ML18092B508
| ML18092B508 | |
| Person / Time | |
|---|---|
| Site: | Peach Bottom, Salem, Hope Creek, 05000000 |
| Issue date: | 04/09/1987 |
| From: | Muller D Office of Nuclear Reactor Regulation |
| To: | Jo Jacobs ATLANTIC CITY ELECTRIC CO. |
| References | |
| NUDOCS 8704140137 | |
| Download: ML18092B508 (7) | |
Text
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April 9, 1987 Dockets Nos.:
50-272/277/278/311 & 354 Mr. Jerrold L. Jacobs Senior Vice President Atlantic City Electric Company Post Office Box 1500 1199 Black Horse Pike Pleasantville, New Jersey 08232
Dear Mr. Jacobs:
SUBJECT:
CONSENT UNDER 10 C.F.R. 50.80 TO CORPORATE REORGANIZATION OF ATLANTIC CITY ELECTRIC COMPANY Your letter of December 18, 1986, to Mr. Harold R. Denton informed us that Atlantic City Electric Company 1s (ACEC) Board of Directors authorized the formation of a holding company, Atlantic Energy, Inc. (AEI), to hold all of the voting stock of ACEC.
Your letter also provided us a copy of your August 15, 1986 petition to the New Jersey Board of Public Utilities (NJBPU) requesting their approval of the restructuring plan.
Under the proposal ACEC would become a wholly-owned utility subsidiary of AEI, with each ACEC common stockholder exchanging shares in ACEC for a like number of the holding company (AEI) common shares.
Concurrently, AEI would become the sole owner of ACEC 1s common stock.
Following the restructuring, ACEC will remain a public utility providing the same utility service as it did prior to the restructuring.
You indicated in your application that the purpose of the restructuring is to permit diversification on a limited basis into non-utility activities.
The goal of such diversification is to enhance the financial strength and operating results of the entire system.
You contemplate that the holding company 1s diversification may initially be into energy-related activities such as cogeneration and other alternate energy forms.
You also indicated that the new structure will insulate its utility ratepayers from the risks associated with ventures of non-utility subsidiaries of AEI and will enable utility managers to focus on utility operations.
ACEC expects that its utility operations will account in the foreseeable future for the dominant share of the consolidated assets, revenues and net income of AEI.
Under the New Jersey statutes, NJBPU approval is required prior to formation of a public utility holding company.
Such approval was granted by a NJBPU order of January 5, 1987.
The NJBPU approved the reorganization request on the condition that the new holding company refrain from pledging any of its assets for the support of the financial obligations of any non-utility subsidiary.
This is to protect the financial integrity of utility operations.
We have discussed the restructuring of ACEC with the NJBPU Revenue Requirements and Finance Bureau.
The NJBPU indicated that after the restructuring, ACEC would continue to be regulated as to retail rates by the NJBPU as at present.
Sales of electric power for resale would continue to be regulated by the Federal Energy Regulatory Commission (FERC).
Thus, the NJBPU staff confirmed 8704140137 870409 PDR ADOCK 05000272 I
PDR that there will be no change in ACEC's source of funds for operating its utility facilities, including its share of operating costs and eventual decommissioning costs related to its ownership interests in Peach Bottom Units 2 and 3, Salem Units 1 and 2, and Hope Creek Unit 1. That source is the utility revenues derived from the regulated rates charged to utility customers.
We have reviewed the information in your letter of December 18, 1986, to ascertain that the proposed action:
(1) will not reduce funds available to ACEC to provide its share of operating costs and eventual decommissioning costs related to its ownership interests in Peach Bottom Unit Nos. 2 and 3, Salem Unit Nos. 1 and 2 and Hope Creek Unit No. 1.
(2) will not adversely affect the management of ACEC utility operations; and (3) will not result in ACEC becoming owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government.
Based on our review of the information provided in your letter, we have made the following determination.
Utility capital costs (including ACEC's share of any capital improvements or additions to the nuclear units) would continue to be financed through a combination of internally generated funds (derived from customer revenues) and security issues. Long-term debt securities and any preferred stock would be issued by ACEC as at present. Additional issues of common stock to raise outside capital, however, would be issued by the holding company.
This is the usual financial relationship between a utility holding company and the utility subsidiary.
The NRC's explanation of its financial qualifications rule (49 Federal Register 35747, September 12, 1984), is relevant to this case.
NRC stated that the rate regulatory process conducted by State public utility commissions (such as the NJBPU in this case) and FERC provides reasonable assurance that utilities can obtain the funds to operate nuclear plants safely.
