ML19209B072
| ML19209B072 | |
| Person / Time | |
|---|---|
| Site: | Skagit |
| Issue date: | 07/10/1979 |
| From: | Lazar J AFFILIATION NOT ASSIGNED |
| To: | |
| Shared Package | |
| ML19209B067 | List: |
| References | |
| NUDOCS 7910090108 | |
| Download: ML19209B072 (79) | |
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, 3 WTED CORRESPONG g gg79 > '_,
I a g3SecitDII "A L,,5serAce Testimony of Jim Lazar "j $c.c'.
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~ Q, A critique of the financial filings of the applicants must look de eply into the assumptions used by the companies in formulating their estimates. In reviewing the information in the prefiled testimony, certain inaccuracies in the data are immediately evident.
Beyond the inaccuracies, the over -optimism of the applicants regarding future construction and financing costs must be reconciled. The increased cost associated with required schedule revisions must be allowed for. Fine.117, these calculations must be avaluated in order to more accurately ascertain the ability of the applicants to successfully finance their participation. To some extent, a short review of the ability of the applicants to obtain the rate relief they will require, and to sell power at the price required to amortize the projects they are participating in must be considered.
A number of errors occur in the data which should be corrected by the applicants prior to a final analysis of their financial capabili ty . None of the utilities have correctly reporte d their share of cos ts for WNP-3. WPPSS has just released their preliminary 1980 budget, and although they have indicated that further upward revision will be required in the wake of the Three Mile Island mishap, at least these mos t recent figures should be worked into the utility reports to this board. None of the utilities correctly shows expenditures for Pebble Springs slipped to reflect the 1989-91 operational dates announced by PGE May 22.
None of the capital cost estimates for any of the plants for which report is being made by the applicants are achieveacle in the 7910090IOS-
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current inflationary market in which large power plants are built. The utilities have reported underestimates of plant cost, financing cost, inflation rates, and fuel and operating costs. At the same time, they have overestimated plant capacity factors, allowed for generous rate relief, nd expressed a highly optimistic picture of corporate financial stability. Puget in particular has consistently reported the most optimistic market scenario, while even their own calculations show them to be at the edge of their financing capa-bility. With such heavy exposure in one project, P uge t 's op timi sm should be replaced with caution, in order to avoid possible corpor-ate suicide. All of the participants are presently selling s cock celow book value. Attempting to raise the tremendous amounts of capital required for the construct program they have proposed will place extreme risks of further a ttion of existing stockholder's equity. While all participants report that they will get back over book value in the next year or so, there appears to be little justifica-tion for their optimism. For them to report any other expectation would only result in further deterioration of the marketability of their securities. With extremely tigh t internal cash generation, the capability of the applicants to weather any unanticipated adversity during construction is questionable. At the same time, virtually all utilities now engaged in a high rate of capital expansion are experiencing little other than adversity. Constrec-tion costs are skyrocketing, interest rates are high, plant perform-ance is below expectation, demand is slackening, and rate relief is lagging. Without a cushion of internal cash generation, the appli-
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t cants cannot handle any of the escalation and schedule delays which are inevitable under the overoptimistic construction cost and schedule scenario they have drawn. When the cost and schedule estimates are properly revised by the applicants, the inability of these utilities to successfully undertake a program of the magnitude they propose will be fully evident. Until such time as this is done, the gaps and inconsis-tencies in the data presented make meaningf ul analysis impossible. Each applicant has reported at least two different cos t estimates for the projects, as well as for their other prcracts. Puget and Pacific have both provided four separate conflicting estimates of eventual project cost, all of which are theoretically up to date. Until their cost and schedule estimates can be reconciled with one another, and witn the experience of the industry as a whole, it is only possible to describe the wide gap between their capability to finance the projects and the costs which they will face if the project ~ is placed under construction. Beginning with their schedule for construction, and proceeding through their cost estimates and financial reports, this attemp t to critique the applicants will draw heavily on reports made by the threc W4 shington applicants with the Washington Utilities and Transportation Commission (WUTC) in C ause U-7 3-0 5, a generic rate proceeding in which Puget, Pacific, and W ater Power art. all respon-dents, and in which my client Fair Electric Rates Now (FERN) is an int erve no r. Unfortunately, comparable data is not available for PGE. Some of the inconsistencies between the data filed with the NUTC and those presented to the ASLB may be the result of sligh tly
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different timing. Many of the differences do not appear to have any temporal relationshhip. The exhibits submitted with this testimony are either individual record requisitions or excerpts from larger publications. The full publications are available for review if a need should arise. CONSTRUCTION SCHEDULE The planned operational date for the projects, September, 1986, and September, 1988, are unachieveable. Operation in 1986 would allow only 72 months construction time, assuming 6 months be tween issuance of a Limited Work Authorization (LWA) in September, 1979, and issuance of a Construction Permit (CP), and allowing an addi-tional 6 months between fuel load and commercial operation. A number of extensive studies have been completed recently, and all indicate that much longer time horizons are appropriate. The s tu dies, completed by the RAND Corporation for the Department of Energy (COST ANALYSIS OF LIGHT WATER REACTOR PCWER 'LANTS, RAND, June, 1978), by the General Accounting Of fice of Congress (TENNESSEE VALLEY AUTHORITY CAN IMPROVE ESTIMATES AND SHOULD REASSESS RESERVE REQUIREMENTS FOR NUCLEAR PCWER PLANTS , P SAD 7 9-49, March 2 2, 1979) and by the Washington Public Power Supply System (NUCLEAR POWER PLANT COST SCHEDULE AND PRODUCTIVITY, AN OVERVIEW OF THE INDUSTRY AND IMPLICATIONS FOR THE FUTURE, WPPSS, April, 1979) have all analyzed nuclear power plant construction schedules. All indicate that a construction period considerably in excess of that proposed will be required to complete a reactor being licensed for construc-tion at the present time. This schedule delay will significantly 1115 097 affect project costs, which are already straining the capability of the participants to finance new construction. The RAND study develops a multiple regression model for esti-mating power plant construction time and cost. The formula (exhibit page 1-A) for construction schedule, when applied to Skagit 1, indicates that an LWA in September, 1979, followed by a CP in March, 1980, would result in a 107-month construction period, less a small adjustment for the experience of the Architect / Engineer. This would result in fuel load in February, 1989, and conrercial operation in October, 1989. This isapproximately three years longer than prcposed by the applicants. The GAO study on cons truction schedules, completed in March, 1979, indicated that the cor struction schedules. used by TVA were 1-2 years optimistic. Their analysis of construccianhistory, ranging f rom an average of 4 6 months for plants completed prior to 1970 to 90 months for plants completed in 1977, appears below. Average Number of Cons tru ction Calendar Reactor Duration for Year Units First Units Before 1970 12 46.0 months 1970 4 47.6 months 1971 4 54.9 months 1972 5 66.0 months 1973 7 68.0 months 1974 10 66.9 months 1975 3 78.7 months 1976 4 91.4 months 1977 4 90.4 months A regression analysis between date of completion and time required for completion provides a surprisingly good curve fit, with R2= .94; a completion date advanceme it of one year is accompanied 1115 098 _5_
by an increase in time required for construction of 6.18 months. This is a somewhat obtuse mathematical relationship, appearing to put the cart before the horse. The outcome is somewhat akin to Alice's experience on the treadmill, having to run ever faster in order to remain in the same place. Perhaps we are fortunate that the relationship i' not exponential in form. The trend shown by GA0 indicates that a plant completed in 1986 would have required 148 months to complete, requiring a construction permit in 1974. It is certainly evident that a construction period of nly 72 months is inconsistent with recent experience or with the direction of the trend which has occurred. In evaluating the schedule problems being experienced by TVA, the G AO noted with respect to the Sequoyah power plant that:
"T he first unit at TVA's second plant, Sequoyah, is scheduled for fuel loading in April, 1979, after a construction period cf about 120 months. The Authority does not consider the Sequoyah time typical, because rework to satisfy new NRC requirements has extended the construction time. However, the Sequoyah experience is consistent with the trends in private industry."
The NPPSS study of April, 1979, analyted all nuclear plants now under construction and all that have been completed in the United S ta tes . This was undertaken to ascertain if the problems being experienced by WPPSS with their construction program were unusual, or if they were typical of the industry. The Supply System had just gone through an embarrassing budget and schedule revision, in wnica
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their estimated costs were escalated by $1.6 billion, and their completion dates for the five projects advanced by an average of 11 months, comp.ared with the estimates made 12 months earlier. They found themselves f acing a hostile public trying to explain why they were no closer to completion than a year earlier, measured either in terms of financing requirements or completion dates. Their study divided the time requires' for completion of a LWR into five periods. The first two, duration from Nuclear Senumn S upply System award to submittal of a PSAR, and between PSAR and CP, are unrelated to this financial analysis. The three periods following issuance of a CP will be dealt with b.9 the applicants if a CP is issued, and should be considered in estaclishing c likely cperational date for the project under consideration. WPPSS has estimated an elapsed time of about 7 months from date of issuance of CP to the first pouring of concrete, the third milestone they have identified for a plant being built under the conditions prevailing in 1979. (Exhibit page 2-A) . The period between first concrete and fuel load, longest of the time periods involved in construction, is estimated at approximately 100 months for large plants constructed under the 1979 f ramework of pcwer plant construction. WPPSS has forecast this duration as u.cre;uing to as much as 125 months for projects loading fuel in 1982. They note that the present fuel load date estimates of plants now under construction are optimistic by as much as four years. (Exhibit page 2-3) They have not made a specific forecast beyond 1983, as they have surmised that the construction interval between first concrete 111S 100 and fuel load will eventually level at about 90-100 months. (Exhibit page 2-C) Finally, they have estimated a six month period between fuel load and commercial operation. The total of these three periods indicates a plant authorized for construction in 1979 would require betweer 103 and 138 months for construction. As shown in their analysis, time required for completion has already risen from 66 months for plants completed in 1967 to 132 months for those finished in 1976. (Exhibit pages 2-D, -E) Even with a 103 month construction period between CP and Comme rcial Operation, the earliest date the WPPSS study would provide for Skagit would be October, 1988, some two years longer than proposed by the applicants. The other end of the forecast range, 138 months, would draw this out to September, 1991. The WPPSS model suggests the same range as noted by the GAO as "consis-tent with the trends in private industry" in their analysis of the 120 month construction period for Sequoyah. The WPPSS forecast is also very consistent with the estimate provided using the RAND mo de l . WPPSS commentary in their abs tract was not encouraging to other potential nuclear plant builde rs:
" Plants committed in 1966 took 7 years to build. Today they will take 15 unless conditions change appreciably. "
"Most plants will now attain commercial operation as much as 2 to ,3 years later than their current schedules."
The point of agreement in these three. studies is that con s t ru c-tion of nuclear power plants takes considerably in excess of the 6 years allowed by the acplicant. The schedule revision is recognized as a major cause of budget increases for power plant construction,
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'9 causing both increased AFUDC and allowing additional inflation to affect total proj ect costs.
PROJECT COST ESTIMATES The cost estimates provided by the applicant and by the staff are far lower than industry experience, and need to be fully revised. Table 1 of the supplemental testimony of Mr. Winters shows an applicant cost estimate of $3325 million, and a staff estimate of $3191 million. These estimates are low by a factor of two when compared with cost estimates recently completed by other analysts. Further, the schedule revision which would be required if the projects were to be built would increase the costs of this proj ect over others presently under construction. It is also somewhat difficult to understand why the applicants are in apparent disagreement as to the currently anticipated cost of the proj ects. Ii15 102
LO The five nuclear plants now under construction in Washington by WPPSS have all sufferred from budget and schedule revision. WPPSS has indicated that future cost increases will be experienced as changes in design are mandated as a result of the Three Mile Island investigations, and as other unanticipated events occur. I have completed a detailed analysis of the areas of probable cost escalation for WFPSS (THE CFFICIAL BCND STATEMENTS OF THE WASHINGTCN PUBLIC POWER SUPPLY SYSTEM, A CRITICUE, Lazar, March,1979) and have concluded that future cost escalation will be substantial, probaoly in the range of 25% above current estimates, with eventual power cost nearly double the present estimates for some of the plants. WPPSS has indicated that they expect future constructicn cost escalaticn to be in the 10-25% rangeabove tne oreliminary 1980 budget. The original and more recent capital cost estimates for WPPSS are shown belcw. ESCALATICN C:MPLETION PROJECT CRIGINAL SUCGET REVISED EUCGET 5/ KW RATE DATE WNP-1 5622 52348 51373 27% 12/33 WNP-2 5405 51823 51668 19% 9/31 WNP-3 5789 52265 51327 23% 12/34" WNP-4 51009 52633 52106 27% 5/S5 WNP-5 51251 52707 52183 21% 6/35
*WPPSS Consultant study by Holmes and Narver recommendec 1985 operating cate for WNP-3; 12/Sa acopted as official target date.
The WPPSS experience is typical, rather tnan an aberration. A study cone for the Bonneville Power Acministration by Theocore Barry and Associates ' Roles and Relationshics cetween SPA and WPPSS, Barry,1979) indicated tnat WPPSS was controlling costs witnin 3 43 of v.nat was possible. 4; on a $12 billian project amounts to nearly $500 million, so the re: ort made a num er of recommendations for improving management at WPPSS, but was largely su portive of tne tecnnical expertise amassed by the Supply System. If tne Skagit project were t: ce constructed in the time frame propo';ed, tne applicants would be ccmceting wi,th
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WPPSS for some of tne limited expertise availaole in the nuclear power field. 1115 103
.. 11-By comparison with the cost being experienced at WPPSS, the Shoreham plant, being built by ',ong Island Lighting Co. is now scheduled for operation in mid-1981, just befo WNP-2, and is budgeted at 51.54 billion, or $1880/kw, slightly higher than WNP-2. The NRC staff used the CONCEPT model to analy:e the budget prepared by the applicants. The testimony of Mr. Winters indicates that the analysis is based on the~ December,1977 run of CCNCEPT. It is fairly evident tnat any power plant costing model as obsolete as 1977 is inappropriate for budget analysis in an age where power plant inflation is generally running 13-197., annually, as reported by Barry. With construction schedules requiring a 6 month extension with every year of delay, the model to be used should reflect tne most recent market conditions. The RAND study referred to in my discussion of project ccmple: ion cates described the CCNCEPT model as follows:
"In 1967, ERDA began an independent examination of LWR capital costs that eventually culminated in the creation of the CONCEPT model. The CONCEPT model is a machine-operated computer code that adjusts the cost of a base-case LWR at a hypothetical site to the cost of an LWR at any selected location, in any selected year, and in a veriety of configurations. The model relies on the base-case cost estimate and on appropriate cost-adjus tment factors that reflect locational economic factors and time-related escalacion. There is no eficence that results from the CONCEPT model have been used as data; however, the base-case inputs, which have been prepared by United Engineers and Cons tructors , are widely quoted, usually without making note of the fact that (they are minimum-cost estimated of a plant at an ideal hypothetical site.)"
