ML19256F847
| ML19256F847 | |
| Person / Time | |
|---|---|
| Site: | Three Mile Island  |
| Issue date: | 12/20/1979 |
| From: | Hafer F GENERAL PUBLIC UTILITIES CORP. |
| To: | Vollmer R NRC - TMI-2 OPERATIONS/SUPPORT TASK FORCE |
| References | |
| NUDOCS 7912260219 | |
| Download: ML19256F847 (600) | |
Text
GPU Service Corporation 7 -
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gygg 100 Interpace Parkway Parsippany, New Jersey 07054 201 263-6500 TELEX 136-482 Writer's Direct Dial Nurnber:
(201) 263-6013 December 20, 1979 Mr. Richard H. Vollmer Director, Three Mile Island-2 Support Office of Nuclear Reactor Regulation U. S. Nuclear Regulatory Commission 7920 Norfolk Avenue Bethesda, Maryland 20014 RE: NRC Docket No. 50-289 - TMI-l Restart Proceeding
Dear Mr. Vollmer:
~
In response to the NRC's supplementary requests for financial information telecopied to C. W. Smyth on November 9, 1979, enclosed are eight copies of the following:
- 1. Additional response to Supplementary Financial Information Request No. 9 (PA PUC's Order requiring Met-Ed to "show cause why its certificate of public convenience should not be revoked"). ,
- 2. Additional response to Supplementary Financial Information Request No. 10 (NJ BPU's inquiry as to alternative means of supplying Jersey Central's service territory).
Please acknowledge receipt of this material by signing, dating and returning the enclosed copy of this letter. A stamped, pre-addressed envelope is enclosed for that purpose.
Sincerely yours,
\
F. D. Hafer Vice President, Rate Case Management FDH:jb jf j[} Enclosures cc: J. C. Petersen - W/ Enclosures H. Silver - W/0 Enclosures; to be distributed by NRC t 1312%60 1 !g I GPU Service Corporation is a subsidiary of General Publplities Corporation
Person Responsible for Preparation: F. D. Hafer, Vice President - Rate Case Management, GPU Service Corp. Telephone: (201) 263-6013 Date: December 20, 1979 _ GENERAL PUBLIC UTILITIES CORPORATION Metropolitan Edison Company, Pennsylvania Electric Company and Jersey Central Power & Light Company NRC Docket No. 50-289 Three Mile Island Unit No. 1 Restart __P_roce ding __ _ Additional response to NRC Staff's Supplemental Financial Information Request No. 9, telecopied 11/9/79 (item number refers to initial requests dated 9/21/79):
"(10.b and 10.c) Subsequent to our September 21, 1979 request, it was reported (Wall Street Journal, November 2, 1979, p. 12) that the Pennsylvania Public Utility Comnission (PPUC) issued a show cause order to Met-Ed regarding the company's ability to provide utility service in Pennsylvania. Provide copies of the PPUC order and copies of Met-Ed's response to the order, when available. Continue to keep the NRC Staff informed of all developments in the show cause proceeding. Provide copies of all subsequent PPUC orders and other directives and Met-Ed responses related to this proceeding."
Response
As an additional response to this request, enclosed are copies of the following:
- 1. Material filed with the PA PUC in Docket No. I-79040308 on 12/10/79, consisting of the following:
(a) Graham /Hafer Exhibits A-4 through A-8 (b) Arnold Statement D (c) Cherry Exhibits E-2 and E-3 (d) Carter Exhibits J-2 and J-3
- 2. Transcripts of hearings in Docket No. I-79040308 held 12/10/79, 12/11/79, and 12/12/79.
- 3. PA,PUC Staff's comments in Docket No. I-79040308 dated 12/7/79 on Met-Ed's proposed use of a 1980 test year and Met-Ed's motion to sever Met-Ed's clause increase petition and TMI-l "used and useful" issue for expedited treatment.
1639 174
Met-Ed/Penelec Exhibit A-4 Witness: J. G. Graham F. D. Hafer Update of Table 3 of Appendix B Attached to Met-Ed Petition (To Reflect October 1979 Actual Data) METROPOLITAN EDISON COMPANY System Energy Costs and Sales, July 1979 - December 1980 Energy Total Retail Sales Costs Sales % of (S millions) (Gwh) mills /Kwh Gwh Total Sales July 1979 (actual)
$ 15.5 619 25 .1 582 94.0%
Aug. 16.6 654 25.4 613 93.7 Sept. 14.7 662 22.2 625 94.4 Oct. 19.5 632 30.8 596 94.3 Nov. (forecast) 15.6 664 23.5 625 94.1 Dec. 17.8 712 25.0 666 93.5 6 Months Dec. 1979 S 99.7 3 943 25 .3 3 707 94.0" Average Month S 16.6 657 25 .3 618 94.0" Jan. 1980 (forecast) S 24.0 785 30.6 733 93.4% Feb. 21.4 789 27.1 738 93.5 Mar. " 18.2 738 24.7 717 97.2 Apr. - 16.7 683 24.5 666 97.5 May " 17.0 635 26.8 621 97.8 June " 14.7 633 23.2 618 97.6 July 14.9 629 23.7 614 97.6 Aug. " 18.3 662 27.6 646 97.6 Sept. " 8.5 670 12.7 655 97.8 Oct. " 9.8 645 15.2 631 97.8 Nov. 8.3 666 12.5 648 97.3 Dec. " 11.8 709 16.6 685 96.6 12 Months Dec. 1980 S183.6 8 244 22.3 7 972 96.7% Average Month S 15.3 687 22.3 664 96.7* 18 Months Dec. 1980 S283.3 12 187 23 . 2 11 679 95.8% Average Month S 15.7 677 23.2 649 95.8% Assumotions e IMI-l returns to service 9/1/80.
" Cost plus 10*" pricing of GPU's TMI-related purchases from PJM effective 11/1/79.
Other economic TMI-related purchases (Ontario, Jamestown, APS) continue for forecast period. Demand component of cost of TMI-related purchases included for full forecast period. 15% oil price escalation, Dec. 1980 over Dec. 1979.
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1639 175
Met-Ed/Penelec Exhibit A-5 f Witnesses: J. G. Graham F. D. Hafer Page 1 of 3 Update to Exhibit A-3 To Reflect October 1979 Actual Data 1639 176
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Eurecast . Sy s t em Esw rgy_C.mt s (2) ** July, 19/9 August, 1979 S ept em be r , 1979 Oct ober, 1979 Hi l ls7 ' Mills / Hills / j_juoO) tMJ EWil {}000) HWH KWil HWil litTis7 Q000) _ Itut (SIMHJ) Hwie Kul glernal Generaliant Co.a I Titua $ t,969 122,670 16.052 $ 2,046 134,249 15.241 $ 1,875 129,928 14.43I $ 1,402 98,031 ar e t t.ind 1,402 802,551 11.665 14. 304 1,435 106,149 13.515 1,064 79,088 13.467 1,405 Conce.ngh 913 56,]4,8 16.204 95,910 14.658 > t,872 y,083 15.612 2,169 140,377 15.450 1,316 89 Total 4,284 281,569 15.241 4,653 2 413 14.937 315,481 14349 5,808 349,309 14.622 4,143 283,360 14.628 Oil Combustion Turbines 295 5,726 51.584 658 11,655 55.873 276 5,062 54.656 34 2 5.941 57.630 laydro Yorli llaven - 11,388 - - 13,188 - - 14,075 - - 14,840 - g Nuc lea r THI {m} 3 (5,357) - t y ,331) - 4 (4,658) - 1 p,M) -
- Total Internal Generation 4.582 293.249 5.624 5.305 334.986 15,536 5.385 363.788 14.803 4.486 299.073 15.008 i interclunge and other Energy Purchased Interchange Purchased '
From PJN (3) 485 14,358 33.773 877 23,064 38.0I0 1,212 26,794 45.223 5,339 51.383 o From CPU j ,908 89,964 28.212 I ,417 64,145 22.088 900 20,265 44.401 964 103.903 Total 2,393 104,322 22.94I 2,294 _87,209 33,478 28.808 26.299 2.ll2 41,059 44.869 6,303 137,M 45.880 Intercimnge (Sold) To PlH (1,506) (52,352) 28.768 (60,031) (t,805) 30.058 (1,384) (48,764) pg To Cru Total (513) (4,940) 105.984 (901) (23,852) 3 7 ~ 13 (2,116) (5 33.134 37.l78 (1,006) (597) (30,385) f ib,pu) 33.088
.35.188 2,089) Q7,292) 35.254 (2,706) (83,889) 32.254 (3 3 ) h_6,922)
,6 6) 35.467 (1,603) (47,355) 33.840 Otlwr Energy I'urcl.amed (4) b Borderline I 10 53.800 I il 48.273 I il 51.545 I 51.464 Al:P - - - - - - - -
il APS 7,093 257,012 27.598 8,121 325,700 26.795 7,795 267,875 29.098 6,740 215,580 Jamestown 50 2,14 0 23.620 186 8,186 31.263 22.738 210 9,271 22.620 278 11,982 22.620 PP&I. 2,019 57,440 35.160 1.165 30,800 18.719 Ontario 1,409 _4_7,043 l.105 28,700 38.513 1,372 37,341 36.755 29J49 19660 5L592 31.555 1 566 49 577 31.581 Total 10.572 363.645 29.07{ 1,907 63,788 29.890 18.119 416.589 28.178 10.6/7 35$,434 30. 016 80.291 128.702 31.306 Total Energy Purchased (Net) 10,946 410,675 26.654 11,327 419,909 26.975 9,289 303,807 30.572 14.998 418,728 35.802 m Total Energy costs $ 15.528 M ,924 22.059 $ 16.632 754.895 22.031 $ 14.674 667.595 21.978 $ 19.477 717.801 27.134 Total Salem $ 15.518 618.74) _25.096 $ 16.632 653.967 25.432 Q $ 14.674 661.723 22.173 $ 19.477 6l1,626 30.8 16 (1) July, August, September and October, 1979 actual November and December, 1979 forecast
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" luEnergy yment s Costs" are costs recoverable by retall energy clause, all fuel costs and all pusclused power costs except demand cl.arges anJ Installed capacity u
.n (3) Assumed PJH pricing proposal of average incremental cost plus 10% effective 11/01/19 "
(4) Includes calucity cout s
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Met-Ed/Penelec Exhibit A-6 Witness: J . G . Grah am F. D. Hafer r i Update of Table 6 of Appendix B Attached to Met-Ed Petition (To Reflect October 1979 Actual Data) METROPOLITAN EDISON C01EANY Indicated Increase in 8.8 Mill Level Charge Based on Energy Costs Experienced to Date 1979 Actual 4 Months July Aue Sept Oct. Oct. Total System Energy Costs * (S millions) S15.5 $16.6 S14.7 S19.5 S66.3 Total System Sales (GWH) 619 654 662 632 2,567 Mills /KWH of Sales 25 .1 25.4 22.2 30.8 25.8 (Less): Total Retail Charges for Energy Costs (8 mills base, 8.4 mills clause, excl. taxes) (16.4) Increase in Energy Costs Over Level Provided for by Currently Effective Retail Races 9.4 Indicated Increase in ' Level Charge (above X 1.047 revenue tax factor) 9.8
- includes demand component of cost of TMI-related short-term power purchases.
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Met-Ed/Penelec Exhibit A_7 Witness: J. G. Graham F. D. Hafer r ( Update of Table 7 of Appendix B Attached to Met-Ed Petition (To Reflect October 1979 Actual Data) METROPOLITAN EDISON COMPANY Increase in 8.8 Mill Level Charge That Would be Required to Recover Energy Costs Projected to be Unrecovered (Deferred) As of December 31, 1979 Deferred Energy Costs as of 10/31/79* (actual; S millions) S50.9 Estimated Additional Unrecovered Energy Costs through 12/31/79 10.1 Projected Balance as of Proposed 1/1/80 Effective Date of Clause Revision S61.0 Retail Sales Projected for the Period January 1980 - December 1980 (Gwh) 7,972 s Amortization Rate per Kwh, Excluding Revenue Taxes 7.7 Increase in Currently Effective 8.8 Mill Level Charge (above x 1.047 revenue tax factor) 8.1
- excludes unamortized "old clause" balance recoverable by base rates (S14.0 million).
Met-Ed/Penelec Exhibit A-8 Witness: J. G. Graham F. D. Hafer t[ Update of Table 8 of Appendix B Attached to Met-Ed Petition (To Reflect October 1979 Actual Data) METROPOLITAN EDISON COMPANY
" Full Cost Recovery" Increase in 8.8 Mill Level Charge, Assuming Return to 6-Month Historical Clause Effective 1/1/81 S Millions Total energy costs projected for the 18-month period July 1979 - December 1980 (July -
October 1979 actual, TMI-l back 9/1/80,
" cost plus 10%" PJM pricing effective 11/1/79, APS, Ontario and Jamestown purchases, 15% oil price escalation) S283 Amount applicable to retail sales (above X 0.958, ratio of retail to total sales, July 1979 -
Decenber 1980) S271 Plus: Energy costs deferred under retail clause in effect prior to shift to level clause on July 1, 1979 (actual balance of costs deferred under 6-month historical clause as of June 30, 1979) 28 (Less): Energy costs incurred in 1980 that would be recovered in 1981 by 6-month historical clause if that clause were reinstated effective January 1, 1981 (26) Retail energy costs recoverable during 18-month period July 1979 - December 1980, assuming re-turn to 6-month l istorical clause effective January 1, 1981 S273 (Less): Retail revenues for energy costs, July 1979 - December 1980, at current rates (8 mills base, 8.4 mills clause (excl. taxes); 16.4 mills X 11,679 GWH retail sales projected for the period) (192) Unrecovered costs, no revision in current level charge S 81 Increase in level charge required for complete re-covery, assuming increase is effective January 1, 1980 (above - 7,972 GWH retail sales projected for the period January 1980 - December 1980, X 1.047 revenue tax factor) 10.6 Mills /KWH 1639 181
. i e
Met-Ed/Penelec ( Statement D Witness: R. C. Arnold TESTIMONY OF R. C. ARNOLD BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION Q. Please state your name and address. A. My name is Robert C. Arnold. My address is 7 Fernwood Trail, 2 Mountain Lakes, New Jersey. Q. By whom are you employed, and in what capacity? A. I am employed by GPU Service Corporation as Vice President responsible for the Generation Area. I as also a Senior Vice President of Metropolitan Edison Company (to which I will refer as " Met-Ed") . In the combined positions, I am head of the Three Mile Island Generation Group. Q. Please state your education and professional background. A. A resu=e of =y educational and professional background is set forth in Appendix A. Q. Mr. Arnold, what is the purpose and subject area of your testimony in this proceeding? A. The purpose of my testimony is fivefold: 1) to present a chronology of events concerning TMI-l since the accident, 2) to su=marize c5a requirements to restart TMI-1, 3) to report on the actions bei g taken to satisfy all restart prerequisites, 4) to report on the present status of TMI-l restart proceeding before the Nuclear Regulatory Co= mission (NRC), and 5) to illustrate Met-Ed's responsiveness and commitment to TMI-l restart. Q. Would you describe the status of TMI-l at the time of the TMI-2 m accident on March 28, 1979? 1639 182
A. At the time of the accident, TMI-l had just completed its scheduled refueling. It was anticipated that the TMI-l reactor would go critical on March 28, 1979. The Unit vas in hot standby and all preparations were on schedule to take TMI-l critical during the day shift on the day of the accident. Q. Why didn't TMI-l resume power operation after the March 28, 1979 accident at TMI-2? A. Following the accident, a decision was made on March 29, 1979 to keep TMI-2 in a cold shutdown condition until the i=plications of the accident were more clearly understood. It was also clear that the TMI-2 accident would require all GPU System resources to meet the priorities of 1) maintaining TMI-2 in a safe operating mode, 2) minimizing t the fission product releases and the off-site exposures to the public and, 3) to implement a safe transition from the post-accident cooling mode to cold shutdown. Q. Would you outline the status of TMI-l since the accident? A. In a letter dated April 16, 1979, Met-Ed committed to the Nuclear Regulatory Co= mission (NRC) that significant advance notice would be pr::1ded prior to taking TMI-l out of cold shutdown. This letter is included as part of this testimony as Met-Ed/Penelec Exhibit D-1. In a letter of Jun 28, 1979, Met-Ed notified the NRC of the identifi-cation of a number of modifications / actions which would be completed prior to TMI-l startup. This letter is included as part of this , testimony as Met-Ed/Penelec Exhibit D-2. 1639 183
On July 2,1979, the NRC ordered that IMI-2 re=ain in a cold shutdown condition until further order of the Commission and stated that a hearing would be conducted prior to restart. This order is included as part of this testimony as Met-Ed/Penelec Exhibit D-3. I note in this connection that the NRC did not revoke the operating license for IMI-1. An Order and Notice of Hearing was issued by the NRC on August 9, 1979, requiring certain short-term actions that should be completed prior to restart of TMI-1 as well as certain long-term actions toward which Met-Ed should be making satisfactory progress prior to restart. This Order and Notice of Hearing is included as part of this testimony as Met-Ed/Penelec Exhibit D-4. In addition, the August 9 Order also established procedures for a hearing before the Ato=1c Safety and Licensing Soard.
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Q. Would you describe the oune 28 co=munication from Met-Ed to the NRC (. which you identified as Met-Ed/Penelec Exhibit D-2? A. The June 28 letter was a co=sicment by Mec-Ed to perform plant modifi-cations and institute actions which had been identified earlier in NRC ' Bulletins and Orders as well as a number of additional modifications, improvements in the training programs, and revision of procedures which Mec-Ed felt desirable in light of the TMI-2 accident. - All modifications and changes required by the NRC for all other Babcock
& Wilcox (B&W) reactor licensees were incorporated into this June 28 commitment letter. Specific modifications and actions which were to be taken are shown in Met-Ed/Penelec Exhibit D-2.
Q. If Met-Ed had been allowed to proceed with the modifications and actions as set forth in the June 28 letter, what would have been the projected startup date for TMI-1? 1639 184
A. It was expected that all changes necessary to be co=pleted for startup would be accomplished by September 1979 and that actual startup would proceed shortly af ter the required NRC approvals. In addition, a number of longer term actions were com itted to for completion after restart on an expedited basis. Q. Please describe the August 9,1979 NRC Order and Notice of Hearing and its impact on TMI-l restart efforts. A. In essence, the August 9 Order reiterated the co==itments already made by Met-Ed in its June 28 letter. However, the Order also encompassed twenty-three (23) additional specific race ==endations in the area of design and analysis and in the area of operations which had been identified in an NRC report issued in July of 1979 entitled "niI-2 ( Lessons Learned Task Force Status Report and Short-Term Recommendations" (NUREG-0578). Also addressed in the August 9 Order are four areas of concern identified by the NRC staff which are peculiar to the TMI facility. They are as follows: 1) potential interaction between Unit 1 and the damaged Unit 2,
- 2) questions about the management capabilitiec and technical resources of Met-Ed including the impact of the Unit 2 accident on these, 3) the potential effect on Unit 1 of operations necessary to decontaminate the Unit 2 facility and, 4) deficiencies in emergency plans and station operating procedures. Met-Ed is required by this Order to keep TMI-l in a cold shutdown condition until a hearing on TMI-1 is conducted by the Atomic Safety and Licensing Board, which will report its findings to the NRC. No nuclear plant licensee (whether operating a B&W unit similar 1639 185
-S-to TMI-l or otherwise), other than Met-Ed, has been required to submit either to formal hearings or to the protracted delay facing Met-Ed before being allowed to rest.irt or continue operation of a nuclear unit.
Q. What effect has this Order had upon the projected completion of modifi-cations and actions necessary for startup of TMI-l? A. Prior to this Order, Met-Ed had felt confident that, through its planning efforts, the modifications and actions which had been required of all B&W licensees plus those identifitd in its June 28, 1979 letter could be accomplished in the Fall of 1979 and that startup could be realistically targeted for no later than the end of 1979. The very nature and anticipated duration of the hearing process precludes startup during the year 1979. Based on initial additional NRC requirements for TMI-l startup and the y necessity for a formal hearing in accordance with the August 9, 1979 Order, completion of modifications and other actions related to restart has been targeted for April 1, 1980. Revisions and expansion of the NRC requirements and associated engineering and procurement schedules may delay our schedule by about one to two months. Whether any such slippage does or does not develop, we can state unequivocably that Met-Ed has been continuously diligent and thorough in its preparation for restari: of TMI-1. The extended outage of IMI-l is the direct result of the lengthy and special procedure adopted by the NRC before allowing the unit to return to operation. Q. In light of the hearing procedures outlined in the NRC Order of August 9, 1979, what vould be a realistic restart date for TMI-1? A. The NRC adopted procedures and timetable for studying the restart of TMI-l could not be acccmplished prior to July,1980. While we are in complete accord that TMI-1 not be started up until its safety is assured, 1639 186
( x we have urged the NRC to axpedite its procedures so this can be accomplished earlier than its present schedule. However, in view of tha NRC schedule, we believed it was prudent to modify our previous schedule to minimize expenses (such as overtime and premium time pay) and developed the target date of April 1,1980 for having the technical modifications, procedure revisions, and necessary training of personnel completed. Q. Would you elaborate on the status of Met-Ed's preparation for TMI-1 restart in the major areas of concern expressed by the NRC? A. Yes. The NRC Order involved a nu=ber of modifications to the unit. Some of these ite=s are identified as short-term =odifications which are required to be completed prior to unit startup while the remainder
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are long-term modifications which generally are required to be completed ( by January 1, 1981. Met-Ed is currently in the procese or performing the engineering for the short-term modificatioas, procuring necessary materials for these changes, installing these modifications into the unit and preparing a startup test program to verify their adequacy prior to April 1,1980. When it is possible and deemed advisable to incorporate long-term modifications into the unit prior to restart,
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these are also being accomplished in this same period. The remaining long-term modifications will be completed in accordance with the schedules identified by the NRC. In preparation for THI-l restart, training program development, presentation and evaluation activities are currently in progress. While Met-Ed is co=mitted to improving operator training programs, it is interesting to note that based on NRC examinations from 1975 through 1639 187
, s.
1978, the TMI Control Room Operators ranked ninth out of thirty in a group of similar facilities, which attests to their skills. During
, that time span, 94% of TMI's applicants passed their license exams reflecting a f ailure rate one-half that of the industry average.
Training require =ents for re-examining and relicensing the Unit 1 operators have been grouped into six modules. The first three modules have been completed and the fourth was started oc December 3,1979. All required training functions will be completed in time to support an April 1,1980 restarr date. The review and revision of TMI Emergency, Administrative, Surveillance, Maintenance and Operating procedures has been scheduled in detail and aa tracking well witn the established schedule. ( Scheduling and accomplishment of significant maintenance work which is required to insure unit readiness for return to power are proceeding well. The Three Mile Island Unit 1 Emergency Plan was revised to confom with the requirements set forth by the NRC Task Force on Emergency Planning. The Emergency Plan along with the State Plan and the County Plans within the 10-mile Emergency Planning Zone were submitted to the NRC on October 29, 1979 for review and evaluation. Comments received fro. this review have been incorporated into a further revision of the TMI Plan which was submitted to the NRC on November 28, 1979. The TMI staff under my supervision is currently developing the specific procedures which implement the E=ergency Plan. The effort should be 1639 188
_a_ ( completed in mid to late Dece=ber. The Met-Ed/GPU personnel having specific emergency response functions will then be trained on the details of the new Emergency Plan. Fianlly, test exercises will be conducted to test the Plan. In a parallel effort, the State and County Civil Defense organizations . expect to receive comments fro = the NRC on the adequacy of their emergency plans in early December. They will then revise their plans as necesaary to comply with NRC requirements and ce=ments. Q. Mr. Arnold, I direct your attention to the NRC proceedings which have commenced with regard to TMI-1 restart? Please provide some background on this proceeding. A. In its August 9,1979 Order, the NRC enumerated the bases for its N- conclusion that TMI-l should remain shut down pending a public hearing. The bases included matters coc=on to all B&W nu, clear reactors, as well as matters unique to the circumstances present at TMI. The Order also , established a three-member Atomic Safety and Licensing Board (" Licensing Board") to preside over the public hearing, and included guidance as to the scope of the proceeding and the procedures to be followed by all parties. A tentative schedule for completion of the hearing was attached to the Order for possible use by the Licensing Board. That schedule contemplated an initial recommended decision by the Licensing Board within 335 days, but lef t to the Commissioners the final decision as to restart of TMI-1. If the Licensing Board recommends restart, and if the NRC staff subsequently certifies that the necessary short-term modifications and actions to TMI-l have been made, the Commissioners are expected to issue 1639 189
_9 t an order within 30 days of the staff certification on the issue of restart. Thus, the Co=:nission's August 9 Order foresaw a hearing process extending for at least 365 days before restart of TMI-1 might be pemitted. Q. What response, if any, has Met-Ed made to the August 9, 1979 Order? A. As directed in the August 9 Order and a subsequent amendment thereto, ' Met-Ed filed an Answer on September 14, 1979, asking for further discussion and definition of certain requirements and requesting an expeditious hearing process. Q. Are any parties, other than Met-Ed, seeking participation in the TMI-l restart hearing before the Atomic Safety and Licensing Board? A. Yes. By September 14, 1979, all interested persons desiring to participate as parties in the public hearing were to have filed petitions k to intervene setting forth their particular interest in the proceeding and the specific aspects of the subject natter of the proceeding as to which they desired to intervene; eleven such petitions were filed and one additional petition was later submitted. Four state and local agencies - the Comonwealth of Pennsylvania, Dauphin County, the Consumer Advocate, and the Pennsylvania Public Utility Comission - also sought ter participate as interested governmental bodies in accordance with NRC rules which per=1t this participation. Q. Has the Licensing Board made any decision on the various petitions to intervene in the TMI-l restart hearing? A. On September 21, 1979, the Licensing Board issued a Memorandum and Order Ruling on Petitions and Setting Special Prehearing Conference. The
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Board there granted the requests of the Commonwealth, Dauphin County, 1639 190
\ and the Public Utility Co= mission to participate. A ruling with respect to the Consumer Advocate initially was reserved, but subsequently during a special prehearing conference the Consumer Advocate was also admitted to participate as an interested governmental body. With respect to the petitioners seeking to intervene as parties in the proceeding - some of whom are individuals and some are groups - the Licensing Board found that eight had demonstrated standing to intervene, but ordered each to file a supplement to the petition setting forth the contentions they desired to litigate. The Licensing Board ruled that two of the petitioners had failed to satisfy the standing requirement, but offered those petitioners a further opportunity to demonstrate their interest in the proceeding. The Licensing Board deferred ruling on the standing of the remaining petitioner. ( Q. What additional action was taken by the Board in its Memorandum and Order of September 21, 1979? A. A schedule for further proceedings was also set in the Septe=ber 21 Order. ~ Intervenors were directed to file drafts of their contentions no later than October 5, 1979. Met-Ed and the NRC Staff were then to meet with the petitioners for the purpose of good faith negotiations concerning the suitability and form of contentions to be litigated. By October 22, 1979, petitioners were to file supplements to their intervention petitions setting forth their contentions in final form together with the bases for each contention. Met-Ed and the NRC staff were directed to file written responses no later than October 31, 1979. The Licensing Board also announced that a special prehearing conference in the vicinity of TMI would cot:nence on November 8,1979. 1639 191
r ( Q. What events occurred at the special prehearing conference which commenced on Novembe 8, 1979? A. During the special prehearing conference conducted in Harrisburg on November 8, 9, 10 and 14, 1979, the Licensing Board heard oral argunent on the standing of those petitioners for which standing had not previously been established, on the contentions of all petitioners, and on various
- procedural matters. The Licensing Board also directed the partier to begin discovery. Further sessions of the special prehearing conference were held in Hershey and Harrisburg on November 15, 16 and 17, 1979, at which time statements from the public in the form of li=1ted appearances were taken. A linited appearance, as I understand it, allows a person, not a party, to the proceeding to express his or her view through either an oral or written statement on the issues in an NRC licensing proceeding.
( Q. Please describe the future events likely to take place in the IMI-I restart proceeding? A. It is anticipated that the Licensing Board will issue its special - prehearing conference order early in Dece=ber 1979. That order will include the Licensing Board's rulings on the scope of the proceeding, the contentions to be litigated, and the parties to the proceeding, as well as the Licensing Board's recommendations as to the admissibility of contentions relating to psychological distress. The Licensing Board Order also will set a schedule for the next phase of the hearing. In all likelihood that schedule will include a discovery period of sixty days from the date of the Order, followed by another prehearing conference, and then the prefiling of direct testimony. At m 1639 192
s the moment the actual conduct of this proceeding appears to be running about one month behind the schedule anticipated by the Commissioners in their August 9 Order. This based on our view that the special pre-hearing conference Order is likely to be issued during the first week of December, which is 100 days since co=mencement of the proceeding rather than the 80 days originally contemplated.
~
Q. What changes in organization and management approach have been made by Met-Ed to enable it to better focus on the return of Unit 1 to operational status? A. Following the TMI-2 accident, Metropolftan Edison Co=pany recognized through its own and other investigations of the accident that major organizational changes were desirable for more effective management , control. These changes indicate Met-Ed's commitment to operational
\_
saf ety and provide significant improvement in the coutrol of operational activities, and the technical and management resources directing and supporting facility operations. The first step taken was to combine the nuclear technical and management resources of Met-Ed and CPU Service Corporation Generation Divisions into a single organizational entity identified as the TMI Generation Group. The TMI Generation Group was formed on July 30, 1979 to strengthen the overall management and provide greatly increased technical resources for the restart of TMI Unit 1 and the recovery of TMI Unit 2. The Group is headed by myself. In this position, I report to Herman M. Dieckamp, President of GPU and GPUSC, and Acting President of Met-Ed. This reporting 1639 193
- - + m -m -
w mm-
k structure provides a direct link from the Chief Operating Officer of these three companies to the activities at TMI. The primary objective of the TMI Generation Group is to ensure safe operations by means which include strict adherence to NRC Regulations, Technical Specifications and established procedures. This Group was formed to take advantage of the extensive nuclear experience represented by management and technical staff f rom within the GPU Service Corporation and Metropolitan Edison Company. This realignment makes available over 200 professionals who have a combined nuclear experience in excess of 2600 man-years and more than tripled the number of professionals who have TMI as their primary responsibility. There are senior management personnel with an average technical experience of well over 20 years reporting to the head of the TMI Generation Group in the areas of: TMI-1 Operations TMI-2 Recovery Environment, Health and Safety Reliability Engineering Radiological Controls Engineering and Design Various steps have been taken in this reorganization to strengthen key functions in the operation and support for Unit 1. Examples of this are: The line management rasponsibilities for TMI Units 1 and 2 are completely separated. 1639 194
( Each TMI unit is to the maximum extent feasible, to have direct control of the resources necessary for effective and safe conduct of plant activities. The head of the TMI-l Operations, J. G. Herbein, Vice President Nuclear Operations, is located full time at IMI. The organitation formed under Mr. Herbein's direction specifically gives the Unit 1 Superintendent, only the responsibility for operations and maintenance and relieves him of the direction of administration, training, engineering, radiation protection and chemistry functions. The radiological control function for Unit I has been elevated so that it reports directly to Mr. Herbein. The GPU Service Ccmpany and Metropolitan Edison Company Quality Assurance end Control organisations were merged, and Quality Assurance for TMI is their primary function. Q. What do you see as the net effect of the actions being taken by Mec-Ed ~ in the restart of TMI-l? A. I am confident that Metropolitan Edison Company will demonstrate through the TMI-l licensing hearings and other public forums that we have the management capability, the technical depth and breadth, the operational competence and the corporate commitment that provides adequate assurance that TMI-l vill be operated without undue risk to public health and safety. We are comritted to follow through fully on the various corrective actions we have undertaken and beyond that to continue our improvement. The hard lessons caught us by the events surrounding the accident have been comprehended. The need to significantly upgrade our nuclear program 1639 195
([ has been recognized. Metropolitan Edison, we believe, is confronting the issues raised by the accident and its af temath and is taking the steps needed to resolve those issues. The net effect of all these factors will enable TMI-1 to pick up where it left off - providing reliable and economical energy to our custoner - . with renewed assurance that it is being done as safely as possible. Q. Does this co=plete your testimony at this time? A. Yes. In the event TMI testimony may be required in connection with any base rate adjustment, I will supply it at a later date. 1639 196 O
.. . ---e wee =-.--- --
MET-ED/PENELEC STATEMENT f 0F EDUCATIONAL BACKCROUND AND EXPERIENCE OF ROBERT C. ARNOLD APPENDIX A Graduated from the Unive.rsity of Michigan with a Bachelor of Science Degree in Engineering in 1959. Also graduated from the United States Navy Nuclear Power Training program, which was attended from October 1963 through September 1964. - Following graduation from the University of Michigan, served 10 years as a commissioned officer in the U.S. Navy, progressing to the rank of Lieutenant Commander. Following is a su==ary of Naval activities: From September 1959 to March 1961, was electrical officer aboard the USS Willis A. Lee. From December 1962 through Septe=ber 1963, was operations and weapons officer aboard the USS Kepler. From October 1964 through November 1966, was with the U.S. Naval Nuclear Power Training Program. From November 1966 through August 1969, was main propulsion assistant aboard the nuclear cruiser USS Long Beach. Joined Metrepolitan Edison Company September 2,1969 on the staf f of the Superintendent of Production as a Senior Engineer, with heavy involvement in the construction, start-up ard initial operations of ths Thrae Mile Island Nuclear Generating Station. _ 1639 197
Subsequently, was Supervisor-Production from July 1, 1971 until Dece=ber 31, 1971; Manager-Production from January 1, 1972 until Dece=ber 31, 1972; Manager-Generation from January 1, 1973 through Dece=ber 31, 1973; and Vice President-Generation from January 1,1974 through May 31, 1977. Became Vice President of Generation for the GPU Service Corporation, (GPUSC), a position which was assumed on June 1,1977. As Vice President of Generation for GPUSC was responsible for design, construction and start-up of new generating facill:1es for Metropolitan Edison Company, Pennsylvania Electric Co=pany and Jersey Central Power & Light Company -- all operating subsidiaries of GPU. Also responsible for supporting ( the operating companies in the operation of the existing generating stations. As of July 30, 1979, was also named Senior Vice President for Generation of the tietropolitan Edison Company and head of the TMI Generation Group. - Currently is the senior Three Mile Island official in charge of the post-accident recovery effort at TMI. 1639 198
-.- -.. . - _ _ .. - - . ~ . - - - . -..__ _ _ . . . _ . . - - . .