As discussed above, the rate regulatory process as it relates to ACEC and the funding of its operating costs will not be disturbed by the proposed holding company arrangement.
In conclusion, there will be no adverse change (as a result of the proposed restructuring) in ACEC's sources of funds for nuclear plant operating, decommissioning and capital costs.
Pursuant to Facility Operating License Nos. DPR-44 and DPR-56, only Philadelphia Electric Company is authorized to operate Peach Bottom Units 2 and 3.
Likewise, pursuant to Facility Operating License Nos. DPR-70, DPR-75 and NPF-57, only Public Service Electric and Gas Company is authorized to operate Salem Units 1 and 2 and Hope Creek Unit 1.
ACEC plays no direct part in the operation of any of the facilities. Oversight is provided through an Owners' Committee, created pursuant to the Owners Agreement, that consists of one representative and one alternate appointed by each Owner.
The Owners' Committee is responsible for coordinating the administration of all matters pertaining to the ownership, operation and maintenance of the facilities.
The proposed reorganization will not affect the operation of the facilities or the structure and responsibilities of the Owners' Committee, and the identity of the ACEC representative and alternate on the Owners' Committee will not change as a result of the proposed reorganization.
In addition, it is presently contemplated that persons who are directors or officers of ACEC immediately before the consummation of the reorganization will continue in such capacities after the reorganization.
The directors of ACEC who are elected at the Annual Meeting of Stockholders held on April 22, 1987 would become the directors of Atlantic Energy, Inc.
The principal executive officers of Atlantic Energy, Inc. would be persons holding executive offices with ACEC and, at least initially, would continue to hold such offices with ACEC.
Because ACEC plays no direct role in the management of Peach Bottom Units 2 and 3, Salem Units 1 and 2 and Hope Creek Unit 1, we conclude that the reorganization will not affect the management of these Units.
The proposed restructuring will not result in the ACEC becoming owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government.
Our determination is based on the fact that following the restructuring, Atlantic Energy, Inc. would become the sole holder of ACEC's common stock, and the current holders of ACEC's common stock would become holders of shares of the common stock of Atlantic Energy, Inc. on a share-for-share basis. Therefore, the proposed restructuring will not result in a new ownership, control, or domination by an alien, a foreign corporation, or a foreign government.
Based on the above determinations, we conclude, pursuant to 10 CFR 50.80:
(1) that the proposed action will not affect the qualifications of the Atlantic City Electric Company as a co-owner of Peach Bottom Units 2 and 3, Salem Units 1 and 2 and Hope Creek Unit 1.
(2) that the proposed action is otherwise consistent with applicable prov1s1ons of law, regulations, and other requirements issued by the Commission pursuant thereto.
Accordingly, the Commission hereby consents to the proposed reorganization of Atlantic City Electric Company.
cc:
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Mr. E. G. Bauer, Jr.
Philadelphia Electric Company cc:
Mr. Eugene J. Bradley Assistant General Counsel Philadelphia Electric Company 2301 Market Street Philadelphia, Pennsylvania 19101 Troy B. Conner, Jr., Esquire 1747 Pennsylvania Avenue, N.W.
Washington, D.C.
20006 Thomas A. Deming, Esquire Assistant Attorney General Department of Natural Resources Annapolis, Maryland 21401 Mr. R. Fleishmann, II, Manager Peach Bottom Atomic Power Station R. D. #1 Delta, Pennsylvania 17314 Mr. G. M. Leitch, Manager Nuclear Generation Department South 7-1 Philadelphia Electric Company 2301 Market Street Philadelphia, Pennsylvania 19101 Peach Bottom Atomic Power Station, Units 2 and 3 Mr. R. A. Heiss, Coordinator Pennsylvania State Clearinghouse Governor's Office of State Planning and Development Post Office Box 1323 Harrisburg, Pennsylvania 17120 Mr. Thomas M. Gerusky, Director Bureau of Radiation Protection Pennsylvania Department of Environmental Resources Post Office Box 2063 Harrisburg, Pennsylvania 17120 Mr. Albert R. Steel, Chairman Board of Supervisors Peach Bottom Township R. D. #1.