Emphasis added. One would nope that tne NRC staff would provide the pessimism needed to balance tne optimism of tne applicants. Instead, tne NRC has used a "best possible" costing mocel to evaluate a "best possible" scenario presented by the applicants. Just as tne costing models I will discuss which use an " average" apprcach to cost , forecasting are largely in agreement on the cost of a future plant, the staff and applicant are in close agreenent with their "best possible" mocels. 'Jn fo rturra;ely , the bond market and rate payer seldom finance a "best possible" project.
.. 12-It is necessary tv search for other costing models in order to develop a realistic picture of the fiancing requirements for the Skagit project. Several generic studies have been ccmpleted, anc all of them indicate a mucn higher probable cost than presented in the applicant's testimony. In September,1978, E3ASCO Services published an article dealing with the current costs of coal and nuclear power plants. (DRAMATIC CHANGES IN THE COSTS OF NUCLEAR AND FOSSIL-FUELED PLANTS, EBASCO, 1978) Their conclusions (exhibit page 3A,B was that a plant coming on-line in 1988 would cost 51648/kw, and produce power at 63.8 mills /kwh at a 70% capacity factor. Their study allows 5100/kw for furtner regulatory requirements, and anticipates fuel cost at 16.3 mills levelized over 10 years. E5ASCO is Architect 2ngineer for WNP-3&5, and is generally considered to be a nuclear advocate. Their study concludes tnat nuclear generation is less expensive than coal, by a very slight margin. In testimony last October oefore the New Jersey Board of Public Utilities, Charles Komanoff presented a detailed costing model for both nuclear and coal plants. His analysis was somewnat lower in capital cost than the EBASCO stucy, but was directed at a 1985 operational date. His capital ccst estimate of 51575/kw escalated at the 7% inflation rate used by Ebasco resuits in a comparabie estimate of 51929/kw in 1988. At the 13-19% inflation rate aeseed-ey presented by Barry, both of these would be much higher. Komanoff has cone extensive researcn on plant reliability, and concluded tnat a 55S capacity factor was app rop ri a te. His summary (exnibit page 4A ) shows nuclear busbar power at 90 mills, comoared with 60 mills for coal, based uoan 1935 on-line cceration. Stone and Weoster Engineering Co. has also completed a s tudy of generic pcaer plant costs, presented to the Atomic Industrial Forum last February.(The ECCNCMICS CF NUCLEAR POWER, Stone and Webster,1979) The conclusion of :nis rescrt was tnat plants scheduled for completion in 1990 would cost 51937/kw, including a 550/k,w 1115 105
13 contigency included for further regulatory changes. They concluded that power at the bus from a nuclear source in 1990 would cost somewhat in the vicinity of 90 mills, using a 60% capacity factor.(Exhibit Page SA). The RAND study of plant costs referred to earlier provided a regression equation for analyzing eventual proj ect costs. Assuming issuance of an LWA in September, 1979, and a CP in March, 1980, the RAND formula predicts a cost of $2266/kw for the Skagit plant, less an adjustment for the experience of the Architect / Engineer. As discussed earlier, this is based on an assumption of an operational date for Skagic 1 of approximately October, 1989. This estimate is higher than the others, but icwer than the current estimate of any of the WPPSS plants escalated at 77,to 1989. Finally, the WPPSS study menticned rarlier ccnducted a limited analysis of future project costs. Their ccnclusiens are less detailed than those of deus studies, but their cct nntary describes a likely scenario wbich is l' , a : with the other studies:
; . ~t . . .under present conditicns, plants will new take 15 years rather than C- ,, 7 to ccme on line, and cne cca::icted in 1979 will cost in excess of $3 y billica to construct. Perhaps this is a fair and reascnable price to 4 [4. '.' pay for the protecticr af cur scciety, but it rust be emphasized that
. this is a social pric: at a technical ene. It is a crice that nuclear cc.nstructicn manazemer , ~n neither centrol nor be held accountable for."
',- r.r=nas:.s added.
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,9 Esca? 'ing the precent esticate of cost for KNP-5 to 1989, the year nest of the
. ;l kh schedule redels indicate is reascnable for Skagit to beccre cperaticnal, using
.L' g.y the midpoint of the Barry range of inflaticn,16%, yields a cost of $3,407/kw, v ,?.;.: .
, or approxirately $3.8 billica for the entire Skagit project, nearly three ti es the staff cost estimate. To the extent that the investor-cwned utilities will have a higher ARTC rate, this will be higher; to the extent they are able tc centrol
., costs core successfully than WPPSS, it could be icwer. I115 i06
.- 15 and more than double this figure by the report of Puget to my client FERN in the present proceeding before the WUTC. (Exhibit page 8A ) So many different cost estimates for the Skagit project are available from the applicants that it is nearly impossible to make any attempt at analysis of eventual project costs based upon their data. Listed below are a number of the estimates which I have received in the past few months, together with their origin. I hve listed them all in per kw terms, and separated the estimaes which do not include AFUCC. Source w/AFUCC w/o AFUDC Puget: ASL3 Cocket 50-522 51291 51079 WUTC Cause U-78-05 (FERN 11) 51373 (Staff 3-3) 51201 51053 Sand Prospectus 7/11/78 51125 Pacific: ASLB Cocket 50-522 51139 WUTC Cause U-78-05 (FERN #1) 51618 (Staff B-3) 5174J 51298 Sond Prospectus 3/28/79 51518 Water Power: ASL3 Docket 50-522 51087 51021 WUTC Cause U-78-05 (Staff B-3) 51293 5938 (FERN #1) 51294 5923 Stock Prospectus 9/21/78 The sources of these figures from outside this proceeding are contained in exhibit pages 8 - 10. It is clear from this confusion that the participants are uncertain of the project cos ts . They do not even appear to use the same sources of information. The recent estimates by Pacific for Skagit are much higher than tnese used by eitner tne applicants or the staff in this proceeding, althougn :ney are still lower than tne generic studies. At the same time, all of the participants estimates for tneir share of the cost of the WPPSS piants in which tney are participants is much lower than their aritnmetical share of the budgets whicn WPPSS has rel ea sed. Pacific's March bond statement reported costs for WNP-3 of 51350, anc of
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WNP-5 of $1502. At that time, the official budget cf WPPSS for those projects 1115 107
16 were $1570/ka and $2010/ka respectively, aldcugh they have ncw been raised to $1827 and $2183 respectively. The Pacific estirates do not include the cost of first core, which the *iPPSS estirates do, but the difference censiderably exceeds the cost of first core. rne other applicants have also uncerstated their cost obligatiens for k'PPSS. It is clearly evident that all of de cost figures being used by the applicants in this proceeding are artificially Icw. Before any furder ccnsideratien can be made of the ability of the participants to finance par icipatica, 2ese figures should be updated, using cne of the arre recent costing redels availacle. In ::y further analysis at this tira, I will be using ie result of de ?> D regressien andel, unadjusted fc. ei der the high wage rates in k*ashington or for de e:gerience of de A/E. I believe dese will be offsetting adjus=cnca. Tne figure produced by de PMD trdel, $2266/ka, with an cperation date of October,1989, assu: ing issuance of a IRA in Septeder,1979, and a CP in Yarch, 1980, results in a total project cost of $5,837,0C'0,0CO, an increase of 75?'. over de applicant's estirate. . CCST OF PCha , Based upcn tha estirate of $1291/ka, de applicant has incicated dat capital acerticaricn of de project will ecst 40 mills /kah. Usi-.g the figure of $2266/ke, the anorticatica cost rises to 70 mills, based upcn de 757 capacity faccer used by the applicant. Drepping de capacity factor to 60";, as used in de Stone and '.iebster report to de AIF, brings anortizatien to to S7 1/2 mills. The staff fuel cost estirate of la 1/2 rills :.s substantially different $an de applicants have reported to de KUTC, although the basis of de staff estirate is unclear. The applicant repcres to the '.UI apprcxi ately 6 mills, =ch higher than their cwn estimates for coal (3-5 rills), but auch icwer than eider the staff (14.5) or any of the generic esticates (11-25 mills) . (F.xhibit pages 11-13)
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. 17 The staff estirates of busbar pcwr do not include either 0 & M or plant update costs. 0 & M is usually a minor cost in nuclear plants: Secne and Webster used 5 mills, Icwer than Yatanoff, but higher than EBASCO. Plant update is seldctn found in pktspective budgets, but is required to meet the ever-changing require:nnes of tre various regulatory bodies which affect pcwer plant operations. The Trojan plant costs for update (everything other than arortiraticn, 0 & M, fuel) detailed in the cctmutication with si frco BPA (Exhibit pages 14,14A), equal their costs for fuel or 0 & M. I will assume they cernin icw, equal to 0 & M, although they ray rise as rapidly as fuel. Tctal busbar cost: 757. Cacacity Facter 607. Cacacity Factor 37.5 mills Acercization 70 nd11s Fuel 14 1/2 mills 141/2 rills 0&M 3 nills 5 rills Update 5 rills 5 mills Total: 94 1/2 mills 112 rills Trans=issien and distributien costs average 8 rills; Transmission and transferraticn losses ray be as Icw as 77. cn this side of the countains, al dcugh Pacific has reported 147. average system losses (Exhibit Page 14b). Adding dese to the tusbar costs results in a delivered pcwer price of 110 = ills at 757. plant facter, and 128 mills at 607. plant factor. ABILITY CF APPLICANTS TO SELL PChER AT PRODUCTION COST Both Puget and Water Pcwer. have indicated dat their current cost esM mtes for ccnst xtien produce a need fx approxirately a 127. annual rate bike, ccepcunded drcugh the cperati .g dates of the projects. While I have not revisec deir figures, it is evident that a reevaluaticn of the ccnstruction costs for all of de projects in which they are involved will force that revenue requirerent far above de 127. estirated. It is unlikely that they will be able to sustain deir forecast 5.37. and 47. rates of Icad grcwth teared with a eccpound rate hike of
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18 something well in excess of 12". annually.