Met-Ed/Penelec Exhibit. E-2 Witness: B. H. Cherry { Update of Table 4 of Appendix B Attached to Met-Ed Petition (To Reflect October 1979 Actual Data) METROPOLITAN EDISON COMPANY Actual and Projected Cost of Coal, 1970 - 1980 Tons Purchased Cost Year (000's) ($ millions) S/ ton 1970 2 454 $25.6 $10.44 1971 2 108 24.0 11.40 1972 2 271 28.4 12.50 1973 2 356 32.6 13.86 1974 2 341 61.1 26.09 1975 2 000 60.4 30.22 1976 2 046 57.0 27.88 1977 2 212 63.1 28.51 1978 1 884 63.0 33.43 1979 Jan. 130 $ 4.3 $32.96 Feb. 81 2.8 34.49 Mar. 197 6.9 35.30
- s. Apr. 189 6.3 33.50 May 147 5.1 34.76 June 138 4.5 32.84 July 168 6.0 35.56 Aug. 159 5.4 33.91 Sept. 138 4.9 35.32 Oct. 173 5.9 34.06 Nov. (forecast) 133 4.6 34.34 Dec. 197 6.8 34.68 Year 1 850 $63.5 $34.34 1980 Jan. (forecast) 205 $ 7.1 S34.84 Feb. 182 6.4 35.08 Mar. 200 7.1 35.35 Apr. 180 6.4 35.57 May 172 6.1 35.72 June 199 7.2 36.13 July 207 7.5 36.40 Aug. 192 7.1 36.81 Sept. 168 6.2 36.96 Oct. 164 6.1 36.97 Nov. 199 7.4 37.43 Dec. 204 7.7 37.68 Year 2 272 $82.3 S36.24 L
1639 199
Met-Ed/Penelec Exhibit E-3 Witness: B. H. Cherry f Update of Table 5 of Appendix B Attached to Met-Ed Petition (To Reflect October 1979 Actual Data) METROPOLITAN EDISON COMPANY Actual and Projected Cost of Oil, 1970 - 1980 Barrels Purchased Cost Year (000's) (S millions) S/bb1 1970 323 $ 1.4 S 4.41 1971 961 4.9 5.06 1972 1 332 6.8 5.09 1973 1 341 8.7 6.52 1974 1 457 19.0 13.01 1975 636 8.5 13.37 1976 403 5.8 14.34 1977 683 11.0 16.04 1978 668 10.9 16.26 1979 Jan. 57 $ 1.0 S17.94 Feb. 48 0.9 18.87 ( Mar. 28 0.5 19.80 ( Apr. 20 0.4 20.32 May 24 0.5 21.91 June 16 0.4 23.49 July 53 1.4 25.92 Aug. 37 1.0 26.13 Sept. 19 0.5 27.88 Oct. 11 .3 28.50 Nov. (forecast) 41 1.0 24.52 Dec. 55 1.4 25.46 Year 409 $ 9.3 S22.85 1980 Jan. (forecast) 39 $ 1.0 $25.56 Feb. 31 0.8 25.33 Mar. 29 0.7 25.21 Apr. 30 0.8 25.65 May 27 0.7 25.72 June 29 0.8 26.37 July 30 0.8 26.57 Aug. 30 0.8 26.84 Sept. 27 0.7 27.06 Oct. 30 0.8 27.55 Nov. 28 0.8 27.94 Dec. 42 1.2 29.26 Year 372 S 9.9 $26.65 1639 200
Met-Ed/Penelec Exhibit J-2 Witness: E. F. Carter TABLE 9 (Rev. 12-7-79) METROPOLITAN EDISON COMPANY Monthly Bills Under Residential Rate RS (ett. 1-10-79) Level Charge Currently in Effect vs. Proposed Increase Monthly Present Rates Proposed Rates Usage (8.8 Mill Level (15.7 Mill Level Increase (Kwh) Charge) Charge) Amount % 200 $14.17 S15.54 S1.37 9.7% 300 19.06 21.12 2.06 10.8 400 23.95 26.69 2.74 11.4 460 (average) 26.93 30.08 3.15 11 . 7 500 28.84 32.27 3.43 11.9 600 33.73 37.84 4.11 12.2 700 38.62 43.42 4.80 12.4 800 43.51 48.99 5.48 12.6 900 48.40 54.57 6.17 12.7 1 000 53.29 60.14 6.85 12.9 Note: Amounts include 6.922 base rate Tax Adjustment Surcharge (effective 11-2-79). 1639 201
Met-Ed/Penelec Exhibit J-3
, Witness: E. F. Carter TABLE 10 (Rev. 12-7-79)
METROPOLITAN EDISON COMPANY Total Charges to Customers Reflecting Proposed Increase in 8.8 Mill Level Charge Normalized retail base revenues allowed in R.I.D. 434, including 5.42 mill " roll-in" of energy costs into base rates $237.7 Million Normalized test year retail sales 6 872 Cwh Average retail revenue per Kwh (S237.7 million - 6 872 Gwh) 34.590 mills /Kwh Plus: Tax adjustment surcharge currently in effect (34.590 mills /Kwh x .0692) 2.394 Plus: 8.8 Mill levelized energy cost adjustment charge allowed in I-79040308 8.800 (' Total average annual charges to retail customers 45.784 mills /Kwh Proposed increase in 8.8 mill level charge 6.854 mills /Kwh
% Increase in total charges to retail customers 15.0%
Annualized increase in retail revenues , 12 months ended December 31, 1980, based upon projected retail sales of 7,972 Cwh: Mills /Kwh S Millions For energy costs 6.546 $52.2 For revenue taxes (6.546 x .047) .308 2.4 To ta l 6.854 $54.6 02
Fbd 9- - - . . ,
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{; t
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- Before l
_ 2i THE PEUNSYLVARIA PUBLIC UTILITY Col's.ISSION 3 ,
--o00--
4[Inre: I-79040308 - Perinnylvanic Ptiblic Utility
- Conmission versus Metropolitan Edison Coraparg, 5 ,
e t a3., i 0-fi Further prehearing conference. i I F2
--coo--
I 6, i
, Harrisburg, Pennsylvania December lo,1979 l 10 [ n :
i 11 --coo-- 17, '
- 13 14 ,'
4 15 ; pageo 93 to 134 16 l 17 . 10 "D'9']
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19 D"*}D " w Ju o Ak 2 4 to 31 , MORRBACE f.: MARSH /1, INC. 22 f 27 Ucrth Lxlerillow Avenus Harrisburg, Pennsylvarda 7, [( 17112 Af.,I g 1 u 1639 203 f *ONft3?.OH e it.'.f'.C'/J L., IMO. ~ 07 !!. LCCif WILLOW AVC. - Hl.RMIS 9URG. PA. 17912
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4 93 1 l B3 fore i 2 THE PENNSYLVANIA PUBLIC UTILITY COIGiISSION I t
--oCo--
4 tj In re: I-79040308 - Pennsylvania Public Utility Conmierien versus IOtrcpolitan Edison Company,
, et al.
Further prehearing conference. 7 i --ooo-- 0
! Stenogrc.pl ort of hearing held in 9 Eearing Roon Ho,1, North Office Euilding, Harrisburg, Penneylvania, t -c e 10 j Monday, December 10, 1979, 11 I at 10:15 o'c kch a.m.
12 l --oDo-- C Ib
! EEFORE: MICHAEL JOHNSON, Acting Chairman g SUSAK SHANAMAN, Cc=missioner 14 ! JAES H. CAULEY, Commissioner
.,. L
' IUDA C. TALIAEERRO, Commissionar
..o . )[.
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16 t
,,, APPEARANCES:
-' )i.
SAW,EL B. RUSSELL, ESQUIRE 16 W. EDWIE OSDEN ESQUIRE fril' f(i g , ALANU.SELTZERhEGQg.:./f]j{3 p
, Rycn, Ruceell 6: Medouagacy
*g 530 Penn Sqacre Center j P. O. Bor 699
,,1 Rec. ding, Penncylvanic 19603
, and i: JAMES B. LIBEPl%N, ESQUIRE 22 !
Ecw York, Nen York 23 i For - Metropolitan Edinon Company and i Fanucylveci Electric Compcuy
,. [.
<. f' u '
O rooHKc.10H ci stAttcH* L. Itic. - 27 tl. LOC!tWILLOW AVE. - MARfttEOURC. P.* 17112 o** Jo o 'v yg 1639 204
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I 94 g ] APPEARANCES:(Continued) 2 JOSEPH J. MALsTESTA, JR., ESQUIRE G-28 Ucrth office Building 3 Harrisburg, Pennsylvania 17120 i ad STEVEN A. McCLAREN, ESQUIRE 4 Deputy Chief Counsel, Ratea Division l Late Etn:cau 5
! G-19 North Office Building 6 Iiarrisburg, Pennsylvanic 17120 For - Commission Trial Staff 7
CHARLES L. ZWALLY, ESQUIP1 El JOHU E. FIET.ERTON, ESQUIRE h 1801 1iorth Front Street e
! ~ arrisburg, Pennsylvania 17103 Fcr - Universal Cyclops Corp. , Electrc11oy Corp. ,
g et al. , Indnstricl Customers of Penelec j WILLIS F. DANIELS, ESQUIRE 11 Dcane, Morris 6 Heckscher J g :, 232 Ucrth Second Street, P. O. Bo 1003 Ecrrisburg, Pennaylvn,in 17105 33 l For - PennsylvEnic Foundrymen's Association,
; Lebanon Steel Foundry N IGURICE A. FRATER, ESQu.mE y,
i McNccs, Wallace & Nurich P. O. Boz 1166 16 Ecrrisburg, Pennsylvania 17108 ll For - St. Regis Paper Co. , et al. I 1*' i AIAN LTEDER, ESQUIRE gg l Centrcl Fennsylvania Legal Services i 10 Scuth P:-ince Street 39 Lanccater, Pennsylvanic 17603 i For - Senior Pcuer Action Group, et al,
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~
;4 BERNARD A. RYAM, JR. , ESQUIRE 2,*
! 600 North Third Street
; Harrisburg, Fernsylvanic 17102 2.. ,
For - Lethlchem Steel i
.n ERALD GORRISE. ESQUIRE 1
12th Ficor, Pccir.rd Building m Philcdelphic, Penns7 vanict 1 19102 - (' For - Citihtnh, E.A., bgent! uf . 25 L MOHR3 ACH O NAR SH AL, INC. - C7 FL LOCKWILLOW AVL ~ MARRISSURG. PA. 17112 __ L6 a a c
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95 APPEAPlDCES: (Continuad) 1 l D!AT.ID M. PARASC3, ESQUIRE I 3 I HALTER W. COHEU, ESQUIRE h 1425 Sercubarry Square 3 : Harrisburg, Pennsylvania 17127 For - Office of Ccasu=2r Advocate 4 JOHN BOIERS, ESQUIRE 3 4 R. D. 7, Eon 380
, , York, Pennsylvania 17402 For - Holly Ecch, Deep Run Fow 7 ! PATRICIA SMITE
.. Box 52, R. #1 Etterc, Penncylvania 17319 g For - Neubarry Tcunship TMI Steering Carnittee LOITISE DUFOUR 10 3ex to Oahn, Pennsylvanic 19456 e1 For - Licarich Ecology /.ction 13 -
MARK P. WIDOFF, ESQUIPS P. O. Eo: 1547 13 C'- ' Ecrricburg, Pennsylvanic 17103 C ' For - Three Mile Isinnd Alert, Inc. h 14 1s 16 ! 17 +. 18 j 1639 206 zo ! i i 21 i i 22 l 23 e
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&!CMf1DACl1 A b1AftSM/.L. tffC. ~ 27 L LOCKWILt.OW AVE. - MARftiSBURG. PA. 17112
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! 96 1 +
i THE ACTING CHAIRMAN: Good morning. The 2 ! thearings under Docket No. I-79040308 are non cpen and we vill call them to order. Let me outline to you certain business 4: tof the Commission in connection with these hearings that we 5 i
'all have to undertake bafore we get into the sub;iect matter.
6 !
; Th:e first thing we need to do is to conven'e 7
jus all togethe* into a prehearing conference to deal on 6 i
!several procedural matters. The Commission is going to have I
9 lto rule and you will have to have an opportunity to protest 10 , lor abstain frcm expressing yourself on the additional request 11 ! jto intervene and to make statements, i 12 i We want to consider the motion of the q 13 ! l Respondents filed on Hovember 29, we want to consider the 14
!, test period to be used, schedule additional hearings, determin e
^5 1
i the order of witnesses to appear at the additional hearings, 16 i
;to be considered at any rate, to commence the hearing, to 17 !
ihear public statements of parties, allow Respondents to make 18 I statements, arad to mark statements and exhibits for identifica - 19 ! ' l tion, to swear 'in witnesses, authenticate statements and 20 .
. qxhibits, and permit cross-examination.
21 N We have the matter of the City of Lancaster S
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- uhich seeks intervention with respect to only the issue of 23 revching Met-Ed5s certificate. We will need clarifiatior 94.I:
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f from them as to what they mean by that. 1639 207
*?,5 :
l We dic previously defer ruling on the Lehigh MOMRBACH Q (.1ARFMAL. If 4C - 27 N. LOCKWELOW AVC. - MARRisSURO. PA. 17912
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l 97 1 kPoceno Com.ittee of Concern, on their request, if they " ew
- c. 2 jtheir reque t to intervene with respect to the issue of O' 3 lrevcking Med-Ed's certificate of public convenience, tra need i
4 {toascertainwhetherornottheyrepresentanycustcners.of i 5 lHst-Ed. No doubt objections will be raised by the other . 1 6 l parties , i 7 The Manufacturers Association of York has l 8 'l asked for an opportunity to make a statement and we will have 9
]to rule on their right to intervene for that purpose.
10 ; The same thing applies to the York Division 11 !of Borg Warner Corporation. 13 l At this point I would like to proceed with 13 lthe first step and that is to convene us all into a further g
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14 prehearing conference, deferring the formal opening of the 15 ! proceedings. t 16 ' Are there any additional requests to intervene
-7 I
jand to make statements? i 18 , MS. DUFOUR: Conaissioner Johnson, I just 19
; handed to your assistant, the Pennsylvania Alliance desires 20 to intervene and make an opening statement.
21 l THE ACTIEG CHAIRMAlh We pointed out to you l 22 !when you gave this to us earlier that you would have to presen t
- 23. to us, as has everyone else, a fornc1 statement which has I
been notarized. Do you have such a statement? 1639 2 % g
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j MS. DUFGUR: Your assistant has that, l'OMRCACH a t.t.Ut 3M AL. INC. = f.7 N. I.CCKWif.t CW AVE. " HARRISDURS. PA. 17:12
/
- 98 7.
! THE ACTIEG CHAIRMAN: Before we can proceed 2 to approve the petition that you have presented, the formal 3 ;1 complaint, you have indicated that there are some member 4 ] organizations, the Pennsylvania Alliance For Jobs and Energy-5 jPittsburgh, the Erie Area Tax Reform Coalition, United 6
fElectrical Workers Local #506 of Erie. Are they a part of 7 this Alliance? 8 I MS. DUFOUR: Yes, they are. t 9 THE ACTING CHAIRMAH: Do any of them represent 19 tcustomers of either Metropolitan Edison or Pennsylvania i 1.1 1 Electric Company? 12 f MS. DUFOUR: Several of them do, yes. I i
- 13 THE ACTING CHAIRMAN: Can you indicate which i
1
.14 jtheyare?
\
- 15 MS. DUFCUR: Limerick Ecology Action, AUGRY l
16 of York, Erie Area Tax Reform Coalition are Penelec customers. 17 THE ACTING CHAIRMAU: Are you prepared to I 18 indicate in support of this the names of just several customern 19 for either Met-Ed or Penelec? 20 MS. DUFOUR: Yes , I am. I did, I believe,
!i 21l mention one, John Stewart of St. Pe ter 's.
22 i THE ACTING CHAIRMAN: He is a customer of which? C g MS, DUFOUR: Met-Ed. 1639 209 7 g p 2? '. , TES ACTING CHAIRMAU: Do you have any others? I 25 MS. DUFOUR: I donit have the names with me NOHREACH & MAP $ MAL. INC - 27 N. LOCK \YtLLOW AVE. " H ARRISBURG. FA. 171f2
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99 1 ibut the names can be provided. ( 2 THE ACTIKG CHAIRWiN: Can you assist the 3 jChair by indicating the nature of your intervention that you 4 seek? S MS. DUFOUR: Primarily the Alliance would 6 {like to be perrditted to make an cpening statement, a very 7 ;short one, today, and participate, perhaps through tuy own 8 organization, Limerick Ecology Action, in the fr.ll proceedings; 9 but we would not have to remain as a full party to the hearing, 10 THE ACTING CEAIRMAN: You ask for permission 11 !to intervene for-the purpose of making an opening statement? 12 ; MS. DUFOUR: Yes. 4 13 THE ACTING CHAIRMAN: And that you want to G ' O 14 l participate as your interact will show. i Will you be represent' id i . 15 jby ccunse1? Il 16 i HS. DUFOUR: At this point, no, Vark Peterson i 17 jormyself,althoughIunderstandtheAlliancehasanattorney. i 18 'Mr. Peterson vill not be here until later. He is coming from 19 jPittsburgh and has an attorney with him. l 20 ] THE ACTING CHAIRIGN: He is an attorney? 21 ; HS. DUFOUR: He himself is not an attorney 1 22 j but the organizatica does have one. However, I do not think I 23 : that they will be participating to the degree that the attorna; 14 lWill even have to be here. If necessary, I will do it through 15 my organization to simplify matters. 1639 210 0 MO!1RDACH & f4ARSHA1 INC. - 27 N. LCCKWILLOW AVE. - HARRISCURG. PA. 17112 J y l
; 99-A i
1 j TEE ACTIKG CHAIRMAN: You will be doing what? 2 MS. DUFOUR: To the er. tent that the Allisnce 3 luouldliketocontinuebeyondthecpeningstatement,thatthe l 4 iLimerich Ecology Action, which I represent, I would be making c ' lstatecents for them or questions, but I doubt the Alliance 6
!would continue --
7 THE ACTIIG CHAIRIMN: You will be acting as G your own attorney? 9 ! 115. DUFOUR: Right. 10 l 11 l 12 (Transcript continues on Page 100. ) - 13 1 D{'lD *D T b A\ e A
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I 19 4 20 . I 21 , 1 22 23 24 b 25 i R*0HRBACH & MAR'3 MAL INC. - 27 N. LOCKWILLOW AVF - MAILRISOURG. PA. 17112 t ) g II: 1, il
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L 100t-r g x EI t TIE ACIIUS CI%IPJEN: Hold the proceedings, i h
- 7. ] Tc* 3 Ccaziasica has not indicated core very obvicus things b
I to you tha record might have piched up, My naco is Johncon,f t 4l4 I'm a Commissioner, and at the request of Chairman Goodo, l i 5 with tha approval and concent of my colleagnos, I will be . 6 '} presiding, et 1 cast until further notice from m, at thase ! 7 hearings. l, Cp I n You will therefore forgive my eagerness to be i 2 P correct here so that we don't have to be correct elsewhere, 10 J like across the mall. Seze of you who have had cause to go I p 1 11lj there itnots chct I taan. f 1%j Now, at this moment we are going to consider 13 i pre-the request of the Pennsylvania A111ance)' i 'i h, W & .U. LiiW th%ah$f vf M[jj limincry statement. If thero's no objection from any of the Il M d,, parties, the Chair will approve thi's request. Then we will i
' i 16 llidetermine whather there cre any other parties who seek to i: ,
17 make an opening statomant. l 18 l Arc there any parties who seek to enke an ! 19 l opening statom2nt at thic tima? There are none at this time.; n" t 20 Are th ra cny objecticus by cny cf the partics? Colleagues?l 1 ' 11i CG2GSSIOIER CAUIEY: Are we speeifically l
??,
tc1hing about the Pennsylvania Alliance at tha mecent? 4 M TE ACTING CFAIIE6H: At the moment. since i a b EN none other have come forward. We could, at the Manufacturingf h i 25 Associction of York, which seeks to make -- has asked by s- : ev.nx.: u::. - n- e:. tocmiu.ew r,vs. - mmuerune. n ima _ _/ e.._d'$ _ 3 1_- _ _ _ _ _ _ _2 1639 _12
LUL-l l 1 teicphona that they be permitted to tnko a sectecent on
- i 2
- December 10th or 19th. That'c nort Tuesday er Wodnesday. .
3 The satae requect has come from Berg Warner, York Division, l fs nort Tuacday or Wednesday. So we cre faced now with only 1 5 . this request at this tima. i 1 6 ' Esaring no objections fro:n below or above or e 7 - in between,, we will permit the Pennsylvcnia Alliance to 6 cnko a ten-minute staterant, to be limited to ten minutes. .
}
9
)i Who's going to mal:e the staten: ant? I 10 IG. LUFOUR: Mark Peterson will be doing so, 11 but ha's coming from Pittsburgh and probably won't be here 12 before noon.
' f 13 I TIE ACTIIM CIMIRMAN: I am sorry that we i M cannot adjust our schedule to meet the convenience of I 23 !'
individus1 participanta. You met with me inforcally on l 16 Fridcy, and I advised you that we would be taking up this 17 matter at the very outset of the hearings. Is that not IS right, Miss Dufour? 19 MS.' DUFOUR: That's correct. 20 l TIE ACTING Ci! AIR 11E: The Chair does not 21 cppreciate this inconvenience. And unless there will be li Mji after 1r.ch uncnimous ccasont from all of the parties, you
,.{ ;
, will have forfeited your right uhich is extended to you }
(' t i Ml under ein teras of your request to me on Friday. l 25 MS! LUFOUR+ I'll subject myself to the - ncg D,;egr77- nu.-a n. i.ccxs. .:.e v ar. ruenm:una n. s::n
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n 102 14 1' regards of tha rest of the partioc, because I can't speak forj g g 2 f,. lir. Fotorson. I understand what ycu're caying, and it's ; i S ! really beyond cy control., l l f f i 4 } THE ACTING CHAIIn%Ii: I want the record, thoughj
,j to reveal that I have referred to a prior informal caeting f 6 .! on Friday the Oth, at which time I told you that ce would 7 present thic matter for dispooition at the opening of the l
6 l session. Earring objection that could not be composed or o l 9
, uithdraun, ua could expect tho Pennsylvania Alliance to make l 1
10 j tha statomnt at this time. The Chair is obliged and regards i 11
'. it cs an obitgation chich cannot bs comprosised, to preservo U ' and protect the integrity of these proceedings.
h <-
!#}
I think that un have dealt fairly with the g W ; Pennsylvania Alliance, and I cch your forbearance for a feu d a
] comnts chile se ha6dle, j 16 (Off the record from 10:34 a.m. to 17 10:36 c.m.)
,3 16 j TEE ACTING C MIIUGN: All right. TW re back. l l
19 i Do I understand you wanted to address the Chair? i 2C[ 145. LUFGUR: Yes, I did. I was just told that ; l' 21,i Iin-h Fotorson is nor in Harricburg -- he's not in this 1 .
.U..
p building at tir notant -- if that acaid help in any way. I i 23fl TIE ACTIHG CIIAIRIM1!: That he's -- ? l 24 J ,. IG. LUFOUE: That he could be available within , g 25 ' tha half hosr, if that helps you at all. 0*9 "
~~qe = - an=v.. wc. - a n. :.e xm.: err,v:c.- sm=mes=.w n. m y IM M d ' . 'l dif [
- - ....- - - -. - - . - . - f h39]} f
I f 'id3] Ef TEE ACTING CImimi4N: Once ce start we're no'- I
% yl going to interfore. We're not going to break inte it. We'rei h i 3 h still in the pre-hearing conforence stage; and wbsn we 4 complete that, if Mr. Peterson is not here, we'll go ahead 5
; with our bucinesc. And I'll offer lir. Peterson an cppor-g{i; tunity at the end,at the conclusion of the morning session '
7 or immediately before we resum our proceeding after lunch h unicsc there ic a reasonable objection from any of the I e' parties, that we'll permit him to make a statemant then. 10 In the meantic:e I would like to dispose of the
^^ request frca tha Manufceturers' Acso:Lation of York and the I2 Tork Division of the Borg Warner Corporation. They both have i
U requested an opportunity to make a statement, and what we M j need to clarify is whether or not they wish to make a state-13 unnt or they uish to intervene for the purpose of unking a { 16 a staten:ent or uhathar they want to intervene for the purpose d l! of making a statement and for so:ce other limited or total t 10 ! purpoco to participate together with the other intervonors. 19 l d l% Is there a representative here of the z.0 };snufacturcra' Association of York? Is there one here? If
.4 ;l there is one hare, will he please rice? Is there a repre- 1 g
i i E sentative here of the Berg Warner Corporation? Being no:m, !
,n .
' *'; ii I uill aci: It. II Claren.
i ( ; Ml 12.' 110 CIAREN: CommissionerJohncon,I'vebeenf i ! 20 in touch with both persons from Borg Warner and the
,w tyw qg:. 1.t. me.-x u. s.omc.nu ow r.ve.-n:wcounc, n tm:
~ ae m .- ~ _ , . ~ . _ st. 1639 215
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Manufneturers' Associat!.cn of York by eclophone, and they g 2 d., did sche a request to me that they be nilowed sotto tim on [ a 5 !i the 10th cr 19th to c:ke a statement. If the Comnission so 0 rulen, I wouhi return the celephone call and inform them 4fli F simply of the time they may appear, q . 6 TFE ACTING CHAIRM!di: Well, there's also the 7
! need to determine the extent of their participation, their
,, li
" j: intervention, which we can do when they are here.
9 Is chare atty objecticn at this mennne to the , J'h, appearance of either of thace parties for the purpose of
.i l ' $o mhing a stateent?
If I soc no obiection. i Il Yes, cir? O U' j t MR. BARASCH: Mr. Chairman, I'd ius t liim to
! e
.t /
i clarify something. The Consumer Advocate's Office might not i 15 g necessarily have an objection to the intervention of Borg I 16 Warner er thin Alliance -- not tin Pennsylvania Alliance -- 17 to this nmufacturers' group, but we might very wall have d 18 ebjections to dircet testimony they propose to introduce. e S p! I So by not objecting to their intervention, by no mans do i I i '
\ tm .an sss='ly agree w*th the possible subject cntter of j
h i 22 [ testimony and itc relevcnce to thcea proceedings. l
)
%l:' TIE ACTIIG CEldPFAF!: I have not acked you to e t
?3! cpprove th ir intervention for anything more than making j M
, this statomat.
25 I cant to cnnounca now that the date for their
*10 o *
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! I l !' otatement will be -- cinco they have given us the option, '
h; 3l wa sciccted the 18th of December as the day, at ton o' clock, S j and I'll ach Mr. McGinren to pisano contact them and' advise 1 4I them. And will you arrange for choir notifiention in n i E I Ingal mnner that will make certain that wo're doing it k l Sli right? l
?
l Yes, cir? O MR.' MitIATESTA: Mr. Chairman, if I can mhe E iust a quick cc:: rent, I'm not sure I understand what any of 1< these people mann by a state:::ent. If a ctatemant is not 11 i intended to ba ovidence but is caly intended to be a 11 memorini of their position with rogard to any ultimte 13 i
,I determination the Commission might make, I see no reason why d'
{ it can't be redo in writing and not disrupt the evidentinry t 14 - proceedings that we're going to begin today. 16 ", it seems unneccosary to have them com in and , 1 mke an orn1 hind of statement about an ultimate position Ab the C iscion might wish to take and disrupt the hearings.
- o!!
Once ne start with uitnceses, I don't see nny reason to have
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2' theso hinds of disruptions. U ~ TIE ACTING CliA1TJnU: Tharc are tuo. And the ' I D'] Cormiscion, in its ondeavor to & ns paroissive as possible l
,,li and necording to the parties cil of the rights. that they 2
,1 seek, consistent with good rencon, I see no rensen for being 25 I i as rigid as you wculd ask the Cottmission to be. And I k^~ m. r m s w. me. -:- n. t.mm. evuv . - swnmeon :, n. sw:
b 0\ 2 5
I 106~ 4 j
- 7. apprecinto councol's advice. We are unshahnble in our h O i f.! determination to be parmissive, at least where there is a I- mtter of two for no::t Tuesday and a mtter of one todny, j i
4j if he gets here. 51 Are there any obioetionc to the intervention i 6 i of thece parties for the purpose of enking a st'atement?
'l [ That's the only thing I'm asking you to rule on now. We'll 6.; nah them to cicrify uhen they cre here what other interests 41 F ,0 they hcve. ;
y 1 20 ] I think they do have an interest. And until { 11
) oc knen in a cicrified annns: what that in* crest is, we're 12 .. not going to rule on it.
O .J[. G
^3 h I enim it there ic no objection.
t'
,,4 Mr. McClaren)
M will you see that the proper notice is conveyed to each of l 1: 15 f/, those parties with reapact to their cppenrance here at ten e 16 0 o'cloch on Tuesdny, Dacenber 18, for the purpose of snking p
* ' 'I n statetent, limited to ten minates each?
10 ,, Let me renew my previous inquiry. Is the t 19 representative of the Pennsylvania Allinneo availnble? 20jf M3, DIFOUR: l Apparently, he's not in the I: building yet. 11[ , 2? . TIE ACTIKG CHAIPJRIT: We util proceed, than, t
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TCl! with the rest of car -- l 74 MRJ K0 CIREli: Comissioner Johnson, has the $ 25 ! Comission formally ruled, timn, on the request to intervene j .rs - .. D
"* "* * ~ " '"""" ~ '"ff,3f} l & N J
[i 107! P I h! by Lehigh-Pocono Corraittee of Concern and the City of , E{j Lancacter? ) Il ! 5 [, TIE ACTING CHAImi4N: No, we have not. We , If 4d haven't considered them yet. I had announced that what ce ' it v 51 could do at first was deal with choco who had wanted to l
*.; make statocants.
1 . 3 7 We will non deal with the request of the City ; i 0 a of Lancaster and the Lehigh-Pocono Comittee of Concern ! 9 !i ceparately to intervena with respect to the issue of ! i lp' revoking Fet-Ed's Certificate of Public Convenience. Is ! IIl there a representative of the City of Lancaster present? { t g) 2: ! MR. TAIDUAN: Conmissioner Johnson, I'm here j 13l representing the other organization, the Lehigh-Pocono
", ,[o Comittee of Concern, just to cini-ify why I'm standing. I
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13 i, TIE ACTING CHAIRMAN: Will you iust stand at id i. case for a mom 2nt while ue find out what happened to the i { I?[ ' City of Lanenster? i 18 l What was the nature of their request, Mr. I- In what form una it? Written? l FicClaren? ' I 20 F2.. MC CLAREN: They stated their request in h li 211 a Petition to Intervene. But I think if ccunsel has not > i
.d.j! appeared hero today. it could be appropriate for the M. Conmiccion to defer ruling on that request.
i, 43 g l t._, b Sh Can the Reporter indicate chether the t
" I appearance sheet had been signed by counsel for the City of l 9
" '~"~
Y E
.A . ___ _ _ a __s __m.; _ __
i Li l 168~ (' 1 Lenenator? h i 2'! , TIE REPORIER: No, it hoc not. 9 , E CordISSIO?iER TALIAFERRO: Mr. Chairman, is n 4 motion in crder to move? If so, I move that the ruling on o the request of the City of Lancaster to interveno be I
-l l
- 6. H deforred to a later tit:2, at ofnich time counsel will appear lj 2 for them.
1 0 Thnt'c seconded, I
, TE ACTING CHAIRlnN: l n
presume. Ic that seconded? 10 COMIISSIOER SHANA!GN: I'll second it. l . l t
., L u' THE ACTING Cl&IRHidi: Are there any objections;?
.,1 '
COEIISSIONER CAW 2Y: No objection. e O nl No objections. re 8 THE ACTING CHAIRMAM: It is I4 i moved and seconded and' carried. We will defer the matter i R l' of th2 City of Lancaster till a letor time. ' 16 The Lehigh-Pocono Con:mittee of Concern? I 17 la.' TAIDinN: Yes. i I am William T. Laidman. t M ' THE ACTING CIEIinnN: We need you to speak
~ li Wii into the miko, sir, so that whatever you say may be forever j ll i M$ taccrtoca. Will you identify yourself?
ll 2 IE/ IAIDIEN; My name is Willina T. Laidean, M!i cnd seated on the other side of the rail is Robert P. l t k[ Shively. ifa're bcth representing Lohigh-Pocono Cotraittee ; s i' I
% h I,
of Concern. The Commisston aircady has in its poscession 25l m..M. -
,M ,M,inL ._- 7g yA,. . . _ . ,,.
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f 1 109 : 1 evertl !ctta:s from our organization stating our interest in the s 2 i intervention in thic mtter. We had hopad that this would : 3, have been rasolvad at the public creting on Friday, but, . I iL , however, thic morning we're inforced it had not been enken r 5i up nt that tim. I 0 ! i So at this tim I would ask that the Co:anission
? ;} consider our Petition to Intervene and just nske a state-n li !
ment that we cro reprecenting the Pocono and the Pocono lo
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e lj a nonprofit citizens group having cambers who are custocars l . i, - y'
^ it I ij of retropolitan Edison. We have, at the pre-hearing con- !
ei li f' forence, distributed copies of our original letter. And if ll1 12 there are parties here today that were not at that pre-
~) u i I
hearing conference, we would be glad to give them som. We have them in our possession right here.
,1 1" r; '-
If there are any other questions I can answer, N I'd be gind to. U TEE ACTING CFAIRMILN: Yes. The purpoce of the E j inquiry is to clicit from you a cinrification of what you l
'I i j mean by the revocation of the Certificate of Convenience fE i er Mot-Ed'c Certificate of Convenience.
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; MR.I IAIDFAN: In our original letter we stated
]
.e co wish to cddrosc the issue of revoking Metropolitan "h Edison'c Certificcto of Oparatien chich parmits the Cocpany I
/' ii 4,, q to provide public utility service in Pennsylvania and make l proposals for alternativas. By that we're nddressing that w - ucww. - : m=. -:v u. r.e =w:v.=w me. - wxusm:. n. sw n - OSg Ny
=_ _- _ ,. _619_2 2 1-J_ % J~J. _e. _ .. A_ ,._. 2: _ _
b ( ~. 1[ particulcr iccue of the tIrece that are censolidcted in this j e h i
.+ n cace under the dochat num'scr 308. ,
t j 5P It is our position that there cay *oe other
- h. !
1 9 - more vicbis usys of providing ciectrical utility cervice to { 5 h., the residents of liatropolitan Edicen'c crea, and un oculd I i i. u uich to concidar these icanos; in particuinr, public psuer ' I 99
; rather then private ccrporations providing the power. l i
M.V i
!and va uould unnt to be able to question I i
E[ witnocsoc of the Respsadent as to the ability, both 1 u :' k's technienlly and mmngertally, to concetcatly run the public , E[ ,, utility and carte the citiconc of Pennsylvania, as is their !
- ,, e (
"' responsibility. l O },
' ' ~ h l TIE ACTING CFAIRFAN: Are you represented by n
..y counce17 E j 1E." TAIDinH: Bob Shively nnd myself are nppearing for the organization. We are a: ambers of the
'O organi::ntion. Eo are not lawyers, however.
i I w,, [ TIE ACTIEG CFAIPJSH: Do you intend to be e represented by councel? , sej
"'t 1 2 ,~ Ti n DI G I!: 17e would not intend to hava a Il U!!I: Icryar procent. He have severci uho are helping us prepare e I'
/2- p. docuantc. 1I01:3vc0, none of them could be appearing bafore N the Cecairci.on at this tica.
E
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'5?E ACTING CFAIRiiMT: You proceed at your h g ybN Ub brbtNn 7
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<f 1R. T. AID?BN: Yes, of cource. Ue ofton do. !
9 . i.
~ ;a TIE ACTING CIKIRFnM:
I will not restato for I s 2 ! ycu the doggerel taught to me by Sam Russell about ths 5 l-4l charactorization of a person who han himself for a client. h Don't tell it to ma now, Sam.
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, Ilouaver, you proceed at your peril. ;
'i Is there opposition to tha intervention l i
G i i l sought by the Lohigh-Pocono Cornittee of Concern? l f t
'Q -
l COMIISSIO"ER SHAmenN: Comnissioner Johnson, ; i d_ ,f p could ue have it stated for the record as to shothar or not i - a "j. l, scro of the members of your association are or are not
^2 1 q customars of either Met-Ed or Peneloc?
13
- 12. 1AIDMAM: Surely, i i 14 I i
TIE ACTING CFAIRIGN: They did state. I
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- 12. IAIDE4N: The ones that are,mambers that
., l , ,n V -
o
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are customora are all of Metropolitan', Edison. We hight l-1Yh possibly have sora Penclec customers, but I'm not familinr 18 with any of them, so I c9n't cay th9t we do. w '- 1 Uc do, howevar, list in our letter several l 7D l uaccors uno are custoscrs of Metropolitan Edison, Robert l t 2I P. Shively, who will be co-councel, or whatever you care to l [L $ D' 3 '- call us, fer tim Pocono is n r:cabar and a customar of .
,9 6 i
~ ;. Hatropoliten Ediscn, ns cell as Ifary Tone, Edward J. Berg, j k- efio'dreib'oth niso officers of the organication of Pocono.
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. There are nusarous othars, but I don't have their names in L, , p :pn nu:.: m=. .: n. s.e== stew :.v:. - w.amorm. c.1. tma 163 9 223 unwed a. . _ _. .- . -- -
[i y 111-n I1 p 1 j{ front of n:c. $ w ,, 5 !I COI.!HISSIOGR TALIAFERRO: Mr. Chnirm9n, may I 4 h 9jI och n c'.urrification for the record? It's my understanding I}
' ,i }1 that you uich to oddress the issue of the Show cause Order
-:. 1 as to why the Certificate of Convenience shculd not be 5ls!
.r op revoked. Are you prepared to put on witnesses on the issues
?ll1. uhich you stated earlier?
6 '! h ! 9 (Transcript continued on following page.)
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IF 1 112 2,,! MR. LAIDMAU: At this timo we haven't E 2 l determined whether or not we will have witnesses or what 3 form of evidence we might provide. We have several posci- l N l 4,', bilities that we cre exploring at this time. !. 5j ; I have with me, if we are adnitted as 6 jinterrenors, a petition to the Conmission to extend the 1 7 ; deadline for filing, a memorandum of the prehocring order r i 6 j that was issued, so that we might e.xplain further what i 9 l testimony we care to bring to thic hearing. i 10 THE ACTING CHAIRN: This is not intended 11 to delcy? l. 12 MR. LAIDMAN: No. In fact, we state that
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a 13 in here that the interrenors do not wish to delay this 14 hearing in any manner but simply request adequate time to i 15 ( file the aforementioned cem0randa. The intervenors do not 16 believe the request will be a detriment to any party or any , i M party will be put c.t a disadvantage. j l 18 THE ACTIEG CHAIRMAN: Very well. We will 19 not be beginning with this matter, so you will have some l 20 ;jtime, therefore. ' 2! 1 COIGIISSIO?iER TALIAFERRO: Mr. Chairman, if
- 22. a motion it in order, I nove that the Lehigh Pocono Committee 23 be allowed to intervene.
