allegheny) is a rural electric cooperative utility established under the laws of the Commonwealth of Pennsylvania. Financing assistance is provided by the U. S. Department of Agriculture, Rural Electrification Administration (REA) and, therefore, Allegheny is subject to certain rules and regulations promulgated'for rural electric borrowers by REA. Allegheny is a generation and transmission cooperative, providing power supply to fourteen owner/members who are rural electric distribution cooperative utilities which provide electric power to consumers in certain areas of Pennsylvania and New Jersey.

Allegheny maintains its accounting records in accordance with the Federal Energy Regulatory Commission's chart of accounts as modified and adopted by REA.

Electric Utility Plant and Depreciation: Electric utility plant is stated at cost, which includes an allowance for funds used during construction.

Depreciation is provided on the modified sinking fund method for nuclear utility plant production assets and the straight line method for all other assets, except nuclear fuel. The cost of units of property retired or replaced is removed from utility. plant accounts and charged to accumulated depreciation.

Nuclear Fuel: Nuclear fuel usage is charged to fuel expense based on the quantity of heat produced for electric generation. Under the Nuclear Waste Policy Act of 1982, the U. S. Department of Energy (DOE) is responsible for the permanent storage and disposal of spent nuclear fuel removed from nuclear reactors. Allegheny currently pays to Pennsylvania Power 6 Light Company (PP&L), co-owner of Susquehanna Steam Electric Station (SSES), its portion of DOE fees for such future disposal services.

Cost of Decommissionin Nuclear Plant: Allegheny's portion of the estimated decommissioning costs of SSES are charged to operating expenses over the estimated useful life of the plant.

Allowance for Funds Used Durin Construction: Allowance for funds used during construction represents the cost of directly related borrowed funds used for construction of electric uti'lity plant. The allowance is capitalized as a component of the cost of the electric utility plant while it is under construction.

Investments in Associated Or anizations: Investments in associated organizations are, carried at 'cost.

NOTES TO FINANCIAL STATEMENTS Continued ALLEGHENY ELECTRIC COOPERATIVE, INC.

NOTE A

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES Continued Preliminary Surveys: Costs of preliminary surveys for potential development projects are recorded as deferred charges in other noncurrent assets. If construction of a project results from such surveys, the deferred charges are transferred to the cost of the facilities. If a preliminary survey is abandoned, the costs incurred are written off.

Short-Term Investments: Short-term investments are carried at cost, plus accrued interest, which 'approximates market value.

Income Taxes: Investment and energy tax credits, other than those sold through the safe harbor lease arrangement, are accounted for under the flow-through method whereby credits are recognized as a reduction of income tax expense in the year in which the credit is utilized for tax purposes.

Allegheny had no provision for income taxes for the years ended October 31,"

1984 and 1983, because of patronage dividends which are a deduction for income tax purposes but not an expense for financial reporting purposes.

Reclassifications: Certain reclassifications have been made to the 1983 amounts to conform with the 1984 presentation.

NOTE B ELECTRIC UTILITY PLANT IN'ERVICE Electric utility plant in service consists of. the following:

Depreciation/

Amortization, October 31 Lives/Rates 1984 1983 (In Thousands)

Nuclear Utility Plant:

Production 39 years $ 231,485 $ 227,326 Transmission 2.75% 27,994 28,149 General plant 3% 12.5% 813 813 Nuclear fuel Heat production 16,776 12,523 Non-Nuclear Utility Plant 3% 20% 825 688 Total $ 277,893 $ 269,499

NOTES TO FINANCIAL STATEMENTS Continued ALLEGHENY ELECTRIC COOPERATIVE, INC.

NOTE C SUSQUEHANNA STEAM ELECTRIC STATION Allegheny owns a 10% undiv'ided interest in SSES. PP6L owns the remaining 90%.

Allegheny's portion of costs associated with the station totalled $ 547 million and $ 491 million at October 31, 1984 and 1983, respectively.

Allegheny's share of costs to complete the station are estimated to be approximately $ 30 million as of October 31, 1984. Both participants provide their own financing.

Unit fI1 of SSES began commercial operations in June of 1983. Unit /I2 is expected to begin commercial operations in February, 1985. Allegheny receives a portion of the total station output equal to its percentage ownership. The statement of operations reflects Allegheny's share of fuel and other operating costs associated with the station.