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Historically the Northwest has had stable electricity prices. Water power rates declined, in real tems, by a substantial proportion since 1960, as shown by the graph they have filed with the WUTC. (Exhibit page 15 ) Presently, most new construction in the region utilizes electrical resi tance space heating, which is responsible for a sizeable chunk of the demand growth the utilities are experiencing. The elasticity associated with space heat saturation is the highest of any market sector, -3.00 according to Puget. This and Puget's other elasticity estimates are contained 'in Exhibit page 16. Regional energy forecasts have been dropping, even thougn the sizeable rate hikes have just barely begun. When the Skagit projects were first proposed, the utilities were forecasting a 6% rate of load growth. The 1979 forecast has dropped to 3.9%. The 1068 West Group Forecast indicated that consumption in 1977-78 would reach 18,000 MW; actual consumption was slightly over 14,00CMW. The Northwest Energy Policy Project identified scme 75 billion kwh/ year of conservation potential in the region whicn was cost-effective at 20 mills, their estimated cost of new ' power resources. With rapidly increasing electricity prices, it is reasonable to expect that energy awareness will improve, and that more conservation potential will be developed. The conservation study done for SPA by Skidmore, Cwings, and Merrill in 1976 concluded that conservation was six times as cost effective as new generation; while new generation costs have increased (in this region) by more than 20% annually since then, conservation costs have not risen as fast. Other conservation studies show the same relationship. While the costs of both conservation and generation may rise at the same rate in the future, even this would result in an increased number of dollars to be saved by moving to conservation. The " monetary illusion" will probably prove to be a valid and significant economic force in energy markets in the future in thee 1115 110
.. 19 Pacific Nortireest, as historically stable electrical prices ( in a wrld of inflatien) suddenly begin to outpace other cost escalaticn. The 40-607. rate hikes the FUD's will i= pose this winter as they begin to pay for WPPSS will be the initial evidence of this. There is very little rarketing experience in the regicn for 110 mill pcwer; it is dcubtful that a market will be develcred. The applicants report tl .t they expect to be able to secure whatever rate increases are required in order to fund the projects; if their ccnfidence were justifiable, I would do well to seek work outside of the utility rateraking process. Tne type of rate relief they muld require in order to more ccnfidently pursue financing muld be for inclusien of ccnst:uction work in progress (CilP) in d eir rate bases. Financial advisors to the utilities, Blyth East an, Dillen and Co. , asked for this type of relief before the Washingten Legislature last session; E3 328, which wculd have audorized this practice, was not enacted. Ballot ceasure 9 in Cres;cn has prohibited this practice. The vetc of HB 435 in the 1975 Washingten Iagislative Sessica prevented de %LTC frcm granting full inclusicn of CvTP, as the utilities have requested. A letter f ctn de fo=- er Chai~an of tF4 ::RC to Gcvernor Ray gave an indication of de impact of CWIP cn utilities ability to finance expensive generaticn. (Exhibit Page 17) The loss of CIIP has been the rajor reasca that Public Service of New Ha=cshire has been forced to liquidate auch of their share of Seabreck (E:<hibit Page 18) FINANCING PROBIS!S Ordinarily, at least 257. of any capital expansion program shculd be funded thrcugh internally-generated funds. Regulated public utilities have often been permitted to drop belcw this cargin, but a mininun of 157. is new censidered prudent by cost financial analysts in today's difficult financial rarkets. Puget has used the 157. minimum in de arguments before the bLTC. (Exhibit Page 19A)
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.- 20 The remainder of the project can be financed with a tix of cccren and preferred stock and long-tern debt. Puget, en page 4 of their exhibit, shews internal cash generatien producing less tFr. of ccnstruction expenditures in all years between 1979 and 1986, the years in which they expect to build the Skagit projects. In 1984, this funding source falls to less thm 27.. Cost escalatien of the projects beyond that anticipated in this applicatien, or any effective resistance to the rate relief they anticipate receiving, will totally cut off internally generated fends. Even under the best of situations, as presented by the applicants, internal fcnd generaticn is inadequate to satisfy the e.<pectaticns of financial analysts, or the minfrun requirements of the cocpany, as indicated in their argurents before the bl.TC. The cargins by which scre of the applicants meet their required financial tests are already quite slender. For Puget and PGE, th6ir present calcu'.atiens shcw coth interest coverage and preferred dividend coverage already at :Pe lirits. Further cost escalatien, which is inevitable, or inadequate rate relief, which is probable, muld force then below their requirerents. Pacific is slightly better off, but by no reans ccc:fortably abcve their recuired coverage. ' dater Pe.ier appears to be in fairly good shape, but is the smallest participant in the project. Interest Coverage Preferred Divident Coverage Participant Requirement Proj ected Faquirement Projected Puget 2.0X cr core 2.1-2.9X 1.5 or rare 1.5-1.9 PGE 2.0X cr core 2.2-4.1X 1.5X or more 1.3-2.2X Pacific 2.0X or rore 2.1-2.5X 1.5X or core 1.7-1.9X Water Pcar 2.0X or core 2.9-3.6X 1.5X 5.9-8.2X b hhile coverage ratics have traditicnally provided the basis en which finmcial ability has been analyted, a differ at perspective is new being taken by sace analysts. The incie.mc sc Three Mile Island has had tremendcus reverberaticn through the financial ccen m ity:in the year befcre the a-cident, nuclear dependent utilities routinely had bcnd ratings cne step lcwer than ncn-nuclear dep.sndent utilities. The gap Fas widened even further new, with virtually all nuclear
ddpendent utilities selling for a st6stantial discount to bock value . Since the Pennsylvania Public Utility Commission removed TMI frcm the rate base of Penelec and Metro Edison, many financial analysts are beginning to consider the degree of exposure which a utility has in any particular plant. GPU, the parent company for the participants in TMI, has about 60 million shares of common stock outstanding, representing about $1.2 billion in stockholder's equity at book value. With roughlyS300 million in casualty insurance on the plant, a drop of roughly 7h points of GPU ccrmon stock has resulted in a coverase for the accident of $720 million; GPU stock had dropped below 8 during .. e weeks af ter the accident, but has stabilized at 104 or so, which is in keeping with the dividend announced after the accidenc, and consistent with the loss of a $700 million plant. Last year, wnen Trojan was shut down, the dependence of PGE on a single generating site became evicent. With 671A ownership, and a Public Utility Cammissioner unwilling to allow pass-through of purchased power costs, PGE (and Pacific and EWEB) have sued their builder. Puget would be in a far more precarious position if Skagit were built and worked poorly. In constructing a worst-likely scenario, it is reasonable to assume that Pebble Springs will not be built, due to dropping cemand forecasts, and effective local oppositicn. Even Gove=or Ray has indicated that a reduction in the rata of g owta for electricity to 3". wculd allow cancellation of Pebble Springs. We can lock at Puget's capital structure in 1988 adjusted to show the alterations wnich have been discussec thus far. P.eported 1938 Structure Debt: 52,897 Preferred: 792 Common equity: 52.126 55,875
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22 Cancellation of Pebble Springs reduces this by $724 (Exhibit page 8E ) Bringing the cost of Skagit up to realistic levels increases the estimate by $1,005 million. The resulting adjusted capital structure would have the following form: Debt: $3,016 Preferred: 862 Common $2,277 Of this total, some $2334 million represents the company share of Skagit. While GPU was able to lose TMI by absorbing the loss as a reduction of the market value of stockholder's equity, Puget could do nothing of the sort; their investment in Skagit would exceed the total of stockholder's equity. GPU retained roughly S615 million in equity; Puget would have essentially none, and would thus not be in a position to seek any sort of credit whatsoever. Tnis would place Puget in the position of being regarded as a speculative inves tment. Utilities make for poor speculation; at least in casinos there is no regulation of the rate of return...a potential for a high return comes with the high degree of risk involved. Puget is already a BBB/Baa, rated utility. Most investment analysts are already downgrading nuclear investments, including the Bank of knerica, which has announced that they are no longer investing in nuclear projects, calling such investment " imprudent." It is highly optimistic to believe that a company with the level of exposure Puget would face could finance the level of participation they have committed themselves to. Public Service of New Hampshire recently ran into this type of problem with Seabrook, and was forced to sell off 60% of their participation in order to reduce their exposure to the point where they were financeable. (Exhibit page 16 ) It is questionable if any customers could be found in the Northwest. Several WPPSS participants are presently reevaluating their participation in those projects, i recognizing that their financial committment has gone beyond the prudent level. 111S 114
d As reported by the Seattle Post-Intelligence- June 19, Chip Greening Executive Director of the Public Power Council has said tnat the small public utilities have invested heavily in the nuclear plants (WNP 4&S) and face " disaster
- f f construction costs can't be spread to all the region's electrical users. This report is basically a confirmation of my analysis of WPPSS mentioned earlier.
If WPPSS needed to find customers for their plants, and Puget were in the same situation as Public Service New Hampshire, seeking to spread their participation, the ability of either project sponsor to finance completion of neir respective projects may be seriously impaired. The result would be a tremendous amount of capital tied up, but no power production. Some discussion of the rate hikes which the utilities have reported should be considered. Puget and Water Power have indicated that their currertt cost estimates show a need for a 12" compound rate of increase .n revenue /kwn. Revising the cost estimates for both Skagit and Peeble Sorings to reflect realistic conditions would raise this to perhaps as hign as 17".. The result would be an increase in average Puget rates from 13 mills in 1979 to 101 mills in 1990. Even at 12: rates woud reacn 53 mills. With tne average all-electric home using in excess of 26,000 kwn/ year, households may be seeing annual electric bills of over $2 SCC / year. Stem wincows, insulation, and heat amps amorti:e thenselves very quickly at that level of energy cost. Alternatively, many customers may choose to fem Public Utility Districts, anf en would reduce the load wnich Puget has to serve, forcing additional rate nikes to produce tne neeced revenue. If Puget cannot maintain a 5.3" rate of load growth at rates increasing between 12-17: annually, they will to unable to derive the revenue trey require. Puget has indicated to the WTC that without an increase in the rate of inclusion of CWIP, and rapid rate relief, that they will be in a difficult position when seeking financing. Since their coverage raticos are already marginal, their internal cash generation is snown to be inacequate to secure financing, proper res;ense from the WUTC would seem absolutel/ critical to their acility to finance the project. However, in the rate case just closed. Puget was given only 6P. cf their request; the closing arguments of tne company indicated that a reduced amcunt of rate relief would not be adequate to supoort the company's construction program, described as "The largest constructicn program for it's si:e of any electric utility in the United States.* (Exhibit page 19C) 1115 115 Fortuantely, the regulatory system is moving away from average cost pricing to inverted rates, allocating the low-cost pcwer we have available to all ayers in limited quantities at the embedded cost of production, and a;olying higner rates to more expensive power from new resources. Sucn rate structures will allcw
24 power users to optionally hold usage down, or pay new resource cost. They also force new resources to be largely self-sufficient, which would likely render many new projects unnecessary by providing a financial incentive for conservation investments at costs approaching the marginal cost of new generation. For this reason the utilities confidence in their ability to get the rate relief they require should be considered very carefully; they may receive rate relief which will allow them to finance the projects if there is a market for the power at the costs associated with them. The GA0 concluded in their report on the Northwest electrical energy situation (REGION AT THE CROSSROADS) that we could reduce electrical consumption in the Northwest by 30% by implementing replacement cost pricing. Incremental pricing will likely accomplish much of this reduction. The financial calculations and assumptions of the applicants need to be completely reworked and resubmitted. As described earlier, the raw data on project costs are unrealistic. Their other assmptions are not much better. The utilities have used optimistic assumptions regarding future money costs and future rates of in fl ation . Puget has reported a 7% inflation rate for calculating the costs of all of their thermal projects, while the nuclear industry is experiencing 13-19" inflation and the coal industry is notfar behind. Puget has assumed a 9". prime rate for short term borrowing, 2h% lower than what is presently in effect. Their estimate for long-term debt, 9-10h% is at the extreme low-end of the market experience this year for Baa rated utilities, although Baa rated utilities with major nuclear projects have avoided the market since tne incident at TMI, so the market figures may be skewed downward at present. These rates could, of course, rise or fall in the future. Their assumed 9% interest rate appears extremely optimistic, and should be adjusted to .2" above the bond rate, pernaps in the vicinity of 10h-115 1115 116
a PGE has been somewhat more conservative with an allowance for a 12.1% prime rate, and a 10 % bond rate. While starting from a higher base, PGE anticipates only a 9.9% rate hike annually, but this will have to revised upward to reflect the actual costs of the power plants they are building. The result will be a very similar pattern to that of Puget, and both will run into elasticity problems, particularly among their electrically heatea homes. Pacific has more properly treated the preferred dividend rate at 9.4%, although it is still too low. Their assumption of a 14.3% average rate of return may shock the various utility commissions which presently regulate them, but I agree that such increases will be imperative if projects such as this are to be financed, in order to compensate the investor for the high risk of nuclear plant ownership. Water Power, with a superior bond rating, has also been somewhat more cautious in their estimates of future financing cost, although they share the optimism of Puget that financing costs will decline in the near future, which is anything but assurrad. Most ecencmists see a significant recession coming, which will tighten up money markets as savings are consumed. The pattern among the companies is quite clear. Those with the greatest exposure, and the least ability to finance the project, Puget and PGE, are consistent in using overoptimistic data. Pacific, with a highly diversified rate base and very limited nuclear investment, utilizes more realistic assumptions, with their latest bond statement showing a nearly accurate estimate of potential Skagit construction costs, comparM with the unwarranted unda.restimation of the other participants. Puget, at the ; ner extreme, is already shcwing themselves to be at the limit of ability to finance anything, with coverage ratios already approaching their limits, internal cashgeneration ciose to zero, and their ex:reme underestimates of both project costs and financing charges. As cost escalations occur, they will
/
undoubtedly violate their fiscal parameters and articles of incorporation. 1115 117
26 CCNCIliSIONS It is wholly evident frcm the interaction of all of the inccasistencies and inaccuracies presented by the applicants that the financial scenario they have proposed is far mre optimistic than even the cost generous of evaluaticns could support. As they are already shc4.ng their financial coverage at the edge of the pe.rtissible range for both preferred and bcnd coverage, and have virtually no internal cash generation, any adverse events will force them into an un-tranageable situaticn. Even their cwn data shcws internal cash generaticn in-adequate to support a ecnstructica program of the :ragnitude proposed, even before adjustren't of the data to reflect realistic cost scenarios. The acverse events whicn the applicants will experience are easily identified by comparison of tneir data with other similar projects now underway. The cost overruns .vnicn have been experienced by 'iPPSS are typical of :ne incustry, as suppcetec by the recent study by the Supply System, and by the Sarry report. The costs of the last tvo plants WPPSS is building, scneduled for operation lang before the Skagit plants could be in service, amount to ol", more than the applicant's estimate, even though WPPSS is able to accrue AFUDC with tax-exemot securities, and ignoring :ne fact that. inflation is rampant in tne pcwer piant businass, wi:n '.iPPSS acknowlegng that furtner escalation is inevitable. All of the independent costing and schedule models indicate that the applicants nave grossly underestimated the time and expense asscciated witn : heir proposal. The assumptions for financing cost are not reflectiva of the capital market as it new exists, or as mest analysts anticipa:e the future. Finally, there is little evidence that the acpiicants will be able to secure tne rate relief they will recuire, or be able to sell pcwer frcm the projects at those rates, cue to :he nign elas:icity the region will experience as we move from an age of ceclining real energy nrices to an era of rapidly increasing prices.
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1115 118
QUALIFICATIONS OF JIM LAZAR PRESENT POSITION: Consulting economist :n utility rate design and energy conserva' ion. Clients include Fair Electric Rates Now, Olympia, WA (Research Director); Communities United for Responsible Energy, Lewis County, WA; Tacoma Light Coalition, Tacoma, WA; Pacific County Dublic Energy Forum, Raymond, WA; all involved in utility rate proceedings. Also providing assistance to members of Tacoma City Council and Mason County PUD #1 on energy planning issues. EDUCATION: Western Washington University, B.A.,1974 (Economics) Western Washington University, M.A. in progress (Environmental Administration and Energy Economics) EXPERIEllCE: Washington State Legislature, Research Analyst 1977-79 Involved primarily in transportation and energy research, including analysis of alternate energy resources, electrical generation cost, and capital budgeting for large state construction projects. Economist, Sierra Club,1975; engaged in comparison of energy conservation costs with energy production. Chairman, Energy Policy Team, Bellingham, WA City Council, 1974-75; Involved in developing alternate scenarios for energy production and consumption 1975-2000. Professional Organizations: American Econcmics Association Association for Evolutionary Econcmics RECENT PUBLICATIONS: ALLOCATING POWER COSTS TO PRCMOTE CONSERVATION: A RATEPAYER'S GUIDE, (FERN) July, 1979 CCNSERVING ELECTRICITY IN THE NORTHWEST (Jointly with Dr. R. Frye) April,1979 THE SCND STATEMENTS OF THE WASHINGTON PUBLIC POWER SUPPLY SYSTEM: A CRITIGUE Recent Testimony: U.S. Senate Committee on Energy and Natunal Resources, Pacific Northwest Electrical Energy Planning and Conservation Act, S-885; May 24, 1979 Oregen Senate Environment and Energy Co :ttee, Need for Pebble Springs nuclear project; May 22, .375 Washington Utilities and Transpor*.ation Commission, Ability of Saa rated utility to finance nuclear power construction frogram; Cause U-78-21, Decemoer 13, 1979 1115 119
r s r - .., h%%
;;y %%Rd RE.CD CORRF9DONPrNCP l f b 1979 h 3 !'