74!! 00191ISSIOIiER CAWLEY: I will second it. ! (- l 25 ,, , THE ACTIIG CHAIRMAN: Are there any cbjectiond? N OstR3ACH a t.1AnsHAL. lHC. - 27 N. LOCKWIL'.OV? AVE. - H ARRISBURG. PA. 17112 pp p . . e * . / ( ll7 ! .A r," '
'g 3
o ~ 116]39,a253,y 1 w o r M" L , . s. w -
1 (No response.) [ 2 { i THE ACTING CHAIRIG.N: Tnere are no objections. h 3 'It is properly moved and seconded. The Lehigh Pocono Committes; 4 jcf Concern will be permitted to intervene for the purposes as l 5 ! stated by its spokesman here and limited to a consideration of 6 {the shew cause order decling with the Certificate of Conveniene:e. k 7,h Very well, you are advised, sir, that you vill 8 lbe expected -- no, you are not making a statement. In any i 9 4 event, since the first matter to be considered here today o 10 prill be somethin;; other than the show cause order, you will 1 11 !have several weeks time to complete your petition. 12 IG. LAIDMAIh Addressing that matter, we also 13 have sent to the Comvission a memorandum or brief, or whatever , 1.f .to the effect answering the motion by Ifetropolitun Edison to 15 !have the part involving rate increases and remuneration to the i 16 , company doe.lt with in a ticely manner or split apart and we il li 17 ictate our opposition to that, saying in the order of the 1 18 lComnission the clear intent was to have the more substantive 19 issues of the actual viability of the utility addressed first. 20 i Tce Ccwission is in receipt of copics of this , i 21 j dated Deccmber 5. He wcu]d give copies to the other parties 22 nor if that would te acceptable to the Commissicn. I 23.1 THE ACTIIG CHAIFJIi!H: You mcy do so. However, E _ g.h I indicated to you that we had determined that we would begin 25 with another issue, and ths.t issue is the request of the h r.10MftBACH O TAAF.SHAL. 3HO. ~ 27 fl. LOCtCWIL2.OW AVE. - MARRISSURG. PA. 178f2 DOA D C'D WT n - *- -' #
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114
; company to be pernitted to increase its energy cost rate. '
u 2 .it this moment we have before us a request 4 e (from the Recpondents to sever the energy ccct rate increase, 4 land in the alternative, expedite consideration of that 3 request in these proceedings and have the Ccmmission render 1 6 'lan initial decis'icn en whether TMI-l is used and useful in 7
!the public service.
g :; We have not yet received and reviewed the p lccmments of all the parties and I will ask the Cornissica for g ' a ruling on uhether or not that ruling should be deferred. the gy j ruling on this motion made to us to be deferred. 12 COEIISSIGHER SHAHAI4AH: Mr. Chairman, I would li c 13 f nake a motion that we defer ruling upon Respondent's motion e
- 14. until such time as we have received and reviewed the conments I
g iof all parties.
.I 16 ! C0h2ESSIOHDI CAWILEI: Second.
17 THE ACTING CHAIRMAU: Are there any objections '? IG ( (No response. ) 19 i THE ACTING CHAIRHAU: Tnere are no ob jactions. li i 20 j The motion has been properly nade and seccnded that the n '; Co:::aiccion will defer a decision en Respondent's motion to j
! i
~
22 sever the question as I hc6 indicated. before until we have { fl 23 h receiven ano. reneued the co;ments of all of the parties. . p i 74.i COIIiESSIGIIER CAWLEY: Mr. Chairnan, could we f) ' as':: Mr. McClaren wl1.ich psrties have not responded yet to this 35 MDHiiUACH D t.1ARSM AL,1ttC. - 27 f , LOCKWILLOW AVE. - MARRIGGURG, PA. 17112 ll ,, , m.f r mo o q' T , 3 gw c _
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j 116 1 jon the Respondentts motion for one weeh. Q 2 l I2. DANIELS: Than1:: you, sir. g 3 l THE ACTING CHAIR:@.H: Ue have then the matter i 4 jof the use of the test year calendar 1980. Mr. McClaren, how 5 fnanyresponsesdoyouhavetotheRespondent'smotion? i' 5 M R . lic C L A R E U.: Just the two, Ccmmissioner, 7 : Trial Ste.ff and the Consuner Advocate. i 8 , THE ACTIEG CHAIRMAN: Unless there are any 9 ! serious objections and the reasons stated here why, the Chair 10 ivill rule that the treatment of the motion with respect to 11 the request to separate the issues should be deferred for one 12 week, we will defer in this case this matter for one week, so u jspeak up during that cne week or forever keep your peace w 14 juhatever ic is you are supposed to teep. h I 15 - I want to ask the parties to address them-16 selves to the matter of additional hearings. First, let me 17,' state that the Commissioners have come under some pressure, I is $ to say the Icast, to cancel the hearing scheduled for December 19 26, which is the day after Christmas. I don't know why there 20 'shculd be such interest in this, but it seems to be fairly 21 i widespreed . l 22 ; Is there c.nybody who joins ce in insisting i 23 i that we continue with the heo. ring en December the 26th?
- 24. g (Uc response. )
0 25 THE ACTIEG CHAIRMllH: Since I appear to be $ MOMROP.O}l A f.fAMGHAL. t!4C. - 27 !!. LOOKWILt.OW AVE. - HARRISBURG. PA. 17111F. i /g , ;
. -.-_.~ .._.-. . . . - _ . _ _ - - - -. .- . .- .
@ 03-g and the test year question? Are there just a few or have
) I 2 ;several been deficient?
3 : MR. McCLAREH: With recpect to the tect year i 4 'ouestion we have only received the comments of the Staff and 5 {theConsumerAdyccati.. l 6 ! With respect to the notion to sever, I have 7 ithe comments of Bethlehem Steel Corporation, Commission Trial S l Staff, Deep Run Farm, Lehigh Pocono Committee of Corrern, i p ! Consumer Advocs.te, and Tnree Mile Island Alert. 10 THE ACTING CHAIRMAH: How many do you believe gg :we raay yet hear from? 1
- 12. - 13. McCLAREI!: Ue have not received comments q 13 f from St. Regis, et al.3 Senior Power Action Group, et al.,
- 14. Standard Steel, Citibank, and the industrial customers represented 15 by liessrs. Zwally and Fullerton. I believe that is it.
N 16 ; HR. GORNISH: Mr. Chairman, Citibank filed 17 !this morning, i gg MR. DANIELS: Mr. Chairman, I represent the 19 ! Pennsylvania Foundrymen's Association. I do not believe that 20 jwe have filed any response to that motion as yet. We will 1 21 jde so, if you are setting a later date, if we deem it importan ' . . 22 l THE ACTIUG CHAIRMAU: This will be deferred I n iby onc ueck, pf IG. DAHIELS: I beg your pardon? F; u 25 THE ACTING CHAIRMAH: We will defer action i
^
t'ON'f3ACH Cs T1ARGHA f4C. *- 27 N. LOCKWILLOW AVE. - t:ARR'98URG. P A.
~ 17112
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;alone, are there any objections to canceling that hearing, i
g ( to be set for a later date? g (No response.) 3 THE ACTING CHAIRMAU: Are there objections 5
!to that acticn?
6 (No response. )
,, THE ACTIEG CHAIRMAU: Tnerefore, under this a ; piece of business the first thin $ we have taken care of is to c
g iget rid of a hearing. Ha'r we have got to schedule it. 10 1 Tentatively, Thursday, January 3, Tuesdey and Wednesday, the l6thand9threspectively. Tuesday the 15th and 16th. January 2.x 12 i the Elst ard 22nd, Monday and Tuesday respectively. i And the J. Ab
- 129th cud 30th, Tuesday and Wednesday respectively.
Is thcre any reason why we should not plan I h I for the tir.e being to proceed en that schedule? 15 l MR. RUSSELL: Perhaps I might just ask a further cuestion. Do I understand from the discussion trith I recpect to a couple of the petitioners to intervene that there g , will be hearings next week? 20 THE ACTING CHAIRMAN: I didn't hear the
, latter part.
ol 2s, Ia. RUSSELL: Is itty understanding from the prior diScuSSicn that there uill be hearingc next weeh? lCould you identify the days?
}.J.'.
b 25 COMMISSIOHER SHAHAMali: We have them tentatively g Mot R8ACH Q MArisHAL. INC. ~ 27 FJ. LOOKWILLOW AYE. - HARRISDURG, PA. 17112 tie .
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i i 118 ' s isebeduled for the 18th and 19th. 3 2 j THE ACTII!G CHAIR &R Were these not unde 1
,ihnown to the pcrties, next week?
t ( 4, ; (Ho response.) S THE ACTIIfG CHAIPJMH: Ue had hoped to have 6 hearings on Tuesday and Wednesday, the 18th and 19th of next 7 ;wech. We have, by everyone s mutual consent, eliminated the e 9 ! hearing for -- well, with r.y objection, I have no interest p ,'in Christrcas, next week Hanuka begins and you can come to my 10 ijhouse then - but, sericusly, the 26th is canceled and that k g7 jis the schedule for this month. gg ) I have just read to you the proposals for i e 13 l January. Are there objections? d u ,- (no response.) 15 ! ! THE ACTIIiG CHAIRMAN: Shall I go through h 16 ',! them cgain? 4 17 (Ho response.) 18 THE ACTIHG CHAIRMAU: So, counselor, Mr. 19 ; Russell, the answer is that we will have hearings next week. 20 lFor all intents and purposes that will be it for the renainder i 21 'of Docenber. It certainly plays c little havoc with our 22 f concept of great urgency, but that is the best we can do 23.juith great urgency for Decenber, Ue will do better in January!
, g ,and Februc.ry. l,
[; , 25 _ Very well. we will proceed with the three j MOKRDACH & MAf!sHAL. INC. - 27 N. LOCKWILLOW AVE. - HARRISSURG. PA. 47112 ij , _ _ . _.m_ . _ _ _
b 119 g:lnajor issues, the company's request for relief. i For the 2 purposes of issue nunber one, namely, the cc:::pany's request i h 3 for relief, Li". . Russell, eJ.1 of the parties have been served, 4 !I presui::e? i 5 l HR. RUSSELL: All of the parties have been r! 6 4 served. 7 ' THE ACTING CHAIRMAN: With copies of your
; ; filing?
l 9 , 12. RUSSELL: All the parties have been served 10 juith copies of the petiticn, yes, 11 ; THE ACTING CHAIRI1W: Of the petiticn? 12-MR. EUSSELL: Yes. Are you referring also to 13 the testimony in support of it? v 14 l THE ACTING CHAIRMAW: Yes. 15 M. RUSSELL: We undertock, as we indicated 16 at the prehearing conference, to got the written testimony 17 out as socn es pensible. He delivered it here to the Com-4 18 mission on Thursday. ide delivered it to all but one Harrisburg 19 l counsel the came day. Because cf problems with the mail this 20 .' time of year we have delivered it to the remaining ones this i i 21 , morning. 22 . THE ACTING CHAIRMAU: ITno here does not have i 23 f copics of these docuuents? yjI MR. LAIDiiaH: Lehi6h Pocono Committee of Concern @ 1 25 j does not have ccpies. g W N me nexurca a unasw, me. -- u x. tecxwu.ow avr - wamsauXn .A, 1 o
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; .L.a u 1 f THE ACTIIG CHAIRMAH: Has this party been i
2 l served? 3 , MR. RUSSELL: We had distributed copies to i 4 jeverybody who was here the first thing this norning. A copy
.i 5 jis being furnished to then now.
6 j THE ACTING CHAIRMAU: All the others do have 7 l copies. Mr. Russell, are you prepared to proceed? i s i MR. RUSSELL: Yes, sir. I g THE ACTIUG CHAIRMAH: Are the parties prepared go ito proceed with consideration of the Respondent's petition? t 77 MR. BGWERS: My nane is John Bowers. I would i 12 .siraply I like to ask a point of clarification, and that is, am i e 13 lI correct in ray understanding that the presentation of evidence 14 by the Respondent on the question which he requested be affordhd I 15 priority in his Novenber 29th notion does not reflect a pre-16 l judgment on the part of thic Ocmminsion of how that motion is 17 to be decided? An I correct in that understanding? 18 : THE ACTING CHAIRMAN: You are absolutely l 19 ; correct. i 20 [ IIR. BOWERS: Tnank you. I 21 MR. 00HER: Mr. Chairman, speaking for the 1 22 Consumer Advocate I think we would need some further clarifi-23 l cation on exactly what is intended in tcrns of whai the pro-g ceeding will be today. A ' 25 THE ACTING CHAIRMAH: Today we will proceed i I MCMft3ACH O f4AfiEMAL. INC. - 07 74. LOCKWILLOW AVE. - MARRISSURG. PA. 17912
l > 121 1 with the issue of the Respondent's request for an increase in { 2 the energy ecst rate, consideration of the testinony, presenta- h 3 ; tion of witnesses, receipt and marking of testimony, and that i 4 !certainly will get us through today and tomorrow before we can i 5 even get into the cross-ezamination. 6 : MR. CCHEH: So then there will be no cross-7 ierauination of witnesses until the 18th? The reason I ask 6 ithe question, Ocmmissioner Johnson, is that the directive from i 9 (this Conmission, as I understood it, two weeks ago was not 10 -that the conpany should have its testinony in as soon as they 11 Icould rahe it available, but rather I understood there would 12 jbe a committent that it would be avatinble to the parties one k p 13 l week in advance of the scheduled date for the appearance of V h 14 the witnesses. 15 j If you are saying the cross-exnmination of i 16 :these witnesses will be the 18th and the 19th, I would think 17 that that is acceptable for the main cross-emm*ation, that IS we may have a few questions that we would like to ask today, 19 but I would 1-ike a clear indication if it is the intent of the 2G Coraission, as I understood it to be two weeks ago, that in 21 !at least future witnesses presented by the conpany their 21 evidence, of a direct nature, will be available to the parties 23 i a week in advance cf the scheduled appearance, unless that is 2411either a nisunderstanding cn g7 part or whether there is a @ li 25 change in the approach of the Cennission. h MOEBACH C; MAnSHAt.. II C. - 27 FL LOCKWILLOW AVE. - HARRISSURG. PA.,47112
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p 122 3j TE ACTIEG CHAIRMAU: There is no misunder-I 3 3 jstanding on your part, Mr. Cchen, and there is no intention a jto change the rules that tre ha.vc lived by in the past. We 4,. fintend fully that in all future sessions we will be discussing i 5 l testimony which all of the parties will have had at least for 6 ; Jae week prior to that testimony being recited here. r u 0 But there needs to be a beginning, whenever
.t 6 you stop. We are going to be faced sonewhat with the same 9 !questic%
i IO Mr. Russell, how long do you think it will l gg i take you to present fully your malJor witness? 12 E. RUSRM.: On the issue with respect to
]i, 13 Met-Ed's petition .with respect to the energy clause we y contemplated presenting that testinony today and tomorrow' 15 through the eight witnesses 1(nose testimony and/or exhibits 16 have been presented.
17 I think with respect to Mr. Cohen it is fair i I 18 j to say that there was agreement in principle that we would i 19lundertaLT in this rather hurried set of prcceedings to get t 20 ' our written testimony in as soon as we could, hopefully by 21 ; a week. In the time schedule we have been confronted with 22 that siir. ply just has not been possible. li 23 1 tainh in all honesty if we are talking
'i.
34.0 about the hearings the 18th and 19th, Tuesday and Wednesday, F 25 g if the issvn there is also going to be the petition with gy( noennen c umsui iac. - a n. Loexwu.ow m. - mm. una, n. ima MQ _ _ _ _ _ _ _ _ 1639 235
! T2T g respect to the clause, the testimony that the parties m'.11 be G
t 2 j using for cross-examination is in their hands, to all intents g
; and purposes.
4 THE ACTIHG CIIAIP.biAI?: Tia question was, would i 5 4 the other parties be given an cpportunity to cross-examine on h 6 the tes Limony that would be adduced today, tomorrow and 1.hc e 7 !next day? i 8 l IE. RUSSELL: To the extent the parties are -- l 9 l THE ACTIEG CHAIRMAN: Is that your point, i yo lMr. Cohen?
)
11 ; IG. COHEN: Well, I assume that there vill be ; I i 12 l cross-czcmination en c11 the witnesses. I am ren17y raicing l j . 11 , the question, and I think that Mr. Russell is speaking to it O ! 14 y from a cifferent perspective than you are, Commissioner Johnson, I, e 15 l I am raising the question of whether there is a clear under-Il 16 standing that the tes timony of witnesses will be available one-17 ; week before those witnesses are appearing in this hearing roon , 13 and I don't bear that understanding from Mr. Russell. 19 g. MR. RUSSELL: Well, Mr. Cohen, I think I was i 2c l!I cut off by Commissioner Johnson, and what I have to say is 21 0 that ne are going to do everything within our resources to 22 get this written uestimony out as soon as possible, hopefully i! g3 ] one week in advance. y.! But I can cite to ycu some of the specific 25 , problets we have had in the past week, and they are issues t10MRt3ACH & t.tARSHAL. FMC. - 27 (4. LOOtCWILLCW AVE. - MARRf $9t;RG. Pt 17182 i y a 16392!3$"
. - n - _ _. . .
l 124 1 ithat have been raised by the Consumer Advocate. 9 m~ 2 l The Consumer Advocate has had people implement-t ! 3 {ing its study with respect to Met-Ed and the GPU System 4 ! bankruptcy situation, they have been at the GPU offices every 3 l day this past week, ue have had interregatories directed from 6 !the Consumer Adyccate we are trying to work on, and there is 7 ;only so nuch that is huranly possible, and I think to be 8 subjected to this kind of criticism is unreasonable and unfc.ir , 9 MR, CCHEN: I can only respond, Comnissioner 10 ' Johnson, that to receive testimony 5:30 on a Thursday with one i 11 working day left, and then to come in on a Monday -- and I am 12 lnot saying it is a burden that cannot be met at this time, I _ 13 lam locking toward the future of these hearings over the next
~) l 14 isix wecks as has already been scheduled -- I think that is a 15 difficult burden not cnly for us but I would assume for othersj, 8
16 and that is why I am raising it at this time. 17 THE ACTING CHAIRMAN: As I pointed out, sir, 18 , wherever we would begin in a consolidated procedure we would 19 I
,1 be net with sonowhat the sarce kind of problem. I can ascure e
20 i you that you will have adequate time. I will ask the Respondent 21, r. to make the witnesses nvailable for crcss-examination at a 22 f' time which would contemplate the sert of span of time that 23 ,you would require. 24 It may not at the very beginning, mean that 25 i ycu will have a full week's time, at the very outset, these uenner.cw a r.:anmu.. me. - 27 n. toexwn.i.ow avr. - na.nnissuno. ca. ivite o**rm, v M ' :16396237 jp jo . 3 y, m. m .
= . - . . - . - - - - - ..
D i 125 1 ifew days, but certainly by next week you ought to be caught N 2 up, at least I hope so. g 3 t
- 12. RUSSELL: If Conniiscioner Johnsen please3 4 I would suggest that by the January 3rd hearings the system i
5 'should be in full operation. In hearings three days this week 1 6 ; to say that we will have in their hands one week in advance of i 7 jnext Tuesday the testinony uc are going to hava then is, I 8 lthink,notinthecards. 9 f F ACTIEG CHAIR.MJtH: But you will make i 10 l available the witness involved at a subsequent week? i 11 i 12. RUSSELL: I have never kncan this 12 l Commission to not make available to any party the right to 13 icross-enamina any~ witness to the extent they deemed appropriata, O 14 i j and we would certainly comply with that wish. e 15 THE ACTING CHAIRNli: You will comply with it. 16 That, Ib. Cchen, I believe is all I can promise you at the 17 j moment, excepting that you heard the Respondent rs statenent, i 18 ' and I expect that this will apply to all other parties who 19 { will be presenting witnsases, testimony, exhibits, charts, Y v,other infornation that they would want to mark for the recc.10 1 21 and introduce, co that everybody would have at least a wack's 22 ; tine on who0ver's testimony and exhibits it would involve. i 23 l S. COREN: We certainly would intend to do i 24 that, and I chculd add that we do appreciate the cocparation 25 1 the company has given uc thus far in making cfficers of the
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t 1 l 126 '
I tecnpany availcble for cur purposes. I.
^ 2 'IHE ACTIEG CHAIRM!T: Thank you. Mr. Russell, 3 JI direct your ettentien to this phase of the precceding, f
4 dnamely, your request for relief in the energy rate cost. 5 lAre you prepared to tell us now who your witnesses will be, 6 the order in which you will be presenting them?
? Mil. RUSSELL: We can tell you what thoughts 3 i we have. How it vill work out in practice remains to be seen.
}
f iWe conter.nlate todcy calling Messrs. Grahan and Hafer to 10 , testify in the overall sense with respect to the petition. i 11 'IHE ACTING CHAIRi@.H: Messrs. who? 12 l 19. RUSSELL: Ecfer and Grahan.
- 13 I THE ACTING CHAIRNJI: And Grant?
)
14 . 15. RUSSELL: Graham as in cracher. i 15 ;o STE ACTIEG CHAIRMAU: That is today? 16 MR. RUSSELL: Ua have other witnesses 3 Messrs. 17 ! Huff and Carter, standing by to tcle up any slack if there is I 16 l any slack in time to be filled today. 19 THE ACTIEG CHAIRMAN: Can you indicate to us 20 the area of testimony of interest to be testified to by each? 1 21 i IS. EUSSELL: Are you interested in what would 22 i be available for the balance of the week, at least so far as l 23 we sac *.chera .:e nay go as things progress? 24 THE ACTIEG CEAIRIHdi: I think that would be (~) i 25 useful. f.tCFACAC:1 L TMRQtA! Ific. - 27 H. LCC" WILLOW AVE. - M ARRISDURG. P A. 17112 i! .
- 2 .
1 1 127 1 f IUl. RUSSELL: We have again, of course, Messrs. t O 2 E Huff und Caceter cyc11able for tomorrow. It is pcssible addi- h 3 jtionalwitrassestemorreu. Ue have Mr. Sins, Fe Newton, Vz. 4 Cherry and 2. Schleicher, and if need be, Mr. Arnold would 5 be available tenorrow r.fterncon. 6 Tcr Thursday, Mr. Arnold wculd likewise be 7 available if required. Messrs. Huff and Carter would also be 8 available . 9 ! 1rs ACTIEC- CHAIRMAN: For Wednesday afternoon? 10 IG. RUSSELL: For Wednesday. l We would likerise i 11 ihave Eessrs. Euff and Carter available if they had not gotten
- 12. , on before then.
Itr. Cherry will be available Wednesday af ter-
,, i 1# '
pJ !nconifhebann'tbeengottentotheretofore, 14 'i So far as the accpe of their testimony wdd h 15 ;be concerned, Keserc. Hafer and Graham would testify with lo, respect to the c1c.use, its operation, its normal operation, 17 > its levelised cperation, the financial data. I will just i 16 lrun dcwn these in the sequence which we have them listed for
^9 our purposes.
20 Mr. Huff would deal with Met-Ed actual data, 21 acccuntin;; data. 22 Mr. Arnold ts testimony, which has been turned i 23N in ', deals icith the TMI-1 status and restart. . g. J's[,k l's. Cherry dcals with the TMI-1 background l 23 / and op3rcting record. N vouanacs a r.;AnsHAL., INC. - 27 N.1.OCKW!'. LOW AVE. - M ARRISSURG PA. 17112 ' D"* 10 " lD IW YM S19 Mld,37f@ A . M _.. MU 2. % n /m w e $ G f';fj. cow .
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i 128 t 1 ; Mr. Newton's testimany relates to reserve i
' 2 capacity and the modificaticn of the results associated with 3 interchange transactions and purchased power transactions'.
4, ! Mr. Schleicher would testify to I'et-Ed's sales I 5 jforecasts reflected in the petitionts data. 6 l Mr. Sims would testify with respect to i 7 inegotiations concerning outside power purchases and the 8 proposed revision to the PJM agreement. i i 9 TiiE ACTING CHAIRI&II: Who does this? 10 3 IG. RUSSM.: Mr. Sims. Mr. Carter will n itentify to the effects of the proposed energy clause charge i 12 ll Change. 1 p 13 l 'IHE ACTING CHAIRMAN: Will you repeat that, 14 sir? . 15 IG. RUSSELL: Mr. Carter would testify to the 16 contemplated effects of the proposed energy charge change and 17 ithe varicas rate comparisons. I believe that covers the ' *.st I 18 (I had identified. I 19 ; THE ACTING CHAIRMAU: What will Mr. Schleicher 20 lbedoing?
}l 21 j Ia. RUSSELL: Mr. Schleicher vill testify to i
22 the Met-Ed scles pro;jections that are reflected in a limited
.s 22 )i ay in the petiticn and the supporting data.
E M l! la. WIDOFF: Mr. Chairman, I would like to asl: C) ~ [' if the testimony -- 25
!aCHADACM & !"ARGS1AL. IMO, - 27 N. LCCKWILLOW AVE. - HARn8SEURG. PA. 17t12 l } } 'l
_6 ,- s
I 1 129 1 l ' DIE ACTING CHAIRI.AU: Mr. Widoff, I am going g ;to ask, to help cur tmseen recardore ifho will likewise be' g .
- 9. ; transcribing this, that you idt atify yourself.
4 E. WIDOFF: Mark Widoff, representirg Three I would like to ask, Mr. Cha.irman, if the 3 lld.le Island Alert. 6 testiri.ony that has just been described vill be presented in 7 the exact form as it has been presented to us, in my case 3 this morning, that is, will the witnesses be reading from the 9 l prepared testimony or can ne e=pect other testimony aside from I go j the testimony that h0.3 been presented to us in writing? 11 l IG. RUSSEE: When you cay other testimony, i 12 lyou mean oral testimony today? 13 l MR. NIDOFF: Either todcy, temorrow or 14 ; Wednesday. 17.4 RUSSEE: We propese to have oral 15 l. 16 testimony today, to have, for example, Mescrs. and Graham (sic / i g7 ' identify the cubstance of their testimony, to give a summary 18 of the testimony. I I 19 d Thora vill be sone identification of exhibits 9 20 ; that were put in this morning, for exaaple, that simply update I 21ll exhibits attached to the petition to reficct the October actual i k 22 ; data insteed of Octobcr estintated which was in at the time of 23 the petition filing. 1 I uculd say there is that kind of supplemental p.g' O u crc 1 that we intens to put in. g MOMM3rsCH te FA.m3 MAL t!fC ~ 27 N. LOOKWILLOW AVE. - M ARRISDURG. FA. 37192
- f. 1/ ' T (.3
i 13C 7j ML, WIDOFF: Does that mean that you will not 2 7 2 lbe Iceding the tastimony that yca have presented to me this o a3 juorning, that you are going to be presenting scme other form d 4,4 of direct testimony here? 5 l F3. RUSSELL: We would propose to ask the 6 witnesses cuestions on further cral direct along the lines I 7 have just described. e THE ACTIEG CHAIRMAE: Excuse me, will you be 9 !introdu::ing any exhibits? 10 l 18. RUSSELL: Yes, we have a nu: ricer of exhibita i
;7 [j that have been submitted at a previcus prehearing ccnference, 12 lso=e distributed to the partica here in Harrisburg and to the
,.-.s 13 iCommissicn Inst Thursday, and others to the r>arties today. i 14 So far as having the witnesses read their 15 y: testimony is concerned, if it is the desire of the Commission I 16 i that they read the questions and answers, that can be done. 37 , I think it is not necessarily - 1 16 THE ACTING CHAIRMAU: May I v*e this proposal: l 1 19ein thic respect? If at the time a witness is to first be 20 Prepared to testify, unless there is a request that be read 21 l his testimony fully, which I take it is a measure to overccas 22, the failuro en the part of the parties to have this material 23 l for a sufficiently long time to have road it, unless there is g i u.[ a request that he proceed to read the testimony, would you O h 25 j be prepared to accept, as we have done it in other proceedings, f 40HFICACM D. FiADOllAL. INC. - 27 M. LOOKVAL!.OW AVI. - H AMftiSDURG PA. 17112 0mm- ' DWB P (J l f) 3~ 9 2 0
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j 131 1 ja resume of the formal testimony, reserving for each of the i i { 2 parties the ri6ht to cross-cxaraine frcm the formal tectimony h 3 which nay not have been read? 4 } Is that agreeabic to you, Mr. Widoff? 5 ! IEl, WIDOFF: As I understand it, Mr. Chairman, i 6 :the proceedings that were held this past spring in this matter i 7 l Wore held in a somer: bat unusus.1 manner because of the tremendons i S ; crush of time and events. In light of the fact that prepared p ! testimony is going to be presented in this proceeding, I am 10 j questioning what the necessity is of departing from the usual 1 11 l practice of this Commiscion, namely, to present the prepared i 12 testimony, allow the parties and the Commissioners an opportun1.ty e 13 j to review it,. and than proceed directly to cross-examination. V 14 l
; But if this is the manner in which the Com-g 15 d mission wishes to proceed, I have no objection to it as long 16 ,
as it is t ratood that we are not going to be presented withl i 17 supplecental testimeny on direct examination, because if that 18 I is going to happen, the entire purpose of presenting prepared 19 i written testincny is going to be defeated and counsel at this 1 I
O ' table are going to be presented with an extremely difficult 21 ; situation to deal with, i
22 i If we are dealing with prepared written i 23 p testinony, we would like to know that we can decl uith it. 24 If we are going to be dealing with spontaneous supplen: ental O h 25)c h testimony, then I think we have a right to be notified. mounar=a o :A esaAL. inc. - 27 n. Lee::ws:.i.ow Avc. - wanarsauna. PA. 17tta D** 't :
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! 132 i ! 12. RUSSELL: I have never been aware of any i
2 isituation where the presentation of prepared t;ritten testinony i i 3 jforacloses the possibility of a party submitting any supple-1 4 ] mental tectinony rhich may be required in the light of cross-5 lenamination or otherrise. h 6 I think Fr. Widoff is asking for a situation 7 that simply dcas not apply for practical purposes. 8 l THE ACTING CHAIRMAU: Mr. Barasch?
? IS. BARAS3I: I would just like tc state my i.
10 ; general agreement with the comments cade by Mr. Widoff. I 11 i I would also conment in response to Mr. Russell i 12 that it is one thing to prepara rebuttal testimony or redirect 13 testimony after cross, it is another mm.tter to present to us, t 14 l without any prior warning, further different substantive r 15 testimony in the course of the direct presentation. 16 l As long as it is understood there will be i i 17 l ample opportunity to discover and to cross-examie at a i 18 further date, than it is of lens urgency. 19 , But I uculd like to make a point. I would 1 20 agree with Mr. Widoff, the purpose of direct testimony is to i 21" give the parties an idea of what we are facing when the witner s 0 22hgetsonthectand. 0 23 0 MR. RUSSELL: I can say very clearly at this E 24[ point that IJr. Grahnm. uho represents the financial aspect [s; h 25 l of this situation, rill'be putting in soma additional supple- . I nona,ogep c. n At:cxAL. rut. - 27 N. LCCKWlu.C'W AVE. - HAftRISOUMG. PA. 17812 b ' 5)
l K.53 1 [emantal testimony. To tell you the truth, I have not had a 1 chance to talk with him as yet about the scope of it, but it it limited testimony in the source and applic tion area. 3 He, for example, is going to describe on oral 4 j! 5 j direct today various of the variables that affect or could
. affect the levels of shcrt-term debt reflected in the petition 6
? >land the schedules. .
g : So I see no reason for any set of handcuffs 9
'that are propcsed to be put on the parties.
THE ACTIHG CHAIRNAN: Are you still unhappy,
- s. O i iMr. Widoff?
11 l
.' MR. WIDOFF: I1". Chairman, if the Comission u., ;
.,, desirer, to proceed on this basis, I have no objecticn, except
- p. -f g ,
to the extent as was indicated by Mr. Barasch and myself g g l earlier, that to the extent that there is going to be testi-E " * " 16 l g ! would ask for the opportunity for full discovely, cross-18 , examination, and all the other protections which are normally g afforded parties in proceedings before the Comission. I was simply attempting to express a concern 20L, II li el l that if wa are having prepared written testimony, we may be defeating the very purpose of it by conducting cztensive a _ e cral direct testineny. If the Ccmmission wishes to proceed 43 g i
,. on that basic, I hate no cbjection. I
": )
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! THE ACTIHG CHAIRMAU: Mr. Widoff, may I
- VICHRTACit & MfJ.5 fit.L. LNC. - 27 80 LOCKWILLOW AVE. - H ARRISBURG. PA. 17f12 O
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[ 133-A g l address this to ycu cnd to all the petics: if there is to be t g lany nced on the nart cf a nurty for udditional direct testircen3lI 3 jto be introduced, all the other parties will be efforded .the
\ .
4 ; rights that they seek, that they vould like to b6.ve in place 5 noa, but which venld certainly be in place by Jnrmnry 3rd, 6 adequate time to assimilate, di6 est uhat ic being offerei in ej 'the supplementti testimony, with a right to c11 manner of I
,3 icross-enamination consistent with good precedure.
i g ! Ma. UIDOFF: Tnank you, Mr. Chairican. 20 l 11 (Transcript continues on Page 134.) 12 : 13 N 14 ; 15 i 16 .i i 17 i i i 18 i en s r i 20 i i n , 27. 23 '
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- ' r" o** B aos N n N m m rg ll.. tin L 1639 247
U 134 *I O t
.T (Bach on the reeerd at 11:46 a.m.) l h 2 ll TE ACTING CHAIRI'AU: At this point we'll C
5[ ~ terminate eur pre-heering conference and proceed with tha l 4 ,! formal prcccedings. I will ash Miss Dufour to advise i li
~
~s whsthat er not a representative of that organization is .
ii ' 6 prepared nos to mhe his stateent. ! I } t 7 ; 16. DUFOUR: Apparently they are not here at l 0 this mount. I can't speak for him. I 9 3 TE ACTII33 CHAIRMAN: He's not bere. In that > i 10 l event, instead of. starting with Mr. Rucsell's witnecces ' u r and adjourning eithin a hal. f hour, we will adjourn for i 1'4 ' s i lunch non to resum at one o' clock, at which tie the sJ - Pennsylvanic Alliance has requested to have a person present S M who is to unho a statc= ant for it Scr ten c:inutes. And if D he is not available at that tim, we'll see what will j l i 2 6f! bappen. But ha uon't go on todcy. I i i A l e r!- ITe stand adjcarned for lunch. IS ! (Ehereupon, at 11:48 a.m., the pre- l
' 1'
.E. hacring conference in th2 above-entitled 20k matter cac cdjourned.) ;
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w I l' CERTIFICATE i i i 2: I I hereby certify that the proceedings and 4 ; evidence are contained fully and accurately in the notes 5 , enken by ee on the hearing of the within cause before the
,t ,
6 l Pennsylvania Public Utility Con: mission and that this is a 7 jcorrecttranscriptofthesame. 0 MOEBACH & MARSH 11, INC.
? l I 10 By_ _
. U Official Reporter 11 1 l
12 I By._ W la,, Official Reporter 4 _ __ . lQ - t 0 -M 14 , Reported by: 1 1 15 ; Jnuns P. O'Hara p Deborah K. IIickey, R.P.R.' 16ij Mohrbach & Mcrohal, Inc. l 27 North LcckwilloJ Avenue 17 Harrisburg, Pennsylvania 17112 16 19
.y 20lI !
Il 21Ig L (The foregoing cortification of this transcript 11!!i does not apply to any reproduction of the smr.a by any a:eans
$l. unless urder tha direct control cnd/or sugarvision of the
(- # 24jj cartifyir.g reparter.) l 25: ncmuu e. e. nw.u. n:c. - e r. :.emwru.e.v r.v:. - nr.arumn i O " l0
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FO y I i i 1 Before i i 3 THE PENSYLVAHI/4 [ PUBLIC UTI g Crg . 3 --o00-- r, .vg p SECRU,. c's 0FflCE . 4 IIn re: I-79040308 - Pennsylvania P@jo,MMMty_ Commission versus Metropolitdii EHsEh Connany, i 3 ' et al. : i i 6 Initial Hearing. 7 __o00__ ' 3 6 Harrisburg, Pennsylvania l December lo, 1979 L 11 --coo-- 12 l
- e. 13 f ,
t 5k l 15 pages 1 to 131 16 l 17 { 18
,J. L 19 !
20 l 21 j MOHRBACH & MARSHAL, INC. 22 27 North Imlwillow Avenue Harrisburg, Pennsylved.a 17112 2 <. , f, 25 lllb .townc.c.ca c. ru RSMA3 !MC. - 27 f:.1.OOKVlhDW AYZ. ~ 44ARRiscuRC PA. 17112
, , f 1639 250"Ji
I! t I- l Before b 2 i TdE PEUNSYLVARIA FUBLIC UTILITY COMMISSION O o, s
--ooo--
I 4 jInre: I-79040308 - Pennsylvania Public Utility Commission versus Metropolitan Edison Comoany, 5 i et al. 6{ Initial Hearing,
? --ooo-.