NOTE D INVESTMENTS IN ASSOCIATED ORGANIZATIONS Investments in associated organizations consist primarily of National Rural Utilities Cooperative Finance Corporation (CFC) patronage capital, "Capital Term Certificates," and "Subordinate Term Certificates" and Baltimore Bank for Cooperatives (BBC) "C"'tock. Certificates'ear interest at 3% and begin maturing in is required to maintain these investments pursuant to certain loan 2025.'llegheny and guarantee agreements.

NOTE E NOTES PAYABLE Allegheny has short-term lines-of-credit available with banks and CFC of $ 52 million of which $ 41.9 million was outstanding at October 31, 1984. Interest rates are generally at prime plus 1%.

Notes payable of $ 18.6 million are outstanding at October 31, 1984, relating to Pollution Control Revenue Bonds issued by an Industrial Development Authority on Allegheny's behalf. The bonds are subject to purchase on demand of the holder and remarketing on a "best efforts" basis. Sinking fund redemption is scheduled in varying amounts from 1986 through 2014, and interest is due monthly at variable rates (6.1% to 6.9% for 1984). The bonds are convertible to a fixed interest rate and fixed term at Allegheny's option.

$ 1.8 million of investments included in other noncurrent assets relate to a debt service reserve fund required under the bond indenture.

NOTES TO FINANCIAL STATEMENTS Continued ALLEGHENY ELECTRIC COOPERATIVE, INC.

NOTE E NOTES PAYABLE Continued Certain restrictions are imposed under short-term credit arrangements including, among other things, maintenance of ratio requirements under existing long-term debt arrangements and limitation of total short-term indebtedness outstanding to an amount not to exceed the remaining unadvanced portion of existing REA long-term loan commitments.

NOTE F LONG-TERM DEBT Long-term debt consists principally of mortgage notes payable for the electric utility plant to the United States of America acting through the Federal Financing Bank (FFB) and guaranteed by REA and a mortgage loan payable to CFC

'relating to non-utility property. Substantially all the assets of Allegheny are pledged as collateral. Long-term debt consists of the following:

October 31 1984 1983 (In Thousands)

Mortgage notes payable to FFB at interest rates varying from 8.28% to 14.724%, due in varying amounts through 2016 $ 474,306 $ 457,226 9 1/4% mortgage loan payable to CFC,

$ 52,685 payable quarterly, including interest, to January 2015. Interest rate to be renegotiated in January, 1986 2,135 2,148 Other 559 554 477,000 459,928 Less current portion 1,209

$ 475,791 $ 459,928 Allegheny has the option on FFB promissory note advances to elect (subject to REA approval) interim maturity dates of not less than two years nor more than seven years after the date of the advance. At the date of the advance or on the maturity of an interim advance, Allegheny may also designate that it-desires a long-term maturity of 34 years after the end of the calendar year in which the advance was made. At October 31, 1984, Allegheny hdd $ 144 million of advances maturing within one year which it intends to refinance for 34 years.

NOTES TO FINANCIAL STATEMENTS Continued ALLEGHENY ELECTRIC COOPERATIVE, INC.

NOTE F LONG-TERM DEBTContinued Aggregate maturities of long-term debt for the four years subsequent to October 31, 1985, are as follows (in thousands):

1986 $ 2,142 1987 3,355 1988 5,377 1989 8,548 The above maturity schedule reflects management's intent to convert FFB advances with interim maturity dates to long-term debt. Allegheny has used a rate it estimates to be an appropriate long-term rate, based on the October 31, 1984, interest rate, to compute the annual principal requirements.

At October 31, 1984, Allegheny had unused loan commitments from FFB and REA of $ 107 million.

Allegheny is required by mortgage covenants to maintain certain levels of interest coverage and annual debt service coverage. Allegheny was in compliance with such requirements at October 31, 1984.

NOTE G INCOME TAXES At October 31, 1984, Allegheny had available net operating loss carryovers of

$ 896 thousand for financial reporting purposes and $ 58 million for tax reporting purposes and investment tax credit carryovers of approximately

$ 29.5 million, expiring through 1999.

In February of 1983, Allegheny sold certain investment and energy tax credits and depreciation deductions pursuant to a Safe Harbor Lease. The proceeds from the sale, including interest earned thereon have been deferred and are being recognized over the term of the lease (30 years).