Delta, Pennsylvania 17314 Mr. Anthony J. Pietrofitta, General Manager Power Production Engineering Atlantic Electric Post Office Box 1500 1199 Black Horse Pike Pleasantville, New Jersey 08232 Mr. William N. Alden, Engineer-in-Charge Licensing Section South 7-1 Philadelphia Electric Company 2301 Market Street Philadelphia, Pennsylvania 19101 Resident Inspector U.S. Nuclear Regulatory Commission Peach Bottom Atomic Power Station Post Office Box 399 Delta, Pennsylvania 17314 Regional Administrator, Region I U.S. Nuclear Regulatory Commission 631 Park Avenue King of Prussia, Pennsylvania 19406
r Mr. C. A. McNeill Puhlic Service Electric ~ Gas Co.
cc:
Gregory Minor Richard Hubbard Dale Bridenbaugh MHB Technical Associates 1723 Hamilton Avenue, Suite K San Jose, California 951?5 Troy B. Conner, Jr., Esquire Conner & Wetterhahn 1747 Pennsylvania Avenue N.W.
Washington, D.C.
20006 Richard Frylin9, Jr., Esquire Associate General Solicitor Public Service Electric & Gas Company P.O. Box 570 TSE Newark, New Jersey 07101 Resident Inspector U.S. Nuclear Regulatory Commission P.O. Box 241 Hancocks Rridge, New Jersey 08038 Richard F. Engel Deputy Attorney General Division of Law Environmental Protection Section Richard J. Hughes Justice Complex CN-112P Trenton, New Jersey 08625 Mr. R. S. Salvesen General Manager-~ope r,reek Operation Public Service Electric & Gas Co.
P.O. Box A Hancocks Rrid~e, New Jersey 08038 Mr. R. A. Preston Public Service Electric & Gas Co.
P.O. Rox 236 Hancocks Bridge, New Jersey 08038 Hope Creek Generatin~ Station Susan C. Remis Division of Public Interest Advocacy New Jersey State Department of the Public Advocate Richard J. Hughes Justice Complex CN-850 Trenton, New Jersey 08625 Office of Legal Counsel Department of Natural Resources and Environmental Control 89 Kings Highway P.O. Box 1401 Dover, Delaware 19903 Ms. Rebecca Green New Jersey Bureau of Radiation Protection 380 Scotch Road Trenton, New Jersey 08628 Mr. Anthony J. Pietrofitta General Manaoer Power Prod~ciion Engineering Atlantic Electric 1199 Black Horse Pi~e Pleasantville, New llersey 0821?
Re~ional Administrator, Region I ll.S. Nuclear Regulatory Commission 631 Park A.venue Kina of Prussia, Pennsylvania 19406
8 I
ii Mr. C. A. McNeill Public Service Electric & Gas Company cc:
Mark J. Wetterhahn, Esquire Conner and Wetterhahn Suite 1050 1747 Pennsylvania Avenue, NW Washington, DC 20006 Richard Fryling, Jr., Esquire Assistant General Solicitor Public Service Electric & Gas Company P. 0. Box 570 - Mail Code TSE Newark, New Jersey 07101 Gene Fisher, Bureau of Chief Bureau of Radiation Protection 380 Scotch Road Trenton, New Jersey 08628 Mr. John M. Zupko, Jr.
General Manager - Salem Operations Public Service Electric & Gas Company Post Office Box E Hancocks Bridge, New Jersey 08038 Robert Traae, Mayor Lower Alloways Creek Township Muni ci pa 1 Ha 11 Hancocks Bridge, New Jersey 08038 Thomas Kenny, Resident Inspector Salem Nuclear Generating Station U.S. Nuclear Regulatory Co1T111ission Drawer I Hancocks Bridge, New Jersey 08038 Richard F. Engel Deputy Attorney General Department of Law and Public Safety CN-112 State House Annex Trenton, New Jersey 08625 Frank Casolito, Action Chief Bureau of Radiation Protection Department of Environmental Protection 380 Scotch Road Trenton, New Jersey 08628 Salem Nuclear Generating Station Richard B. McGlynn, Commission Department of Public Utilities State of New Jersey 101 Commerce Street Newark, New Jersey 07102 Mr. David Wersan Assistant Consumer Advocate Office of Consumer Advocate 1425 Strawberry Square Harrisburg, Pennsylvania 17120 Regional Administrator, Region I U.S. Nuclear Regulatory Commission 631 Park Avenue King of Prussia, Pennsylvania 19406 Lower Alloways Creek Township c/o Mary 0. Henderson, Clerk Municipal Building, P.O~ Box 157 Hancocks Bridge, New Jersey 08038 Mr. Bruce A. Preston, Manager Licensing and Regulation Public Service Electirc & Gas Company P.O. Box 236 Hancocks Bridge, New Jersey 08038