~
r Stenographic report of hearing held in a Hearing Room No. 1, North Office Building, Mr.rrisburg, Pennsylvania, 10 Monday, i December 10, 1979, 11 ~ 1:10 o' clock p.m. l at 12 <
.-oDo--
13 ' {- 1 EEFORE: MICHAEL JOHNSON, Acting Chairman SUSAN SHANAMAN, Co=missioner g 4 (: JAES H. CAULEY, Commissioner
, LINDA C. TALIAFERRO, Commissioner i
--o0o--
16 i IA 17 , PPEARANCES: sal'5EU,% 18 ll w.wns7N#.3,UJ#ELEESQUIRE And EqquraE , p' Alt.N M. SELTZER, ESQUIRE l' Ryan, Russell & McCouagiley
' ! *** 9"" * ~ " "
*O
; P. O. Bon 699
, , . Eending, Pennsylvcnia 19603 cnd
! JAIES B. LIBEPEAN, ESQUIP2 22 New York, New York l
y i For - Metropolitan Edison Company and J P nnsylvanic E?.ectric Company 24 25 i i' O MOHREA H? M 5 '. I 14. - 27 N. LCCXWILLOW AVE. - HARntsDURO. PA. 17182 UM Ak = 1639 251
)
'2 A -
APPEARAUCES: (Continued) _ $ JOSEPH J. IE1ATESTA, JR. , ESQUIRE l G-23 Worth Office Building
, Harrisburg, Pennsylvania 17120 and g ! STEVEN A. McCLAREU, ESQUIRE Deputy Chief Councel, Rates Division I
Law Dureau 5 ; G-19 North Office Building 6 i Harrisburg, Pennsylvania 17120 i For - Commission Trial Staff 7 l CHARLES L. 2NALLY, ESQUIRE 6 j JGBT E. FULLERTON, ESQUIRE i g801NorthFrontStreet 9 I crrisburg, Pennsylvania 17108 i For - Universal Cyclops Corp. , Electra 11oy Corp. ,
! et cl., Industrial Custo=crs of Penelec 10 ,
UILLIS F. DANIELS, ESQUIFl:
- 11 !
Duane, Morris & Heckscher I 12 232 North Second Street, P. O. Bor 1003 Ecrricburg, Pennsylvania 17108 O 13 l For - Pennsylvania Foundrymen's Association, j Lebanon Steel Foundry 14 l MAURICE A. FRATER, ESQUIRE i McMees, Wc11 ace & Eurick 15
^
P. O. Box 1166
# *E ' ***87 ##*
16 For - St. Regis Paper Co. , et al. 17 ALAN LIEDER, ESQUIRE 18 en ca nnsylv d e h gal Se M ees 10 South Prince Street. 19 k n as m , Pennsyl d e 17603
! For - Senior Pet:er Action Group, et al.
O EERNARD A. RYAN, JR. , ESQUIRE 21 800 North Third Street j Enrrisbr 8, Pennsylvania 17102 i For - Ecthlehem Steel 22 l n RALD GORNISH, ESQUIRE'.' /C ,$ 23 l 12t'a Flcor, Packard Building Philadc1 chic, rannsylvanic 19102 (. Mi For - Citibcrl:, H.A., Agent 25 MOHR3 ACH G MARSHAL. INC. - 27 N. LOCMWILLOW AVE. - MARRIScuRG. PA. 17t12 0 *
- lD "lD'T M A J. .Y SUAL
% 1639 252
l!,1!PFF4PJ30ES: (Continued) 1 f
,i
' i DMTID H. BARASCH, ESQUIRE H!:LTER 'i. COEEU, ESQUIES g
, 1425 Strattbarry Square 3 } Ecrrichrg, Pennsylvania 17127 For - Office of Consunnr Advocate 4 !
JCEE4 B0!ERS, ESQUIRE S n, p, 7, y;o 333 York, Pennsylvania 17402 0 . For - HoU.y Rech, Deep Run Fart
?
7 PAEICIe SL'.TTH Een 52, R. #1 8 I Etters, Pannoylvania 17319 For - Nerberry Totmchip TMI Steering Committee i LOUISS DUF7JR 10 gax 10
! Oako, Pennsylvanin 19456 11 ,
For - Literich Ecology Action 12 j MARK P. UIDO.?F, ESQUIEE P. O, hon 1547 13 i
,E u isburg, Fcancy7.vania 17105 i
1*or - 1hree Mi.l.e Islan...d Alert., Inc. i 15 , 16 g fl i 17 . 18 j i 19 l . 20 ; i 21 i 9 23
- bb M. !
25 I MoHR3ACT-I f. MAREMAL. titC. - 27 N. LOCKWILLOW l.VE. - HARFitS90RG. PA. 17312
;[! ....r !
- ', - ,M,[biuM[j.'Cthl63%253
q L 2 ; INDEX TO WITEESSr'S 3 ' .1RTWP2ETE,0: i DIDECT CRO3S 4 lFredD.Hafer&JohnG.Grinrm --- 27 56 i 5 i a ! 7 l 8 g! i 9 l o**m ogwyn3 xo _ o o M e M. JL X hL 11 l t 12 g'. 13 l I-15 16 17 18 t i 19 l i 20 21 i i 22 ! 1 25 I a i 34 i G i 25 : I uonmcu a unsau. ,nc. - a u. to=wiu.cw ave. - won,.oon., ,,,,, n.
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! IUDEX. TO STATEMENTS AID EXHIBITS
( ~ e' 2 l - - O i - MARI2D 3 - i 4 i Met-Ed/Penelec Statement A, State-l ment of F. D. Hafer In Support of Met-Ed's Petition to Increase Its 5( , Levelized Energy C.ost Adjustment 6 1 Charge 22 i i 7 Met Ed/Fenelec Statement E, Witness De L. Buff 22 Supplement 1 to Met-Ed/Penelec 9 ,j Statement B. Witness DgLs7 Huff,qq.^ 22
) .} '
10 ! Met-Ed/Penelec Ctate'dSNt!C'l #'J.iQ l Witness F. A Donofrio 22 11 i Met-Ed/Penclec Statement D,
- 12 Witness R. C. Arnold 22
._ . 13 Mot-Ed/Penelec Statement E, CN 14 Uitness E H. Cherry 22 g i Met-Ed/Penelec Statement G, 15 ! Witnese E, Heuton, Jr. 22 i
16 l Met-Ed/Penelec Statement H, i Hitness E. W, Schleicher 22 17 i Met-Ed/Penelec Statement I, 18 Witness R. H, Sims 22 19 l Mot-Ed/Penelec Statement J. Witness E. F. Carter 22 20 21 j Follouing Exhibits produced and marked for identification: 22 Met-Ed/Penelec Exhibit A-1, l entitled Eevolving Credit 33 l! Ag reement.s Dated on of June 15, 1979 22 241l 25 i h MOHnBACH & StA$tSHAL. fMC. - 27 N. LOCKY.~1LLOW AVE. - MARitissuftG. PA. 17113 A@ c - = = D _m .. JL. m 1639 255
4-B 1 INDEX TO EXHIBITS (Continued) MARKED 3 Met-Ed/Penelec Exhibit A-2 entitled Petition of Metro-3f politen Edison Company for Modification of Conciscion Order Entered June 19, 1979 23 4l 5! Met-Ed/Penelec Exhibit No. 6 l A 3: entitled Forecast (1) i System Energy Costs (2) 23 7 Met-Ed/Penclec Exhibit A-4, entitled Update of Table 3 8' of Appendix B Attached to Met <Ed Petition 23 10 i Met-Ed/Penelec Exhibit A-5 entitled Update to Exhibit 11 A -3 To Reficct october 1979
, Actual Data 23 1
12 l Met-Ed/Penelec Exhibit A-6 i entitled Update of Table 6 c- 13 f of Appendix B Attached to 14 l Met-Ed Petition (To Reflect October 1979 Actual Data) 23 15 Met-Ed/Penelec Exhibit A-7, entitled Update of Table 16 7 of Appendix B Attached to
'7 Met-Ed Petition (To Reflect October 1979 Actual Data) 23 18 Met-Ed/Penelec Exnibit A-8 s
entitled Update of Table 8 U pl . of Appendix B Attached to 20 l Met-Ed Petition (To Reflect October 1979 Actual Data) 23 21 Met-Ed/Penelec Exhibit B-1 entitled Statement of 22 j; Operating Income and Het
^3 Income Year 1980 Horm211 zed and Adjusted to Reficct Possible Exclusion of TMI-1 and 2 g' Mi 7.,a ts and to Ecflect Revenue Wetessary to Achieve Required 25 Return 23 MOHMGAC*'
- MAfMINAL. INC. - 17 N. LOCKWILLOW AVE. - HArtRISSURG. PA. 17112 4
- 3-D** T h m L 71639 5,6 aa-=.
m ._.u,, c.. . ,. - - - - - -
-C IUDEX TO EXHIBITS (Continued) 1,i
MAREED { 2 l I Met-Ed/Penelec Exhibit B-2 3 entitled AveraEe Measure of 3 i Value, Year 1980, at Original Cost Normalized and Adjusted 4 to Reficet Possible Exclusion l 5; of THI Units 1 & 2 24 4 6 ;
- Met-Ed/Penelec Exhibit B-3 entitled Stctement of Retail
, l EnerEy Clause Revenues.
( Expenses and. Deferrals 4 Months Ended October 31, 1979 24 8 t Met-Ed/Penelec Exhibit C-1, 9 entitled Statencnt of Operating 10 Inecme and Not Incone Year 1980 Norcalized and Adjusted to Refleet Possible Exclusion of 11 , TMI-1 and 2 Costs and to Reflect Revenue Necessary to Achieve 12 i Bequired Return 24 1 13 MetnEd/Penelec Exhibit C-2, g entitled Average Measure of W 24 i Valuc3 Year 1980, at Original
, Cost Hor.talized and Adjusted to 15 l Reficct Possible Exclusion of TMI Units 1 & 2 24 16 l
Met-Ed/Penelec Exhibit D-1, 17 l, Letter of April 16, 1979 to l Office of Euclear Reactor 18 i Regulation from J. G. Herbein 24 19 j Met-Ed/Penelec Ezhibit D-2 3 Letter of June 28, 1979 to Mr. 20 Harold Denton from J. G. l Berbeln 24 21 i l Met-Ed/Penelec Exhibit D-3, 22 i entitled Order, Docket Ho, 50~289. in the Metter of 23, Metropolitan Edison Company., l Threc Ulle Island Huclear 24 Station, Unit No, 1 24 25 1 . MOHRSACH a MARSHAL. IMC. ~ 27 H. LOCKWILt.OW AVE. - HAMRtsBURG. PA. 17182 O '
) )
1 4-D IIGEX TO EXEIBITS (Continued) i
!!AEKE_D.
s 2 j, Met-Ed/Penelec Er.hibit DA, entitled Order and Hotice of 3fr Hearing, Dacket Ho. 50-289 25 4 ! Met-Ed/Penelec Exhibit E-1, I entitled Cumulative Capacity 5 ; Factors for Nuclear Units in
! the Comonuealth of Pennsylvania 25 6 1 i
. I!et-Ed/Penelec Exnibit E-2, 7 i entitled Update of Table 4 of
! Appendin 2 Attached to Met-Ed 6
{ Petition (To Reflect October 9l' 1979 Actual Data) 25 l Met-Ed/Penelec Exhibit E-3, 10 : entitled Update of Table 5 of U Appendix B Attached to Met-Ed 11 1 Petition (To Reflect October 12
' 1979 Actual Data) 25 Met-Ed/Penelec Exhibit F-1, 13 ; entitled Metropoliten Edison j Company and Pennsylvania Electric 14 Company Review before the Pennsylvania Public Utility 15 Commission September 21, 1979 25 h
16 Met-Ed/Penelec Exhibit G-1, entitled Composite Power Pool-17 f ing Agreement Among Pennsylvania l Electric Company, Metropolitan 18 : Edison Company, Jersey Central Power & Light Company (GPU Power 19 l Pooling Agreement) 25 20 i Met-Ed/Penelec Exhibit G-2, ' entitled Pennsylvania New Jersey-21 f Maryland Interconnection Corrposite (PJM Agreement) 25 22 l; ll Met-Ed/Penelce Exhibit G-3, 23 r entitled Forecast Short Term Purchases from Other Utilities r-24 !! c Year 1980 25 25 , I HARRISBURG. PA. m 12 gogCACH E gRSHA.: INC. - T/ H. LC3WMOW AVE. - SC o ?
~
,o 1639,258 w.' " n' ' v'
4-E t INDEX TO EXHIBITS (Continued) 2 ( Met-Edfoenelec Exhibit G4, entitled Estraate of 3, 3 SavinEs Resulting from Short
! Term Pouer Purchases April-4 '
Octcber. 1979 26 S I ~ Met Ed/Penelec Exhibit G-5, 6j entitled Estinate of Savin 6S frc:n FJ15 Special Purchase p Year 1980 26 7 l 8 j lict-Ed/Penelec Exhibit H-1,
; entitled Retail Sales Fore-9 1 cast 1980 26 Met-Ed/Penelec Exhibit J-1, 10 entitled Typical Bill Com-l
! parisens3 Penncylvania 11 ,'
Utilities Ratos in Effnct December 1979 26 11 '); . J3 Met-Ed/Ponelec Exhibit J-2, s i
/
! entitled Monthly Bills Under Residential Rate _ RS (eff,1 g 14 l 79) Level Charge Currently in Effect v.s. Proposed Increase 26 15 -
t Met-Ed/Penclec Erhibit J-3, 16} , entitled Total Charges to Customers ' Reflecting Proposed 17 . Increase in 8,8 Mill Level l Charge 26 18 19 I I 20 s, 21y i 22 1 n J
- b. e r ' g 25 II mosanacn ci s.insMx., tr<c. - n ::. Locxw::. tow e.vs. - HAnttiseuno, n. ima 4 ,,;m
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V",9 q .W63 J 259 _oo o = - , n. n x.a_--..--------.-p---s~ -
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.; 57 t
1 I THE ACTING CFAIluGN: There are soma cents a 3 i ctill unoccupied, and I'm going to ask those who are o 3 S ,i standing to find seats. 4 Thoce that cannot find seats will be asked to j 5j leave the roon, so you better start looking for seats. I l 0;j see several right now. Tat's not have any difficulties. 11 7 ll h reason that I ask timre be no stendees 3 0J is because we est observe the safety and fire laws. Nou, II Gy there are tuo cents up here, 11 , i 10 The Cc=mtssioners are fully aware that you've _ 11 }l como here with signc. I am going to give you a one-minute il 12 ; opportunity. Raise ycur signs. Do it now. Because you 1 1E O will not be permitted to have tha signs raised during the k 14 f proceedings. So raise your signs new. 1 _ 15 l (Off the record mocantarily.) i 10 ! TIE ACTING CliAIISBIH Please icwcr your signc. 3 17 y Those of you who made this trip, ue welcoms h ISI you harc. iin hope that you participate in a mnner which l 19 d' all citizens have a right to participate. I 20j Having said this -- i 21 VOICE: Would you talk a little louder? The J f
.Wn cenior citicens hero ccn 3t hear.
25- VOICS: He's trying to hide his cords. f, ,'i E TES ACTING CHAIRMEN: We will proceed with H
,. 9 40
; this efternoon c agenda.
i I call upon Miss Dufour to cdvise ig g.r- :.xe.e:p :=e :.. :ue. -- an . r.e::~::u.m ex=. - nex:u:w. re m 52 ,, F i.1.63 2604
'm'
_ e. _. .._ - _ . , ,
p
- t. o f
1
'l the Cornission uhather or not tha spokasaan for the group g h j is here and is prepared.
{
, i i e i 15. DUFOUR: Yes, sir, he is. Alan Kornblum !
i' 4 i of Citizenc' Action of Northeast uill speak for tha
#-hf Pennsylvanin Alliance. !
- i 0
l TEZ ACTIIiG CreLIRIAN: In accordance with an ! n I
' j agreeuant reached with the representatives of your group on c
( e i Friday and again hero this morning, you have ton minutes, j q l, and at the end of ten minutes we hope that you trill -- ekcy. i i M l 12. K ORUBLUM: Cotmissioner, my name is Alun l - -
'l ;
" }j K orn blum. I am frca CAI% Cencuser Action in Northeast. 3
.,. t
~~
j That's a Philadelphia-based organization. O e
.c
" i i Wo, as consumers, are interested in conser-u i l
'- i vats.on, ana therefore ou statement is less than ten minutes:.i i
1~4 i j And we have even squeezed in two more spankers, if that is j 16 okay with you. ! l* 17 !
, Those speakers will ha Senator Eclack, who is 1
1kj hare in suppc:-t of Pennsylvnnic Alliance, as well as Miss
- I
'#s, .'" i I
Pat Loogenecker from Elizabethtown, jest five niles away I I
'iO frca TMI, tico hnc eota cuartlits new inferri:ation about tha l
*], !! radiation 12r.:1 on Mr.rch 28th, as call as currently, around l
'.. ii
-~-
the plant. t
- c. ;!
This all will ha loss than ton minutes, if t' l
~4 that is ohly t.-ith yor.. !
1 25 l TEE ACTING CPAIPEAN: It has to be part of l' 6, q y. e z. u =. - x. n. w=.. =.e : ..z - u..,m.::nu. a,:syp - ae e 1 m ,!!!4 klb3YL
). _. _
Il 9 C 1l! your ton minntes, i 1 3(j 10.. KORNBI,00M: That's fine. { 3 1 We are here because the PUC has a historic 4 l opportunity to challengo the combination of utility company i 5 j trresponsibility and governent inecmpetence at the root t of the continuing Three Mile Island crisis.
%e 7" The Pennsylvania Alliance has repeatedly B. challenged the idea that the public is financially responsi-i 9 ble for a utility company's mistakes.
i 10 j Mat-Ed's investment in two nucicar reactors 11 i is en enampic of high rish and speculative construction. l 12 i Met-Ed and the electric utility industry have been kidding y U themselves and the public for years about the economic and l I4 safety hazards of nuclear power. 15 , Their current financial problems were created 16 by their own irresponsible investment in an unsound and I 171l incredibly cupensive nuclear technology. That is why 1 10 ; Iiet-Ed must now depend on higher priced purchased power oil. l 19 } In other words, Met-Ed's rate hike request t . 20j cannot be legitimately separated from the Company's overall 4 21 j managemant and investment policies. These policies have 23 brought the rocidents of Pennsylvania to the question of fi SS whether cr not 2St-Ed should stay in the electric basiness. (~ s 24 l Met-Ed's nuclear investments created a situ-1 25 ! ation which threatened the lives and safet.y of hundreds of 11CICO/.CM C tifCifAL. !!!:". - 27 K. LOCKWII. LOW N/L - 117JLR!3CLI.10, PA.171I A ( Q_ 'l OO O " '
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thcusands of people. It is well kncwn that several workers + h 3I were contaminated during the accident and that more warhers a . l were crposed as cleanup operations began a few months later.l
. 1 -
't j The most dangerous and difficult cleanup has not yet even j started. !
f . 0 l Since the crisis, Met-Ed's credibility gap l l has become a crodibility Grand Canyon. Not only has Mat-Ed i
" l n l i failed to operate with c rational investment policy; it has ;
- c. ! l The gross mnageant j repeatedly violated the public trust.
i 10 j incompetence revnaled in the Rec:eny report is terrifying. i I
~ j "i If this Cornission is actually to serve the
~s public interest and not play Santa Claus to Mat-Ed, it mst,
~o s
et the hast, begin a full and serious exploration of j l alternativas to Met-Ed continuing in business. First and foremost, it met investigate the 10 possibility of a public bcdy taking control of the Company's' U operations. This will prevent any Lockheed/ Chrysler-styk l 16 plant which uses our tan do11crs to bail out a failing l 1 corporation. l t EC We are equc11y opposed to a bailcut financed . I l
?.; i by customers ifno Iu:ve no respcasibility for the accident, j i
3.N though increased ciectric rates. 26 It is tha PUC's job to protect us frcm Met- g {' ,yE Ed's mistakes. g 25 In coditica, we say the cc:: mission should L w:: D**D news == T e r.mc~n.. m - a u. i :.e ! S' ", =ma.on m:. - wr.m uhe ji2() _ __ , L a . w-ww%u
k 9 l 1 I follow the strong logic of its previous decision and remove l i 2F Three Mile Island Unit 1 frc:n the rate base. When the Com t 1 . S fi mission decided inst June 15th to remove Unit 2, it stated ! l 4[j that ratepayers should not pay the cost of plants rendered t l 5 ! useless through no fcult of their own. I i 0 It is not the ratepayers' fault that the j 7 Huclear Regulatory Comission has ordered Unit 1 to remain I ft closed. The NRC issued this order because of continuing I oI '
~
questions about the plant's safety. i 10 By removing this plant from the rate base, the
.. 1 i u i PUC will intorrupt the pattern of government handouts to l i !
'2 q large corporations. The PUC will also live up to Pennsyl- l 13 vania law, which stated that power plants must be used and i
e
"] i useful, i 15 Cur irmndiate concern is that the PUC consider 26 - the question of Mat-Ed's license and the status of Unit 1
!! I 17 h before dealing viith Met-Ed's rate request. TheCompanywill!
I $
.W obviously de averything in its power to avoid these ques-t W tions.
1 20 The EUC bcs another chance to put the public's] 21 interest first. We urge you to tell the nuclear industry i 22,l that the net for their trapeze act hes been rolled up. . 23fL I could new li'te to introdtec Senator Bodsch, { q , 24h who has a very brief statemen of support. I 25f i
. , m,THE. ACTING CHAIRMAN: Senator, the Comission i' , . , _
rir:::t Act: e c:Ar:c:n.t inc.-u n. Le:::cmnt.cw AvJ - nutarenuno, PA, tit:2 j__$ JJffI} b l'639126:4$ - . . .-
Il 10] { 1 is privileged to have you in our midst. 2 f SENATOR BODACK: Thank you. . l 3 THE ACTING CF.AIIEN: We hope you are 4 comfortable. I 5 i SENATOR BODACK: Under the conditions, I'm sure I 6 I'm quito comfortabic. 7 As you know, Mr. Chairman, I'm Senator Bodack. j 0 I am the Chairman of tha Subcornittee of the Consuer i 9 l Affairs Cc:maittee which has been set up to look ~into the i i 10 tcxing structure of utility companies as it affects consumer! 1 .I 11 j rates. l 12 I'm here today fully in support of the PAJE C, i 9
.j d organization in their stand on the Three Mile Island inci-i 14 dent and rates. I personally do not feel -- it's my opinionI I5 l that consuscro should not be called upon to pay for servL es, 16 ! that they are not getting through the utilities.
17 Ac was stated by the gentleman before me, 16 these units have been taken off the line, and it's a service 19d I for which the custer. cars are paying and they're getting no a i 20 i;} services. And that kind of cituation is niso a matter [ 1 21 h1 which should not only have the scrutiny of the Public Utility 2N Ccmmission, but I think that th2re should be a Senate com-73h mittee set up to look into that hind of thing. M i We hcve e situation today where the utility , h 25 companies are asking for more plants, more facilities, to gr?.C*i e "A TSt,% t:50. - E7 !2. 3 0::*:Y.' !.AoV? N*1 - IIARmatUnG, FA. 77111 f.:r _wm N _,. _ _& ._-- <= w _ _ . - . _ .
~
U 16:a I' i f 1 , handle projected needs which here yet to be proven are ! 2 necessary. I think that that is a gross micropresentation S , to the consumer. I think we are paying far in encess' of l 4 . chat we cheuld be paying for those hinds of things for
~
3- l, services which we do not need. 0 And without getting too lengthy here and 7! stopping the ac=t person from their portion of the ten 0d minuten, I would just like to reiterate my stand that I do n e l-
-O support the PAJE organization and ask for your favorable h
10 {i consideration in the matter. 11 .
't.2 i (Transcript continues on following page.)
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11 7 THE ACTIIiG CHAIRYJJI: Senctor, first of all, ( 2 the Cordncica thanks ycn for taking time out of your tusy day g
, to come here with other citi:: ens from the area and express
.z. t
>your viet:s.
4, 5 : I would be remiss if I did not take this ' time-- 4 6 and it is not time from the ten minutes, incidentally, you 7 vill get your full ten rnhutes - I would .like to point out 6 'somethin5 to you, Senator, so that you can perhaps discuss , 9 ithem with the members of your comittee. 10 .Tnis is the first time in the history of thic 77 l Commission that proccadings of thic Hnd have taken place. Of 12 course, this is' the first time sinco any Comincion has been i 13{confrontedwiththecamekindofprciolen. p It is tha first tima that any Corninaion in G 15 o bthe Jnited Stntes has inquired of a utility as we have with 16l respect to its r$6ht to continue M bg id a icate of
.g ,. 9,: m 77 convenience.
18 Our problem is a very, very severe one. It is i 19 la severe one for all of the Commonwealth, particularly the 20 ratepayers, the industires, tbs cornercial enterprises that 21 Jar in tha service area. You may tale note that the Coertis:sion is 22 [ 23 citting en banc. Chaircan Goede is not here and will not g participate beccuse in three reeks, virtually, his resi6nation C 25 from the Comissien will '. wye been effective and he will join g
.n _. - - . . . . . ,
! 12 1 jMayor-Elect Green's cabinet as Mancging Director of Ibiladelphf c.
2 l For that reason he has elected not to partici-1 _ ;pate, and for, I thinh, a valid reason. Ile will not be here O ; 4 lwhen this c:atter comes to be voted upon finally. 3 But we thank you very much. We would appre-6 {ciate it if you vould call to the cttention of the rarr.bers of 7 jtheSenate,particularlyyourcommittee,theseriousnessand g the promptness with which we are responding to this matter of g qgreat distress for the utility, for the retepayers, and for I 10 ,the Commonwealth as a whole.
.!.1 :
So en behalf of the Comnission we thank you 12 f f r c :ning today. (Applause.) c 13 { Y u have three minutes. Will you identify yntself? 14 13 MS. LONGENECIER: I am Patricia Longenecker. 16
#" #" '" * " "' "" 87 ##" ' "" *8 * *
- 17 Mile Is1 cad. I am co-founder of the Coalition For Renewable 18 Energy Resourcec. It is a grm p forced this sn - r in 19 Elizabethtown so that we cay initiate work for and lobby for 20 solar legislation in the state. To date la Pennsylvania we 2'have 1 no incentives for the developreent of use of solar energy, 27,I cud c1inatologically ne should be the pioneering state of the 23 n reheastern states in this development.
! The public vould feel very encouraged if the Ab
( 25 PUC vere to help topromote this inexhaustible energy source h!OHftDACH & MA!tSHAL. IMO. - 27 N. LCCKWILLOW AVE. - H ARRISDURG. PA. 1711 A o m #'" J 4 - *- [1~6391268 ak
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i 13 3 iin their rulings and thereby shoe the people you serve that ( 2 {you do not direct a bics in favor of the utilities which h 3 !enists today. 4 l As for the utility in question bero today, 5 ! Met-Ed, it is hoped your Commission will be looking objectivel:7 6 at its terits, and whether or not it is a responsible company 7 l cnd deserving to provide c public service. s The evidence which has led rm here today has 9 l been gleaned over si=, seven conthe of listering to testimony 1 10 and hearings, comes under the heading, lessons learned. This 11 is a phrase uced repeatedly by Metropolitan Edison in its 12 l surface cpologies as amends to their regulating agency and the 13 public. C 14 , I cannot see any change in MetropoEtan's O i 15 ' operating procedures nor attitudes since March, and under 16 2 these lessons learned category I have listed three divisions. I 17 I Hu:foer one, no regard for public safety. October 17th in tg Middletown in the hearing room at a round-table discussion 19 of HRC cud Met-Ed employees at cach point where the NRC 20 gentlecan asked for safety grade in the next ordering of 21 acterial the reply was another grade will'he doing the same jch. 22 W rhers ct,TMI are gearing up for a restart. 23 ! Ecildings cre being painted cnew. Workers are being brought'in. g.:] There is no question in cny of their minds that it is a matter 25 f time until restart. Piolicly they have been given no h LFomiSQhg,myg , - e u. to=xwu... m. - mmmm.. u, i . A oc o =
} 3[
, l, Another lesson not learned in that of giving 1.
I the public truthful, factual inforcation. The graphs we have 2 l lbeen given in the news nedia, the one millirc:n for dental z-ray 3i
!equivalcutlowbackgroundinformationiserroneous. When ne 4 ;
ichecked back to see tino put cut these low background readings, 5 i
'it was an ad hoc cocaittee so that no oce takes responsibility ,
61
!even though anyone dno has sat through conths of hearings realf.zes 7 1 '
1 1this ic false. S j i The dosimeter charts we have known about up 9 j I have brought along copies 10 l}untiltodayareagainerroneous. out of the Deparrmant of Enviromtal Resources here in 11
!Harrisburg. At the Forest Test Lab at the Middletown Airport 12 1 j readings were picked up 45 millirems the week af the accident.
13 Up until this point readings on those dositeters badges were 14 lIcontinually zero. 15 The readings are done by an independent lab 16 in California to check z-ray Inb equip =ent. Theequipser.?usqd 17 to check parasitized (sic) insects and that type situation. 18 All right, those readings show soesthing very 19 I different from the dental x-ray we are led to believe any 20 radiaticn people received.
"I l The week of TNI a nursery school in Hershey 22 called Met-Ed and said, may we take our children to visit 23 ,: the airport?
The airport is a block from the room where we (. - 24 were )4 getting 45 nillire.cs of gacsa radiation. Met 'Ed 's reply, 25 ; yes, go chead, and they cent. I call this irresponsible and
- ucunca t. MARSMt.. MC. - 27 N. LCCKW1LLOW AVE. - HARRI$DURG. PA. 17112 3
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land I call it disregard for public safety. (Applause.) 15 1 1 j DER has known about this, it has boon on their f 2 desk for six tracks. a
'to have seen nothing in our news cedia h 3 !with these fccts.
4 'Ihe third lessen I feel not learned is that l 5 lof l}eopardizing their cnployees and their fnrrnies at Metro-i 6 politan Edison. In this I am speaking of the radiation doses 7 Ithey are c11owing their workers to receive continually year in 1 G landyearout. The workers are lulled into a false belief that 9 i this radiation vill have no effect on their health nor that 10 of their children, when in actuality a geneticist vill tell 11 jus differently and that we may be headed for trouble. I 12 From the E;eneticist I have this: the rmclear 13 : industry sets h1 her dose levels,5 rems a year,for their 5 b..- 14 l workers.Research shows that in Brala.,/ India there is a South $ 15 correnpondirdy sa::e dose from background radiation with the i 16 y result of severe montal retardation of genetic origin being i 17 l four tines higher in the otudy than in the control population. I 18 Again disregard fcr public safety; for the 19 l nei6hbort cnd the workers arcund TMI. 20 It is ay su ma. tion after these months that 21 ;if a cenpany so openly ignoren its enployees and neighbors i 22 j while ths whole world stands untching, that such a company 23 ll has no right to operate nor do they deservo any confidence e 14I that they would carry out the technical worhings of a nuclear 25 facility when they are unobserved. O IdoliftD ACH a EtARGHAL. INC. - 27 N. LOCKWILLOW AVE. - tsar 3199URG, PA. 17111
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16 1 f I have these reports and I have the ccpico to 2 let with you, if there is anycac helo who would like to have 3 then. (Applause.) 4 l 12. HORKELUM: Comissioner, if I could have 5 jonc more mor.:ent of your tir.c. There are over 200 people who i 6 jhave corae todc.y from across the state representing 60 different I 7 organizations. If we could have one moreainute just to name G lthese organizations, Commissioner, I think the people throughcut i 9 lthe state would uppreciate it, because we would like to calm i 10 jit known that consumers arc welcome in the State Capital and l 11 that cccmunity participatica and connzunity empowerment should 12 not be relegated to teztbooks, but are pcrt of the actual 13 jsituation. l 14 { So if I.could have one moreminute to read i 15 f the names of these groups. 4 16 l THE ACTIKG CHAIRMAN: You used more than one i 17 Iminute in asking. Piccse proceed is:nediately to do so. 18 Incidentally, before ycu do, let me point out that your last 19 speaker exceeded the time allotment by four minutes and she 20 was not interrupted. I 21 Ecr ycu will not be interrupted. Please * -+
%2 ] read this list and then we must conclude your participation 2T+of(lithic nature at this titre.
p 24 : IG. HORUBLUM: Thank you very much. Frca the l i 25 :Harrisburg area: I wounuca a iansn4t. me. - 27 n. toexwittow ave. - nanni our.4. ca. 37:in W Q _ _ _ ILS3k272
a 3 17 1 Lebanon League of Uonen Voters (^ 2 i
! Sixth Street Up:,oJn Revitalization Effort, Inc. h j (SURE) 3 l Fifth Street Action Center 4 i 1 Tnree Milo Island Alert 5
b Harrisburg Heighborhood Convention Planning 6 ' Committec (IEC) 7 ; Limerick Ecology Action 2 AUGRY 9 j Harrisburg Fair Ecusing Council 10 i Susquehcnna Valley Alliance 11 ) American Fedcration of State, County and Emieipal i Eaplcyces, Local 972 12 j Pennsylvania Social Services Union 13 jl - JL.algamated Eeatcutters Union International. g 14lI From the Philadelphia area: Philadelphia Ccancil of Neighborhood Or6anizations 1 16-Consumar Action in the Nor'theast 17 Keystone Alliance 10 ' Grass Roots Alliance for a Solar Pennsylvania Clcan Air Council 20 !
! Community Cocrainating Council 21 l
; Hartrauft Conranity Corporation 22 '
I Neighborhood Employment and Ecenomic Development 23, Specialiste , 2/ , Southeast Germantown Conmunity Development V. 25 - Corporatica g I posmen a tesut, we. - ze n. coexmucow Ave. - mmsaunc. n. ima i D .' ;
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j 16 g Philadelphia Unecployment Project United Minority Enterprise Association 3 f i 3 l Point Ereece Federction 4 Action Alliance of Sernior Citizens 5 Penn Kno:t Neighbors Association i 6 l Germantown Alliance for Safe Power 7 ; Consumer Caucus for Neighborhood Energy Planning i 6 ; Institute for the Study of Civic Values 9l Haratfoee i 10 i Philcdolphia Com= unity Rchab111tation Corporation 1 y; Heritage House Solar Evolution 12 Scuthwest Hurnn Relations Council Tenants Action Group. n 13 f 9 From the Pittsburgh area: 15 l Pennsylvnnin famnce for Jobs and Energy (PAJE) I 16 PAJE Utility Service Advocates Polish Hill Civic Association 17 16 , Hill District Citizens Development Corporation 1 i 19 East Liberty Garfield Citizens Council 20 Homewood Brushton Communi.ty Action Program I 21 Greater Pittsburgh Senior Citizens 22 Northside Ccamunity Action Program 23 ,i Southwest Pittsburgh Connanity Action Program p ! Scuth Ockland Citicens Council b,) 5, 25 j Peopleis Power Project /New American Movement moxns ACH te 24AR6H A1., INC. - 27 N.1.CCXWILLOW AVC. - H ARRISBURG. PA. 17812 mm m ,
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l 19 1 l Coa.lition for a I!cp-I!uclear World I 2 l United Steel Workers of Baerica, Local 1190 h 3 f Citi=cns Health Alliance 4 Pittsburgh Free Clinic t Ccamunity Health Advocacy Hetwork 5 :i l' 6[ Lower Meadcuc Block Club 7 l Uabash Block Club 6 Hunger Action Coalition l 9 : Beaver County Citizens Concerned About Nuclear Enere;y i 10 j G."cenpeace 11 $l Welfare Rights Organinction of Alleghercr County C 12 j Arc 1gamated Clothing and Textila Workers Union i 13 i Nobilization for Survival C O 14 ! Arlington Civic Council 13 Chad'. rick Civic Ansccition I 16 l Silver Lake Improve =2nt Association. l 17 Ocm:nissioner, thank you very much. Members 18 ; cf the FdC, na tha.uk you. Consunars. (Applause.) i 19 l 'IHE ACTEiG CHAIRMAN: I want to advise all of i 20 the partics, shculd ycu be intorested in litewise having a 21 j;demonctrction of this kind, na will be glad to negotiate with 22 ycu, follow the sama rules and leave when you are through, no i 23 ' waving of bonners, t 2,[ Tais in.not scrathing that we will afford to 25 one grcup nlcne. This Oc raisnien cporates without prejudice, h MCHTtSACH th t1AR$HAL. ft!O. - 27 N. LCCKWILLOW AVE. - Mt RRISSURG. PA. 17tt2
! 20 1
1 !without bias of one kind or another. l _ 2 . IIcw at this time we can continue. Mr. Ruscell , 3 are you ready, sir? 4 i IG. RUSSELL: Esforo caking that various i 5 { documents be tarked for identification, I perhaps could give 6 f you a word of explanation ac to our numbering system, 7 As you are aware, this set of proceedings 6 iinvolved two public utilities and it will, we expect, involve 9 avidence relating to each of those utilities separately, and
).t., icome of the evidence will apply to both of them jointly.