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kh. Exhibit of Jim Lazar e a e l!15 120
COST AN ALYSIS OF LIGHT WATER REACTOR POWER PLANTS PREPARED FOR THE DEPARTMENT OF ENERGY WILLIAM E. MOOZ . R-2304-DOE JUNE 1978 Rand SANIA MONCA, C L +34% 1115 121
e e . the substitution of the BW indicator shows that plants using SW equip-ment took about 11 months longer to construct. Locational variables , whether or not a cooli.ig tower is used, and whether or not the plant is colocated with another plant, appear to have little effeer. on con-struction time. The regression indicates that learning exists, and that the coefficient is significant. It also indicates that there is a countertrend to this one that is related to CPIS. It can be thought of as a time trend toward longer construction times that is countered by the experience curve of the architect-engineer. Since the t-statistics of the location indicators, colocation indicator, and tower indicator are so low, we eliminate these terms and run one last regression analysis. The results , shown in Table 5, are what would be expected from the preceding analyses, and each term is significant at the 0.01 level or less. The regression equation has Table 5 THIRD T2 REGRESSION ANALYSIS FOR 65-PLANT DATA BASE SAMPLE SIZE . . . . . . . . 65 505 0F WEIGHTS . . . . . .. 6.5000D 01 ESTIMATED STD DE7 . . . . . 1.3111D 01 R SQUARED .. . . . . ... 0.5355 _ 7ARIABLE CCEFFICIENT E STD STD DEV T 0 -2.7082D 02 a.67550 01 -3.1217* 3 CPIS 4.54780 00 1.31250 00 3.4650* 10 SIZE 4.36430-02 a.9292D-03 u.8977" 24 SW 1.30650 01 u.88223 00 2.6761* 31 L:8 -4.00390 00 1.95050 00 -4.1035* 9 72 DIP!N DENT V ARI ABLE ANLLTSIS OF V ARI ANCE SOURCE DF SS 55 F REGRESSION 4 1.12900 04 2.9726C 03 17.293 ERRO3 60 1.03140 04 1.71900 02 TOTAL 64 2.2:043 0'4 All coefficients significant at 0.01 or less. 1115 122
Table 11 THIRD RFCRESSION ANALYSIS OF 39-PLANT DATA BASE S AMPLE SIZE . . . ..... 39 SUM OF WEIGHTS . . .. ... 3.9000D 01 ESTI5ATED STD DEV ..... . 1.04710 02 2 SQUARED ......... 0.7643 YABIABLE COEFFICIENT ESTD S*D DEV T 0 -8.8855D 03 1. 0499D 03 -0.4636* 3 CPIS 1.41340 02 1.5373D 01 9.1939* 10 SIZE - 2.19 43 D- 01 9. 80 99 D-0 2 -2.236d? 20 TOWER 9.20400 01 3.4354D 01 2.6792* 13 toc 1 1.1812D 02 4.1363D 01 3.0976* 3d LX -7.2422t 01 2.0119D 01 -3.5997* 3 3 CO ST/K V DEPENDENT YARIABLE ANALYSIS OF V ARIANCE . SOURCE DF SS MS F REGHESSION 5 1.17350 06 2.34700 05 21 uCS E R RO R 33 3.6184 D 0 5 1.09550 04 TOTAL 38 1.5353D 06 Significant at 0.02 or less. Significant between 0.02 and 0.05. even show that these increases have been more pronounced than has been generaly understood. As we will see, other factors have helpe; to mitigate the temporal cost increases. Two questions arise concerning the CPIS coefficient. The first concerns how real it is. We have already noted the high collinearity of CPIS and T1, and have discarded Tl ss a major cost determinant ex-cept as its variability is captured by the other equation variables. This decision was based on the statistical characteristics of TIRSID. The hypothesis that Tl itself lacks cost significance can be further tested by u ng another argument. The data base shows that Tl in-creased appr. ximately 15 months over the 5-year period covered by the 39 data poin'.s. If the measured increase of $~00 per kwe were really due to increases in T1, it would imply that construction permit a M7
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_f I m L- T L 1115 121! -
the substitution of the BW indicator shows that plants using BW equip-ment took about 11 months longer to construct. Locational variables, whether or not a cooling tower is used, and whether or not the plant is colocated with another plant, appear to have little effeer. on con-struction time. The regression indicaces that learning exists, and that the coefficient is significant. It also indicates that there is a countertrend to this one that is relcted to CPIS. It can be thought of as a time trend toward longer construction times that is countered by the experience curve of the architect-engineer. Sinc; rhe t-statistics of the '.scation indicators, colocation indicator, cad tower ind cator are so low, we eliminate these terms
, and run one last regress ~.on analysis. The results , shown in Table 5, are what would be expected from the preceding ar lyses, and each term is significant at the 0.01 level or less. The_ regression equation has Table 5 THIRD T2 RECRESSION tsNALYSIS FOR 65-PLANT DATA 3ASE SLMPLE S:tE . .. . . . .. 65 SUM DF WEIGHTS . . . . . . . 6.50000 01 ESTIMATED STD DE7 . . . .. 1.31110 01 P SQUAPID . . . . . . . . . 0.5355 j
74RIAStt COEFP!CIENT E STD STD DEY T 0 -2. 70 8 2D 02 8.6755D 01 -3.1217* 3 CPIS 4.54790 00 1.31250 00 3.a650* 10 SItt 4. 36 4 3 D-0 2 S.92923-03 u.9277* 24 BW 1.30650 01 4.38223 00 2.6761* 31 L3 a.00390 00 1.95050 00 -4.10]5' 9 T2 DEPENDENT V ARI ABL E AN A LYSIS O F V Aa! ANCE SOURCE DP SS MS P R! TRESS 0N u 1.18900 04 2.97:6: 13 -17.293 EPtoa 60 1.031.D 04 1.71900 02 TOTAL 64 2.2204D 04 All coefficients significant at 0.0L or less. 1115 124
WASHINGTON PUBLIC POWER SUPPLY SYS1 EM NUCLEAR POWER PLANTS COST, SCHEDULE, AND PRODUCTIVITY, AN OVERVIEW OF THE INDUSTRY AND IMPLICATIONS FOR THE FUTURE t Prepared by: The Project Planning and Measurement Department J.P.M. MAIDMENT Project Management Specialist April 1979 1115 125~ g
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_ ind p ALLOCATION OF PLANT COSTS + 1978 ESTIMATES 9,y Se coal. D LLARS PER KW The 1648 Jy
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k& ElG5i:Elsif15E INTEREST DURING k 1266 y
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- :::-:5:::+55 555 INDIRECTS AND :55!5!5!$5335E5!$!bi A (([38k' OVERHEADS 1978 LEVEL [jjjjj5j!E5j5j!jjj[j!j!j5j[j5j 3 MO 103 e CCNTINGENCY 1978 LEVEL Y[ "*
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m- 1978 'EvEL % ex/s 220:e//. l i rei
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. . . . 1978 LEVEL
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.v , y su m = m..,w p q m:srwrmw:1 NUCLEAR co^'
OPERATING DATES 1988 & 1090 PD M OR' M :lt OPERATING DATES e. fi: 1988, 1989, & 1990 . ct CHART 5 - . h. tr
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h Chart 5 shows the breakdown of these estimates Indirects and overheads, which include engin- n into major e!ements of cost. The cost of mater- eering, design and related services are based on ; ial and equipment will be established by the a well-managed and well-executed pcoject. ; c market conditions existing at the time commit- ; ments are made, both as to order price and The sum of these items is only about 45 percent terms of sale. You simply would pay less in a of the total project cost. The remaining 55 per- ; buyer's market or more in a seller's market. cent covers estimated escalation and interest during constructicn. The installation cost can vary significantly de- Escalation is pure judgment since no one can be pending upon how well the project is managed certain of the escalation or inflation trend as and constructed, the labor climate in the area, was demonstrated by the unpredicted inflation-labor availability and quality and other factors. ary binge in 1974 and 1975. Ebasco's present We have assumed here a controlled, well- opinion of future ' post 1973 escalation indi-managed ccnstruction program. cates increases averaging about 7 percent per year. F The estimates include an item for contingencies. lllJ j 3] ' Here,13 percent has been used for the coal. There is only minimal centrol over interest fired plant and about 17 percent for the nuclear, during construction. Availability of money at primarily because of greater uncertainties as to an 8.5 percent per year interest rate and a cash what may be required for the future, flow requirement typical for the types of plants o A.
MW 9 LEVELIZED BUS BAR POWER COSTS :lls First Ten Years Plant Operation (70%CF) , g MILLS PER KWH 63.8 65.2 !n
- 3.c .. Abo LEGEND: O abo FIXED CHARGES . 13.3 o,e att
# CPERATING & MAINTENANCE COSTS 1.8 w - e nu the
/ FOSSIL FUEL OPERATING COSTS s-NtiCLEAR FUEL BURNUP COSTS [
' We U NUCLEAR FUEL CARRYING COSTS M.--
^"
P00ROR8NAL 10.7 A 0.4 A 1.3 > 7.9 j y ,pj 0.6 A , O.6 ' 5.6 4.7 ' TYPE OF UNIT 3>- NUCLEAR COAL NUCLEA R COAL AUTHORIZED > 1969 1969 1978 1978 h*R[T N > 1976,'78 1976,'77,'78 1988,'90 1988,'39,'90 FUEL COST LEVEL 1pTICN PE R100 > 1977-1987 ,1989-1999 CHART 6 plutonium is allowe 3 by 1989, which Ebasco and nuc! ear plant investment requirements and believes may happert, the cost of nuc! car fuel increased coal and nuc! ear fuel costs, bus bar changes significantly. The estimated cost of the power costs will also increase relative to esti-initial core remains unchanged at approximately mates made in 1969.
$1.23 per kWe. The levelized investment in fuel for the first ten years of operation, 1989-1999 What are the re!ative economics between coal increases by S t4/kWe to $147/kWe. However, and nuclear for base load generation? Obviously, the tota! estimated fewtized fuel cycle costs for this must be studied for each situation, but the the first ten years will be 13.70 mills per kilo- next chart shows how the two examples com-watt-hour or $1.34 per million Stu, a 16% re- pare based en the investment and fuel values duction from the cost estimate based on no previously shown.
reprocessing. } } } ,p). b Chart 6 shows the levelized bus bar power costs Assuming no reprocessing, there is a ten fold for the first ten years of operation for the nuclear I increase over the values estimated in 1969. (no fuel reprocessing) and coal-fired plants esti-With reprocessing there is a seven fold increase mated in 1969 for initial operation in the 1976-over the values estimated in 1969. 1978 period and as is estimated today fcr initial operation in the 1988-1990 period. LEVELIZED BUS BAR POWER COSTS in 1969, we were projecting bus bar power of it is obvious, then that with increased coal-fired about 3 mills per kilowatt-hour for a 2 1200
KOMANOFF ENERGY ASSOCMTES A COMPARISON OF NUCLEAR AND COAL COSTS by Charles Komanoff Presented as Testimony before the State of New Jersey Board of Public Utilities on behalf of the New Jersey Department of Public Advocate Division of Rate Counsel In the Matter of the Board's Order Of Inquiry into the Reasonablenes's of Electric Utilities Construction Programs - Docket No. 762-194 Phase III October 9, 1978 1115 134 475 PARK AVE SCUTH 32nd FLCCR NYC 10016 212-665-4191 \, //
e = Table 1.1: GENERATING COSIS FOR NEW JERSEY NEW UNITS (All Costs in 1985 Present-Worth Dollars) Section of Nuclear Coal This Testi=onv Unit Si:c 1150 Mw 600 Mw1/ Capacity 2'/ 2300 Mw 1800 Mw 8 Capital Cost, per-kw -
$1875/kw $1025/kw 2 Fixed Charge Rate 15.56% 13.94~ 10 Annual Fixed Charges $671.0 Million $257.2 Million Annual C&Ml $ 5.6.8 Million S 54.6 Million 9 4 /'
Capacity Factor 55% 70% 3/5 An=ual Generation, =wh 11,081,400 11,037,600 7uel Cost, per-kuh2 2.43c 3.17c 7/6 3 Annual Fuel Cost / $269.3 Million $349.9 Million Total Annual Cost' $997.1 Million $661.7 Million 5/ Generating Cost per-kuh- 9.00c 6.00c/kwh Notes
- 1. An expansion plan using 300-Hu coal units appears to be slightly less expensive than the 600-Mw coal plan.
- 2. Unequal enounts of capacity are compared which are equivalent in their contribu-tions to system reliability. The assumed Equivalent Forced Outage Rates are 22.5% nuclear and 15% coal. See Section 8. ~
- 3. All variable costs are levelined averages for the 1985-2015 period, present-worth to 1985 at a 10% discount race. .
- 4. Nuclear capacity factor is average of projections for PURs (60") and 3Was (50%).
- 5. Generating costs are 30 year average levelized to 1985. Costs in 1985 would be 7.72c/kuh nuclear, and 4.58c/kwh coal. This calculation uses 1985 fuel and 06M costs and lifeti=e fixed charge rates and capacity factors.
Ii15 135 - XM
. 4 THE ECONOMICS OF NUCLEAR P0kT.R PRESENTED BY W. J. L. KENNEDY, VICE PRESIDENT AND DIRECTOR OF ENGINEERING STONE & WEBSTER ENGINEERING CORPORATION TO ATOMIC INDUSTRIAL FORUM, INC.