The net proceeds and related interest were .required by REA to be used to retire outstanding FFB debt. The amount so restricted of $ 2.3 million was included in other noncurrent assets at October 31, 1983.

Under the terms of the safe harbor lease, Allegheny is contingently liable in varying amounts in the event the lessor's tax benefits are disallowed and in the event of certain other occurrences. The maximum amount for which Allegheny was contingently liable approximated $ 24 million at October 31, 1984. Payment of this contingent liability has been guaranteed by CFC.

NOTES TO FINANCIAL STATEMENTS Continued ALLEGHENY ELECTRIC COOPERATIVE, INC.

NOTE H RELATED PARTY TRANSACTIONS Allegheny has an arrangement with an associated organization-, Pennsylvania Rural Electric Association (PREA) under which PREA provides Allegheny with certain management, general and administrative services on a cost reimbursement basis. Total costs for the services provided for the years ended October 31, 1984 and 1983, totalled $ 1.4 million and $ 1.2 million, respectively.

NOTE ICOMMITMENTS AND CONTINGENCIES .

Allegheny and PPSL are members of certain insurance programs which provide coverage for property damage to members'uclear generating plants.

Allegheny's portion of the facilities at SSES is insured against property damage losses up to $ 110 million under these programs. Allegheny is also a member of an insurance program which provides coverage for the cost of replacement power during prolonged outages of nuclear units =caused by certain specified conditions. Under the property and replacement power insurance programs, Allegheny could be assessed retrospective premiums in the event the insurers'osses exceed their reserves. The maximum amount Allegheny could be assessed under these programs during the current policy year is $ 2.1 million.

Allegheny's public liability for claims resulting from a nuclear incident is currently limited to $ 6.2 million under provisions of the Price-Anderson Act (Act). Allegheny is protected against this potential liability by a combination of commercial insurance and an industry retrospective assessment program.

In the event of a nuclear incident at any of the facilities owned by others and covered by the Act, Allegheny could be assessed up to $ 1 million per incident, but not more than $ 2 million in a calendar year in the event more than one incident is experienced.

The Board of Directors has approved construction of a hydroelectric generation facility and purchase of equipment for a project to reduce peak power demand (Load Management Project). Financing for these projects has been arranged with REA ($ 48.8 million) and CFC ($ 3.2 million). There were no significant outstanding construction or purchase commitments or loan advances at October 31, 1984.

Ernst &Whinney 300 Locust Court 212 Locust Street Harrisburg, Pennsylvania 17101 717/232-7575 Allegheny Electric Cooperative, Inc.

Harrisburg, Pennsylvania The audited financial statements of the Cooperative and our report thereon are presented in the preceding section of this report. The information presented hereinafter is for purposes of additional analysis and is not required for a fair presentation of the financial position, results of operations, or changes in financial position of the Cooperative. Such information has been subjected to the auditing procedures applied in our examination of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

Harrisburg, Pennsylvania January 31, 1985 SCHEDULES OF NONOPERATING RENTAL INCOME (EXPENSE)

ALLEGHENY ELECTRIC COOPERATIVE, INC.

Year Ended October 31 1984 1983 (In Thousands)

INCOME:

Rental-building 656 S 607 Rental-parking 47 46 703 653 EXPENSES:

Utilities 129 110 Payroll and employee benefits 39 46 Management and leasing fees 21 20 Office and administrative expenses 12 2 Maintenance and repairs 99 77 Real estate taxes 133 134 Insurance 30 30 Interest 198 278 Depreciation 166 166 Loss on property disposal 44 871 863 NET NONOPERATING RENTAL EXPENSE $ 168 S 210 SCHEDULES OF ADMINISTRATIVE AND GENERAL EXPENSES ALLEGHENY ELECTRIC COOPERATIVE, INC.

Year Ended October 31 1984 1983 (In Thousands)

Office supplies 110 64 Travel, conventions and meetings 97 74 Payroll and employee benefits 919 726 Legal, auditing and engineering 940 277 Association membership dues 83 25 Experimental and general research 279 237 Board meetings, directors'ees and travel 79 65 Penn Lines 82 75 Information programs 113 51 Rent 120 96 Payroll taxes 58 47 Insurance 16 16 Insurance SSES Unit //1 632 257 Miscellaneous 25 14 TOTAL ADMINISTRATIVE AND GENERAL EXPENSES $ 3,553 $ 2,024