I 11 i There ic no single way cf engaging in a i 12 jnurberin;; system that answers all of the possible desirable P 13 inspects we ticuld like to cover, but we have concluded, for 14 fbetter or worse, that we ccn identify and I thirt the other i 15 ! parties and the Commission can identify exhibits most readily i if we have a circle set of numbering sequence for exhibits, 16 17 f therefore, to avoid the cultiplicity of systems we have 18 lcencluded that we would have one system starting with witnesse 3 19 lA,B,C, alphabetically, i 20i The prepared written testimony, if any, of a i 21 !given witn0cc, witness A, for example, would be Statenant A. 22 , Any supplements to that would be numbered i 23 ;coauentially cc Supplemants 1, 2, 3 to Stater.: ant A. [ p 24 The ~exhib%ts of witness A would be nurbered 25 scquentially lhhibit A1, A2, A3. I ueansAce. O MARSHAL. WC. ~ 27 r.. LOCKWILLOW Avit. - HARRISBURG. PA. 17t12 om wM e _ ;1639 276 I Uo y rl AIAL
21-1 j In every case, for better or for worse, whethe2-( 2 it has to do uith Met-Ed alone, Penelec alone, or both of therr. 3 l Jointly, they uculd be der:oninated Met-Ed/Penelec er.hibit so i
'Phat is the best numbering synten ve are able to
'4fandco.
5 cene np with. 0 With that backgrcund, we have handed to the E 7 jreporter three copiec of c nunbar of sets of documents which O we ask to have narked for identification as follows: Met-Ed/ 9 lPenalec Statement A, together with Met-Ed/Penelee E-Aibits A-1 l 10 jthrough A-8 inclusive, v 11 fict-Ed/Penclec Statenant B together with f 12 l Supplement I to Statenent B. 13 .l { Met-Ed/Penelec Exhibit B-1 through B-3 inclusire. g 14 Ect-Ed/Penelec Statement C together with Met-15 llEd/Penalec E:d2ibits C-1 and C-2. 16 Mat-Ed/Panelec Statement D together with F.at-17 Ed/Penelec Exhibits D-1 through D-4 inclusive. 18 Mat-Ed/Penelec Statement E together with Mat-19 ! Ed/Per21ec Exhibits E-1 through E-3 inclusive. 20 I6t-Ed/Penelee thibit F-1, Met-Ed/Penelec State - M h ment G together with Mat-Ed,/Penelec Exhibits G-1 through 22 lG-5 inclusive. 22 Mat-E6/Penalec Statement H E.ni Hat-Ed/Penclec k' . , 24 ; f Cthibit E-1. 25 l-Met-Ed/Penelec Statement I. g I it OKnD/.C;-t C ri:AMSMAL. titc. - 27 N. l.OCKWit. LOW AVE. - NARRtSOUttG. PA. 17112
. J : ~j .
!! 22 7, j IJat-Ed/Penelo'c Statement J together with 3 !Ect-Ed/Penclec Enhibits J-1 through J-3 inclusive.
3 , FollowinS Statements produce'd and marked for identification:
., l 4 i Met-Ed/Penclec Statement A, State-l ment of F. D. Hafer In Support of 2 5 l Idet-Ed 's Petition to Increase Its
! Levelized Energy Cas t lid, Jus t, ment 6 i Charge
? l Met- Ed/Penclec Statement B, i Witness D. L. Euff G l
} Supplement 1 to Met-Ed/Penelec 9 j Statement B, Witness D. L. Buff f
10 ; Met-Ed/Penelec Statement C, Witness F. A. Donofrio 11 1 Met-Ed/Penclec Statement D, ' *
.12 i Hitness R. C. Arnold r 13 , Met-Ed/Penelec Statement E, Witness B. H. Cherry 14 Met-Ed/Penalec Statement G, 15 , Uitness E. Newton, Jr.
16 Met-Ed/Penelec Statement B, l Witness E. W. Schleicher 17 l i Met-Ed/Penelec Statement I, 16 i Witness R. H. Sims b 19 ; Mot-Ed/Penelec Statement J.
- Witness E. F. Carter 20 It 21l Following Exhibits produced and marked for identification:
9 22 Met-2d/Penelec Exhibit A-1, entitled Ecvolving Credit 23 j Agreenent. Dated as of Junc 15, 1979 ,c 24 h, 251 i mounpACH & STARSHAL. INC. - 27 ti. LCCXWu, LOW AVT. - HAftrtisstJRG. PA. 17812 o~"R""AB3BM"
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23 1 l b 3 Mec-Ed/Penelec Exhibit A-2 S entitled Pctition of Metro-3 I politan Edison Company for ' Modification of Cocaission 4 Order Entered June 19, 1979 0 , liet-Ed/Penelec Exhibit lio. j ~3, entuled Forecast (1) 6 System Energy Costs (2) 7 ! Met-Ed/Penalec Exhibit A-4,
!; entitled Uedate of Table 3 G ~
of Appendix B Attached to Met 4d Petition 10 ' Met-Ed/Penelec Exhibit A-5 entitled Update to Exhibit A-3 To Reflec t October 1979 Actual Data 11 -l 12 j - Met-Ed/Penelec Exhibit A-6
,, entitled Update of Table 6
{S of Appendix B Attached to Met-Ed Petition (To Reflect g 14 f October 1979 Actual Data) 15 I ' Met-Ed/Penelec Exhibit A-7, entitled Update of Table 16 7 of Appendix B Attached to 17 l Met-Ed Petition (To Refleet October 197S Actual Data) 18 , Met-Ed/Fenelec Ernibit A-8
! entitled Update of Table 8 19 I of Appendix B Attached to 20 '
Met-Ed Petit;;n (To Reflect October 1979 hetual Data) 21
, Met-Ed/Pene3cc Exhibit B-1 i entitled Statement of i 22 Operating Income and Not l 23 Income Year 1980 Hormalized i i and Adjusted to Reflect Possibic !
U Exclusion of TMbl and 2 i Mf Costs and to Refleet Revenue ! 25 6 Necessary to Achieve Requirsi Return g
--McH3DACH f4 t.1ARSHAL. fMC. - 27 N. LOCfCWILLOW AVE. - HAr.RISBURG. PA. 17172 I
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'09279 1
- . . . - . . . . . ..- . ~ ...... --- - - - --- .. --
l 24 1 l .. 3 ;' Met-Ed/Deneloc Exhibit B-2, entitled Average Mcasure of 3 i Value3 Year 1980, at Original j Cost Dortalized and Adjusted 4 to Reflect Possible Exclusion of TMI Units 16 2 5 6 Met-Ed/Penelec Exhibit B-3 { entitled Stctement of Retail Energy Clause Roycnues, 7 ! Expenses and Deferrals 4 Months l Ended October 31, 1979 8 Met-Ed/Ponelec Exhibit C-1; 9 j cntitled Statement of Operating i 10 ' Inccma and fict Income Year 1980 I Norcalized and Adjusted to Rcflect Possible Exclusion of 11 l TMI-1 and 2 Costs and to Reflect ii Revenue Decessary to Achicve li ! Required Return <- 13'i Met =Ed/Penelec Exhibit C-2, entitled Average Measure of 14 Value, Year 1980, at original Cost Normalized and Adjusted to 15 Reficct Possible Exclusion of TMI Unita 1 & 2 16 Met-Ed/Penelec Exhibit D-1, 17 Letter of April 16, 1979 to 18 1 Office of Encicar Roactor Regulation from J. G. Ecrbein 19 l Met-Ed/Penolec Exhibit D-2, 20 { Letter of June 28, 1979 to Mr.
; Harold Denton from J. G.
4 BerbcLn 21 Met-Ed/Penelec Exhibit D-3, 22 entitled Order, Docket Ho, 23 50-289. in the Matter of
! Metropolitan Edicen Company,,
Three Mile Island Euclear 24 : Station, Unit No. 1 [. A 25" c,q e 2 '- ', nonnueu a uansur rne. - a rc i.ocicwn.r ow m. ~ manisavam ea. i7iin Eggggg{ 2d
3
. 25 1$
( 2 Met-Ed/Penelec Exhibit D-4, entitled Order and Notice of S Boaring, Dochet Ho. 50-289 4 Met-Ed/Penelec Exhibit E-1, entitled Cumulative Capacity 3 lj Factors for Nuclear Units in l the Commonuealth of Pennsylvania o Met-Ed/Penelec Exnibit E-2, 7 ;l entitled Update of Table 4 of i Appendix B Attached to Met-Ed S l Petition (To Reflect October 9 { 1979 Actual Data)
,j Met-Ed/Penelec Exhibit E-3, 10 entitled Update of Table 5 of Appendix B Attached to Met Ed 11 Petition (To Reflect October 1979 Actual Data) 12 y!
i Met-Ed/Penelec Exhibit F-1, 13 ! entitled Metropolitan Edison C- g l Company and Pennsylvania Electric w 14 i Company Review before the 4 Pennsylvania Public Utility 15 Commission September 21, 1979 16 Met-Ed/Penelec Exhibit G-1, entitled Composite Power Pool-17 . ing Agreement Among Pennsylvania Electric Company, Metropolitan 18 Edison Company, Jersey Central
} Power 8: Light Company (GPU Power 19 Pooling Agreement) 20 l Met-Ed/Penelec Exhibit G-2, I entitled Pennsylvania-Hew Jersey-21 ! Maryland Interconnection Composite (PJM Agreement) 22 ,
Met-Ed/Penelec Exhibit G~3, 23 entiticd Forecast Short Term i Purchases from Other Utilities 240 Year 1980 25 f.!OHROA .7 Hq L. INC. - 27 H. LCctCWILLOW AVE. ~ HARR158URG. PA. 17112 D b ,g, b b.l
26 1 2 Mot-Ed/Penelec Erdlibit G-4, l entitled Eststate of 3 9 Savings Resulting from Short
! Term Power Purchases Anri.1-4 ; Oc tober,1979 5 ; ^ Met Ed/Penelec Exhibit G-5, entitled Estimate of Savings 6l from PJM Special Purchase Year 1980 7 ::
Met-Ed/Penelec Exhibit H-1, 8 entitled Retail Sales Fore-cast 1980 Met-Ed/Penelec Exhibit J-1, 10 l entitled Typical Bill Com-parisens, Pennsylvania 11 .l Utilities Rates in Effect i ,s ;! December 1979 Met-Ed/Ponelec Exhibit J-2, ( 13
. entitled Monthly Ellis Under 14 Residential Rate RS (eff.1 79) Level Charge Currently in Effect vs. Proposed Increase Met-Ed/Penelec Exhibit J-3, 16 entitled Total Charges to Customers Reflecting Proposed 17 '
Increase in 8,8 Mill Level Charge 19 . 20 D lD lD _Lo M e Ma~3'h]f m 21 j t 22 1 23 l N 24 25 mowncacx a mansnat. rue. - av et toexwittow ava. - wannismusa. iviin wi,n 9 282-m. e o v 7, . o m e m.e
._ ~ we-~.-
l 27 11 At this t h we wculd call Massrs. Hafer and b 2 Graham na witnesses and I would lihe to point out as one further h 3 inspect of the evidence subnittod, the basic testimore with I 4 jrespect to the petition concerning the energy c1cune change
!.has been eponsored by Messrs. Graham and Hafer, ard during 5 i 6 !the course of the testinony we will have them identify which i
7 portions of the petition and the supporting data they are 6 l sponsoring has been sponsored by each of them respectively. 9 l THE ACTING CHAIRMAN: Ihy I interrupt you 10 fforaneuent? Unicas there is en object-icn, I am requesting i 11 ithe reporter to cdninister the oath to each of the witnesses. 12 lIn this way we can be certain that everytMtw is in order. 13 { jandnooneforgetsnnything. .. 14 I 15 FRED D. HAFER end JOHN G. GRAHAMi called as 16 witnesses on baht.lf of the Respondents, having been duly sworn 17 laccording to law, rere examined and testified as follotts: 18 l 19 . DIRECT EXAMINATION 20 ;IEY 'IHE ACTIEG CHAIRMAN: oe ue
! eMlt.
21 Q Will you announce your names to the reporter? 22 Who is proceeding first? 23 i A (Hafer) I will proceed first. I(v name is 2<; ( Fred D. Hafer. I an Vice-Frecident. responsible for rates of 25 !GPU Service Corpcration, itCMRDACH C. MAESMAL. fMC. - 27 M. kCCKWif LOW AVE. - HARRISBURG. PA. 17112 O
l Hafer/ Graham-direct 28 l 1 ! A John G. Grnhnm, I am Treasurer.of (Graham) ! E iGcneral Public Utilities Corp. oration and Vice-President and i ( 3 l Treasurer of GPU 'Servicct Corporation,. ' 4 f l'a RUSSELL: We will proceed first with the 1 5 j eral direct testimony of Mr. Hafer. 6 BY IG. RUSSELL: 7 Q Mr. Hafer, I shcr you a document which has 6 jbeen marked for identification as Met-Ed/ Penelec Statement 9 A cnd ask you uhether that was prepared by you? 10 A (Hafer) Yes, it was. 11 Q If I were to ask you today the same questions 12 lthat appear on that statement would your answers be the same 3 C '2 as are contained therein? 14 A (Hafer) Yes, they would, except as I will 15 i note shortly, to the extent that some of those nunfoers could 16 h be updated with developing actual information as it becomes i 17 iavailable they may be changed. i 18 I Q I also show you a document which has been 19 marked for identification as Met-Ed/Penelec Exhibit A-2 and 20 ask you whether you are sponsoring that exhibit?
*I A l1 (Hafer) Yes, I am, 22 li Q I show you c document which has been marked 33 for identification as Met-Ed/Ponelec Exhibit A-3 cnd ask you p 24f tfnether you are sponsoring that exhibit?
r 25 A
~
(Hafer) Yes, I am. MOMPBACH C ttARSyt It4C. - 27 N. l.CCKWii. LOW AVE. - HARRISSURG. PA. 17112 D** qa 7
-= = =
F6390284
Hafer/Graban-direct 29 1( Q Has Ezhibit A-3 been described in your direct f g testimary which is Statement A? 3, A (Hafer) Yes, it has. 4 l Q I also show you exhibits which have been l 5 ; marked for identification as Met-Ed/Penelec Ezhibits A-4 6 lthrough A-8 inclusive and ask you whether you are sponsoring 7 ltheseexhibits? l 6 : A (Hafer) Yes, I an. l 9 l Q They have not been identified in your direct 10 l testimony, bave they? 11 A (Hafer) No, they have not. i 12 j Q Could you identify them briefly for the record ? 13 A (Hafer) Yes, beginning with Met-Ed/Penelec { 14 li Ezhibit A-4, A-4 is an update of Table 3 of Appendix B attache 3 15 ito the Met-Ed petition. Tnat petition has been identified as 1 16 Exhibit A-2 in these proceedings. 17 Q For the information of the Com:nission and 18 the parties, will you identify the nature of the updating 19 g of that erbibit? i 20 A (Bafer) Yes, the updating of this exhibit 21fismerelytoreflecttheOctober1979_actualresultsand 22 i replace those actual results with the October forecast 1 23 1 results which had been included in the original submission. y ! Q Or vice versa? Ycu are replacing the actual-- 25 A (Hafer) I am replacing the forecast results h MOHR3.*,CH Q M AR AH AL. WC. - 27 N.1.C OMWH.L.CW AVE. - H ERRISSURG. PA. 17182 VIb .; Y D** , T ' va. u.w:
- . oe e - =
1639 285
h Hafer/ Graham-direct 30 1 i with the actual results. Exhibit A-5 is an update to 1 2 Exhibit A-3 for exactly the same reason. 3j Exhibit A-6, cgain an update to Tablo 6 of i 4 'Appendin B which was attached to the Met-Ed petition. This 5 'is also for the purpose of reflecting October 1979 actual data , l 6 l Exhibit A-7, an update of Table 7 of Appendix 7 lB attached to the Met-Ed petition, also to reflect October I 8 iactual results. 9 ; And Exhibit A-8 an update of Table 8 of 10 Appendix B to the Met-Ed petition, again to reflect October 11 l actual results. 12 I might add that the actual energy costs in e 13 l aggregate for the month of October were $19.5 million as 14 l compared to the original forecast for that month of approxi-1 13 Imately $17 million. Q Directing your attercion to Met-Ed/Penelec 16 ll 17 Exhibit A-2, which is the petition cf Het-Ed with respect 18 l to its clause level, could you briefly describe which portions 19 cf that petition are going to be supported by you? 20 A (Hafer) Yes, I can. I and my staff are 21 ; responsible for all of the rate activities of the GPU system 22 y companies and as such I am sponsoring the petition and the f 23 g appendicies thereto. E pk I am particularly going to be focusing on 25 the derivaticn of the energy c1cuse, the purpose for and MOHREACH & MAR $HAL. lHC. - 27 N. LOctCWILLOW AVE. - MARRISSURG. PA. 17112
* , ' f.*
- l Hafer/Grnbnm-direct I f ucritings of the energy clau::c, and the variety of calculaticns c A i lof energy costs which go into making up the energy clause G
3 factor. 4 I may, from time to time, have to refer to f
. i 3
'various experts, depending en the amount of detail that is 0 involved $n the cross-examination.
7 We are going to offer the testimony of various R' of the cystem experts for certain creas of detail. But I am 9 in general sponsoring the overall petition itself. 10 - In areas that involve the cash flow of the l 11 i company and the financial posture, financial ecodition of Is3t-12 lEd, I will be relying on Mr. Graham. 1 ( MR. EARASCH: Mr. Russell, could we geti 'g 14 ' clarification of something? Would it be correct for me to 15 understand, Mr. Russell, that M1. Hafer is the 6eneral policy 16 'e witness for GPU uith responsibility for -filing this petition 17
. so that questions of a general onture about that petitica 18 .vould be addressed to Mr. Hafer?
19 IE. BUSSELL: To the best of Iqy knowledge 0 l Mr. Hafer has indicated he is spcnsoring the petitic::2 6enerallyi 21
, and is spscifically directly in charge of the matters relating 22 ftotheclauseandtheoperationoftheclause,andMr.Hafer 23 f uculd be responsible 'fith re::pect to the financial aspects of i
24 l it, so I think to the entent any question would relate to the 25 l petition in general, Mr. Hafer would be an appropriate witness @ McHR!!ACM Q NARSHAL. INC. - 27 N. LCCf W4 LOW AVE. - HARRISBURG. PA. 17112 y . a . y ,.. _
31-Hafer/ Graham-direct 1 i la. BARASCH: Thank you. I 2 s IBY IG. RUSSELL: i 3 ! Q Could you cuninrize briefly, Mr. Hafer, the 4 substan::e of Met-Ed/Penelec Statement A, which is your prepare t 5 itestimony? 0 ' A (Hafer) Yes, I trill try to. As I have I indicated, while I am sponsoring the overall petition in the 8 Met-Ed filing, I may have to rely on a variety of other people 9 who are experts in particular fields within the GPU system 10 to provide some more detailed information. 11 Certain of the calculations and items that I are included in here are, indeed, complex. But, just as the calculation and derivation of these figures and numbers are N complex, the conceptual nature of the energy clause is indeed 15 very simple. 16 Beginning back in the early 1970's this 17 ' Ccmaission raccgnized that the fuel costs at that tin:e of I 18
'the electric utilities throughcut the state were changing
'more rapidly than could be handled in base rate proceedings 20 and alleyed them to be treated separate from those proceedings.
I l So in the early part of the 1970's the 22 f Commission introduced fuel adjustment clauses for the i e Pennsylvania utilities. , eJ , ( "' ' Ecen a companyrs base rates are established there is a certain amount included to be billed on every FACHRBACH & MARSHAL. INC. - 17 N. LOCKWILLOW AVE. - H ARRIS8URC. PA. 17112 oe re o7 , L639 -288. qhmko a y L Ur ,Q
^
mM.
t l' Hafe"/ Graham-direct 33 s ikilowatt hcur sold for a leve1 of cost of energy-fuel, oi1, ( z i
' or purchased power, e
3 In the case of Fatropolitan Edison Corpany 4
- there currently is included 8 mim or eight-tenths of a cent j
1 5 i j for every tilcwatt hour that Met-Ed sells to its retail 6 I j customers, but that amount falls my short of the actual cost 7 l l of energy, and so the Oommission had adopted a fuel clause 8 l j first and later an energy adjustment clause to be applied to 9 !
!I cach Micratt hour sold to take up the slack, as it were, or 10 i j the shortfall between the actual cost of energy and the cmount 11 l billed the customers.
l 12 1 i Met-Ed and Penelec ucre one of the early fore-
' 1 C qrmmereintheenersyc1euseinremey1vana,thata,ec1euse 9 14 l uhich took into account not only the cost of the fuel which 15 l we censuna but also the cost of the fuel component of energy 16 which we have to inly from our neighboring utilities, frequently 17 bought an the basis that it is more economical than running 18 some of our ,nn older, more expensive, particul#.s.y oil-fired 19 l j generating stations.
20 ! i Likewise, in times when the cc=pany is able 31
, to ac11 energy to neighboring utilities, the amount received
\
$2 '
i for cuch scle is credited against the energy clause and any 24 I;berafit tborefrom iG floved through to the custwsr just as M~ I ( Che Ccst is flOWCd through. 45 In July 197o orders of this Cctrinsion were f tCRWACH O MAf1*HAL. If4C. ~ 27 t!. LCCKWILLOW AVE. - MAnRisourto. PA. 17?12 D** '
; 3 h, . ~h[
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j Hafer/ Graham-direct 33 A I !put into effect allowing Kat-Ed and Fenelse to be the first i s 2 lco:::penies in the state that I kncu of to implenant energy 1 3 lc.djustrant clauses. That was based on a three conths rollins 4 f average of actua.1 costs incurred including the cost of purchased 5 f power and including credits for any amounts of money received e i
,in cosnection with the sale of power.
?
Tnose clauses worked until this Commission i 8 hbegan its own generic proceeding and concluded in Investi6ation
!i 9 ilDc ket 214. that there should be a statewide energy adjustment 10 clause very similar in nature to those in effect at that time 11for]!Met-Ed and Penclec except that the averaS ng period rather i 12 l than being three months was extended to six months.
m 13 14 i S (Transcript continues on Page 34 , ) 16
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17 , l l 18 l i 19 ; 1 20 ; t 21 l 22h 23 g 26 i 2s ;
'I " CHRSACH & fult3HAL. If4C. - 27 ft. LOOKWILLCW AVE;. - HARRISDURG. PA.
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t . Hafer-Direct 34 ' I-The effect of that is to smooth cut the change on customar
:: charges frca month to month. Imd in more normal timss, I
"o e
q when expenses can be anticipated to be up one month and
, I:
o
y down a littio bit the next, it uorks very well.
e
*5 l'I The problem is, hwaver, that when there is 0
a continuing escalction in the.. cost of energy or when there . n 2-1 , is a step change, as in the case of major units being re-31 moved from service, it takes six months plus a month for e !
'/ calculation until the cost rate which is being applied to 10 bills can actually reflect the costs being incurred by the 3
n
- Company.
12 ! That was enactly the case in March of this O U.
'i:l year as a result of the TMI accident. So in the pro-e 0
14 i coodings which toch place immadiately following the Th*I 15 accident, the Company asked this Comission -- and this i 10 Cocmission agreed -- to put 'into effect a levelized energy h 17 adjustment clause factor. 19 : That factor had tuo advantages. One, ier the n
!?In Company, it allowed a more rapid increase -- that is, a D
2: 3l ctop increace -- in the . billing factor of the clause to n 2Ui catch up with the rapidly increased ccst of energy, catch I. Ep up quicker then wculd have been the case had the old siz-1 5 .7 month rolling average clause been alicaed to function in 2 4 its normal tray. M , .tt also had the advantage of holding down the m
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j 11afor-Direct 35 1
.i I s
- : peak to which those costs would have risen to. By giving i i i nI t "q the costs earlie-4, allowing tha increase earlier, by j spreading it out over c longer period of time, the peak was j 4 i not as grect. So it benefited both sides. l j
,-2 5 At the tima that clause was implemented, 'the ,! t 6- Comission utilized the Co:npany's forecast, the reconsnenda- )
?l tions of the Consunnr Advocate's witness, their own staff, l 1
B 1'. and derived a series of energy estimates for the period i i t c i ending 1980. That is, for the period beginning July 1,1979,!
'l and continuing thrcugh December 31, 1980.
10 11 , I won't go into any detail how those nanioers 12 were arrived at, but they acro predicated upon the fact 13 that the Throc Milo Island nuclear station Unit No. I would 14 be returned to service January 1, 1980, 15 , So it ecs recognized by all the parties that 16 while the energy clause bills in the first six months of thiE 17 ' 18-month period -- that is, July through December of 1979 -- 18 . eculd fc11 a little bit short of the actual eosts incurred, i 19 3 that the resumption of sortrice of TMI Unit 1 in January of 20 1980 would alicu us to catch up for that. I 21j That averaging process wculd then allow the r .I recovery to ba slightly above the energy costs being u
- 23) incurred et tice tb cnd allow to recover or catch up for f
24 l the excess costs which had been incurred through the 25 , balance of 1979, __ 3k,,1;g 2 lbv. , me. - a u. tocem.= i_ m .-- mnm1- une,7
1 3 6 ,! pafer-Dis. ace t a}g i / Tha Commission allowed the energy clause l l i / i factor of S.S mills, hat's.made up of 4/10 of a mill for l; i 3[t revenue tax and 8.4 mills for energytests. That 8.4
'1
]
mills, coupled with tha 8 mills already included'% Met- , 5 i Ed's base rates, gives us an aggregate of 16.4 mills of
- -,)i 0 'I j total energy costs being charged for every kilowatt-hour 7-sold to retail custours in the Co::nnonwealth,
- ij e
In October of this year the energy costs c'
"i actually e=perienced by Met-Ed were about 26 mills, cr
-3 10 l nearly 1 cent greater than the energy cost predicted or 11 ! anticipated in establishing the levelized factor en i 12 June 19. C, G l Likewise, the anticipated return to service 14 of January 1,1980, has now been moved bach, so that we 15
) no a anticipate the most optimistic return to service date i
16 ; for TMI-1 as September 1,1980. l 17 Therefore, the 26 mills that we are incurring i If3 today cannot be expected to change very significantly, at l 19' least until September 1,1980, and this shortfall of about M" a penny a kilcuatt cill continue.
!i 21 I should add that when we entered in 1979,
}
d 12j ,. our forecast was that oil would cost about $15 a barrel. e. When the Conrcission handed down i.ts decision entered I 2<' June 19 catablishing the levoli=ed factor, we anticipated h 2U and the Cc:mtission recognized in that derivation oil costs o, , m UCII"!O.".OM 0: T!?.MO*UA. *?iO. - ? N. f.CCf WILLC'!! t.YC. = HAR. R!OrU'tC, PA. !71 lit 7, c ;
._ _. . 2.1 , _16M_ 93
.s -
s f h Rafer-Direct 37 f -[ If of approximately $20 a barrel. { c Oil, I think as everyone knows, has continued i
! 4 3
to rise, sariously aggravated by the Iranian situation, to 1 3 k the point where the actual cost to Met-Ed of oil in the month t 0 ' 1 of October was $28.50 a barrel. 1 G : i
&t-Ed is not a large consumer of oil for its !
? I .i l generating stations, but the energy that I." enat purchase on '
G i
! the interchange network is Isrgely oil-fired. So it has 6-4 n j t
l essenticily the sac:e effect as though it were buying it to l 10 l
]' run its own generating stations. ;
I aAi The shortfall of energy costs versus energy I 12 l c ~ collection which we have been incurring is accumulated in an 13 account referred to as the deferred energy account. It 14 appears on the balance sheet of the Company. It is an item 15 which will be discussed at considerable length here and is 16 j a direct pay of unasuring the cash flow problems, some of I f i 17 I the financial difficulties being experienced by Et-Ed. I 15 I want you to understand it because it will be [ 19 q addressed so n:nch. And if I may, I'd like to take just & i 20 ! cecond to erplcin how it works. I 21'l 1 Tha energy costs which are incurred by &t-Ed 12 j in a given month appesr ao fuel erpense for the Company as 1 23 1 that fuel is actually burned in the generating stations or r b ' 24ll '; as the interchango is actually incurred in purchases from 25 ' other companics. That appears on the profit and loss D
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Hafer-Direct 38 { 1 q state m nt, if you util, as energy espence. O E I Ho:cever, for one reason or another, the energy 1 3( clause workings of the Company don't reflect -- don't recover 4h those energy expenses at the sam time they cre incurred. I l Sll There is a icg, either by design in the levelized clause or i i 0 just by cachanics of a rolling average cicuse. Havertheless, ,-5 7 there is n lag. C So in order to achieve a proper match between i p i the revenues and the crpenses as reported by the Company, an 10 accounting cathodology referred to as Deferred Energy nl Accounting 10 employed. There is an entry on the income i 12 l statomant after the orpense and equal to the expense called i b~ 15i l. Deferred Energy, and in this example it would be a credit. g 14 At som later date when the energy costs are 15 allcad to ha recovered in the energy clause of the company, 16 they show up so revenue to the Co:npany. That credit is 17 reversed. Sc cgnin there is a balance at that point between 10 ' the two paricas of the revenues and the expenses of the 19 Company. 20u,! Tha signiftecnt thing eo imep in mind is that 21 j in the interim period of time the bills have to be paid. 1q The oil cuppliers, the coal miners, our neighboring companies li ! 33 y uho cre colling us energy, are not in the least bit interected f i i 24 l in the plight of the wcrhings of Hat-Ed's energy clause and j g 25 the feet that there is a lag there, but rather they insist i.'- ,b r er.r.cn a ne,tzut; . me. -:/ n. teemyr. t.cw /sr - HAncrenWto, PA. f?!M O I yg e s , _
I Enfer-Direct 39 s E y that the bill be paid. 3 l And so there is an accumulation. of these S{ deferred energy costa. That is, an accumulation of amounts 4 for which Fot-Ed has had to pay out money but which have not 5 ! j been recovered from the customers. Those appear on the t
=
0 I balance sheet of the Company as Accumulated Deferred Enat*gy i E i Costs, and they are in essence being financed today by tin 6-6 0 commercial banhars, a subject which Mr. Graham will address 9 in a short perics of time. 10 i Ect nevertheless, at the present time at the 11 end of October Metropolitan Edison Company -- or at the end 1 of DecenG:er, rathar, of this year, Metropolitan Edison i 13 Company will have approximately $75 million of accumulated
! deferred energy costs, including some $14 million from its 15 li prior energy clause and about $16.million which can be 16
, associated with' the workings of its current energy clause.
I 17 This is an aggregate of some $75 million which 4 jt has to be carried and financed and which adds to the I l financial burden of Met-Ed, monies which have been paid cut
^0 i which have boon spent in tha generation of electric power.
2[ lut-Ed has asked to have its billing factor 22-] under ths Energy Adjustrent Clause increased by 6,9 mills for every kilosatt-hour sold. Six point nina mills was r., 24j arrived at by taking a look at the actual cost being incurred, 25 l; the estimated cost to be incurred in 1980, reflecting the
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~
l Hafer-Direct 40 ( a 8 revised in-service date of THI-1, and also reflecting the e 2' ever-increasing costs of oil and massaged to some degree i ep to try to provide the minimun amount of increase that would 4 be required in order to keep us within reasonable, manage-c
~j abic, we think, borrowing limits.
6 We have been sensitive or tried to be sensi-7 ! tive to the plight of the customer. We are very much aware 6-7 q! of the burden that any change in anything they buy places 9 on them. We are very much aware and take very seriously 10 the nature of the service which we provide. But the 11 , financini plight is such that this is the absolute minintm a
'3 tint we could justify at this point in time.
(' U Had the Company asked to increase its Energy 14 k Adjustment Clause sufficiently to recover this $61 million 15 that will be ca the books at_ the end of the year to recover 16 it over the nert 12 months -- that is, through the year 1980 -- 17 we would have had to add approximately 7.7 mills. IS Had the Company asked to just go current -- 19 9 that is, recover the costs at the level they will be 20 incurred -- we wculd have to add abcut 10 mills. 21 1 Tne combination -of the two, then, to go 2? ! current with the average level of costs to be incurred and
\
UI! to recover the shortfall that has baen occurring since Mf July 1 through the end of this year, would be something i 25 i approaching 18 mills. We did not ask for that. As I I r.mm..=u uneiw. :nc. - a n. s.e rmacw ave. - sunmenuno, n. ima em m gy ~, .: ,,- R _ J-t Am dM9921Zd. _
Hafor-Direct 41 l f' i
- 1!! indicated, to held that do:4n as best we could to 6.9 mills. i fi ?
2] I shculd point out, however, that the timing i 1 5 of this is entrer::aly critical because the borrowing capacity' 4! of Mt-Ed is being rapidly exhausted. The monies c:ust be ,
- 5) accuculated before ne exhaust that borrowing supply.
'd j And to the extent that the factor increase I
.-8 ? cannot be granted at 6.9 mills on January 1,1980, then it 0 f will require an increase of appro=ic:ately 8.4 to a E February 1,1980 to accomplish the sam result and keep us 10 i within these limits or appro icately 10.7 on March 1,1980 i 11lj to do the sam. 1
- E Stated another way is the problem doesn't go 13 away with the passage of tim. The problem only gets I
16 worse with the passage cf tinn. 1 IS The increase that we have asked for will 16 . aggregate appronicately 16 percent,15 to 16 percent, over- f 17 all on retail rates and appro=imately 12 percent to the IB I, average residential customer. That rate is comparable to p i is l the average rates being charged by other utilities and is : 20 i less than those being charged by sor.a of the mafor 21j utilities in this State. 2Tli I don't suggest that that justifies an L 1 2
' 3 f, increase. I do suggest, hemver, that it is relevant in O l
! f 34llj considering the recscnableness of rates charged.
2Oi There are significant financial limitations
\
um mn a use.wr,. me.-=: n. :.oew..w cw w - unmetuna. n. xmz D D 3'If ,i. g n o :11bL . l[)3{a:!l -.
h Eafer-Direct 42 ( 1 e i on V.at-Ed. It has been the crua of our problem for som
# li tim, continues to ba, and I uculd turn that part of tha b
5 discuscion over to Mr. Graham when he gets to testify. I 4' j Q Nr. Hafer, is Fat-Ed in any way at this tima h i asking its cusecurs to reimburse it fer energy ecces which i Fat-Ed has not yet incurred and paid for? l t j! A No, it- is not. I i g i. IE. RUSSELL: If the Commission please, I 3 9 i uculd propose to go through some brief examination of Mr. -9 ~0 I ll 1 i Graham and then see chat cross-examination, if any, is l i n
^~
i possible for oither or both of the witnesses, a { :.3 HR. BARASCH: Mr. Chairman? g THE ACTIlU CHAIRMaH: Yes? u~' ER. EARASCH: If I could make a cozzsent on 15 that, sir? If I understand Mr. Graham's testimony or the (unintelligible) of his testimony, Mr. Hafer has already 17 indicated that he's basically a general policy witness i 18 supporting this filing, and I wouh! rather conduct soon ic ' .
'9 general cross-eramination of Mr. Hafer right now before we I
w
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get into any moro detail, before ce go on to another witnessj 21 12. RUSSELL: Wil, the Petition, unfortunately, 22hc had to set forth all the cliegt. icas to make out the claim l 23h.- that Recpondent has cubmitted. Mr. Hafer has touched on 34 l i the matecr of deferrals and the borrowings that they repre- h
'25
{,;sent. t think Mr. Graham would help round out that overall ux=t..:en e . nms tu.- e u.1.ceta:naaw wie. --ammszur.o. er. sr:se
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!l- Hafer-Direct 43!
n < s I !l . picture so at least the parties would be aware of our views ' E uith respect to it and perhaps could direct their crose-l 3 '1 ! examination a little more clearly and sharply. 4i FR, BARASCH: Mr. Chairman, obviously the t 5[' Consumer Advecate and I suspect no other party here is f 0 }l prepared to conduct thorough cross-examination at the 7 moment. I well understand Mr. Russell's problems with the -10 - 8 l,ij inte provision of testimony. ! h ! gl But we have had an opportunity to do some 10 ! work the last several days, and we do have some general 11 f questions that would help to form the issues better in our 12 mind as to what tha purpose of this Petition is. And I
-- t would rather deal with Mr. Hafer straightforward at this
/' point in time and then corce back to both Mr. Graham and 10 Mr. Hafer later if discovery and answers to interrogatories 10 that are presently outstanding should deal with the need 17 for further cross-examination.
18 Eut I do have soms general questions that I I (! have. I don't knew whether other counsel have questions I 20! of IIr. Hafer. . v TE ACTING CHAIENAN: Mr. Barasch, beyond !
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clarifying the issues raised by Mr. Hafer, what is the ( n ,
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" i. purpose of your cross-enaminction? Does it go beyond tha !
( ' I need to cicrify? I 25 j MR. BARASCH: It's tha combinat'on of i
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s q Hafer-Direct 44 C I i clarteytus and trying to put the matter in perspective for usI 2 , and for thf s Cem:nf.ssion as to what the purpose and signifi- !