CONFERENCE - ON NUCLEAR POWER AND THE PUBLIC KANSAS CITY, MISSOURI Februarf 26, 1979
\
1115 136
f All costs are in $/ kw net electric sendout based on custom design, first unit on site, once-through cooling, scrubbers on coal plant, designed to regulations and standards applicable as of 1/1/79 except that $50/kw has been added to 1990 plants for possible future regulatory requirements. TOTAL 1937 AFUDC
' TOTAL 497 @ 97* 1509 286 TOTAL AFUDC '1440 '" ESCALATION 903 -
AFTER 1/1/79
@ 9% - 1223 234 513 669 ** ESCALATION 13 0 900 557 710 f AFTER 1/'/67 PLANT COST IN 302 "PRESENT DAY" 900 DO N
*367 PLANT COST IN "PRESENT DAY" 279 [AS OF 1/1/79\ 710 367 / DOLLARS \ 279 AS OF 1/1/67 .
1250 M W 800MW 1250 MW 800 MW NUCLEAR COAL NUCLEAR COAL PLANTS PLACED IN SERVICE 1/1/79 PLANTS PLACED IN SERVICE 1/1/90
" Based on experienced escalation "* Based on assumed 6% compound escalation rate to poi,t of each expenditure Coal escalation is nearly as high as nuclear, even though it has a shorter schedule, because construction starts later to meet some in-service date.
Estimates are based on plant design as of 1/1/79, not as it would have been in 1967 Numbers marked
- are, therefore, higher than would have been estimated in 1967 when regulatory requirements and effects on schedule could not have been anticipated. Estimate assumes 115 months from authorization for detail design and 79 months from construction start to commercial operation date for nuclear. 78 months and 48 months, respectively, for coal.
A standard preapproved nuclear plant would reduce cost by cbout 5300 per kw. ALLOCATION OF CAPITAL COSTS
.2 1115 137 n
WASHINGTON PL!BLIC POWER SUPPLY SYSTEM
/A M b N SliPPLY SYSTEM PR*O!ECTS:
QUESTIONS & ANSTNERS
.i l
i 1 PREPARED BY bib [5$ STAFF FEBRUARY 1979 ; k t 1115 138
\1 f.
1-LACE ltATE C01lPARIS0ft , 1978 llagefitr. _ inclutling fringes llu ke Tennessee Coimionwea 1 tli Cra_f L. Power Co. Va l l ey_ A,o tipir i ty. Edison Co. l_lan t oni ilo il erma Eer $ -
$13.84 $16.30 $19.06 Carpenter 8.82 10.14 13.65 15.96 Electrician 9.30 11.90 15.81 19.36 Ironworker 9.30 lI.74 15.53 18.01 c'
etmetal 10.58 12.97 14.54 21.12 Pipefitter 9.30 12.72 14.72 20.50 Laborer 5.25 7.07 10.88 14.51 Operatin9 fn9ineer - 9.67 15.10 16.14 Composite Rate $ 8.83 $ 1.l_. 21 $14.36 $1fl. 27 Percentage i ess liian tillP-2 107% . 63% 27% - t 6 N W
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........................-. 4ANur&C7uAIv. pe00VCfION .ua<*5-............-.--.... FA8N = AGE aafE it t A L 4 54 4 AasFONA calif HA=All 104HO NEvmA ORE CN Uf4H =*5H U$ PCS 1949 1.19 4.49 1.10 3.62 3.0% 3.16 3.99 3.58 3. 2 F 3.39 1.59 4.80
.; 1910 1. t h 4.A9 1. 91 3.30 3.21 3.29 4. N 3.02 3.26 . 36 1.a6 4.90 F 81 P t 1.if 5.42 3.h1 6.02 3.11 3.9) *.24 4.39 3.6% 4.2S t.F3 8.96 19 f 2 s.Jt 9. 66 3.49 6.26 3.65 3.11 6.39 4.30 1.49 6.52 1.81 2.04 1971 6.19 9.11 4.11 6.65 3.95 4.0% 6.5d 4.60 3.FF 4.42 L.94 2.49
- 19 t* 6.41 F. 06 6.60 4.F1 6.29 4.19 4.Ae 5.32 1.92 S.22 2.32 2.69 s 11 P5 6.41 4.05 6.89 1.25 4.66 4.15 1.26 5.53 6.05 S.79 2.45 2.ft
, 11 F6 4.t1 f. 42 5.11 5.60 3.39 S.2F S.61 6.38 4.49 6.33 2.e5 2.93
- r. 1917 9.63 4.4F e.56 1. ;9 S.69 9.51 9.40 6 61 1.14 6.95 2.93 3.88 f 1918 6.14 4.A1 6.35 6.42 5.9) 6.52 6.55 NA 5.64 14 3.10 3.39 UI 1977 Sf 91 5.71 9.e3 s.F1 6.13 9.65 9.40 4.16 6.F9 9.27 6.99 NA NA CCf % . 4.? 1.A% 5.66 6.L2 $.44 6.J4 6.33 6.81 5.25 6. 77 3.1' 3.38 N:lv 5.15 1.39 %.17 6.13 9.35 6.03 6.27 6.d5 5.30 F. J t NA NA
. Off %.45 11. 10 9.75 4.19 S.d0 6.29 6.29 6.92' " 5.32 7 23 NA NA
- N 1978 JAN 5.17 10.92 5.00 6.21 S.96 6.26 4.40 6.4% 5.18 f. 2 3 3.18 3.3F
/ tsi %.44 10.64 5.44 6.19 5.46 6.36 6.11 5.99 5.42 F.29 NA Na
=&a 5.16 u . 09 5.36 6.24 S.96 6.12 6.26 6.ie 5.6a F. n NA NA
{l ye . Ard 9.11 1J.J8 9.15 m.19 9.1F 6.3% 6.Jn 7.06 S.51 F. 34 3.38 3.38 j *st JHNF
- 6. 12 4.37
't.17
*. 01 9.92 6.00 6.36 m.62 4.85
%.60 6.26 7.16 6.64 6.56 7.80 7.13 5.55 S.63
- f. 3 9 F.52 NA NA NA NA
), Jot v e.1F 9. 1 *.21 %.4F S.52 F.09 6.6# F.63 S.9% f.65 3.30 3.23 I A uf. 6.16 9.0$ 6.J4 6.66 5.63 6.93 6.# 4 7.22 5.F6 7.62 NA NA
- 1 4
Sr a f' ne. t 6.29
. 32 13.26
. 83 6.is 6.15 a.95 6.57 6.Os 6.40 6.62 6.66
..s=
6.63 F.is F.36 s.si 5.92 F. s s r.6a u 3.20 N. 3.54 i Na N 6.l4 1 26 4.27 6.63 6.10 6.69 6.68 F . 61 S.93 F .17 NA Na aft 6.67 1.92 6./1 4.72 6.23 6.F4 7.JO NA 5.96 14 NA NA ,' 2 . 19F9 nN 6.4, u 6.i6 6. n 6.40 NA 6... NA 6.iG NA 3.49 3.36
.; FF9 6.%0 NA NA NA NA NA NA 54 4 NA NA NA NA i,i I
6 P00R ORGINAL "
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!115 140 I.
7
P R O S P E C'"11!!
$85,000,000 Puget Sound Power & Light Company First Mortgage Bonds,9%% Series due 2008 Interest payable January 1,1979 and semi annually thereafter on'each July 1 and January 1.
The New Bonds are redeemable at any time at the Company's option at the Regular Redemption Prices set forth herein, except that the New Bonds may not be so redeemed prior to July 1,1983 through certain refunding operations as more fully set forth herein. The New Bonds may also be redeemed at any tirne at the Special Redemption Price (100% plus accrued interest) from cash in the Depreciation Fund and in certain other circumstances. See "The New Bonds." THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Pnce to Ueder wnting Proceeds to
, Public(1) Discour u(2) Company (1)(3)
Per Bond . . . . . . . . 99.287 % .875 % 98.412 % Total - 564,536.550 $568,750 $53.967,300 (1) Plus acerued interest from July 1,1978 to date of delivery. (2) The Ccmpany has agreed to indemnify the several Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933. (3) Before deducting expenses payable by the Company estimated at $150,000. The New Bonds are offered subject to prior sale when, as and if issued by the Company and accepted by the Underwriters, and subject to the approval of certain legal matters by their counsel and by ecunsel for the Company. The Underwriters reserve the right to withdraw, cancel. or modify such efier and to reject orders in whole or in part. It is expected that delivery of the New Bonds will be made in New York City on or about July 18,1978. Merrill Lynch White Weld Capital Markets Group Menill Lynch, Pteree, Fenner & Lusith Incorporated Salornon Brothers Dean Witter Reynolds Inc. Th: date of this Prospectus is July 11,1973 1115 141 x8
Power Resources-Under Construction or Planned Estimated Estimated Estuosted Total Toist Net Esnmeved Coastrwetson Cosit s) Compa n y's Cost of Casabelley Emergy Date of Project eed Unie ( Mess. Source Opera. Comesay's Cost to Company's 1m a ties Total Ownenup 3/31/78(e) Share Ng estes) ( Fuel) anan t b ) per K W (Militens 1 Shere MI (Ml!!!oas) (Mit!!.ns) Coising Colsartp, Montana J 700 Coal 1982 5 714 to 4 51.000 to 2 5't. 518 5 250 to 700 Coal 1983 5 786 51.100 Pebble 5pnngs 5 273 Atlan gton, Oregon i IJ60 Nuclear 1986 51.151 to 52.900 to 2 IJ60 20(e) 534 5 580 to Nuclear 1989 S t.230 $3.100(d ) Rock Island 5 620 Rock Island, Wastungton 14 410 Hydro 1978 79 Skag (O (f) (O (O (O Sedro Woolley, Wastungton I I,288 Nuclear 1985 $1.126 to 12.900 so 40(e) 561 51.160 to I l.218 Nuclear 1987 51.165 53.000( d ) Stjoo Satsop. Wastun gton 1,240 Nucliar 1984 $1.129 to $1.400 to $ 58 5 70 to i 51J10 5 8,500(d ) 5 75 (a) Including allowance for funds used during construction and giving effect to estimated future i inflation but excluding transmission facdity costs. Esdmated construction costs are subject to review and may be further revised from dme to time due to delays in regulatory action, environmental matters, changes in equipment delivery schedules, contract disputes, financing considerations and other factors which may arrect the construcuon program. Data on Pebble Springs and WPPSS No. 3 are supplied by the sponsor. (b) These dates represent current estimates. As a result of environmental and licensing preceedings, the Company and other plant sponsors have expertenced delays and future delays are possible. See the desenption of the projects below and " Environment" , (c) Should any of the proposed plants be cancelled, the Company may incur substantial additional costs, including cancelladon charges, since the Company must make substantial investments and commitments in proposed plants pnor to compleuon oflicensing and other proceedings necessary for their construcuan and operadon. (d) Not including cost of initial nuclear fuel cores esnmated at 570 million for Unit I and $158 million for Unit 2 of the Pebble Spnngs Proje, 592 million for Unit I and $100 million for Unit 2 of the Skagit Project and $63 million for the WPPSS No. 3 Project. See "Skagit Project" and " Fuel Supply-Nuclest Projects" for desenptions of contract disputes that may ar r ect the costs of a nuclear steam supply system for Unit 2 and fuel cores for both uruts of the Skagit Project. ( e) Joint cwnership arrangements for the Pebble Springs and Skagit projects are i ubject to continuin review and negodadons among the project participants. Pending allocadon to other parues of an uncommitted 15% ewnership share of the Pebble Spnngs Project, the Company wtll carry an addidonal 3.5% of the project costs. (f) All construction expenditures for the Rock Island Project will be incurred by Chelan County PUD, the owner of the project. The Company will receive, under a power contract,100% of the output through the year 2012, subject to reducuan after July 1, :000, as described below. Chelan County PUD has issued S298.6 mdlion of revenue bonds for construction of the project, including interest during th construction period. 16 P00RORSEl. 1115 142 Y
D- T * ;;, . c';.. CAUSE U-78-05 FERN PUGET SOUND POWER & LIGHT COMPANY REVISED ITEM 1. Q. Please provide (1) the capital cost and cost per kilowatt hour as estimated at the time of the original application, and (2) the most recent estimated capital cost per kilowatt hour together with the dates of the estimates for each thermal generating facility in which
- you are x participant.
A. CAPITAL COSTS ONLY (2) .MOST RECENT ESTIMATE b! (1) ORIGINAL ESTIMATE SX10 Milla/kwh
! SX10 Mills /kwh 1/ 92.2 4.89 331.3 17.59 Colstrip 3 & 4 1/ 688.6 12.33 1415.1 25.34 Skagit 1& 2 375.3 12.30 670.8 21.'98 Pebble 1 & 2 -
27.4 S.14 77.0 22.91 WPN #3 1/ Includes Cwners Costs , AFDC, Escalations & Taxes 2/ 751 Plant Factor 3/ Includes transmission 4/ The original estimate and the revised estimate are on substantially Myers in different basis as described in the testimony of R. V. WUTC Causa No. U-78-21 I115 143 j) ,$
; & ar Seaue R _ w c e _ f b w r % ,. w Rer a I rm_3 - /
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- Cause No. U-78-05 i 3
a' . Attachment No. 73 , g I j S100,000,000 i Pacific Power & Light Company First Mortgage Bonds, c'o Series due 2009 i l' I i The Bonds will be redeemable,in whole orin part, at any time on 30 days' notice at the option of the 2 Company at the redemption prices set forth herein, provided that, prior to April 1,1984, no redemption I may be made at a general redemption pnce through refunding at an e:Tective interest cost to the Company ofless than the e:Tective interest cost of the Bonds. Such restriction is not applicable to redemptions at a 1 special redemption price for the replacement fund or with certain deposits and proceeds of property. (See I ,
, " Description of New Bonds.")
L l
! Y THE
- , THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVE '
'. SECURITIES AND EXCHANGE CONINilSSION NOR HAS THE CON..mSSION f PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIN11NAL OFFENSE. i This Prospectus is to be used in connection with the Public Invitation for Bids for the purchase from the Company of the New Bonds referred to herein. The Company will receive bids up to [2:00 Noon. New York Time, on Apnl 10, 1979, at Room 2033 Two Rector Street. New York, N.Y. An information meeting will be held at The Federal Room. ith Floor, Nianufacturers Hanover Trust Company,40 Wall Street, New York, N.Y., at 2:30 P.Nt., New York Time, on Apnl 9,1979. 1115 147 The date of this Prospectus is Ntarch 28,1979.
e
)DDRORGsit -
Future Generating Plants reproc. the Pre Company's Ownershi' The pr Sched. long-te uled TI-by Name- Cost Total Estimated Spon. plate ihrough Esiimased Cmt for stor Enerty Source sur Ratant % MW 12/31/78' Cosi' Per KW' . Indicati ( Mega.
,, a n o <0003 <000 Trojan Pebble jim BRIDGER Skagit Roca Springs. W)cming Cost Fired Siesm No 4 1979 500 66.7 333 S144.300 52:5.300 S 67i No.~ 3 1943 700 10 0 70 WPPS.
COLSTRIP Coal Fired Steam 9'500 130.200 431 Colstrip. Montana No. A 1984 700 to u 'O wpp3, WPPS$* N uclear No. 3 1984 1.240 10 0 1:4 23.w) 16 A.e002 1.3602 If,atil Saisop. W ashin gton No. 5 1996 1.240 10 0 t:4 21.600 186.3002 1.5022 SKAGIT* Nuc!est No. I 1986 1.288 20.0 258 43.700 -15 8.9n02 1.7798 availab No. : 1988 t.288 20.0 258 - 376.t002 1.4582 Concrete. Washin gton off site Nuclear No. I 1987 1.260 29 42 3702 58.600 549.30022 f.JAf2 PEBBLE SPRINGS * .2,700 465.50023 1.2532 Arlin gton. Oregon No. 2 1939 1.260 29 43 3703 TOTAL 1.977
- Or i Costs and estimated costs include only the Company's portion of jointly-owned plants. Estimated filed ar costs are subject to constant review and change. '0037) 2 Excludes costs of nuclear fuel. ' Indemt 3 The Company's portion is currently funded at 29.4% but 15Po of the plant ifavailable for other i Project participants ar d if this entire portion is assigned, the Company's portion would be reduced to 25Fo; ' against PNGC, a group of Northwestern public agencies, has announced its intent to acquire 10c~o of Umt No.1. i has dei i
d The Company is advised by the sponsors of the nuclear generating facilities in which it is the per participating that fuel supplies for such facilities have been arranged to allow the units to operate for the predict periods indicated below: I- Or Trojan Until March 1983 (March 1988,if tne present interim agreement isubsidi for importation and use of foreign uranium remains in effect) Montai Pebble Springs No. I 21 months 79-3-u. Pebble Springs No. 2 No contract thirdti. Skagit No.1 33 months becaus Skagit No. 2 33 months others. WPPSS No. 3 Until approximately 1998 pay,w, Until 1990 with approximately vs of the annual requirement for on Jan; WPPSS No. 5 t!' followmg eight annual refuelings under contract. becaust and pu: The fuel cyc!c for nuclear generating units involves ti.: ;cquisition of uranium concentrate, its the pia conversion to UF, enrichment, fabrication of the nuclear fuel assemblics, storage of spent fuel and, if which permitted by federal energy policy, its reprocessing. Contracts for uranium concentrate, conversion, merit. enrichment and fabrication, beyond those covenng the supplies for projects listed above, will be required for operation of those nuclear projects. The Company anticipates that the necessary additional fuel Fu supplies will be available, but is unable to predict the prices therefor The Company is informed that no Power ' 26 1115 148 yg
FEltti 1. (1) PACIFIC POWER & l.ICIIT CollPAllY & v Production Plant Construction Expenditure Sunnary -
- For the First Year a Project was included in The Company's Iludget
('t housands of Dollars) _ Original Budget Cornpany i In Total Cost Per Description Year Sha re-flw Service Cost Kw (1) (2 ) (3) (4 ) (5) (6) Fossil Plants: Jim Bridger Unit 4 1974 333 1978 Colstrip Units 3 and 4 1974
$137 225 $ 412 140 1979 35 730 255 flucicar Plants:
WPPSS tio. 3 1974 125 1981 69 475 - 556 WPPSS tio. 5 1976 124 1983 122 763 990 Skagit 11o. I 1974 120 1982 63 777 531 Skagit tio. 2 1975 258 1985 254 403 986 Pebble Springs lio. I 1973 330 1979 120 000 364 Pebble Springs tio. 2 1975 315 1985 331 020 1,051
,c I P,
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FERil 1. (2) PACIFIC Poller & LIGitT C0!! patly Production Plant Constrisct ion Expeitdi ture Suunnary ('iliousands of Dollars) 4 Company In Cost Per Description I.ocation Slia re-itw Service Total Cost Kw (1) (2 ) (3) (4) (5) (6) Fossil Plants: Jim tiridger tinit 4 Rock. Springs,11yoming 333 1979 $ 225 281 $ 676 Colst rip linits 3 and 4 Colstrip, llontana 140 1984 130 300 931 tioclear Plants: ilPPSS tio. 3 Satsop, liasliington 124 1984 168 635 1 360 tlPPSS tio. 5 Satsop,llasliington 124 1985 186 250 1 502 Skagit 11 o . 1 Sedro lloolley,llasti. 258 1986 458 854 1 778 Skagit tio . 2 Sedro lloolley,11asti. 258 1988 376 126 1 458 Petalile Springs tio. 1 Arlington, Oregon 370 1987 549 258 1 484 Pelila te Springs tio. 2 Arlington, Oregon 370 1989 465 509 1 258 IJOTE : 'llie amounts sliown exclude nuclear fuel cn a' & g.a
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PROSPECTUS 900,000 Shares Tae Washington Water Power Company Common Stock (rto par value) Outstanding shares of Common Stock are listed, and the shares otTered hereby will be listed, on the F"' New York, Pacinc and Spokane Stock Exchanges. The last reported sale price of the Common Stock on the New York Stock Exchange on September 20,1978 was $23Ps per share. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COA 1511SSION NOR HAS THE CON 1511SSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN-TATION TO THE CONTRARY IS A CRISilNAL OFFENSE. L'nderwriting Price to Dixounts and Proceeds to Commissionu l) Companyq 21 Public S23.50 S.64 S22.S6 Per Share .. .... . . l
$21,150,000 5576,000 $20.574.000 Total .. . ..
l j (1) The Company has agreed to indemnify the several Underwriters against..certain civil liabilities, including liabilities under the Securities Act of 1933. (2) Before deduction of expenses of the Company estimated at 5135,000. i The shares of Common Stock are otTered by the several Underwriters when, as ar.c ifissued by the Company and accepted by the Underwriters and subject to their right to reject orders in whole or in part. It is expected that certi6 cates for such share! will be available for delivery at the olSce of Kiider. Peabody I & Co. Incorporated,10 Hanover Square, New York, New York 10005, on or about September 28.1978. l' I Kidder, Peabody & Co. Dean Witter Reynolds Inc. Incorporated The date of this Prospectus is September 21,1978. 1115 152
~"
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I
/ ,
-The major portion of the Company's construction program relates to three projects comprising two coal-fired and three nuclear generating units scheduled for completion at various times from 1983 to 1988.
The Company has agreed to participate in the construction and ownership of the WPPSS No. 3 project (sponsored by the Washington Public Power Supply System) and, subject to negotiation of formal contracts, the Colstrip project (sponsored by The Montana Power Company) and the Skagit project (sponsored by the Puget Sound Power & Light Company). Additionalinformation with respect to these projects is set forth below. Estimated Estimated Sponsar's Company Costof Costper Kw of Estimated % of Cost to Company's Kw of Installed - Date of Company's 6-30-78 Interest Installed Proirt, Location and Sponsor Csoacity 1,u d Operation i a) Interest (s000n M ts000He) Capaciev tc) Cotsinp--Colstrip. Montana The %ntana Power Company Pcoduction Plant-Unit No. 3 . 700.000 Coal 1983 > 15 512.184 5140.143 5667 Production Plant-Unit No.4. 700.000 Coal 1984 Transtrassion Plant < 15 1.365 48.168 Skagit-Sedro Woolicy, Wash. Puget Sound Power i L:ght Company Production Plant-Unit No. l . t.219.000 Nuclear 1986l 10 17.383 237.732 923 Production Ptant-Unit No. 2. 1.233.000 N uc! car 1983[ W PPSS No. J-Satsop. Wash. Wasnington Public Power Serly System PrActa:n P! ant . 1.240.000 Nuclear 1934 5 9.487 57. 9 1 931 (a) These dates represent the latest available estimates. As a result of environmental and licensing proceed-ings, delays have been experienced and additional delays are possible. See " Business-Electric System and Power Supply". (b) Inclusive of AFDC. (c) Exclusive of AFDC and,in the case of Skagit, the cost of nuclear fuel. Estimated construction costs are subject to review and may be further revised from time to time due to delays in regulatory action, environmental matters, changes in equipment delivery schedules, Gnancing considerations and other factors which may affect the construction program. Data on plants are based on infor nation supplied by the sponsors. Upon completion of the Colstrip project, Skagit nuclear project, and WPPSS No. 3 nuclear project, the Company estimates it will have expended approximately 566,000.000 for air and water pollution control facilities and for aesthetic purposes. This amount is included in the estimated cost of the Company's in-terest in the projects shown in the abcve tabulation. If any of the above projects are delayed or cancelled, the amounts and timing of expenditures will be changed. See " Business-Electric System and Power Supply" The Company has selected a site approximately 60 miles west of Spokane for a future coal-Grea plant, but the size of the plant, participation by other utilities, and proposed dates for construction and commer-cial operation have not been determined. The Company expects to Gnance the remainder ofits construction program and debt maturing through the end of 1978 with internally generated funds, the New Common Stock and bank borrowings. In order to Gnance the Company's construction program thereafter, funds generated from internal sources will be used together with substantial additional amounts which the Company expects to raise by bank borrowings and the sale of securities.The types, amounts and time ofissuance of such securities cannot now be determmed. Continuation of the Company's construction program d: pends upon the availability of outside capital. The Company will need adequate and timely rate increases if revenues and income are to reach and be maintained at tevels which will result in sufGcient internally generated funds to meet its cperational re-quirements and permit external Gnancing ofits construction requirements at a reasonable cost. If adequat: funds cannot be obtained from outside Gnancing and internal sources, the Company, of nec:ssity, . vill reduce its construction pre? ram. 1115 153 v /0A
Le.luest 11 . 3 Tile WASilINGTori NATER POWElt COMPANY CONSTRUCTION DOI.I.ARS 6 AFUDC s Col.STitIP #3 6 #4, SKAGIT #1 6 #2, UNP #3 Total As of 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 Total 12/31/77 . >1st rip #3 -4/82 mstruction Funds ($000's) 11,346 7,341 44,058 40,534 25,722 10,400 -- -- -- -- -- 139,401
'UDC ($000's) 1,017 1,261 3,420 6,973 9,756 10,982 -- -- -- - --
33,409 ilstrip #4 -2/83 >ns truction Funds ($000's) 5 177 13,307 13,683 12,024 10,647 4,019 -- -- -- -- 53,862 'UDC ($000's) 1 8 574 1,708 2,787 3,740 4,215 -- -- -- -- 13,033 agit #1 -7/85 nu,truction Funds ($000's) 12,039 9,982 16,855 17,081 22,045 24,814 17,504 8,122 1,425 -- -- 129,867 'UDC ($000's) 1,363 1,431 2,558 3,983 5,626 7,594 9,372 10,448 10,824 -- - 53,199 _agit #2 -7/87 inst ruction Funds ($000's) -- -- 197 1,208 8,184 17,088 33,277 26,978 17,384 6,527 1,074 111,917
~U DC ($000's) -- --
8 67 462 1,523 3,639 6,169 8,032 9,037 9 ,337 38,274 IP #3 -1/84 . t mstruc tion Funds ($000's) 6, l /1 8,776 10,847 10,094 9,461 6,613' 3,662 1,644 -- -- -- 57,268
'UDC ($000's) 567 887 1,711 2,591 3,412 4,087 4,519 4 ,67 8 -- -- --
22,452
; P00RORGlhAl.
/oa
RESPONSE OF THE WASHINGTON WATER POWER COMPANY CAUSE NO. U-78-05 FERN Recuest Request 1: Please provide (1) the capital cost and cost per kilowa tthour as estimated at the time of the original application, and (2) the most recent estimated capital cost per kilowatthour together with the dates of the estimates for each thernal generating facility in which you are a participant.
Response
Capital Costs for Lar2e Thermal Proiects 3 (2) Most Re ent (1) Oricinal Estimate Estimaee g/: 3x10 6 Mills /Kwh E Sx10 6 Mills /Kw'n 3/ WNF 43 29.1 11.0 79.7 30.1 Colstrip #3 & #4 hl 55.3 6.2 239.7 26.8 Skagit #1 & 42 17 2.2 15.6 333.a 30.3 1,/ Estimates include property tax, owner's administrative and general expense, escalation and AFUDC. Fuel is excluded. J/ Refer to the response to the WUTC staff's Request 3-3 for the basis of the plant cost da ta. 3/ 75". Plant Factor. 3,/ Includes transmission. 1115 155 DC
Cause No, U-78-05 PUGET SOUND POWER & LIGHT COMPANY Part B, Item 4. Q. Please supply levelized fuel costs (Life of Plant) for above plants in which ycd are participating. A. The levelized fuel cost for Plants Puget is partici-
.pating in are listed below:
Fue' Costs Notes Mills /KWH Colstrip 1 & 2 (1) 3.297 (2) 4.64 Colstrip 3 & 4 Skagit 1 (3) 6.28 (3) 6.32 Skagit 2 , (4) 7.39 Pebble 1 (5) 8.14 Pebble 2 (6) .- 6.4 b7PSS 3
- 1. 1978 Actual Costs
- 2. Estimate S7.06 / ton, 1978 Dollars (Fuel Agreement has not been completed)
- 3. 1978 Dollars 20 year levelized Costs
- 4. 1978 Dollars 15 year levelized Costs
- 5. 1978 Dollars 15 year levelized Costs
- 6. 1978 collars 15 year icvelized costs 1115 156
/
w- ~~ * - . PACIFIC POWER & l.IGilT C0!!!'AliY
\
Incremental Fuel, Operating and liaintenance Expense (Thousandu of 1977 Dollara)
. PP&l. Share Variable 1.i ne Output 0 75% P.F. Fuel Expense Operation & Haint. Exp. I.i ne No. Resource 000 Hull Anunal $ Hi 11s /Killt Annual $ Hi1is /Kull tio .