! t 3 ;t cance of this Petition is and how it relates to other matters '
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before this Cecmission. I i
- ) i
*j The cross-e.xaminatica is not lengthy, obviouslyl,
-11 , We haven't had an opportunity to get at the kind of detail i l that we might like to. But I suspect I have about 15 or 20 f t 8 i i minutes of questions that 'I would like to address to Mr. ol! l Refer. l 0 '
' THE ACTING CR&IRI&N: Mr. Russell indicated t
Ti (
; that Mr. Graham's statement was quite pertinent to the testi-l
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i 12 i { many of fir. Hafer and in fact was essential to its integrity, ! jIthinkthat'schatyoucaretryingtosaytome,anyway. 14* i
- l. MR. RUSSELL: I think it would round out the ,
1.5 s l picture and gi.ve the overall picture for the Commission and i 16 i the parties. I 17 Mr. Johnson,nsy I ask one 1 FR. DANIELS: li 16 question for clarification, because I didn't get the entire 59
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aswer to tha lact question of Mr. Russell? Clarification
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fonly. TTaenever it comes my turn. v 1 l THE ACTING CHAIRI&N: Well, that can either be m
, vary soon or after Mr. Graham testifies. That's what wa ;
F 7' '} were trying to determine. 2if, Will you be at case for a few moments? j $ 25I, (Off the record momentarily at 2:16 p.m.) I g, g r.g..a
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Graham-Dircet 45 l I q THE ACTING CHAIIGIAN: The Chair is going to be 3 h persuaded not by logic and law, but by my wrist watch. May I 3 inquire of first Mr. Barasch, How long do you think that l i your interrogation of Mr. Hafer will be? l
't J,,
5-12 IR, BARASCH: I believe it will take about 15 6 1 minutec. The questions are basically designed with yes or k 7
! no answers in mind.
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Gl i THE ACTING CHAIRMAN: Thank you. Mr. Russell, o
", how long do you think it will take you to proceed with I i gi I direct on Mr. Graham? -
d' ER, RUSSELL: Well, I hesitate to say how long 12 a lawyer will take, because Mr. Graham has a legal background.! 13 i I don't think it would take any more than 15 minutes to have 14l him cover sinat I would propose he would contemplate. 15 i
'IHE ACTING CHAIRMAN: The Commissioners are 16{H eager to have a view of the consolidated testimony of both.
17 And if it n:eant going over to the next day, we would yield Ib to your request, Mr. Barasch. However, in view of the' fact to
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that this can all be accomplished by this afternoon and very 2k shortly, if you would hold your questions, we would appreciate} 21 i it. 22 , We'll direct you, Mr. Ruseell, to please pro- , 2h coed with Mr. Graham, r 1 24 BY MR. RUSSELL (Of Mr. Graham): 1
^
25 Q Mr. Graham, I don't believe you have yet F1CHC3.WT fc l?A"tC~:T.L. 1110.-- 17f . LCCL*W' .LO*// A".T. -= *stMift:30tJ3G, PA.17512 (P[P p r p 'd!'t ,, I.
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} h 3k TEE ACTING CHAIRMAN: Excuse m. Miss, {
I : 9; your colleague has been swearing -- ) i i r 4 z NR. RUSSELL: He has been sworn, Mr. Chairman. !
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TEE WILNESS: John G. Graham. I'm Treasurer ! 0 of the General Public Utilities Corporation and Vice-Presiden 5-13 7l and Treasurer of GPU Service Corporation. , BY MR RUSSELL: Q Er, Grabsm, I shca you a document which has been i 10
. marked for identification as Net-Ed/Penalec Exhibit A-1, and !
" l
, ask you whether you are sponsoring that exhibit in this pro- l 12 I i
caeding? g
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{ 13 A I am. I'I ; Q Could you identify briefly uhat is represented t
} in that exhibit? ;
i 10 A Exhibit A-1 is the revolving credit agreemant l I 17 which tms entored into by the GPU system, including Met-Ed 16 j and Penelec, in June of this year. ' t 19
)
Q Did ycu participate in the negotiation and l r W l preparation of that exhibit? s I
! i 2I j A I did. !
li ! Mf0 Q As a matter of fact, did you participate in the '
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'#0 negotiatica and conc"= tion of that agreement this past 2J hm m.. ._-r?
25 ! A Yes, I did, Mr. Russell. v.: me. - :rnue:wcrt.t.ow i.ve. - ru.n.waunc, u ime O Q' W 7 7: ,r - .3- - s b . ., D i
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0 Graham-Direct 47 1 1 l Q Now, you've heard Mr. Hafer's comments with 3 respect to the allocation of responsibility of himself and i 3 I yourself in connection with this Fat-Ed Petition concerning 4 its energy clauce level. Could you describe briefly in your. i 3 3 testimony the areas of the Petition within your area of 6 { responsibility? l t 7 ! A Yes, sir. As Treasurer I'm responsible for 1 0 ! cash forecasting and for monitoring the availability of funds 9
, to the GPU system, including Metropolitan Edison Company and i-14 10 Pennsylvanin Electric Company, l
11 ; I was responsible in connection with the 12 l Petition for developing the relationship between the level of i 13 the Energy Adjustment Clause and the time when the factor 14 > was changed to the availability of cash and credit resources 13 to Met-Ed under the revolving credit agreement. 16 That agreement, which has been marked as Exhibit 17 A-1, makes available approrimately $412 million of credit to 3 18 the GPU system, of which apprazimately $292 million is 19 available initially. That is, before a further vote of the 20 banks. Of that $292 million, $125 million is available for i 2'i j financing Metropolitan Edison Company. t 27.i Figura 1 attached to the Petition is an esti-23 mate of the levels of short . term debt that will be necessary ( 24 j to finance Fietropolitan Edison Company in 1980 in th . event i 25 there is no change in the Energy Adjustment Clause. 9vg 4* ge ymam mc.- zn 1.oew.nu oc ve.- mnmmun=. n m s1 i A4 & '
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Graham-Direct 48 { 1 l i Q If you'll pardon me a second, Mr. Graham, this h 2 l is Figure 1 -- l I 1 3 A Attached to the Petition. l I t 4 Q -- Appendix B of the Petition, which is Exhibit 5 ! A-2? I 67 A Yes, sir. On that exhibit we have plotted, j i 7 first .of all, what is called "All Other Needs For Cash -15 8 Resources", which is the net of the expenditures for con-9 ' struction, for refinancing; the availability of funds from 10 l internci sources, such as depreciation accruals, deferred l 11 taxes -- all of the other items from the operation of the 12 business. C 13 And as you can see, that line, while it changes 4 14 somewhat throughout the year, the bottom line on the exhibit 15 tends to retnin relatively flat. What that means is that M ! aside from the deferred energy, the banking of energy coste I i 17 by the Company, Ibt-Ed tends to be in a relatively even cash IC generation position. 19 l On top of that line, the top line, solid line, i
! J 20 i is the chcrt-tero debt that will be outstanding during -1980 !
i 21 if there is no change in the Energy Adjustment Clause. You l 2?. can see that that builds up during the course of the year ! t. S put then secres to decline slightly in the fall of the year ; (-. m W,f;after the return of TMI-1 to service, which is assumed to W 25 cecur in the late sus 2sr or early fall of 1980. t.ICI7.rAC*I n Pts.00f tat. !P 0. - C' TL LCCI." WIT.t.CW AV2. - MAftP.tSDUftG, PA,171TF. 0 0 '
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,d There are two dotted lines drawn on the exhibit.l- ,
2 [, The top one is the debt limit under the revolving credit [ d i S f agreement, which is the $325 million of credit availaole to ' i: 4 Met-Ed under that instrumant. 1-16 5h Eelou that lina we have drawn a second line - i i 6 $15 million down frca it, or at a debt level of $110 million, , a
?!! which we have characterized as the margin of safety in il c
" , financing the Metropolitan Edison Company during 1980, i
li 9li That figure is intended to deal with an of the 10 I changes that might occur, all of the variations that are l,,a I,: . possibio during the course of the year. And I will come back 12 n t in a few minutes and describe our view of the many variables 13 that there are in the financing of Pat-Ed. 14 If you will turn over one page to Exhibit -- or 15i Figure 2 attachad to the same exhibit, we have there replotted 16 only one line, the total short-term debt figure, which is 17 lower because we have assumed an increase in the billing IS , factor of 6,9 mills por kilowatt-hour, effective on 19 ' January 1, 1980 20' As you can see, what is happening is that we 21 j are finnneing substantially less deferred energy -costs, and SI[ m are therafcre staying within the $110 million figure which Zh I describad cc the availcble credit under the revolving credit (- 0 24 agreement with the $15 million margin of safety. 1 (' ' As you can See, on two occasions during the
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[ Graham-Direct 50 { 1 coarse of the year the total short-term debt comes up to and ; h 2 k touchas the $110 million figure. As Mr. Hafer described, l l 3 i.i it was in that manner that the 6.9 mills per kilowatt-hour 4 i was calculated. I i 5j We looked for a billing factor that allowed us t 6 ! to continue to defer substantial energy costs on behalf of .-17 l 7 cur customerc until mi-1 returns to help with this problem C I but tried to arrive at a figure thct kept us within the i 9 credit limits available to Met-Ed, with some relatively 1 10 modest margin of safety of $15 million. 11 I would like to, in connection with that l 12 I $15 million margin of safety, talk for a few minutes about I C 13 i 9 some of the anny variables that we see and the places where 14 the avcilable funds might go up or might go dcwn. 15 What ge hava tried to do is develop a base 16' case that will be very similar to our 1980 budget. But as 17 the yacr goes on, things do change, and the likelihood is "I that this oncet case will never materialize. l 19 For instance, in constructing this case for 20 this application, we assumed that Met-Ed would have 21 l available to it either this month or early in next month 27.j cbout $8 million of afditional insurance recoveries from the , P i ESi! $300 million of property insurance en TMI-2 You will recalli F !! A 2'.;j! that Mat-Ed has circady received $10 million. W e 23 0 i' I should say that the $300 million is available
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1 Graham-Direct 51 L x 1 for all three of the owners. About half of that is ! i 2 I availabic for Met-Ed. I S We have reached an agreement with our insurers ; i 4 under uhich, instead of about $8 million being available, j 3 I early in 1980 about $25 million should be available to Met- I 6 I That $25 million should bo
} Ed from insurance recoveries.
.-18 7 delivered to bbt-Ed's first mortgage bond trustee within the 8 nort few weeks, and we will then proceed to take those funds ' 9 down from the trustee. 10i That's an instcnce where even since this has 11 been prepared there has been a more favorable financini d2
- development than we had enticipated.
13 Another unjor area uhere there will be changes 1 4 from these projections is in the area of energy costs and 15 energy recoveries. With respect to energy costs, we are 10 seeing constant changes in the price of oil and the price 17 of coal. We have developed our projections on the basis of 18 assumptions as to short-term purchases of power. And as to 19
- the change in the PJM interchange agreen:ent which this Com-20 l
' mission approved recently, we have also made our projections i
21J on the basis of an assumetion as to when TMI-1 will return 22lltoservice. l 23 Any of those itens night be somewhat different I
~r c spi from what we have erpacted.
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7 Graham-Direct 5p { ?. recovery, the timing of this proceeding is very T.mportant h 7, ( becaur - tho 6.9 cilic per hilcuatt-hour produces approxi-f. S 1 mately $5 million per conth of cash for Met-Ed, and two months 1 4 ) of that is two thirds of the margin of safety that,I have j t. l % 5 i described. ) 6-19 6 , The level of the allowed recovery is also very 7- I portinent in that regard.
"I taiother cajer area where there arg (pot _ential 9 l changos frem uhat we have expoeted is in the level of and the 10 timing of the TMI 2 cicanup and restoration expenditures.
11' The level of the base rates that sa can charge to customers 12 ' is very 1:2portan in this rega.t. We have assumed in our C --
'3' i projections that the revenuca for TMI-1 will continue to be h l'I ,available to us. Without them the cash positics of Met-Ed 15 f would change substantially.
16 This com:nission has received a filing for the i 17 ji change in the GPii consolidated tax allocation agreement. We d 46 hsve assumed that change in this proceeding. Th t is subject 19' to the cpproval of this Commisnion and the SEC. 20 j We hava assumad a 1cvel of expendittrees for N 21 construction and for operationa and mairtenance expnse which if 21.j is concistent appro=iintely with our 1900 budget. 12 nay be 23 that wo weald have to make changes in those expenditures M either upmrd or de maard, h 25
.It is also possible that there would be changes !
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[l Graham-Direct 53 L I' in availablo funds from investors. i I. 2; With respect to bank credit, currently there is j t E' $125 million available to Met-Ed under tha revolving credit l I 4; agreement. He could be hopeful, with favorable rulings by } 5 ! this Cczmission, that we might be abin to increase that sub- }< l 6 -20 jlimitco=auhat. We are also, howevnr, hesitant about j 7 l restrictions upon availability of the $125 million in the l 0} face of adverse rulings. I 9 With respect to permanent fini,- ;ings, we have [ 10 ; filed a security certificate to issue up to $12 million worth 11 of short-term bends to the banks in the revolving credit I 12 J agreenne and hope to do that before the end of this year. l U l In the near term that vould not increase the 14,l $125 mi.111on figure, but it would preserve financin g 15 ccpability and make it possible for us to atarket that amount I
- 16) of bonds scmtime Inter in the year with favorable rulings 17lj from this commission.
18'l In addition to that, Met-Ed has $7 million 19
, worth of bonds which mature en February 1st, and I would hope 20 to do the som thing. That is, issue them as chart-term 21 L bonds to the banks and then reissue them at some point in the '
2 future to incticutional investors. e 2N! I might say that Mot-Ed has recently completed a 24l a cooling towar at its Titus Plant, which cost about $12 I 25 million, and that will provide the basis for tax exempt 9 d dity f Q i ;A. me.-57 n, r.ocins.tove Avr_ - manmuno. FA. 7s t n (j g- - O ' m_ _ .' 16391310 __
I Graham-Direct f 54 1 { ] financing. I 2j By maintaing this financing cepability for l 5 mt-Ed, we hope to be able to take advantage of that low-4 cost money at so:no point in the future. We do not see any: 5 i opportunity this year to tap the equity markets, either for ! 6-21 I 6 I d m:ney market equity or for preferred equity. 7 Having listed all of these potential variations , e 8 l from our anticipated sources and applications of funds, I i 9 shouM say that there could be many others. A storm can take 10 i a requirem2nt of immediate cash .There can be changes in the 11 ! laus that govern the Ccmpany. Tar laws are a good example. a 12 And many of these changes come along during the year to cause C 15 l variations in our sources and applications of funds. 9 14 It's all of these reasons that led us to choose 15 a relatively modest figure, in our view, of $15 million as 1 16 l the margin for safety against the $125 million of credit i 17 I availabic to Etropolitan Edison Company. I 18 j Q Mr. Graham, you mentioned the matter of TMI-2 19 ) insurance recoverica expected to be received in the next J K' ll coveral traeka, and I believe you said the funds would be put 1 E7- , up with Mot Ed's first mortgage bond trustee. Is that correct? f Zh A Yes, cir.
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'M Q How and tinen wouM Mat-Ed expect to obtain the M
funds to put up with its first margage bond trustee, at h 25li least so far as you've assumed it for the purposes of this I ' raev tea =:r o escre:1.t., inc. - e rt z.e:tewrz.:.ow Avr - ndame:uac,'PA. trtis - om m 3
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] Graham-Direct 55 y.iproceeding?
' ! t 3i A We have not made the change in those figures i i
S 1 yat to roflect that change. My best guess is that we will 1 4 l receive som portion of that in January and the rest of it in i 5 jMcrch. 6 I might say with respect to insurance recoveries. '22 7 }thatifyou'veoverhadanaccidentwithyourcar,justwhen 6 '; you'll get the money from the insurer is one of those things t 9 i that's not particularly predictable. I 10 IInder the mortgage bond indenture we have to l li l put up with the tractae either bondable property additions I 12 or cortified e::penditures for tha cleanup and repair of the 13 l plant. This is a somewhat uncharted area, and we are in a 14 I tim when, with Mat-Ed being in a state of stress because of 15 , thaso proceedings, we don't knou exactly what difficulties i 16 { ue may have with the trustee as to taking those funds down. 17 With respect to pollution control or other bond , f Q 13 l icsues by Mot-Ed in 1980, have you cny assurance at this tim
.1 39 ' ao to any possible purchasers of such bonds?
20 A We had been attempting to market securities for l 21 l Est-Ed, particularly pollution control bonds, and had dis-I, 21b cussionc with cur investm nt bankers and with institutional i i Ed,; investors. The pondoney of thace proceedings has made the I r ;
\
M marketcbility impossibic at this tim. l 25 .,, I believe that with acceptable rulings from this
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] crabaq-Direct 55a 1
{ 1 .f Comission in those proceedings it will probably be possible h t 2 f to market those securities at som point in 1980. I S ; I don't kncu inst hou long it will take to l
. i- t conclude thoso proceedings, for investors to see where Met-5 Ed is after those proceedings, can the capital markets are
-23 6 in such a serious stressed position that it's very difficult 7 i to know what funds will be available from investors next year ' I U j or at what cost. ' I i 9 ! I 10j (Transcript continues on following page.) Il li h 12 C u !! O 14 15 16 17 f 18 ,
'I 19 20' 21
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p Hafor/ Graham-cross 56 0 1; C. RUSSELL: If the Commissica please, I 1 t 2 ;Ibelieve that is 'inct we have for Hr. Graham and Mr. Hsfer at i 3 i iMn ti:tc . I 4 l THE ACTING CHAIRWLW: Thank you very 2:nch, 5 iMr. Rucsell. t 6 MR. MALATESTA: Ordinarily I would expect to l 7 lbe the first party to cross-em%n the witnesses. However, 8 the Consumer Advocate has requested, and I have agreed to cllow I 9 f hin to quection these two witnesses first in these proceedings 10 f tnd I would lite the opportunity to follow the Ccusur.ar Advocar,e . 11 ! THE ACTIEG CHAIRMTJh That depends upon how # I 12 jwell we like the arrangen:ent. We might want to preservo it I 13 jfor the rest of the proceedings. Will you proceed, Mr. Barase:17 14 l MR. BARASCH: Thank you, Mr. Chairman. I 15 am David It:c Barasch cnd I cn Assictent Consun:er Advocate in 16- the Office of the Consumar Advocate. 17 jBYMR.BARASCH: 16 Q Mr. Hafer, just to make sure I have this
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' correct, earlier. Mr. Russell had asked you if you had overall 20 policy responibility for filing this petition.
Am I colTect 21 j to say that you did? 21 A (Hafer) Ycc. 33I! G I would just lite to ask you some preltrinary
,s I ps M g questions about yo.:r petition, 9thich I have hcd a chance to 25 lraview, and your direct testimony which I have reviewed in a l
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j Hafer-Grabam-cross 57 1 fuuchmorecursuoryfashicn. ( 3 4 Laching at ycur Exhibit A-2, that is the 3 { petition and your direct testimony, to sucmarize 3mur Hovember 4 1st petition in that petition ycu are requesting a modificaticn 5 ;cf thct June 19th order so as to provide Met-Ed trith an 6,japproximate $55 mi.111on increase on en annuni basis above 7 ipresently permitted fuel cinuse levels, is that correct? Oj A (Hafer) Yes. 9l Q That increase interpolates into a 6.9 mil 2. i 10 jper IGTH Surcace if put into place on January 1 of 198c? 11 1 - A (Hafer) Yes, it does. I 12 Q This increase in GPU's opinion is the minimum 13 s
- I take it is the phrase you used -- necessary to keep Net- g 14 !Ed's short-term debt limit within %nn3cabic limits," is that 15 , correct?
i 16 5 A (Hafer) Yes, cir. 17 , Q In quantitative terms when you use the phrase, I 18 manngeabic limits, you r.enn keeping your naximum short-term 19 debt levels at or below $110 million, d.s that correct? 20 A (Hafer) That is correct, i 21 ; Q And your actual short-term debt limitation f 22 iunder the revolving credit premium is $125 million, is that M ' correct? r 28j A (Hafer) Yes, it is. C ,l
#5 '
( Q To summarize, ycar.petitica to modify the I f tCHEDACH & f.1ARSHAL. INC. - 21* f:. LOCKWILLOW AVL - HARRISEURG. PA. f7112
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I Hafor/ Graham-cross SS I 1 LEAC io cited at or designed to solve the cash flow problen s 2.itbat you see ccr.ing to a head in Ihy or June of the toraing i 3 jyear 1980, is that correct? - 4 I A (Hafer) That is correct, yes, sir. It is, N 5 f.I might add, Mr. Baracch, also related to a concept of trying 6 to match the ecst charged for a service with the costs incurred i 7 jforprovidingthatservice. l 8 i G 'Ihank yen. If I can digress for a seccad, 9 lregcrding i your cach flow situation between March 28, 1979 and i 10 j Septer.ber 30, 1979 is it true that I&t-Ed incurredabout $37 11 trMnion in c'. eanup and recovery costs relating to the Three 1% Hile Is1cnd Ho!"2~necident? e 13 A (Eafer) Are you referring to a specific 0
.14 lc2hibit, kir. Barasch? It sounds like about the right number.
15 I q I toch that from your third quarterly report, i 16 qpages 21 to 22, divided by two for the 50 percent ownership 17 cf bbt-Ed. 18 l A (Hafer) It scunds right, yes, I don't have 19 that in front of me. 20 Q Have those costs added to or contributed to El l the chort-term debt or ca.sh flow problem that we were just n 22 i speaking of? 23j n (nager) yes, t c 24 Q Mr. Hafer, bach in June cf 1979 this 25 ! Commission at:arded you a levelized increase in your energy I MO* d MCACH & MAR 2HAL. fMC. - 07 H. LO XWILLOW AVE. - MARRISBURC. PA. 17113
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, Enfer/Grahan-cross 59 1 clause of 8.8 m m n on an annual basis thrcugh December of C .!
l' 1980, is that correct? O 3 A (Hafer) Yes, sir. l 4 Q That increase amounted to an approximate s 5 !15 percent increc.ce in total rates above the rates being paid t 0 by customers prior to the cccident and prior to this Commissicn's 7 f order in ycur most recent base rate case, RID 626, is that 1 E
! correct?
9 A (Hafer) That is correct. 10 Q Now referring to that June order, there were i El k a number of factual assumpticns that underlay that order, 12 fweren'tthere? 2 ! ^ m. C- (Haror) O I4 Q And if all the assumptions in that order had 15 l he t d true, would you now be projecting that IIet-Ed's short-16 I term debt level eculd exceed $125 m m % in 198c? 17 A (Hafer) Well, ehrly the most significant 18 jassumption underlying that order and the rakeup of those costs lo'
, was the return tocervice of Thrae Mile Island Unit No. 1, N
20 which at the tima of these pfoceedirl;s was believed to be 21 ! January 1.,1980. 22 : Q But there were several other assumptions 5 23 : contained in that decision as well, is that correct, sir? / 24n A Yes. (Hafer) 25 Q If all of them held true, wculd you be in the O l mom acu c. mn . me. - a ru.oamow m. - maam. m j7 o** g %geg
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Enfer/ Graham-cros8 60 I situation that you are in new in terms of $125 million debt , i 2 l limit? w y 3 A (Ecfer) No. l 4 Q Toank you. Regarding the cash f1cv projection:, 5 lthat you presented to this Oc:rainsion back in the spring of 6 this year, if I understood your earlier testinony -- I an not 7 !sure whether it was yours or Mr. Graham's -- you assumed the 6
! price of oil replacing both TMI units 8 power would be approxi-I 9 lcately $20 a barrel, is that correct?
1 10 A l (Hafer) Yes. 11 ' Q Tant fi6 ure uas for the period May 1979 to 12 December 1980, that was your prodection at trat tiae? 13 f A (Hafer) My recollection is that the estimate i 14 used for the entire 18-month or 20-month paried was about $20 15 ' a barrel. 16 Q Tnant you. If you were making a chilar 17 projection today for that same period of tire, with the 16 ' information you have now, what price would you use now? 19 And if I could help you with that, I believe that your petitica, J 20 iTable 5, would indicate an enswer of $26.65 a barrel. 21 'i A (Hafer) Taat is correct, and that is, by the 22 [ uny, based on nost recent results, and that appears to be 23 optinistic, again. As I indicated 6 my opening statorcent, 24 in the acnth of Octobar 16tropolitan Edison paid an average
/' i 25 f cf about $28.50 a barrel fer oil. Tnic projection was based MOMTLCACH a ft.WSMAL. INC. - 17 N. LOCKWILLOW AVf - MARRf3 BURG. PA. 17112 l '
Hafer/Grahom-cross 61 1 on recults that we bad knom through the c:onth of June. The b 2 oil prices an I racc11 were cacalated by about 15 percent i 3 canually. 4 The world oil market has continued to worsen. 5 Q Can you quantify what portion of your present i 6 iincreated need for cash above that which you projected back in 7 lKay of 1979 is cttributabic purely to that increase in fuel O cost? I 9 i A (Hafer) I can give you some round numbers at 10 . the monent. 1 11 Q I believe we have interrogatories generally on 13 this point, already. I just was wondering if you can give us 13 isome idea at this point in time.
'l g
M A (Hafer) The Latimate that va now have for 15 the year 1980 versus the estimate that we had at the ttne of 16 the previous proceedings is about $60 million, cs I recall, 17 higher 3 and of that amount about two-thirds or about $40 milli an
+
18 roughly 1.s assccinted with the delay in return to service of ' 19 TMI-1, the balanco is cssociated with all other factors, most17 20 !just the continuin6 increase in the cost of fuel. i 21 )
)
IIou there are an nwful lot of things that go 22 !intonakingupthosenutfoers,includingtheavailabilityof 23 purchaced poner arrarscaents from outside systems that wasn't (V kanticipated at the tine, at least not directly anticipated or 25 j g b;identifiabic at the time of the June 19th order, the un nc>muen a m.nsau.. me. - a n. toewuow me. - nnaisounc. n. modificatu .on N' ' ' 9 3l9
l Hafer/ Graham-cross 62 1 !to the PJM ngracment inich has been approved by this Comission 2 j;in its declaratory crder, and as I believe, is still nutiting 3 l clearance by the D.C. und 11r.ryltnd Cc::caissionc before it can 4 te submitted to FERC, and a varicty of factors like that. S }Eut if you will accept thoca brord numers for the time being - 6 ! Q For the time being, thank you. Also, in that i 7 l June order this Conission provided Met-Ed and Penelec with a i 6 imedification of their energy clauses to permit the recovery of 9 l capacity or demand charges directly through the clause, is tht : 10 l correct? 11 A (Hafer) That is correct. 12 :i 4 That was provided as an incentive for l - 13 'Metrcpolitan Edison to obta.in cheaper bulk power purchases 14 throrgh December of 1979 in the order, is that correct? 15 A (Hafer) I can't testify to the reasoning l I 16 t behind it, but it is written in the order that it would 1 17 ' expire December 1979, yes.
^
18 Q In your Nove der 1, 1979 petition is it i 19 t correct to any that ycn had assumed there that this capacity 20 cffset -- if you want to call it -- would be extended through I 21 1980 to Decenber of 1980, is that correct? i 22 A (Hafer) Yes. { 23 Q Also that June 1979 crder -- and the Ocnsumer J 24 ! Advocate testimony there that you referred to earlier -- 25 assuned that "det-Ed uculd be able to contract for bulk poimr p,, uoa'acacu c: runsus inc. - a n. soexmu.ow ava. - unaissuna. w m ia I I I u 3 }h }2
li Hafer/Grahan-cross 63 l! 1 3purchesec na cn citernative to PJM cplit savingc sales, ic { 2 tho.t correct? 3 L J$ (Hafor) Yes. 4 h 4 And that such svcilability of bulk power would I 5 lp3rhaps reduce Ibt-fps replacement power expenses by about i 6 i25 percent below your spring estimates of TMI replacement 7 jpower costs, is that correct? d 6l A (Hafer) Ycs, sir, that was the assumpticn. t
? Q and as I understand your direct testimony and 10 jsene cf the documents I have had a chance to look at, is it 11 fair to say that GPU hac been largely abic to achieve those 1
12 iscvinga levalc, when we are speaking purely about the savings i 13 ,from bulk power purchases? C. > A (Hafer) I think it is fair to say in broad 0 14 f 15 terms that GPU has been successful in negotiating a number of 4 16 icutside purchased pcrer arrangements which have helped to brina; i 17 !about substantially the same types of savings that were 18 anticipated in the June order, assnming, of course, that 19 we can get the acdificanon of the PJM agreement in place, 20 lwhich we have anticipated in our projections. 21 ; Q But so f ar things in that one area are holding 2?. lpretty much true to form? 1 23 l A (Hafer) That is rght, it is the slippage t
?A y of return of TilI-1 and the centinued tmnnticipated inflation
(-- 2slin cil prices 1:hich have largely contributee to the$pro MQf{*tDACi4 0 tJAR3HAL. INC. - 27 fi. LOCMWILLCW AVC. - MARRtSOURG. 2 i o** j
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i Hafor/Grah m eress 64 1 I Q Thnnit ycu. Mr. Hafer, I don't know if you y 2 uill be able to nn! mar it or not -- cnd if it in necessary 3 I to respond thrcuch the interregatories we have already sarved, il 45 that will be fine - but could you quantify those savings in 5 dollar terms at the nement? 6 E. RUSSELL: Cla:'ify or quantify? i 7 E. BARASCH: Quantify. l 0 l! THE ACTIEG CHAIRMAN: wit 1 you repeat the 9 ;lquestion? 10 i E. BARASCH: I was ashing Mr. Hafer if he 11 would be abic to qu:mtify in dolhr tcrns that 25 percent 12 savings we have just both reached an cgreement upon. - 13 l MR. RUSSELL: Mr. Ecwton's Exhibit G-4 gives M' cn estinate of savings resulting from the short-term purchases . 15 i He is one of the detailed witnesses to whcm Mr. Hafer had l 16 l nade reference, i 1 - 17 E. BARASCH: Fine. Could we just have a 18 ncment, please? Thanh you, that answer is sufficient. 19 BY E. BARASCH: 20 l Q Finally, Mr. Hafer, that June 1st order, as 1 21 lwa all knca, assumad TMI-1 usuld be back in operation producing i 22 ' electricity by January 1, 1980, is that correct? 23 A t (Hafer) Yes, sir. 2 Q Back in the spring of 1979 dien r t yea estimats g 25 at thatMOH:tCACll time --& t.!AR3HAL. whenIF:C. I say N.ycu
.".7 I maan GPU - that savings frq LOCKW1LLOW AVE. - MARfttsBURG. PA. 17332 h II s il (I
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g Hafer/ Graham-cross minion 65
- 7. TIS-l's return to service would be appro::imately $7/per month
{ 3 for lbt-Ed? h 3f A (Hafer) My recc11ection was that it was ' 4 c1ccer to about $6 million for TMI-1 and four for ThiI-2. 5 k Q Ycur present position assumes Ti&1 returning i 6 jby Septenber 1, eight months from January of 1980, correct? 7 A (Hafer) Yes. I f 0t Q Sc in effect the revenue impact of TMI-l's 9 hnow dolcyed return to service is about six million times eight t 10 juonths or abcut $48 million on an annual basis, uculdn't that i 11 pbe correct? II 11 i . A (Hafer) That would be before reflecting any n !of tle savings .se hcVe been abic to achieve through these O- j h 14 icutside purchase agreements. I think when we do that it is 1, 15 !something closer to $5 minien a month, i 16 l Q Fine . In other words, Mr. Hafer, if TMI-1 1 17 jdid in fact return to service on January 1 of 1980, the IG approximate $40 millica er $45 mmion of energy cost savings 19 would have been availabic to largely offset the $55 million
}
20 { cash flow shortfall that your present petition is aimed at i 21'; averting? 27 A (Hafer) I have a little trouble characterizing i 23 , c"h0sc ac crJ.-ings, but the fact in that if TMI-1 would be 1 24' availabic for service before September 1,1930, specifically as jJanuary 1,1980, then we are estinating that the actual total 1 h MOMft2ACH & f#.itEMAL. (*4c. - 27 T4. LCC:W?!LLOV! AV;;. = HARRISQUnG. PA. 17112 m t I .' E "
Hafer/ Graham-cross 66 1 ' cost we would in::ur in the year 1980 s-ill be about (J+0 less T
.. 2 than we are now forecasting.
3 ! So if one makes the assumption that you want 4 l to be at orcetly the sano point in chort-tern borrowing, yes, i 3 l you could reduce the request. 6 R By the amount of the savings in returning 7 : THI-1 to service? 8 l A (Hafer)'Yes. 9 R Thnnk you. Mr. Hafer, how much prior to 10, , November 1,1979 did GPU realize that it would exceed its i 11 ichort-term debt limitations in 1F207 i 12 l A (Hafer) I can't answer that quastion. i A, 13 l Q Iet ma try and ask it another wcy. I assumed I 14 Ithat the action of the HRC in deciding to hold extensive 15 , hearings must have played a largo role in your recoSuitiDS 16 your short-term debt problem. 17 A (Hafer) Yes. 18 Q How much after the ERC's decision to hold 19)thosehearingsdidyoudecidetofilethepresentpetitica? 20 A (Hafor) Mr. Earasch, I am not trying to I' 21 evade the question. It is just that I can't at this point 22 i in tire.e put c11 the dates to5 ether. 23 : I thint perhaps if I have an opportunity , l q 24 !:cnce I get tach to my office I can uit down and put all 3Y the piccas together. I just hven't thought of it in that MQHnDACH C MfJ!EHA1., INC. - 27 ft LOOMW2LLOW AVL - MARRFSCURC. PA. 17512
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h Hafor/Grahevoss 67 i 1 ; context, h 2 j Indeed the HRC's unwillingness to yield or h 3 ;.even expedite the proceedings as wo had asked, and try to j 4 jbring TMI-1 back on line, caused us considerable concern. 5 IIt generates a lot of the preolem that we cre facing today. I 6( I don't recall the date of that, however. 7 Q Let c3 ask you approximately. Do you kncu i S Iapproxicately when the NRC made that determituttion? l 9 A (Enfor) I just don't recall. 10 l Q Eat I precute -- I don't want to led you 11 .!seneplect where you -- 12 Ij A (Hafer) We appeared here before this 13 Q Commission on September 21st in a public reviett session. M q At that point in time we had indicated that the return of 15 service of TMI-1 would be dolcyed because of the NRC pro-16 ceedings. So we certainly knew it then. 17 Q I wonder if you woul.2 accept, subject to l 16 check, I have a document labeled United States of America, 19 fucicar Ecculatory Commission, it is your Exhibit D ft of i 20 jWitness Arnold, that would appear to indicate that the NRC 21 lgave you notice of those hearings on August 9,1979 Dees 22 l that sound right to you? 23 A (Hafer) If that is the date of that, yes. N 24 Q So then from August 9th there was a period of u ltmoaneaha1fmenths, approximate 1y? . S MOMRDActi a f4AR$ MAL. INC. ~ 27 N. LOOKWILLOW AVL - MARTttGBURC. PA. 17132 O AC
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Hafer/ Graham-crocs 68 1 l A (Hafer) I dcn't reedt because I know that i 2 i uc had caked the HRC to reconsider and we urged the regulatory 3 j bedica of the states in which ra cerve to ask the ERC likawise . a 4 [ I don't knce at what point I can say that we just realized 5 ! we were floggirg a deed horse. t 6 ,8 Q Eut certainly by the time you made your i 7 I Precentation to this Commission in September of 1979 it was I s j cpparent that you weren't going to Ect any action out of the 9iNRC? i 10 l A (Hafer) It wac cur estimate that TMI-1 was 4 11 not going to be able to be brcWght back to service January 1, 12 yes. n 13 Q If that is the case, why did you wait until i 14 UcVember 1 to cake a filing? 15 A (Hafer) I think that is an unfcir question. 16 ( 13. RUSSELL: I would say this, Mr. Barasch, i 17 ! if we had come in with less than three months actual data to 18 ! shcw this Comission, the likelihood cf our being told that 19- we were prematt're was encellent. 20 IG. BARASCH: I believe the question was 21 ; addressed to the vitnacs. If there is en objection, I would l 22 , like counsel to interpose en objection, Thic is the policy 25 uitness ubo r. ado the decision. All I want to know is somethirqi; I g] p.g of the thought prccccses that vent into it at tha tine of the 0 25lpetiticn. 1 Mo}incitCH L MAESHAL. ENC. - P.7 N. LCCKWILLOW AV T - HMtRIESURG, PA. 17112
Hafer/Grcham-cross 69 1 THE ACTING CHAIR!D.H: Go en and cnswer that. 2 l THE WITIIESS: O
- (Hafor) In the process o" j
3 jputting together our forecasts there arc a great number of 4 l things which have to be taken into consideration. Certainly 5 ,i: the rcturn of service of TMI is the mest significant. But i 0 ithe predictions forecast for all energy sources and the costs i 7 j or fuel, the cost of interchange, the crailability of special 8 l purchases,theavailabilityofinsuranceproceeds,thecicanup 9 costs, et cetera, et cetera, all play a vital part. 10 : It was merely a process of putting together 11 h Ya revised esticato, reexamining the results that we were going il !to be faced with in 1980, and it Just took that amount of time . 13 Q i Cortainly there was no reason we would have 14 ihad for delaying that 3 once ne felt comfortable that these 15 were reascnable czpectations. 16 jBY MR. BARASCH: 17 Q I am certainly not suggesting a delay. I am 18 . Just trying to understand the thought processes. Then 29 days 19 later ue get a petition to expedite consideration of that 20 natter filed Hovercber 29 I guess I am wondering why we wait i 21 luntil November 1 to make a filing and then pretty shortly 1 22 ] therec.fter ash for expedited consideration. , 23 l HR. RUSSELL: Which petition are ycu referring I 24 to, Mr. Barasch? 25 i 151. BARASCH: The petitica filed by counsel
-1 Hol!!!r.ACH C: I4 ARCH &l INC. - 27 N. 't.CC!CWILI.OW AVE. - HARRISBURG. PA. 17112
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l Hafer/Grahan-cross 70 1 jrequesting severence and expedited consideration. i y 2 l 11 RUSSELL: The motion. This petition i 3 litself uns filed Ecranber lat. 4 ! G. BARASOH: Thank you. Yec, the motion, 5 .if the record could correct ths.t, in place of the word, motion , f 6 ! petition. i 7 THE WITHESS: (Hafer) The energy clause { 6 f typicelly tends to be a rather easy thing for a Cotanission l 9 to deal with. The questions are very. limited in scope. They 10 l; don't get into such things as capital costs and rate of 11 , return and OE expenses. 12 l We report in detail to the Cominsion each 13 nonth by about ths 19th or 20th day following the close of 14 the month the actual workinga of the clause, kilowatt hours 15 sold, charges billed to customers for energy costs versus the 16 actual ecsts incurred in operating the stations and mking 17 ' purchases, and there is a bnineing account. 16 , Typically it can be done ina very expedited 19 l fachicn because it han a great number of protections and it 20 io very visible to the Comission. 4 21 ' There was no reason for us to believe when 22 j ue made the filing that it was not coupletely reasonable for 25 , this clause to be nodified and to go into effect January 1. 24 f Under tae ottor cor.rpanics' operations of their clauses they 25 .get changed in Icss than a nonth. f.f GHRBACH 0. FRTLSHA! ttfC. - 27 PL t.CCKWRf.OW AVE. - MARRISSURG. PA. 17112
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l Hafor/ Graham-cross 71 1 l Ue had no idea that the Cc:nission, first of O 2 !a11, on tue sane day we fiand.sai, so1ns to enter en order 9 S !against Mat-Ed to sher cause 1(4y it should Imep its certificati i 4 lof public convenience, nor did we have any indication that the i 5 !Co::unission was going to consolidate the proceedings and 6 indicate a desire, at least initially, to handle this broad 7 ideep reaching questian of its continuing in business prior to 6 f addressing the question of the energy costs, and we therefore 9 l asked that the energy clause be put up front and be addressed i 1 10 ifirst because it is our belief that to supply the energy the i. 11 !coste ::111 have to be incurred irrespective of who is burning l 12 tthe fuel, i 13 ' BY Fa. EARASCH: g 14 [' Q Thank you. If I could turn your attention i 15 ' to Table 2 of- Appendix B of your petition, Met-Ed/Penelec 16 i Exhibit A-2,1 coking at the right-hand column of that exhibit, 17 that table basically shows that if your petition is granted, 18 , Mot-Ed's short-term debt limit would peak at $110 million in 19 June of 1980, is that correct? 20 A (Hafer) Yes, sir. 21 l Q New I want to make sure I understand this, i 22 ' just dcing semo math I want to make sure I understand the 23 If the 6.9 mill request that you have asked for j craibit. i 24 ! uere granted on February 1,1930 instead of January 1,1980, C i 25 , wouldn't your June short-term debt level be $114.8 million? e I MOHnCACH a MARCMM MC. - 27 H.1.OCKWH.L.OW AVE. - H ARntSSURC.. M. m 12 m awa r,..- Ep,w$MM Oii6}% 3 o** xQ Q
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l Enfer/ Graham-cross 72 I A (Hafer) Yes. I haventt checked your arith-1 2 jcaticbutitwouldbohigherifthecameamountwereallowed 3 linFebruaryratherthaninJanuary, i 4 Q Basically, if I were to look at'the third g !colu:::n, Reduction Due to 6.9 Mill Increase, January 1980 shows 6 m Son? l$4.8m
?
A (Hafer) Yes. 8 l 4 Bacically all I do is add 4.8 to 110?
.i 9 ! A (Hafer) Yes.
I 10 l Q Thank you. So if the Commission were to 1
;t ;vait until February 1,1980 to grant your reqtrest, you would 12 lstill be $10 mD. lion under ycur short-term debt limit in 13 l June of $80, is that correct?
I I
.14 j A (Eafer) We would have eaten up a third of I
15 , the margin of safety that Mr. Graham was referring to, yes, i 16 l Q Which would be $10 million under the ceiling? 17 A (Hafer) Yes, as it now exists. 18 , Q Thank ycu, Mr. Hafer, your various cash flow 19 lcasumptions that you are rr. king in these proceedings, tinat i 20 j ecstnr.ption is made regarding GPU dividend payouts to stock-i 21 {holdersforDacetber30of1979andMarch 31, 19807 s 22 ,! A (Hafer) The assumptions for GPU dividend i 23 ] ps.youts to ctockholdors have no boaring on the Met-Ed energy i y !adlJustnent clnula application or any of the schedules that F 25 .are attached. f.:OM;;f1ACH Ce StMtSMAL. trt=. - 27 N. LCcKWILLOW AVE. - MAftRISSURG FA. 17112
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{ Hafer/Grahan-cross 73 1 l Q Did GPU pay a dividend for the third quarter C 2 of 1979? E 3, A (Hafer) Yes., it did. J 4 ; Q How much per share did they pay? I 5 ' A Twenty-five cents. 6{ Q In dollar aggreccte terns how nany millions 7 lof dollars did that amount to? 8 A (Hafer) Approximately $15 million. i 9 ; Q Did Kat-Ed skip its dividend payments to GPU i 10 iin the third quarter of 1979? 11 A (Hafor) Tes, it did. 12 i Q Did Jercey Contral skip its dividend payment i 13 lto GPU in the third quarter of 19797 g 14 A (Hafer) Yes, it did. j 15 Q Did Pennsylvetnin Electric Company skip its l i 16 dividend paym3nt to GFU in the third quarter of 1979? - 27 A (Hafer) Yes, it did. 18 Q Where did GPU get the $15 million to pay the 19 l dividend? l 1 20 A l (Hafer) It had to borrow it. 21 Q If GPU had skipped that dividend paya;:ent to i 22 its sharcholders in Septenbar of this year, would that $15 21 'n1111cn in funds hc7c bacn avcilabic to provide an additiona'.. k ,e 24$scurce Of cash for the nargin of safety as you refer to it k 2:. jfor Metrcpolitan Edison? g MC';.'1DACH C !.!Af'iHAL.A l' 3. - 27 fl. LOCKWILLOW AVE. " HARRtS9URG. PA. 17112 o~ m y - p,.ai a
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- A (Hafer) I thint that is a question which l
( 2 cannot be answered that directly because it raises such a 3 ;spectrte. cf other possibilities that it should probably have i 4 lthe better part of the day devoted to discussing it. 5 It is clear that if GpU did not pay a dividend 6 i,it would have had $15 million nore in its ban 1t account at that l 7- point in time or at least $15 million of credit theoretically 8 otherwise available. 9 Ebat ramificationc would have come from the 10 dbanho, for e:r.azple, uho are participating in the revolving i 11 credit agreement frca action by the-shareholders, action by 12 ithe bondholders, et cetern, one does not know. i 13 l Q Since the signing of the revolving credit 14 ingree:::ent -- and if you are not the appropriate witness, 15 lperhaps Mr. Graham will cnswer the question -- have the bnnkst i 16 isaid anything to you whatsoever regarding the consequences I - 17 jor GPU passing its dividend? IS A (Hafer) I am not the appropriate witness to i 19 jdirect that to. Mr. Graham is the one who deals with the banh:' 20 fon almost a daily bacis. I 21 12. BARASCH: Mr. Russell, do you have any 22 ! objection to lir. Graham ancworing the question? 23 13. RUSSELL: No. Mr. Graham is here to c 24 itestify,. if you U::.nt him to cnswer the question.
) 1 25 I.R. BARASCH: Yes, I would at this time.
110H7:DACH D L: Arts!fAL. f t;O. - 27 N, LCcKW!LLCW AVC. - H ARR:53URG. PA. 17f12 l lJ JJ j . j,,; i r
Ti Hafer/ Graham-cross 75 1' 7.IiE WITHESS: (Graham) I am in weekly and ( 2 iso:netirces daily contact with trardberc of the bcnking group. g , 3 ;For the most part, although not co=pletely, that is with the 4 two agent ban!ss, Citibant and The Chemical Bank. 5 i They have frequently discussed both opportunities i 6 ltc obtain additional cash for the whole GPU systeti, including lI 7 ! Met-Ed and Penelec, and they have discussed further opportunit:.e s 1 0 )toconservecach. i i 9 , In the course of those discussions we have, i 10 ifrom time to time, talhed about what impact eliElination Of the i 11 !GPU dividend or ncn-payment of a preferred dividend might 1 12 thave upon the availability of other cources of investment, l jand we have often discussed what impact non-payn:ent of the 13 g 14 l dividend t culd have had upon the Jersey Central and Penelce i i 15 jfinancing in the sprirg, and the Jersey Central financing in 16 the fall, and the opportunities tc reissue the bonds that I 17 discuaced previcusly for Het-Ed next year and for Penelee to is issue bonds next year. 19 i The banks as a general matter see themselves i 20 having their leans repaid in this situation from two placec. 21 lOne is from an increase in the enorgy adjustment clause to 1 P 22 i;cbtain the cash that has been deferred from billings to i 23 .: custcners .
- 24. [ The second is in permanent firmncing, which b
25 i lis the typical way that an electric utility system pays out g fic1!RUACH & MA'.3HAL. IMC. - 27 fl. LOCKWYLt.CW AVC. - MAMRtSSURS. PA. 17152 D** (+ m +M]'63 h373 i ,6 @ *
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. Hafer/Grnhnmcross 76 i ;its bank debts, g 2 They rcccgnize, as you do, that non-payment 3 !cfthedividendmayhavetheshort-termbenefitofreducing 4 GPU Corporation's borrowings. On the other hand, they express 5 ;lsubctantial hositance abcut the passibility of foreclosing the 6 operating ccmpanies from the 1cng-term debt markets.
7 iBY ha. BraAscH: I 8 Q Shank you. Do you have any letters or f a 9ldocunents j or any other written communications that would 10 j indicate expressions of encouragement from them to you to 11 lIEake GPU dividend payments to stockholders? 12 ij A I don't have any writings from the (Graham) i 13 lbankera , As I recall, there was such a letter in the spring 14 frou Merrill Lynch and I believe that sms entered as an 15 lc hibit in the Inst proceeding, if I recall correctly. I I 16 don't think I remember cnything in writing since that time. 17 I might say that to come extent the situation 18 is not the same now a3 it was in the spring. 19 , i 20 l (Transcript continues on Page 77 . ) - l 21 22 l 23 l D"* '3' 1 l w w. o .. _:., , u , 25f I
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1 Grahsm-Cross . 77 I l BY 12. BARASCH: 9 3 Q Mr. Graham, assuming that you don't receive 3 a decision of this Commission regarding an adjustent in 4 your lewli=cd enargy clause, what is the present thinking 5 of the Company regarding the payant of its December 31st
- -1 6 dividond? I'm referring to GPU now.
7 A GFU does not pay a dividend again until late S F ebruary. The Board of Directors meeting at which it would 9 usually be considered is the first Thursday in February of ' 10 1980. 11 It declared a dividend early in October, 12 which wcs paid in November to shareholders of record in I C Ud October, so the ac::t time it coms up is in February. O n 14 - Q h~nat would be your understanding of GPU's U feelings regarding payment of that dividend in February, 16 assuming that there's no decision on increasing your LEAC 17 between non and that time? i is ,' A I'm only c small part of the management of the l 19 I corporation, and obviously that's a matter that will be 201 decided at the highest levels of the management and ulti-21 ! mately by tha Bacrd of Directors.
; a.
We hnc 7' fromithe'cotistolidatedyNison experi-p . .:j ...lill,I%lMW I!r!W
- 2P cnce that climination of an electric company's dividend I 24 has a very scricus, substantici, long-term impact upon tha h 25 gI ability of that company to cccoss any capital markets, b .
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p\ Graham-Cross 78 ! 1 , Q Phybe I endo a mista're in my question. I ,' j 2 i think -- I'm not really asking so such for general GPU policy, S I but you as Troacurcr. I guoss uhat I'm trying to find out is l 4 , if you dcn't receive an adjustment in your fuel clause, ucaid 5 j GPU have to borrow next year in order to pay that dividend? { -2 S A GPU teill have to borreu to pay that dividend if
! t
? ) whether thic cicuse is changed or not. {
0 I Q Thank you. t' { 9 ) A The borro'iing would be at the GFU Icvel and { 10 ) would have no impact upon the cash within Matropolitan Edison l I
~
t A1 : l Company. - J 12 ! Q So far, Mr. Graham, Ponclec hasn't done any U p borrowing, have they? I 14 A No. They are in a short-term investm2nt { 15 l position. i 16 j Q And what's your understanding? Could Penelec 17 I borron, drau down their short-term debt allowance, in order i 16
- to make funds available for n:eeting Mat-Ed's fuel costs?
f 19 j A I don't believe that the SEC, under tha Holding ti 200 Company Act, t7ecid permit Penalec to borro;e to loan money to 1 :
.'lb Matropolitan Edison Company.
i: I think that also we would havo ! 31 to icoh very clocaly at the interests of t'he senior security I a I" 5 holders of Fca21oc boferc ne could try to make such an j
- r. -
i- t 3Qt arrcngement. 5 E I might say, though, that the constraint at the
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{ 1j L I present tisc is the availability of funds to the total GPU ;
} $
2 system of about $292 million, and right nou ee're at about
!! i S Il $205 million. So Penelec' barrowing would not be of particu- f i
Ql 1ar use, I don't believe, for that purpose. , -3 5 lil Q Thank you. At the present time, Mr. Graham, { 0' . it is still GFU's intention to pay approximately $60 millica I i 7 l in dividends to its steckholders next year, in that correct? c ! ,
;! A The question of the declaration of a dividend i 1
1 9 I is a matter that is passad upon qucrterly by ths Board of 10 Directors. My financial forecasts are based on the continu , t s1 j ation of the existing dividend, but I should say as an i i 12 l aside that that's the way we virtually always do our C 13 1 h e financial forecasts. If l I don't think I can express an intention of i 13 either the msnagement or the Board of Directors, and I also Edl think there would be scan fairly sericus implications nnebr i T* the coeurity lat:s if I did. 1U IEt BAPdSCH: Thank you.
<a i . Mr. Chairman, I have some other questions. I e 1 I
-,a
*y Juns starting to cross Mr. Graham. It was not my intention 21 to got into it uith Mr. Graham at this time. If you like, I El y can continue and do a littio bit of preliminary cross with I i
N: Kr. Grah:m and conclude I:rf cross-eramination for this ! afternoca, or I could defer to PUC Trial Staff and permit
,,5 j!
them to do whatever cross-examination they want at this i 0 um . r . - = 1:. :.==am.=v: .wr. - w.xus=vac. n. tw=
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;. Grdh m-Cross '
80 u 3 1 juncture. Tha choice is recily up to you._ I'm prepared u l 2 to do either. t i O TIE: ACTIIC CHAIPJfiN: Please be at ease. I I l
.;. (Off the record memntarily at 3:18 p.m.) }
5 16. BARASCH: Mr. Chai.rcan, I might note I ' 3-4 61 have aboutfour or five queseions for Mr. Graham, if that
'l 4 aids ycn in your deliberations.
- 6. THE ACTING CHAIRMAN: The Chair declares a ten-mitiuto recces at this tim, and I'll give you your 9
10i ansucr. 11 d (A recess was talan from 3:19 p.m. t f 12 to 3:38 p.m.) t 13! THE ACTING CHAIRMAN 5 Mr. Barasch, we want to l 14 concult with you publicly. You say you have a few questions: 15 It is new alcest twenty minutes of four. If your few l ! 16 questions are like som of yours that I've lived tirough,tirnh 17 ! I uill adjournit=ediately after you're through because it will i. 18 be too late to start. 19 , And in that instance -- this is off the record i-* il 20h no. Let it ba on the record. Let it show that the Presidint: d if if. !! Officer of the Comaission threatened the representative of i p, . the Consur.cr Advocate -- c-n 25 h I'2..' RMMSCH: Mr. Chairm n, am I permitted to
,c 0
%!j cxcept to your characterl=ation of my questions?
!i 23 THE ACTING CHAIRMAN: All I have to say, sir, 1- [ c= t .::: n m : cat me. F n D*9 'oT T 1 n .w r:. z.c:- m.tew i.ve.-:unniz:ur t 6 3' 5,338
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>: is ehse ce =cne eo cooperate teh you. util eher he ee and .
2 I jwilltheyberatherbrief? Ecesuse I want to put the 3 l Respondent in the sam stress. l 9 MR. BARASCH: I believe, Mr. Chairman, that I r
*i ! l
.i can complete the questions in 15 or 20 minutes, tops.
f 1 1 THE ACTING C MIRMAN: Well, why don't we make 8-5 ,j' i {
! it 15?
8 I { Do you think, sir, Mr. Graham, that you can ! SiI cooperate with us?
~0 1
t MR. GPAIMM: I'll cooperate to the ertent of l
*N answering questions before they're asked, Comissioner.
12 0 "' "^""" " d " " * "'** ** *'*"" "#- L) O Chairman, that I'd be more than willing to defer to Staff 14'
; councol.
15 !
! THE ACTING CHAIRMAN: Will you please proceed? ,
16 l ER. BARASCH: Sure. I
'i.7 BY MR. EAP4sCs:
1 16 j Q Mr. Graham, in your ora'_ direct testimony I l d (
,9 1
ji thought I underatoed ycu to say somthing like this -- I'm
!i 20p doing it frca memory: Somathing to the effect of favorable 21ld netion by the Corzniccion -- you didn't define regarding what -l-t 32 could result perhaps in n incronse in your lines of short- I 25 tero debt. Remember thnt statement? i , , . t Mh A Yes, sir. -
ti 33 Q And you 91so said that adverse actions could m-em + m.eeus, u::. - r.r n. eu:ve.ucvnar. - sr.a::se.c. r. m := mo m ' ' p,, , ,. . o
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Graham-Cross 82
]
C 1 j result in a collapse, perhaps, of short-term debt. Is that ! 1 f I correct? # i I 3
) A I didn't put it quite in those terms, but yes, !
l 4 sir. 3 Q Now, you talk to the banks on a regular basis. l b Perhaps you could help me define what you menn by " adverse 7
- -6 nction". If this Com
- nission were to decide to deny your i
8 request for crpedited treatment of the fuel clause, would f E that constitute an cdverse action in the minds of the banks? 10 A f I don't believe ao. I think, however, they 11 l would be very concerned if that started to drag out for a 12 substantial, catended period. Q But a mere deci.ston, let's say, next week to 14 i deny your request for severance alone wouldn't put you in any 1 O l jeopardy with the banks? 16 I A All other things being equal, I agree; that l 17 would not. I might sny in the context of.that that they 18 know that ue have been able to reach a more favornble E'
! settlement uith the insurance carriers as to an additional 20
] r.dvanco paycent, and they would have that in their minds 91so, 11N Q So in other words, by filing the Petition you i:
Lil dc9t see yosraelf as having in any cay incrensed your risks i h : s
, 2N vis-a-vis the banks and support of banks?
!! l Zh t A I don't think so. !
,- i
" I Q Thanks. I want to understand another
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G Graham-Cross 83 c ii 1jjreintionship. I thought I understood you to say a favornble g 2 l ruling on the fuel clause or the energy clause perhaps could
! l 3 i resuJ.t in more short-term debt being permitted to GPU and i
I 4 i Metropolitan Edison. Is thst correct? I li I 5J A Yes, if coupled with favorable action on the ! I e 6 ! other two matecrs that are pending before the Commission. 8-7
? Perhaps I can explain that this wayi The legal -
2 l limit of the Metropolitan Edison Company is approximately I 9[i ! $100 million. In addition, you'll recall that in June we gave 10 h to the banks $40 million of Mot-Ed bonds. We also gave them 11 ' certain other securities, nuclear fuel and guarantees by GPU 12 ,I Corporation and pledges of stock, 13 g For purposes of determining the legal limit of 14 Met-Ed, you c.tn appro::imately add the 100 million and the 15f ' 40 million to get to $140 million. 16 The banks would prefer to have their investments! 17 at the operating company level rather than at the parent 18, company level. They'd rather have their loans be closer to
- 19. the sou ce of revenues tha.t support those loans, and the il 20ji revolving credit agreement expresses the view that if possi-t 21' ble the loans shcald be kept at the operating company level.
11 22!; I think that with an acceptable energy clause 3 35 0 change, with unintaining the TMI-1 rates, and assuming that i 24 our franchise is not revoked, that the banks would be willing i 1 15 I to extend the cublimit of Met-Ed from 125 million to, say, I annen eu.n-w_. me. -:: r:. :.o:mvu.cv: cer. - w:m :::no. ,4. ime D" ' " lo
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Graham-Cross 84 1 p $140 million. 2; And it's one of these snowballing things thst 9 5' because ce have a highar energy factor and the banks there-4 fore can oee chamselves being paid, they are more willing to 5 ; allow us to borrow more money. t i 1-8 Q But in a cense what you hwe then is if you ! 7 got the LEAC increase, you'd have less need for u increase 0 in your short-term debt but you'd have more cecess, in 9 basically what you're saying? 10 A Yeah, and I would have more places where I 11 could finance Mat-Ed in the event that sosething adverse 12 develops. 13 Q Ohny. And on the flip side,-if you received 14 an unfavorable decision, you'd need the short-term debt more 15 but you'd have less access to it? 16 A I would hope I wouldn't have less access. I 17 would hope that I would have the same amount of access. 18 Q Okay. Thank you. Earlier, Mr. Graham, you 19 mentioned insurance recoveries. I wonder if you could 10 quantify how unch those recoveries are expected to be and 21 when thay would occur. 22.(! h
. A Speaking fo- the whole of the three companies J Wj now, rather thnn iust Mat-Ed, but you enn divide the nunfoer
( 1 24 I in half for Mat-Ed, the policy is $300 million. Soon after 25 4 the accident we received 20 million. We have now negotiated NO:=AC c IMACC If.: INC. - U N. LCCXW!!.f O'.7 /.VE. - t*103ttCU30.'FA. t7152
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I. Graham-Cross 85 ! I a settlertent under which we will receive an additional Z f 50 milllon in the next few weeks. ! i 3 ! I would hope that in the first qunrter of 1980 f 4 I could receive another 6 to 10 million dollaro, and then I l a 8-9 5 ) would hope that at some point in 1980 -- perhaps in the l 6 middle of the year -- we would ham a sufficient agreemnt 7 with the insurance company that we could start to become : 8 relatively curront, with some kind of a lag, as to the { 9 i recovery of those dollars that are covered by the policy. j 10 I think I should state that if you read the ! 11 policy as a typicci fire insurance policy dcas, there is no 11 i legal responsibility on the part of. the insurance company to l ( . . . , !
? l pay anything until we have filed a final Proof of Loss for alll! h
. 11 8 a': of our claims under the policy. !
15 So if the insurers applied that literally, we - ! I 16 I i as tiny havo the legc1 right to do, we wouldn't receive amy l 17 { money for perhaps three years or so.
' H 10 t We have been able to negotiate with the's so as i
1 i 19 d to get advance payments, but that is a difficult, uncharted l C 10, negotintion that is not entirely predictable as to ernetly i t t 21$ when those dollars will com niong. ! 1 11 f 0 But tinse various recoveries that you anticipate! -- ISI those recoveries are not included in the various cash flow b M forecasts that cre shown on Table 1 of Appendir B of your h 25 Petition, are they? ff CP***. Acti O F4 a.ni" A* . tX0. - 27 !!.
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j Grnham-Cross do s 1 ! A Yes, they are. V I 2 I Q They are included? 3 A Yes. They are all in the category -- both the ! t 4 enpenditures to clean up and restore the plant and the 3-10 l 5 ' anticipated insuranco recoveries as an offset against that 6 are in that category of "All Other Needs For Short-Term Debt". 7 ' Q Also, Mr. Graham, you mentioned bond selling
; s
l! ability at the present tima. Does GPU have sufficient i
9 'coverego at the present time to sell neu debt? 10' , A Well, GPU, of course, wouldn't have -- l 11 1a. RUSSEII: There's an addirienal debt. 12 l 12. BARASCH: Thank you. 13 THE WITNESS GRAHAM: GPU wouldn't hwe coverage: 14 ! but of the opercting companies, Penelec does have coverage to
- I o sell additional debt but does not at the present time have a 16
- l nced for such debt.
i 17 : Ibtropolitan Edison company will hwe coverage i 18E through the end of this month to sell approximately $12 millio;( IP t of bonds at an interest rate ' priced approximately 9 qual to 23 the borrowings under the revolvin't credit agreement, and we , i 21L have filed a securities certificate with this commission, as j
- ,,-c -
1 I centioned ecrlior, for approvallof issuing"thosejbonds to 1?: i g .pq t - ,
, o j
M the banks pcrticipating in the revolving credit agreement.
~
r p , Mh BY IR, BARASCH: 25 Q Assuming such bond issuance was made, Mr. Graham .
- c ; 1 :,rc. - u ::. t.c e:-r. a.t.m. ,w::. - mmer.mo, sm::
s F Grahan-cross 87 4 s 2 :i ho;r would that affect the forecast in Table 1, Appendix B? 1 ig 1 2 Is that included also? k
)
5 A Yeah. We do not have that $12 million of bonds !
.f p in. We do not have a carhet for those bonds at the present 4
5 h time because of the pendency of these proceedings. Car 8-11 ; 0l intention is to issue those $12 million of bonds to the banks, 7 which ut.11 serve two purposes: C First, it will give additional security to the
- 9. banks and thereforo, no believo, make them more willing to 1
10 I stay with us through n difficult period. / 11I-I Second, it uill preserve that financing l G capability to 2ht-Ed to reissue those bonds to an institutional O M 8 investor or a group of institutional investors as long-term 14 securities when such investors feel that the situation is 15' sufficiently stable that they're willing to invest in Mat-Ed. I 16 17 (Transcript continued on following page.) 16 19 I
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_ _ _ . . . _ _ _ ~ _ j Hafer/ Graham-crcss 86 1 ; Q What planc do you have in 1980 to roll over i s u 2 ;the debt? 3 , A (Hafer) On February 1st e::ac'cly $7 udllicn 4 jof, I think it is two and three-quarters or two and five-t t 5 eighths percent money natures, ref present intention is to 6 l request authority frora th'_s Cornissicn and the SEC to issue 7 those bonds as short-term bonds to the banks participating in 8 jthe revolving credit agreercent. Because these are replacing 9 hmaturing debts I won't need coverage and I won't need bondable S 10 property to be able to do that. 11 ; tiet-Ed 'clso has, I think it is five and a 11 ; quarter million dollars of two and three-quarterc or two and 4 m 13
!five-eighths nonoy which cones due in December of next year, 14 1930. I would hepe by that ti== the situation surrcunding i
15 4 Met-Ed wculd be sufficiently stable that I would be able to t 16 reissue those bonds. 17 I have not anticipated that fhnning in this 18 ) forecast, either, nor hcVe I anticipated the $7 million becaus o 19 there in no carket for any of those securities today, and they 20 l'w m not increase the $125 million that is available. 21 ; Q After June of 1980, rill you have sufficient 22 jcoverases to issue increnantal debt based upon present base 23.{I rater ? r 24 j; ' A (Hafcr) Ko. 0 25 Q
! That assurces THI-1 stE7s :in rate base.
I
- canuncs 2 .tanswit. inc. - c.7 n. toexwittow ave. - HARRtBGUftC. PA. 17112
- x saan
i Hafer/ Graham-cross 09 1 l A (Hcfar) No, I wD.1 not. C E Q I think earlier you stated that you have 5 l applied to the Public Utility Comnission to change the 4 lallocatien methodology for deferred taxec. If approved, will 5 lthat help the cash flow of Ket-Ed? 0 [li A (Hafer) Tnat is already reflected in these 7jfigures, b Q So it is in the forecast? 9 A
; (Hafer) Yes, sir.
10 i NR. BARASCH: I weuld l2ke the record to note, il !Mr. Chairnan, that I accomplished ry task in 13 minutes as you 12 asked ma to do, i 13 M is all I have in the wcy of preHaimry g 14 lquestionsforcachofthesewitnessesatthistime. I am sure 15 !we will have more upon receipt of outstanding interrogatories, 16 and perhaps based upon discovery we stay be able to conduct in 17 the upcoming dcys, but at this prosent time that is all I 18 :have for the afternoon. U l THE ACTIEG CHAIRMAN: Are you cure? 2,0 1 MR. BARASCH- Yes..
} MR. RUSSFZ: Mr. Johntan, could I have just i
22 !cne second? I would like to check fith the witnesses and them i 2.3
- diccuss with the Occuission and the parties the availability r **< of uitnesses for torcorrcu and Wednesday. So we can perhaps O ~g o
jhave those that we need and not bring in those we won't need. MOHM3ACl-! C f.lAf?S$8 A1 IMc. - 27 94.1.CCl: WILLOW AVE. - HARRIStFURG. PA. 17122 D"D
- W
lb ', . '.[ij 9 347
Hafer/ Graham-croso # l 1 j 'IEE ACTING CHAIFlian: We will be at' case. t 2 l 4 IG. RUSSELL: If the Cortaission please, Mr. 1 3 l Hafer vill be cble to be bere tenorrow, if there is any cross-t 4 crn cimtion by any of the parties for him. Mr. Graham has a i 5 : commitment back in Parsippany tomorrmt with respect to the fs ) investigation that the Censumer Advocate had mentioned I think I 7 j the other veeh into the future viability of Met-Ed. 3 8 We can have available, in addition to Mr. 9< Hafer, if you would like to have him here, we propose to have 10 ,available Messrs. Buff, Sims, Wenton and Schleicher, and leave 11 Messrs. Cherry and Arnold, Carter and Huff to the extent they 13 )'are needed, for Wednesday. 1 13 ,' ' THE ACTING CHAIREUT: When can we have Mr. 4 14 fGrahanagain? Would it be pecsible to have him here Wednesday? 15 i THE WITNESS: (Graham) It would be possible. I 16 It wculd be a great detriment to my narriage. But I could J 17 come back. I would prefer if it could be next week. 18 I TEE ACTING CHAIP&IAIT: Any nan trao invokes the 19 sanctity of his narriage in a prceeeding of this kind is 20 l clrecdy in deep trouble and about to plunge deeper. Can we l 21 !have ycu cn Wednesde.y? 1 22 THE WITRESS: (Graham) Yes. Den I hmre a 25 .notc? t M" COLLIISSIORER SEAUAli4R: All four of us will i 25 { cign a note to your wife. il nexuaca a ruawia., me. - n u. i.ccxwu.ow avr - unmaune. ex. iriin mm o - - D '
..9 ,;,
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l Hafer/Grahnm.crets 91 1 THE ACTING CHAIRMAR: In that event, what do { 2 you thint ycu can cecomplish, Mr. Kalatesta, betwaen new and, e
-3 let va ::ay3 4:30 and 4:4S?
4 liR. ISLATESTA: leybe a little, maybe quite a 5 lbit, I an not sure . It depends on how well it proceeds. I 1 6 i will try ny best. 7! THE ACTING CHAIRIMH: We won't have Mr. Graham 8 available tomorrow. I think we can have hin cometime on 9 IWednandcy, is that right? 1 10 j THE WITHESS: (Graham) Yes, sir. i 11 j THE ACTING CHAIRMAH: What is your concern, 12 t $getting back at an early hour? 13 THE WITNESS: (Grahnm) No, I promised uy wife g 14 II would take a day off for Christmas shopping and thati is the i 15 llastone. 16 THE ACTING CHAIR!CH: Do it on Tnursday. 17 , All right, Mr. Malatesta. 18 BY IG. ELATESTA: 19 r Q Er, Grahau, I will direct my first question 20 ! to you, cnd this is c bit of a follcw-up on what Mr. Barasch 21 juasquestioningyouaboutontheinsuranenpayments, t 22 j In your direct testimony on the subject of i 13 l Figure 2, Table 2inAppendixBofEnh$bitA-2Ibelieveyou 24 i caid, then you uent thrcugh the list of possible changes in k 25 I h ferpectations,thefirstoneyoumentionedwasinsurance,and f40:inuAC!1 O t*,% AGHA 1 It40. - 07 N. t.CCffWII. LOW AVE - HARRISCURG PA. 17112 m 0 - Q ,y- Q. , ue . w "3h N46 a b39 349
l 'Hafer/Uraham-cross 92 1 lI believe you said on direct that you casumed an .tB mm ion i 3 jadditicnal insurance recovery- to Met-Ed by the end of 3l December 1979 Do you rectu saying that? t 4 , A (Graham) Yes. I ' 5
\
Q Iiew in cross-c7mhtica you got into sli6htly j ' f 6 idifferent nu::foers and I am not sure I am not confused. You ! 7 lthensaidyouwouldgetasmuchce$25millionfromMet-Ed 1 S
!by the end of Decorfoer 1979 under.the present arrangement you 9 Ihave with year insurers, in that correct?
10 l A (Graham) I c pect that $25 million win bc 11 ] delivered to Met-Ed's first mortgage bond trustee, and we vill 12 ]then work to take those funds dern from the trache and get i
. 13 ithem into Est-Ed. '
} million 14 j Q Is that in addition to the $8/you tuentioned 15 as one of the assumptions in ycur preparation of those? !
1 16 A (Graham) Ho, it is in place of. l In other 17 words, what we had thought wculd be about a $16 mWiion 18 settlemont has worked cut to be about a $50 million settlement . 19 j i Q Or as to Net-Ed $8 million versus $25 nillion? 20I A (Grahmn) Tnat is right. 21 1 Q And therefore the figures on Tabic 2, Figure 2 22 jdo not incorporate that $25 million settlement? t 75 A (Graham) Tcat is correct. I r, 24 Q So that is an additicual $17 mn 11cn that you 25 had. not expected sinen you prepared these exhibits? I * ', sownsAcn o us.amat mc. - e r . Locxwe. Low Avt. - Haartisnuso. PA. tri12 o erno rm r' " m + 1639'350 us4M s &ol uI L.:2 ;i . i . w .
Hafor/ Graham-cross 93 1 ' A (Graham) It in er. cept that I want to be a ( 2 i jlittle ce.r.aful abcut assuming that I can take that money down g 1 3 ffrcu the trustees without any problem. I dcn't know whether i 4 !the trustee uill feel uncomfortable because of the pending I 5 ! proceedings in this matter. 6l Q !?cre the proceedings ponding when the $20 l 7 lmi111cn was paid by the insurance company back in the spring? I 8 A I believe that was obtained in f/s.y
! (Graham)
I 9 or June and was not tchen dor:n from the trustee until July, 10 lafter this first proceeding bad been completed. Frankly,.I 11 Qwas not sufficiently directly involved in that matter to know 12 nether the pendency of the proceeding had en inpact upon Q 13 taking those fundo d'own. g 14 ! Q Con you recite any present tangible reacone 15 l thy the trustee would not allow you to take the $25 mri tion i 16 idown? 17 l A (Graham) Yes, the ttro orders to show cause 18 addrested to the base rates and the franchise. 19 You also nantioned another $5 m m ion, l Q i 20 ; actual.ly it was $10 million, for all three companies but 21 l $5 nillion fer Met-Ed, that you may get from the insurance 22/ i companics in carly 1980, is that correct?
^ '
24' l. Yes, I vculd hope that we would be
,' (Graban)
( 24 . able to settle some more of the claim in the first quarter or V t 25 go of 1933, MCMMDACN Q MAUGHAt HJO. ~ 27 N. LCCKWILLow AVL - HARfMS9URG. PA. 17112
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i
1 4 Hnfer/ Graham-cross 94 1 f Q That was not a built-in assumption in your L 2 ! preparation of the exhibits? 3 t A (Graham) There was in the e hibits an assumpt en 4 !that we would obtain additional insurance paycants during 1960 5 )I don't have the exact fig;ures with me that were built into 0l this. 7 l We are seeing a soterfnat more favorable O jeIperience with the insurance companies in the sense that we ! 9 I
'have made a settlement with them for a larger amount earlier i
10 lthan we thcught we could. 11 ,! . Now by the time ycu get to the end of 1930 1
]I am not sure that it has not all caught up again, and I would 13 jhavetotakealookatthosefigures.
.14 l
a Q Mr. Hafer, in your direct testimony you
~
15 itestified that you will have about $75 million in accuzulated i 16 deferred energy cost at the end of this year, is that correct? 17 l A (Hafer) Yes. 18 Q And $124 million of that is attributable to I your "old clause" and $61 million to the new clause, is that 20 jcorrect? 21 f A (Hafer) Yes. 22 , Q ITnder normal circumstances, and you did 23
;tectify cs to hcx the clause acta normally, does the accumulated 2e.:
,. deferred enort;y ccrt account ever-' reach a baltnce of : ero?