(1) (2) (3) (4) (5) (3=2 1) (5-4,1) 1 Colutrip- 920 $ 3,219 3.5 $1,472 1.6 1 2 Jim tiridger 14 2,188 10,720 4.9 3,938 1.8 2 3 Pebble Springu #1 & 2 4,625 26,827 5.8 1,388 0.3 3 4 WPPSS i3 815 5,051 6.2 244 0.3 4 5 Skagit il & 2 3,384 20,302 6.0 1,015 0.3 5 6 WPPSS #5 111 5 5,051 6.2 244 0.3 6 7 Total 12,74,7 $71,170 $8,301 7 8 Fuel Expense - 5.58 !!!!)o/Kuli - $71,170 t 12,747 11U11 8 9 Operating and Haintenance Expense = 0.79 Hilla/KUll.= ($8,301 1 12,747 Hull) x 1.22A 9 10 Total Incremental Fuel and 06H Expenue - 6.37 Hilla/Kull = 5.58 + 0.79 6.37 Hilla KUll' 10 N W _ _ Sources: 197tl Capital Iludget
- Adininistrative and General Expense ,;
p' u Economic Analysta 1.oading Factor na Shown on Table 8 Er' l N Power flesources 7 Y~
e
, RESPONSE OF THE L'ASHINGTON L'ATER POWER COMPANY Cause No. U-78-5 Exhibit 3 Request Request B4:
Please supply levelized fuel costs (life of plant) for above plants in which you are participating.
Response
Levelized fuel costs for plants in which our Company is a participant are as follows: Fuel Costs Plant (Mills /kwh) Colstrip #3 & #4 (1) 4.64 b17 #3 (2) , 4.71 Skagit #1 (3) 6.28 Skagit #2 (3) , 6.32 (1) Estimate is in 1973 dollars. The Fuel Agreement has not been completed. (2) Estimated in 1973 dollars. Fifteen-year leveli:ed costs. (3) Estimated in 1978 dollars. Twenty-year levelized costs. 1115 158 N/ /1
Department of Energy Bonneville Power Administration
- P.O. Box 3621 Portland. Oregon 97208 in revy ree, t* ,PRT MAY l0 Ms. Sue Ellen Heflin '
W/ Fair Electric Rates Now (FERN) 7241 Coc=ercial NE. Olympia, Washington 98506
Dear Ms. Heilin:
In response to four letter of inquiry to Mr. Gene Tollefson, dated April 20, 1979, the data you requested is furnished. The enclosed table lists the exports and imports between the Pacific Northwest (?SW) and the Pacific Southwest (PSW). These values are the total quantities over all three transmission lines. I believe this table has all the data you requested about i= ports and exports. The data en Trojan refers only to the 30 percent share of Eugene Water and Electric Board (EWE 3) which is net-billed with 3PA. BPA's net receipt of power is as follows: Sept. '76-Dec. '76 710,973,000 kWh Jan. '77-Dec. '77 1,947,718,000.kWh - Jan. '78-Dec.' '78 499,673,000 kWh p'ns. Please nota that these values are net. When a nuclear plant is shut down, it still requires operating power, approximately 20,000 kW. These operating amounts have been subtracted from the power produced when the plant is running. You also asked for the costs related to the 30 percent share. The values given will be for the same periods as for energ/. Some e:<planation would be advisable first. The costs as broken down are the budgeted nu=bers. These are determined by the participants at the beginning of each fiscal year. The budgeted costs are then paid by 3?A in a predetermined pattern over the year. At the end of the year an adjustment is made for actual expenses. This adjusted amount is shown as "actually paid." The budget is arranged in categories that are close to the questions that you asked. The category "other" 2.; includes capital additions such as more efficient pumps or offices, and expandibles such as supplies. 1115,159 L.:J
% /4 i
2 Bud 2eted Costs of EWE 3 30" Share of Troian - S 4 Debt Service Budget 'Princip al & Share of Total Interest PGE 0&M Fuel Other Sep. '76 - 7,811,416 3,572,478 920,071 1,945,700 1,373,167 pg, Dec. '76 6,227,100 actually paid Jan. '77 - 31,966,240 10,757,676 6,083,520 7,748,070 7,376,974 Dec. '77 29,125,500 actually paid Jan. '78 - 31,751,700 1/ 10,559,985 7,155,000 6,373,300 7,663,415 Dec. '73 29,755,000 actually paid 1/ During the calendar year 1978, due to the Trojan plant not being allowed to operate, the annual budget was reduced from S33,191,740 to S31,751,700. I oelieve this information answers your request. If you have any questions about it, feel free to contact me.
~'
Sincerely Yours, bl d/~L]/ 'K Richard Nyland
.) A fw Special Assistant to Power Manager
Attachment:
Table 2. t N
PAClflC POWtk & l.IClli CatlPAtu State of Wasliington Applicat aan of LHIC to loaJ Classen Couna i t a.c n t and Sy s t ein IkeanJ-kclated iietgy-WelatcJ I.ii.e Bi l l ing -ke l,a t ed Total tulivery Lossen bivermilied IREC t it IC IMIC LHIC 1.ine 11.4 I.u ad C_l a_ _s . _ _ _V_o l t a .g e- Peal .E..n.e r y. Factor
/ / f.i.ll __ t / F Wil
_I.o _m._.I _
/= / E. W_i.l --//FWi.l _.
lia . (8-s.6.n I kesidential Se c onJ a r y 17Z 141 48.2% 1.42 2.78 0.8) 5.0) 1 Ceneral Service; 2 0-30 kW SeconJary 17 14 47.4 2.14 2.78 1.01 5.9) 2 3 10-100 FW SeconJary 17 14 $9.9 1.3) 2.78 0.29 4.40 1 4 100-100 kW Sec unJ ar y 17 14 50.8 1.3) 2.78 0.18 4.29 4 5 300-1,000 Fu Secondasy 17 14 1.21 St.6 2.78 0. 0t, 4 . 0 's 5 6 1,000-10,000 FW Pri:23ry I) 11 71.0 0.79 2.69 0.02 1.50 6 7 10,000 6'W and ove r Pr t.2 s t y 13 11 98.7 0.52 2.69 ** 3.21 7 I Annual tenaan.1 -He l m a cJ I k lC in / /6bil - ($/KW) -(100) (1 - Peak lomme.) load Class FWil/Cus t oce r iSU't7anUIv'7inIlaeJ1,oa1 6atto W i8760 al.2 usa)~ kesiJential I $ , J 'Ju
- l C.S. 0-10 EW l$,04b Ene r g y -ite l a t cJ I k t t; s i. / / tJil - ( t /6 Wil) l 30-100 EW 12 7.9 h 11 - Energy I_on:,e=T 100-100 kW $03,1
- 6 3do-l.000 Eu 1,6'A ti , 7 61 Cou.a t t u.e n t -li e l a t e.1 thtC in / /6Wil - j $/tjuq q3ca ) j lo!!) _ 1,000-10,000 fu 7,6'A 1,116 An nie a l 6 Jil/ Cu s t .u se r 10,000 I?J and over ( Pr i . ) 167,179,460 S.aus c e s . t og a nce r in.;
- t a il ne < is t.
- Includes 14,9 79,000 k J. t emper at ur e ad just::ient U g
applacJ to temident' sal cla.m. {
** Atmount less than 0.005//KWH w {
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Page 3
/
THE WASHINGTON WATER POWER CO. RESIDENTIAL ELECTRIC RATES 1200 KWH PER MONTH COMPARISON WITH COST OF LIVING 200-20 4_ 10 0-COST OF LIVING 5 z -WASHINGTON H z a
/ (,20 %
/
d 0 - - - - - -
- m. _ _ __- ___/
x LM v RESIDENTIAL Q- ELECTRIC RATES , u 8 O II I II i 1960 1970 1978 YEAR 1115 162
% /f
Cause No. U-78-05 PUGET SOUND POWER & LIGHT COMPANY
/
Part C Item 7. Q. List all price elasticity studies,
. performed by you or for you by others, which estimate price elasticity for energy or capacity, by customer class, either annually, seasonally or diurnally.
A. Estimations of price elasticities were conducted by the Corporate Economist in conjunction with the e estimation of the econometric model. Below are the final results of these estimations. (Industrial elasticities are those estimated by K. Anderson for the PNUCC) Short Run Long Run Residential Saturations
- Ranges -
.25 - .93 Dryers -
.22 -
.63 Water Heaters -
.17 -
.61 Space Heaters -
.30 -3.00 Residual -
.18 -
.37 x
Commercial -
.15 .50
-Industrial (by SIC)
SIC 20 -
.06 -
.41 24 -
.15 -
.97 26 -
.11 -
.71 28 -
.21 -1.39 29 0 .32 -2.14 37 0 .06 -
.43 11tr
- Elasticity of Saturation IiIJ s/)7 l0 Si
, 1-51 Residential sector does not have one constant price elasticity.
\
. - UNITED STATES a
NUCLEAA REGULATORY COMMISSION
, W ASHINGTON. D. C. 20555 February 28, 1978 i
Ecnorable Di:cf lee Ray Governor . State of Washingten Legislative Building - Oly: pia, Washingten 98504 In re: Puget Sctrid Pcwer & Light Co. , et_ al. (Skagit Project, Units 1 and 2) i Docket Nos. 50-522. 50-523
Dear Dr. Paf:
1
- D.r.k you for ycur letter of de 176 (received en Feb=2ry 27),
and your e:cressien of interest in and ccncern for the prog ess of the Skagic proceeding. t The Atdc Safety r.d Licensing Scard is likewise c=ce=ed abcut the pre pass of the case. D.e Scard has been ready to proceed as scen
; as the parties have cv gleted the preparatien cf deir evide.ce.
l Despite de endaviers rade to devise a schedale fer the exdange of I data intended to be presented for evidr.ce, the =st recent sdnittal c _.:.ved en February 27th, just about a week before de scheculed March 7th hearing, r.d pessibly eco late for adecuate review r.d prepa-raticn for cc:plete c=ss-e.v* .atica by the recipient parties. l Seis=ic r.d geologic hearings have an 1:9.appy attribute of taking i sore tire dan ence r.ticipated. For instr.ce,- de AEC-EC for.ed an l ad hoe hearing reto
- or atterneys holc..
- .ng. cut ass:.e_
of the
.mts.s.c.r. eal Scard as Starr persv. P=el,
.et, butsto notare as cc=csed ac:-i .-
i istrative law judges provided by the AH .isrative Prececure Act, =d I technical perse. .el, in order, as stated, to e:cedite a hearing en seis=ic nattars placed in c=centien i . the Ccn Edisen Indir. Point
, proceedings. D.at hear =; gret.r> szs fermd abcut three years ago, e ; case is not ever yet, and dere is no indicacicn of sten it sill be.
Tne Skagit ASL3 will cer-My better 2at reccrd en seis=ic ratters. Equally i=crat to the Licensing Scard, as i=cr_r.c to ycu es you have sated, is the interest of the ccnstrnrs, bcth as to need for pcw_r r.d de ecsts involved. To digress a :rrent, I =st c=ratu-lata ycu cn ycur prescient anticication e:cressed in 1977 dat elec-tricity cc servaticn in the Pacific Ncrti . east would prcbably not be an P00R ORGM 1115 164 l
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am " * * * * " " *
*." . ". - = = . . . . - - . . . . . . .= b- b* N - - . - . -
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insu=cuntable p=blem in viea of your large water resecces for hydro- , electric dams and the abt= dance of Icu cost electricirf. Ycur anticipa-tien certainly has been ecnfired with the water supply available to your regica today; in fact, the Portland General Electric (Troj m) nuclear plant is not cperating ecday. And interestingly enough, de Wall Street Jcurnal reported the oder day that Pacific Gas and Elec=ic Corgany GC6E) nas filed fer a rate decrease of scoe $89,000,000 for the stated reascn that its water sucply wi.11 permit greater use of the hydroelectric da=s available to PG5E. , Yee centien of costs to the ccascers is within cur cencern as these costs bear t=.cn abilic.i to firr.ca =. d l.ikelv
. - recentes fren -
rates to pay for cperaticns c.c_ng tne u.:e or tne preposec plant. m passing, I =ight ccreent dat if de Wasningten Public Se: tice Co.u.i.s-
; sien has adcpted the cerent but fleeting fashicn of "censractien-wrk-in-progress" rate raking, de cens=ars have had.their rates raised to pay for a plant not yet ccnst-=:ed nor audorized. It sculd be inter-esting to kncw hcw rany thcusccs or pcssibly tillic-.s of dollars have been collected so far. As ycu 'ccw, of ccurse, de f=dren"' and standard principle for utilief charges is to pe =it rates to be suffi-
. cient to pay the prudent costs of a utiliev plant and c:eraticns used i md useful in the renditicn of service. This principle enecurages care-t ful and accurate pirning befcre building a plant, and p==jt const:=-
I tien when designs and sizes are found adecuate. Ltdar de presently j fashicnable chac:y of cens==rien-work-in-prog- ess races, the dellars 3 collected in adiance f=n const_:nrs cight well be a basis fer a utilief j to pay interest to ecnst=ers whose ceney is not providing service at t the Hun of collecticn of de added rate arctnts. t
! I think it fc= '. ate dat ycu have read ~or have been inferred abcut the references to the Diablo Crfen pr ceeding at de January 24th pre-hearing ccnference in de Skagic case. I an sure dat de Pacific Cas and Elec=ic Cc:rri ccncl""ed dat adacuate data had been collected to warrant a cens: m:icn per=ic. Unfo=.d.ately, the PCIE censuler.ts failed in chair investiga:ica, and even rejeccec as "sceculative" a sug-gestien that any eard:uana fault was sufficiently adjacent to be a problem. Tnese censultants a : eared to take de viea chat a Ic .e incer-I venor witness should be recuired to "preve" his surgesticn of de existence of a fault. For:t:ately fer dat witness, an cil ...yany in an investi-gatien of the area nearby to de PGIE nuclear plant, fct=d a rault, and the tragec/ of incc:=lete investigatica cr.s nca 1:e weighing heavily en PG&E, and cuy be ene of de reascns for the p=:csed reducticn of
$89,000,0C0 in races. If de rate payers are caying for ccnstructien-work-in-p=gress races, de weight :ust be nigh unto t:tearable.
300R ORGINAL 1115 165 H
/ ,I f .
i As you perhaps noted in the January 24th Skagit preheadg, scen
, intervencrs have cade scte si::ilar suggestiens of earthquake faults as were trade in the Diablo Canycn case. 'inile other preceedings, both at the state level, and also at perhaps inccerlete Adviscr/ Cc:Ixittee en Reactor Safeguards reetings have censidered seisric and geologic cntters, the 'EC Licensing Ecard proceeding is de cnly cne gove=ed by the federal Administrative Procedure Act,'h.ich provides for cross- . ex:c:dratien e.d full excicratien of the issues before a federal agency.
Neither the state nor ACPS deter r.aticns are cc =elling to the federal
, proceeding. To be sure, the Skagit case will be decided en its md:s and the facts related solely to it, but I wuld e:c:ect de Licensing Board to note that the Director of de censulcets for the Arplier.ts 4 i is the sare for both de Diablo Canycn and Skagit cases.
3 In cenclusien, the Licensing Board will e:c:edite ie Skagit case
; in every way possible. As indicated, delays in preparation e.d ex- + change of intended evidence have acccuated for 1 ate sub=i :als in dis . proceeding. As previcusly indicatd, de Ecard has been reacy as seen as the parties ha'te been. Tne Acplicr.:s, cespite their enreaties in . November for an esrly (Cecerter 5) hear =g after de AC?S reetings, l filed en Decerter 12 a substantial re-wrking of deir seisric r.d i geologic data. The Regula c / Staff, th= ugh no fault of its cm, nor that of its censultants, the U. S. Geological Survey, *.ich P2s rany priorities, was cnly able to file its final seiscic report en Febru-ary 27th. The licensing Board v;.ll endeawr to accc:rrdate dese late filings but de caution rust be excressed that pessibly :he c=ss-exa=inatien begi::.ing en Shrch 7th ray net be cercleted at dat session, r.d the Lice: sing Scard schecules will reqdre de nex: sessica to 'ce in April. +
Your patience with us will be acpreciated. Ycur letter having i been sent by ccpies to de parties to de proceeding, dey w_ll no j dcubt take heed of ycur interest in seeing that the evidence is p=:rt-I ly prepared and presented. Please be assured that dere is not r.y
! ". . . across-de-ocard cisinclinatica to crecess dis case with cua I dispatch."
Respect $i!.ly ycurs, P00R 0ER _ _w & ml W. Jensch, CP"..an Atoc:ic Safety and Licensi .g Ecard 1115 166-
/78
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g p1 THE W A!.!. STREET JOURNAL.* 1
% nday. Starch 5.19N
- Construcuen 'cf the project. in the ses-ttIty tO 3' eCllCe -am vdm of Sea,,.ok. was su,ce-ded fo, seven months in 1977 af ter the federal Enyt-mnme Staxem. Seaxoor en ntd Pmtecton -~v Admimstration danger nearby marine hfe. Construction was ruled ha!!rd again, for three weeks in 1973. by the N,uc~ ear Project
> '- "-- "- - c-Through all this, antinuclear organizations
' have been holding demonstrations at the Seabrook site.
PS of New Hampshire's Plan surprised ceility These delays and the suff opposttlen al-
- To Sell Part of Holdm.g: ways seem to have eaucht PS of New
' Hampshire by surprise. The latest surprise a
Could Cause N,ew Delavs ! came ust dovember wuh the eiecn* of
' ^ l Afr. Gallen, whom the utility opposed. over incumbent Gov. Steldrtm Thomsen, who w wu.a.smr.nomu. w// nenree' supported the nuclear project and vowed to
' 5 ANC!! ESTER. N.H.-The fate of the l keep the surcharga.
In its announcement cn sgam. off 1 gain Seabrock nue! car power over tne weekend. the utility said :ts Mard, stancn became even mere blurred over the
. vee <ent after a two. day session. " reluctantly de rect - maragement" to cut 'he ut:'it'rs
- Cdmg a " financial crisis " caused by a hafding in the project to ':0". from 50% An-rat! dispute. Puthe Service Co. of New other utihty. United Uluminatmg C1. which Hamph:re said it plans to reduce its ',0'*, supphes e! ectr:c:ty to the New Haven ind
- holding in the !2.5 bilhon electricity ;enerat , Br:dq=oort areas of Connecticut, owns 00'". of ing facthty to 0".. Th:s would mean that PS the project.
of New Hampshire wouldn't any longer 5Md The PS of New Hampshire announcement contrulhng interest in the power station, un. 53'd the board told the management to sell der constructen since 1376. '
= of the project to utihties outside New Furthermorr PS of New Hampshite. In a Hampshire and r, to companies in the state, shott press re! ease, hinted that construction
.of the pro;ect. delayed two times already ; i The utility we'ifdn't name potent:a! pur-could be :,uspended aga:n. This would hap I enaser. ncr terms of the sale. but it :s pen if some of the 13 other uttlities with ! knowr that at feast five utihhes andi!ssocra-holdings :n the project don't move tn quickly ; tions .re :nterested in increasing their hold-to buy 'ip the chunk of Seabrock that PS cf ' ings. They are afassachusetts. Afunicipal New Hampshne wants to sell. Wholesale Electt:c Co., an assnaation of several vestern afassachusetts munictoal "We're just plain g=tting tired of all com New Eng!and Gas & E!cetric this." a PS of New Hampshire source said. : Ca; pames:
Etern Uuhty Associates. a holdtne
We've been pressed to our breaking peing . company! Sangur !!ydro Co. of 5farne. and several times, and this Ume its beycnd our i Abme P'ibhc Service Co.
breaking point.- 1 In addit:on. the PS cf New Hampshire
.he latest dispute is nyer a 9'". surcharge a board ordered the utthty to seil its J", inter ~
PS of hw Hampshire has Nen tacking onto est in Pilcim !!. a Stassachuse!!s nucfeari custcmers' e!ectrie:ty bills far construction power plant and :ts 37 hNd:ng of afi!!stonej works in pr9gress, or CWlP. 111 in Cannecucut. i Governor's Vow ..These steps have been taken by the! board in the face of the hnancial crrsts cre-This iurcharge. atmed at g=nert.ing $17 Med by the adverse p' .Mcal atmosphere re-mdh:n m added revenue a y .i . was jeepar- lated to CWIP which has developed :r. New d:Ied last November with the tw.;n u .uampshire and the total fa:!ure to date of governcr of Hugh J. Galten, who has vowed to do away with the CWIP. effor*s to r?ach a solution.' PS of New Hanmshire . aid. PS ! New Hampsh:re ':as said that with- CI "8 f' tan to sell part of :ts Seabrook in-out t':ese add:t:onal fur.ds it wouldn't have . terest the company said. " prompt favorabie the financ:a! ability to retain its 50'". Interest reponses and action from the other partict-in the Tre! ear profect. This would support ' P33!8 N h" U"d" I 5"8PC"5'"" UI C"' the contennon by some securttles analysts : 5NU"" of the Seabrnok project is to ha snd ut.hty industry experts that PS of New . "H, j -[ Hampshire has neither tha financial re I sources nor pohtical savvy to steer the mas. > ' sive !wnt"terator prn'ect thrt*tch its l { f tmunt.-t course. . J a 11j
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s f 1 BEFORE THE UASIIINGTO?! UTILITIES AND TRANSPORTATION COMMISSION 1-1 , 3 4 UASHINGTON UTILITIES AND ) TRANSPORTATtJ:i COD 1ISSION, ) CAUSE IIO. U-78-41 5 ) Complainant, ) VOLUME XXIV G ) vs. ) PAGES 371G - 3877, inc. 7 ) PUGET SOUND POWER & LIGHT ) ORAL ARGUcENT ' 8 COiPANY, )
)
9 Respondent. )
) -
10 11 12 A continued hearinE in the above matter was held on ( 13 Wednesday , January 24, 1979, at the hour of 1:00 PM in 14 the Hearing Room, Highways-License Building, Olympia, 15 Usshington, before Chairman ROBERT BAILEY, Cor: mis.cioner 10 ELMER HUNTLEY and Adminic trative Law Jtidge JOHN VON REIS, 17 The parties were present as follows: 18 (AS PREVIOUSLY NOTED) 19 20 22 ?0DR ORGM 23 m.,. c P. E C E i \/ J D 25 JE3 '3/9
...ua. u r. u n; :c. u t.
. . 1115 168
!. l l '. i b. ; . .: N l;. ; .
ya
A - 844 b lR ({ cs.) Pfhj er{- C/2-10 s - ( 1 projects of 33.76 million dollars. (This is the equiva-2 lent of putting the entire average amount of major proj-3 ects CWIP in the rate base but with the 7% AFDC of fset.) . 4 The importance of the Company's proposal is dramatically 5 demonstrated by line 9 of Exhibit 115. As can be seen, 6 the Staff proposal will not provide adequate coverage. It 7 is only with the Company proposal and rate relief effec-8 tive before April 1 that adequate coverages are maintained 9 for 1979. It is for this very purpose - to maintain the 10 credit of the utility so it can adequately finance - that 11 the Commission i..itially decided to include major projects 12 CWIP in rate base. In addition, line 2 of the Exhibit 1 demonstrates that adequate financial flexibility provided 14 by internal cach flow is available only under the Company 15 case. The Staff case with rate relief effective April 1 16 providec less than GS internal cash flow - wcIfibelow the 17 151 which is the absolute minimum that the Company must 13 have to preserve any type of financial flexibility in 1979 19 in meeting its construction program. 20 Icsues have been raised with respect to whether major 21 projects CNIP chould be included in rate base, cuggesting 22 that ir chould only be done under certain conditions. :tr . 23 King, in his rebuttal testimony, clearlo actlinec the fact 24 that the Ccmpany ha:., met all of the i i cuggosted by t.he 25 witneacec a' followr>:
?0DRORIG'NL
_9_ 3740
\/ Eh\
' Closing argument, Beighle
/
is 1 JUDGE VO!! REIS: Mr. Beighle. C/10-1 2 MR. BEIC1ILE : First I want to talk a 3 _ittle bit about CPIP in rate base. The Staff 4 position in response to Puget's nosition with 5 rennect to increased revenue recuirement from o construction work indicated that there is no 7 evidence that we cannot finance in 1979. Uhat a the Staff does is chev ignore the fact that we 9 sit at year-end 1070 with S75 nillian in short 10 tern debt and no coverages and nouhere to go. 11 And that just is not facing uo to the prchlem. 12 Mr. Adans , correnting ,on C"IP, points out 13 that he thinks it is unusual to include it. I ( 14 can supply the jurisdictions. There are over 20 15 jurisdictions that include sone part of construction Ic work in prorress in rate base. jp is nothing unusual 17 in the tinited States. There have been other utilities la that have had this problem with then major generation 19 construction progran and they have had to ask for 20 some relief in the cash flow area in cov rages in 21 order to carry out the construction prorram. 22 that we have reallv neard up and down the 23 hench, as Bill Unaver has nentioned, is a back door 24 attach on tho Sitiny Council. I think everything 25 ve have heard today on load forecastinc, rescurce j 33 6
%3C
w 9 argument, Belghle
. ?
( I that in that case it was significant in the quotation 2 that they pointed out that every year this account
'3 is .noinn to increase. Let ne point out that our 4
accelerated deferred tax account is production 5 plant only. And ours has been increasing becau e G we broucht tuo units in at Colstrip in 1975 and 7 1976. But we do not have any new units coning in 8 until Colstrip in 1983. 9 10 So whatever arnunents there are for foolinc around with that account and putting it in year end 11 just do not exist because we are not building 12 transnission plant every year or, like the telephone 13 company, putting in new phones or new wires and 14 everythinn. This is production plant only. And ue 15 do not have a new olant until Colstrip 3. 1G I would like to take the last gouple m of minutes 17 that 3. I have and nahe a couple hincL of general 18 observations. Tnis company, puret power, is in the 19 Spotlicht nationally. 20 In tfr. King 's opening testir ony he citedtsu Unll Street Journal articles, one of 21 which pointed out that it has the largest cons truc tion 22 progran for its size of any electric utility in the 23 United Grates out 24 of the hundred n]us utilities. A second article pointed out that it had the 25 inrgent c orecast increase in its conmon stock. It
=
3 i e
. Closing arguments, Beighle
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1
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l had more conron stocl to sell than any utility in /10 4 - 2 the United States. This cononny has done everythinc 3 it enn do to ret itself in finnncial position bv 4 way of planninc, hv wav of financial forecasting, 5 so that it can built a plant that it thinks is G vital to the economic well beinF of this area. Peut 7 it cannot do it alone. It needs the understanding 8 and the assistance and the blessinn of this Comnission. 9 I spent yesterday on Unll Street meeting eith 10 bond ratinc a,".encies in connection uith Pur,et's 11 preferred stock offerine. As this Cormis sion is 12 nware, we have to ret a bond ratine, on not only
, 13 our hands but on our preferred stock. The failure 14 to cet that rating would be the kiss of death on 15 any of the securities issues because they t.ould .
1c not he lecal investrents. He wou;1d be in reel 17 p rob lens . .. la tJe do have the botton of the barrel ratinc as 19 it is. e are rated BAA on both our bonds and 20 preferred stoch. And we are on the botton step 21 to nowhere. 22 nur nnvrav I think it is clear that not only 23 is the connany in the spotliaht; I think this 24 Conrission is. I think every word in this rate 25 order will be rend hv Unll Street and will ha reread E 3 s mn}}