25 A (Ecfer) In theory it would, yes, because l' MoMRBACM Q F4A*t3HAL. !!{c. - 27 N.' LOCKWtt. LOW AVE. - HARRIGBURG. PA. 17113
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Hafer/ Graham-cress 95 ' I !if energy costs ever stabilized or et least reached a level C 1.of moderate inflation, then the nore.1 cyclical werkings of 3 the clav.se could at least allow the deferred energy balence
+. y to approach zero because there would be up and down from 5 ! month to nonth. One month the cost would be higher than 6 ! the factor being charged, the next month it would be lover.
I 7 !You wculd expect that the would try to get to zero. I O j Ucw in a period where costs are continually 1 9 increasing,. then the cnswer is no, the deferred energy balance 10 , would ravar be zero because of a lagging six-month historical 11Ic1cuse. It never gets caught up if it is always on an upward
.i 12 i 31 ope, 13' k Q Ent there is al. ways an expectation that 34 L whatever thebalance is, that vm be treated ~ by subsequent I
15 i receipts of revenues and a new balance will then build up? e 16 A (Hafer) I don't know if it is fair to say 17 ' that tbat is always the expectation, but that is recognized 18 that that is a problem as costs continue to increase. That 19 li is why we have ~ requested in tha case of New Jersey and receiw d 4 20 l a forward locating energy clause and that is why the energy
*g e I i clanno presumably in this proccoding, had the costs been rare 1
4 22 l predictable, would have worked better than the cid trailing 23 : elgugg, si 24 ! Q Do ycu 'mcw wha.t the balance of your b 2F'
! accumulated c7.eferred energy cost account would have looked v.osseoAes n MA!'tSMAb. INC. - 27 M. LOCKWILLOW AVC. - H AMRISCURG Pg., ,17:12
- ! l.6 19. ! ' '. , ; ' . o - '<
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.. . L , "1639'353
I Hafor/Grahnmcross 96 1 llike en December 31, 1979 if the TMI-2 incident had never Q 2 cc.curreG? ; 3j A (Hafer) Abcut $25 mnlion. 4 { Q Does that include the $14 nl'tiion in the cid i 5 Iclause? II 6! A (Hafer) Yes. i 7 - Q So instead of $61 minion deferred under the i 6 ;new clause that we now expect, it would have been about $10 e 9 ) million? 10 A (Hefer) That is what we had expected, yes. II Q Your proposal to increase the not energy l 12 ' clause by 6.9 nins a acnth will not recover that $61 million?
- 13 , A (Hafer) Ho, it will not. 'i !
14 l Q In fcet, it will keep it at about the same i 15 ) IcVel, will it not? i 16 A (Hafer) It will actuall7 Grow and then l i 17 begin to try to coma back down again after TMI-1 goes on. 16 Q December 31, 1980 it will be around $60 millicn
'9 iagain, will it not?
l-20 ! I, A (Hafor) Yes3 if TFE-1,comes back on. 21y Q Otherwise it will be higher? l 22 : A (Hafer) Yes. If you lock at Table 2 you l 23 ' ccu cee that it buildr up till September of 1930 and timt is (.. 24 when we are enticipating TIII-1 to return to service, and then 25 f begins to go act:n. t! _c-om. um - u. i.ccmo _c. m. - m,mm. ,_ ,,, m
+
a
> P 00l
$s
... -:< ,,b;4 tA J 1639 354
. n' _ _ ._y _. -__ __ _ - - - - -
l Hafer/ Graham-cross 97~- 1, Q This is projecting pretty ' ar f into the fuNre3 C 2 but if the Commission were to grant the 6.9 mill increase and O 3 fif TMI-1 t;ere to coma bach cn line en September 1,1980, what 4 jvould be ycur best guess as to the size of the accumulated 5 jdeferred energy cost account on December 31, 1981? Would it 6 lstill be around $oO million, assuming all other things being 7 iequal? S THE ACTING CHAIRMAN: Mr. Malatesta, are you f i 9 !assumingthatTMI-1wouldbebackonline? 10 IE, MALATESTA: Yes, sir, that was incorporated i 11 fin my question. I 12 ; THE WITNESS: (Hafer) I don't have those l 13 ! figures with F.:s but you can cee that the deferred energy 14 balance is declinirg after TMI-1 returns ~ to service, declining 15 fr 1980 by five million, eight million, four trillion. 16 ! So I would expect that it would continue 17 that decline into 1981 until such time as egain inflation 18 l caught up wit:2 us, i 19 BY MR. MALATESTA: 20 l Q Are you saying then that once THI-1 comes i 21 lback cn line it will set into action a series of events i, hat i 22 j rill permit the reduction of this deferral to what the normal t 23 circuczttnces would be, as though the accident had never 24 ! happened? l 25 A (Hafer) I am not sure I can figure that out PtOMRBAC11 O I-TMtSH AL. INC. - 27 N. LOCKWILLCW AVE. - H ARRISeurtG, PA. 17112 lDl3l1 D* lD E o s~ m m a[ul[u X
~
m
=
1639 355
{ Eafer/Grnhnm-cross 98 1 !in my mind as to that normal circustances would be. g 1l Q What I am trying to say is, isn't Met-Ed's S 3 goal et none point to have an energy clause that operates 4 jnormlly and have an accumbted deferred energy cost account 5 !that in the norm 1 accumulated deferred energy cost account? 6 A (Hafer) Sure, Idet-Ed 's goal would essentially 7 lto be have no net accumulated deferred energy account over the 8 japan of a year, or if it did, at least a modest one, if it was t unavoidable to have it. 10 { Q Does TMI-1 coming back on line in itself 11 ! create circumstances that will allow that condition to occur, I I 12 ja normal cituation? m 13 A (Hafer) It depends on what is done with the 14 energy clause at that point in time. 15 ; Q Ycu. mean another additional incres:ent? 16 A i. (Hafer) I mean that there has to be some 17 kind of a modification. We have a cituation where when TMI-1 18 lcomes back on line it will reduce substantially Fat-Ed's 19 average monthly energy costs. At the present time we are 20; working with a flat billing factor, whether it is at the 8.8 21 mills or ubether it is at the 8.8 plus 6.9, and that will 22 expire at the end of 1980. 23 Ecw the Ccnmiscion then has an option of c 24k uhether it continues with the fortfard loching levelized
- } 25 approach or -# aether it reverts back to the I.D. 214 type sir-I 7:OHTtCACH tk MARSHAL, INC. - 27 N. LOCKWILLOW AVE. - HARRIS 9tJRO. PA. 17112 ma e o 1639 356
% do do dw k ,,
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, . e-9.npe w y am e%- -e%.-m,
--m .--ee a= avgasinge*y*=*w _ _ _ N-9'"N"N* ' * * * - " * * - ' ' - " " - ~ " " ~ ' " * ' '
l Hafer/ Graham-cresc 99 1 ponth rolling average clause or whichever. l C 2 a j rou un % you have e sive me the ho1e $ 3 lccenario before I can really casuer the question. Certainly l 4 lchen TMI-1 cones back on line it will bring the cost down md r 5 !jas indicated on scz.te of my tables it will immediately cause 6 lthe accumulated deferred energy balance to begin to decline 7 lslightly. 8 There will come e. point in tin's where the t i 9 ! inflation in fuel costs will eat into that modest decline. 1 10 lI donit know what that point is. I 11 4 At this time ner.t year if THI-1 is back on 12 line -- let'c start uhere we are now, right now you have come i 13 before the Co~minsion and said you need an additional $55 g 14 million in revenues throu6h your net energy clause to prevent 15 ! cortain events from cccurring that you find distasteful. At 16 tbis time next year if TMI-1 is back on line, will you need 17 an additional increment or change in net energy clause 18 3 pro;iected revenues to prevent other distasteful events fra: i 19 loccuring in 19817 20 A (Hafer) Assming our current forecast for i El
' energy ccsts and availability is accurate, no, we should n,ot 22 need another change in the ener67 ad;iustment clause factor 25 , to avoid increases or further increases in the deferred energy 24 l balance as we are new pro;iecting. That is, if the rate we 25 cre c.sking for, the 6.9 mills, were clicwed to stay into I
MO!!RRACH Q NAf?SHAL, INC. - 27 N. LOCKW:LLOW AVC. - MARRISRUR4. PA. 17112 i
,.. ,,. ,7
j Hafer/ Graham-cress 100 I leffect after TIE-1 ccmes into service, thhn the deferred ' 2 energy balance chculd be et least flat or possibly declining. 3 Ve are indiccting the balance thrcugh the end
)
4 of 1980 it will decline. 5 Q Eat you don't Imow if it is going to decline l 6 f into 1981 at all ct this point? 7 ; A (Hafer) It obi-icusly will decline to semo l 8 point in 1981. I just don't hnow where the continuing increase 9 in oil prices and daterchange costs crosses ever this deMa 10 l that is built in as a result of the return of MII-1. t 11 l i Q If the balance in Met-Ed's accumnated 12 !h deferred energy cost account cn December 31, 1979 were
)
13 {h10million,wouldyousayNet-Edwasahealthypublic 14 utility financinn y? 15 A (Hafer) No, that in itself would not be any 16 hind of an indicator. All other things being the same, it ' 17 would have $51 nillion more of short-term credit but it w'ould 18 l not be fair to look just at that number and make a deterrainati on i 19 Iof whether Ect-Ed is healthy or unhealthy. 1 20 Q Ey the same token, does the fact that there
- 21) are $61 nulien in that acccunt under the' new cinuse indicate 22 ! that ISt-Ed is an unhealthy public utility?
i 23 A (Hcfor) It does not in isolaticn, no, and 7 Ml it has to be icohed at in the contert of two things, One, 25 how much did that aggrcvate the overall firmmial posture of McHREACH & mat , //[4AM s -e. ._ 1.
T.ST TARG.T (MT-3)
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TEST TARGET (MT-3)
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j Hafer/ Graham-cross 104 1 {i that date, and therefore the only thing that has changed is i, 9 tc L ; the revenues c.vcilable to service the capital have declined 3 lcr have been reduced by $49 nimon. 4 How there are a nuriner of bases that one 1 5 could construct to justify or to need the 4 9 mill wa, including 6 the fact that the cost of capital has gone up since that tine, t 7 i
- the operating and maintenance expenses, the investment in 1
8 iother items other thcn TMI-2.
?.
9 So I am using it as a guide, as a yardstick, 10 if you will, because that capital has not gone away. But it 11 lis coincidence that it was TMI-2. I don't think it need i 12 !necessarily be TMI-2, 13 BY HR. IMIATESTit: 14 l s Q In addition to the @9 million or the 15 inflationary equivalent of that wbonever th at may be all:wed, 16] or if that may be allowed, wouldn't you also require paynent.s 17 for cleanup costs you are now incurring or will incur that 18 won't be covered by insurance? 19 li (Hafer) 'Ihat gets us into a tthole new 20 l spectrum in the regulatory arena es to just how these cleansp 21 ~ iccats shculd be treated, whether they are treated as an . ongoing l 22 natter of expense, whethor they are capitalized and depreciatch 2I'over 30 cr 35 years along with the plant. It is still very V c 2ei-lnl uch up in the .ir, g 25 Q But that still would be required to put year MC}tR3ACH 3 D!AftS14AI INC. - 27 II.'ECCKWILLOW AVE. - HAftRIS50RC. PA. 17113 j j
l Hafer/ Graham-cross 105 1 !contpeny in the financial condition it was in prior to the {. 2 accident? 3 i A (Hafer) Ycs, sir. Provision would have to
}
4 lbe trade for those cleanup costs. 5 i Q How much do you think those will be eventually? r 6 (! A (Hafor) We are estinating that the uninsured 7 j portion of the cests could amount to approximately $100 i S lmillion for the total plant, so for Met-Ed that would be 9 i about $50 mmicn. If it is capitalized, that $50 mmion i 10 lwould then have to be repaid over 30 or 35 years, the life i 11 lof the plant. 12 f Q That is at current velue of the dollar, of 13 icourse. O. ! Q 14 l THE ACTIEG CHAIRMAN: You are talking about 15 fwhatplant? I 16 f THE WITbiESS: (Hafer) We are talking about 17 ,TMI Unit No. 2. i 18 THE ACTING CHAIRMAU: Is there a suggestion f 19 by either of you that TMI-Ho. 2 should be considered at one 20 l point or another a viable pioce of property that would add to i 21 1the productivity of Eat-Ed and to the fund of electrical 1 22 l pcwer available to customers? Is there such a suggestion 23 f floating around? l 24 l IG. MALATESTA: Mr. Chairman, I am only asking b 25 l questicus about the total am0unt of dollars this company needs k I. CHABACH Q ERSMAL. INC. - 27 fl. LOCKWILLOW AVE. - HARRISBURG. PA. 17112 o ~m e m ne n y n3 u
~
1640c00'2 M JUJ)URL . m, 2.s . m "
Harcr/Grahan-cross 105a 1 {torestoreitsfincncinistatustotheconditionitwasprior 2 f tothe accident. I an not considering what would be included 3 !in rate bacc or any of the ccaponents of the company's f 4 kfinarcial ccndition, only what kind of dollars are needed, 1 5 ;cnd I an not sugge: ting one uny or another iMat happens with 6 lTZ2-2 cnd I don't think Mr. Ecfer is, either. I I 7 TEE ACTIEG CHAIRMAN: Mr. Malatesta, far be G .it from us to cuggest the course of procedure for the Trial 9 , Staff, but let ne tell you what this Commission is interested 10 :in knowing, Hctr is this utility going to become a viable one? 11 12 ,( Transcript continnee en Page 106-) 13 i i 14 e l l 15 ; I ( 16 i l i 17 1MO 003 18 19 ; I 2O l , i S 21
~
h 1 22 : 23 "4.
'8 ii
(. i, 25
- f. ONRBAC11 C MASCH/.L It!O. - 27 N. LCCKWILLOW AVE. - MAftR155URG. f*A. 17f12 ID =%
~V I' -
e. I! 106 { I 12. MAIJJESTA: Those are the questions I'm 2 asking, sir. a. TIE ACTING CHAIRIEN: Not if you're dwelling 10-1 li 4 l with Unit No. 2 Unit No. 2 is so far away from being in l, 3 f the picture as a contributing elenient that any discussion of' ' I 6
- it, it seems to m, is to just merely ertend these proceedings ,
7 1R. )RIATESIA: I'm only referring to the 0 i accident, sir. Becauce the accident concerned TMI-2, then E indirectly I guess I've raised its specter. However, I'm 10honlyreferringtothedateofMarch 28, 1979, and the
< li !
; financial condition of Met-Ed prior to that date and I
12 i its:sdiately thereafter, and it matters not to ma whether 0 "
- i TMI-2 uas included within that picture. It's the financial
%^'
condition I'm interested in. W2 ACTI1E CHAIRIGH:- And now I don't know who 10
! will raise this question, but I'm interest 2d -- and so are my 17,j colleagues -- i1 the fincncial condition of this company.
16 j# Right now we have Unit No.1 in the rate base 1 l but contributing nothing to the power, creating a burden for
g the consumar at this point. We have a Show cause Order 3Illh seeking to estchlish chy it sheuld not or why it should remain, -
22 in the rate base. 1 g What uculd happan if this Cosnission were to C ,
^Y d
decide that TMI-1 must com cut of rate base? How much money ' i s~ 'e '. Iwould be affected? What would it do to this entire picture? i u=nm.= : n .-nn=s. .s.. n:=. - c >:. s.e=uv:n.:.nw x:=. - tux = cum n. m n 1640 004
'A 107 ;
O. E - Isn't that the kind of thing that we ought to ! 1 j 2 ; be talking about at all -- incidentally, if we're talking i S about that, socehou or other we must have forgotten what we [ i 4 started to talk about, which is, namely, the Company's re- t 3 quest for rate relief. 6 MR.' MATATESTA: Mr. Chairman, I'm going to put i
?j my cards on the table.
i u E ~ t L THE ACTING CFAIRMAN: That would be helpful. 1 9 KR.' inTATESTA: It is the position of the Staff f i 10 ! in this case that the rajor issue as this Comission has , ( 11 described it all through these proceedings is whethat the 12 I Certificate of Public Convenience of Metropolitan Edison
;3 Company should be revoked, and it's our position that if i
14 l you're going to revoke it, fine. And if you're not going to 15 ! revoke it, than you must consider this: Ec:t much is it going 16 , to cost not to revoke it? If you're not going to revoke it l I
'?
j at this time. l 18 I think this Ccmission has to make a comit- i IE ment to bring that company back into a healthy state, and I'm ' 20 just trying to find out how nuch it's going to cost before 1 21 you make your decision whether to revoke their license or not.!
, t 22, .
But you cr.n't -- I don't want to see this ! l
- re M R
.m Comission -- nt lecst it's ccr position that we should not h % be here a year from now asking these same questions, ~seeing 13]iupdated version 9 of these same exhibits, and deciding what
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1640 005~
? ncfc~r-crosu 10c Q I we're going to use for a tourniquet for 1981. ! h i
2 ; I think m've got to decide right now whether j l 3 ' the Company's going to camnin in business and how much it's 4 j going to cost to keep them in busim ss, not for a year, but 5 for 25 years or 30 years. And that's where my questions are 1 6 { heading. 10-3 7 TES ACTING CHAIR}RN: Well, we'll make -- we 6 J Commissioners, you know, are at your mrcy, and we don'.t 9 want to persuade you to alter your course. You put on your 10' best case, Mr. Malatests. 11 IG. MAT.ATESTA: Thank you, sir. 12 THE ACTING CHAIRMAN: We'll have to get answers 13 i to what I suggested is a very important question that this 1 14 ' Commission needs to know, 13 MR. MALATESTAi Yes, sir. I'm going to try and 16 help all I can. 17 TFE ACTING CHAIRMAN: Thank you. l 16 i BY FR.I MAIATESTA (Of Mr. Hafer)5 o 19 Q Let's just recap what we have so fe, Mr. Hafer , i 20 j Ue have $49 million in 19 -- in March 1979 money that's going 21 to have to be updated to whatever date that money becomes 17, j cvailable, We have $50 million in enticipated cleanup costs
,! )
2S F at this ti:m, plus uhatever additionni fuel costs are neces-14 ' sary to bring the accumulated deferred energy cost account 25 back to a state of normalcy.
- f.70Cf.Ci{ t. !.t *.CSIiAL. tNO. = f.** I:. LO0in*Rf.f CV? AY2. - f fAft2tcQuitG. FA.17112 1640.006
9 .- _ ! Hafer-Cross 109 1 Is that correct? Is that what it's going to o ,. 2 j taho, appro=imately, to make Ect-Ed a healthy company? l 5 ' Let's not use the word " healthy", but to put Net-Ed in its f
,1 i
4 ] pre-TMI-2 accident financial condition. l 10-4 h, I ! l A No. I don't think it's fair to say they're ' 6 additive like that, t
? We have asked for an increase in the Energy l i i 8 1 Adiustmsnt Clause factor which would aggregate about i 4
$55 million on an aggregate basis, effective January 1 of 10;l!nextyour. We have testified that while we think that's the i .
li f minicum amount we can get by with, that if it'a done on a l 1- 2 reesonable baci.1, that we think the credit will be with us l @ 13 through ne=c year. l 14 In fact, there may even he som opportunity to 15
' get a couple million dollars more of increase in the revolvinsj 10 credit agreement.
17' When TMI-1 retutns to service, the energy costs
- 16. of the Company, barring any unforeseen events, will decrease b
19 I by about 4 or 5 nillion dollars a month, aggregating about 2% 45 or 50 million dollars, again, on an annuni basis. 11 4 Ill a Those dollars could then, theoretically, be I l
,%! reserved and kept to recognize TMI-l's costa thst were -- I l il Ul don't want to en11 it TMI-2, but the equivalent to the i
EI March Order. 25 I Essentially, the revenues would be about the cen. men e er.e:re.: n:c. - n n. z.oce.ra.ew e.ve. - nuu:amma, m. ir:t
. _g s - : . :
1 1640 007
- s. .
!j Hafer-Cross 110 [
T 1 l sane as they would have been in March 29, 1979, if this l
! j 2 } increace in the factor is granted effective January 1 and )
i 3 . if there's no modification once TMI-1 returns to service in l 4 '. terms of levels of charges to custosers. I 5 l We w uld than have to face ourselves with the LO-5
. i 6 ! problem of, What do you do about the inflation that has I
7 j occurred since the test year of the last rate case, ; 8 l March 1979 and 1980 or 1981, whatovar the test year is, i 9 But I'm saying that there is a difference 10 ! between a tourniquet approach and complete financial health. 11 t htropolitan Edison Ocmpany is in a position or was in a 12 position where it had ample capacity. It did not have a D O 3j largo construction program after THI-2 was entered, and it
,n i hud a rate order in hand, albeit never impleunnted, which 15 ; was based on a reasonably current test year.
I 16 I Now the situation has changed so that it now 17 f doesn't. have TE-2, but we believe that THI-1 will be back. 18 ' And I think the inerense that we're asking for here of some 19 ' $55 million, if retained after TMI-1 comes back, adjusted 1 20 only for the inflation that takes place, should be enough to ' 21 j at least koop ht-Ed as a viable financial entity. 1 22 ! We will then have to address the problem of, I! 23 J What kind of highar roscrve ratios should the Company have 24L or does tha Cc= mission want. But I don't think that would , b 2_G
.. ' be any different whether it's &t-Ed or whether it's some
}
?.*CHr.3M! O FMA".O!fAL. INC. = =*/ F!. LCOKlV!LLCW AVE. - !!A!tR133U:tc. PA.17214 1640=008
C Hefer-Cross 1 111 l 1 new utility serving the Company. The numbers would turn out 2 I to be tha came. l
. i 3 ! That's also our position uith the energy l t t i
4 fclauseincrease. The fact of the matter is that there have l 10-6 I ' 5 to be kilowatt-hours supplied to the customrs of Met-Ed, ! t
- 6. j and those kilowatt-hours can only be gotten fro:n a certain f
I
? lnumberofsources: Coal, v ., or interchange. And once 8lI they're acne, whether it's Mat-Ed buying them or whether it's, I
9 the PUC buying them or a state power authority buying them, 10 the bills htve to be paid and the price is the same. 11 El l As n further test, I indicated that when one i 11 i compares the rates charged by Met-Ed to the rates charged by k u I the other malor otilities, electrie utilities, in the i 14 i Commonwealth, they are not at all out of line, even including 15 the increase that's requested in this Petition. 10 Q Than this increase is enough to restore you I? l to your pre-TMI-2 accident status, the $55 million in your 18[IbtEnergyClause? 19 A No. No, it is not. 10 $ Q Do you think it's fair, then, to compare your i 21 . rates eith that increcse to the rates that would be charged tspf if we alica tha full force of the accident to flow through u
}
I 2 to your ratepayera? ,c . f k M.; A That really wasn't my point. The concern seemsi Uk to be that the charges are so high that it's piscing an undue ,
^I "r!*7"MC~ ~ C. NO - 37 IL !.CO:W/iLI.OV/ A*r.* - Ott.CT:tO :fJaG, PA.17 12 .u...
_ ._. ._ g __ __ _ _ 1 _640__009
IInfer-Cross 112 0 2 '""'*" " *h" ""*-Ed """" " "" ""* "h" ""**** " ' 2 continued viability is being raised. I'm suggesting to you i i S that the rates of Met-Ed are not too dissimilar -- even with l l 4 this increase are not too dissimilar than any of the other l
\
5' maior utilities around the State. l
~ '
6 Q Well, you concede that this increase is a 7 , tourniquet and is not corrective surgery, if I can use that U unfortunate metaphor. 9 A No, I don't think that it's a tourniquet as 10 such. It's certainly not the same character that the ! t i a June 19 Order was. I think it's som2where in between those l 12 two. I O D Certainly, it's not restoring Met-E3 to what I 14 i I uould defino as complete financial health because the 15 resultant returns on equity for Met-Ed are still going to be 16 very low for the year 1980. 17 sue it does put them in a pc,sition where they la will have access to credit from now until TMI-1 comes back i 19 j' on line next fall, and at that point we enn then go forward M beenuse 'DII-1 will giva us som additional running room be- 3 i 21!f cause the energy costs being experienced subsequent thereto l! I 52l{ h uill be 1cucr. 23l; Q When you compare tha rates of Met-Ed, even j 2 including this increase, preposed increase, to the rates of O 25' othar electric companies, though, these aren't the rates l : = ..cn e r. .:::2.:.. me. - = n. i.e:w.i.:.:.onve. - w.we=une, n. m e: 1640 010
h Hafer-Cross 113 ! 1 that would ultimately be charged in order to restore Met-Ed 2 h to its pre-TMi-2 accident status? l 3 A Neither are theirs. Philadelphia Electric 4 and the other utilities are n11 in periodically for rate 1 0 increases. I'm just saying that uhen one looks in- terms of i 10-8 reasonableness -- what would I pay if I were living in 7l Philadelphia or Pittsburgh -- I find that I'd probably be
- g]I paying more thcn being a Met-Ed custo:ser, t j
i
'o Q Would you be paying 50 million to clean up E0' TMI-27 i U A I'm not even suggesting at this pof.nt that i
12 that's relevant. I'm just saying for the same service I would be paying more dollars. Q But that's an ultimate cost that this company'y , 15 ' going to have to bear to restore it to its pre-TMI-2 acci-10 - dent status. 17 : A I don't know that that's been determined, at6 18 I wasn't even getting into it. I'm saying for the same 9 kilowatt-hours I'd pay more money if I lived in Pittsburgh i than if I lived in Reading, even with this increase. 2 I'm not trying to tr.ake --
^
-hp THE ACTING CRAIRMMI: Let rc.e interrupt for a j
.: i
"". moment. I've haard and the othar members of the Co:nnission !
3 g 24, have heard for the past 10 ninutes references made to ecmparh-t
*5
[ sons of chat this costs now and what it would cost inter and
. r. . . , . :em= c : m::cw.. m=. - m:. r.o ::c.nu.cn .wa. - mnmz= , ri. m m ia u. m .
1640 011
!; Hafer-Cross 114 I
{ 1 hou this stacks up to other utilities. 2'
! Such information is available, and I'm going to j l
S j ask you, Mr. Malatesta, and you, Mr. Hafer, to bring to these 4 ) proceedings informtien on 1979, comparison of ccats to all ! I O j classes of custo::ses -- 10-9 0
, E. MilATESTA: Mr. Chairman, I believe that !
n i I
. Mot-Ed has already provided that information in its Exhibit f
c A-2. At least it makes reference to it in Paragraph 13 o , i appearing in Figure 6 of Appendir B. And colacidentally, I i
.4 - I w~ d don't think I have Figure 6.
s 1; i
! IC, RUSSELL: The data is updated in Exhibit 72 l J-1 to show the typical bill comparison for the typical g
' rentdent'.cl customer for rntes that are in effect this month I
14 i of December 1979. I 15 [ THE ACTING CHAIRIRN: You hne that where? 1'd i L; le/ RUSSELL: This is Mr. Carter's Exhibit J-1. 17 l TIE ACTING CHAIPJRN: Mr. Russell, what is the 1 1 top bracket in tha Bht-Ed column? to
~
; IE.' RUSSELL: What is the top?
20N TIE ACTING CKAIPJ1U: The top portion of the t N Fbt-Ed column. E 2! HR. RUSSELL: That ticuld be the increment m i
~ i no::eciated with this 6.9 mill increase. I b v U TIE ACTING CE1IRIuli: Thet's what it would be $
if -- h't.UU?.OM C */ADSUf.L. IMC. - 27 !!. LocT.*!! LLC'Y /N:". - IWt%00Unc. Pf% 171!R
; 1640 012
s
] Hafer-Cross 115l hu 1 MR RUSSELL: If it ware added. !
21, TE ACTING CIMIPJMN: If granted? h i
- e. j 0 IB,. RUSSELL: Yes. -
i 0 TE ACTING CHAI1 GEN: Right smach in the middle, f 5faren'tyou? ; 10-10 6h1 $ Mr. Russell,}Ir. Malatesta, and Mr. Hafer, the l 7 dresidential er that portion davoted to residential use is s O
! approritately 30 percent of the Company's business, isn't it -
n of the Company's generation?
~ }
1 10 l j MR. RUSSELL: I think in rough terms, yes. 11- THE ACTING CHAIRFEN: And I think th.r that 12 would characterize the revenue proportion as well very similar k) --
" to that, leaving about 70 percent. We're concerned with that s.
2'e70 percent as well and what the ccmparisons are. Perhaps you O can add another sheet or another few sheets showing the impact;
'6 A
,in comparison as it relates to commercial and industrin1. 'l d [l I'm sure that's available to you, i
I% MR. HAFER: Chairman Johnson, if I uny, on II INSeptember 21 cinen t.;c cppeared in our review meeting before the 1%llComicsion, we distributed this kind ofand a you booklet, I M(;jmay reen11 ee hcd view graphs of that, the sann charts. This O I 33H hns been intreduced in this case as an exhibit, designated ns ! e 2(F-1 no baing sponsored by W. Diechamp. There are sose addi- [ h & M{!tional rate ccapariscns in there and comparing industrin1 and I i
*y.
- Lccamereici rntes.
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~, 1640 013
P Hsfer-Cross 116 C 1 la. IGT.ATESTA: Mr. Chairman and Commissioners, j 1 3l if I could, I only have e couple more questions I'd like to .! l S ash Mr. Hafer at this time and then speak with him again on l 4p cross-examination at a subsequent date. And Mr. Graham also i i LO-11 3 l, at a cubsettuent date. So if I could just finish up, I'm sure l 4 we cculd be out of here by a quarter to five. 1 7 THE ACTING CHAIRMAN: By all means, proceed. 1 0[r PR. IRIATESTA: Thank you, sir. 9I BY MR. InIAESTA: 10 j Q Mr. Esfer, I'm going to refer you to Table 7 I; 11 ) of Appendir B of Exhibit A-2 and Table 8 of that same Il appendix and exhibit and also to what I thought I haard you g say on direct examination. First' on Table 7, it was my I understanding that you said that n 7.7 mill increment in
# Met-Ed's Net Energy Clause as of January 1,1980, would 16 recover the $61 million deferred under the new clause as of 17 3ecember 31st, 1979. Is that correct?
1Si A yes, 1: 19 And than I niso heard you testify, with regard Q 70 to Table 8, that an r.dditional 10.4 mill increment, effect!.ve I n 21hJanuary1st, 1980, would allow Met-Ed to go current or wind il Lif up, quote, " current" at the end of 1980. Is that correct? e < M A Yes. O _ Q And the e cumulative figures, is that correct?
,a
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25 g 7,,, no:e.2..c:: aur.cw_, ire. - cy n. tee: emu. eve ,wc. - w.nrawna, n. rri sm
. 164.0 014
Hafer-Cross 117< J bv 1li Q So that means a total incren:ent of 18.1 mills 3 j
' in your Ibt Energy Clause effective January 1,1980, if >
3 allowed to cecur, could pu~. Met-Ed on January 1st, 1981, in E the san:e position, vis-a-vis its Net Energy Clause, as it 3 gl 1
-1 would have been without the accident, is that correct? l 10-12 ,
It That's correct. 7 i Q So that masns that what you've -- 1 i 8 j A That factor, by the way, Mr. Maistesta -- that 4
~0 would essentially say thet in the twelve months of 1980 ce 10 would not only collect all of the energy costs we were going IT "
to insur, including the eight months' worth when TMI-1 would be unavailable, but also tha $60 million of lag that we 13 haven't collected ne the end of thi.s year. 14 If that wem so, we would be even t the end of 15 1980, cnd at that point, chu, our energy cost factor would drop substantial ~.y for 1981.
- ')
Q D:actly. But it would be at uhat would then be N a normal level, pro -- in
~~ y A It would be what's required to catch up.
- e.Y
"'t Q And it would be e pro 'IiG-2 accident level?
Gi A (No ansver). n, +-
""e Q Or appro::imately what it would have been withoub cc0 /' ^ !:4 tho accident? 1 l
A Yosh. The deferred energy balance would be ! 1 25
. back to its more normal Invel, yes.
m u.e un=-n. uc. - c.r v. wexvnum arc. - ummenna. ra. m :z
~
1640 015
- - . ~ .. . _ _ . -- --.--- .-_ - A
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i; t P.ater-CEES 118 - C < ii Q So that mans that - -
'2, $55 million - well,l
]
2
; 6.9 mills will accomplish $55 millian '- r/iitional revenues. !
c l l
" j In order to bring you back to your pre ">. 4 status on your j
- t. i 1 j Net Energy Cicuse clone would require almost three tims th9t j
~ ;
in additional annual revenues, is that correct? I 10-13 6 i I:. To get actually eatabt up by the end of this I I 7 iyear, yes. t
~ '
A And thet's approrimately another $100 million 9
over what you've proposed? -
10 BEL. RUSSELL: He said caught up by the end of I i
-;1 this yacr.
i 12 ; TE WITESS PAFER: At the end of 1980. We O 1~., . 9
,hcven't proposed that.
$l
~
'f BY MRi b2LIATESTA:
15 i j Q I realize that. I'm just trying to find out 16 what it's going to cost eventually. But if we were going to 17 l catch up in 1980 alone; if this Comission were going to say
. r 13 today, We're going to make a comitcent to put Met-Ed bach i
^ g.
! where it una prior to Erch 28, 1979, andwe'regoingtodsitj 20 by January 1st, 1981, we're talking about an additional
~i'
,i $150 million in fuel c1suse revenues, aren't we?
EN A Well -- I li vu "i! Q Just approximately. G.; - . !!
*' A If your definition of "back where it was" is to ,
g I 3
~
j get it acan to a deferred energy balance of $26 million, as ttC* Irt.C2: c: f.!A !CEf. t!! . - C7 II.1.C C? 71; .LC.7 /J."s.*. - ILU1 t!3CU tC, Pl !7110 1640 016
Y Hnfer-Cross lig ? bv 7-1
! we've identified it, by the end of 1980, that's what it could 2' I require, yes. I i .
3! Q And thnt would put you in a state of, quote, ; 4 " normalcy" January 1st, 1981 vis-a-vis your Net Energy Clause?l 5l. A And would allow a substantial decline in the j 6 I j energy cicuse factor at that point, yes. l 10-14 ,7 i Q I agree. I agree uholebeartedly. So that's ! EJ p $150 million in Not Energy Clause revenues to bring you back l DY \ li to normalcy. You've already identified $49 million in March t I 10 ! i 1979 noney in base rate revenues to bring you back to normaley; n - plus approrismtely another $50 million from son:ewhere to pay
., t
- e
! for cleanup costs to bring you back to normalcy, is that '
13 ! v corroet? i 14 ! MR RUSSELL: Well, if the Commission piense, I 15 DE-2 has been raised in the questioning here. TMI-2 is not l 16 sn issue in this case. I hsve abstained from discussing 17 DE-2 simply because it is not an issue in this case. But it 10 caems te un that if it is going to be raised as an issue, then; d i 19 ] certainly ve want to state our position with respect to it, i
~
20 l 12. IMIRIESTA: The only questica I've asimd i yl uith regard to TAI-2 is about uhat the cleanup costs project ; i : ynhtob2, uninsured cleanup costs, cnd Mr. Hafer hnc responded l g ! 1;.b:$50 million. For my purposes that's the only questien I have, ( l g 7./. p end his answer is satisfactory. j s 25 ! ntt; ACTING CHAIRMAN: I think that Mr. Russell ticnme:: c w.ncun, ive.- a : . :.ccr:rnt.t.ew en. - nAmosun=, r>A. tm a
. . .1MO. 01_7_ . - -
s Rcfor-Cross 120 II { I has stated it correctly. TMI-2 at the moment is not an issue {
$/
2lbefore us. TrII-1 ic, and I'm still wondering why you haven't j 3 pursued that. l l i
.g ;, Im. MAIATESTA: With all dua respect, sir, the 5 5 lissue hafore us isn't Tt!I-1 or TMI-2 It's Metropolitan ,
! i 6!{ Edison, and uhat I'm trying to do is get the fullest picture l
!! ( 15
?"of what it's going to take to put Metropolitan Edison back i 1
8 juhereitwaspriortothateccident. To rce that's the ;
- c. i, 9 l question that tra cast resolve *oefore we get to the key legal l 0
}
10 j! question of uhather this company ohould be continued as an :
- 1 !
- .iloperatingut111ty.
l; 12 1 So I think I've gotten answers. to the questions { ~ 13 I had today. I'll defer any further cross-eramination of Mr. 14 j!Hafer. l g' i 15 la. EsEER: Escuse ca, Mr. Maintesta. I didn't { l That ! 16 j)'caswer ths very last question, and the answer is no. . t 17 :misinterproted tha numbers which I recited for you, and I will - 6 1 IS ;argain tell you -- 19 THE ACTING CIMIIS!AN: Just a moment. In this r 10 interchtn;;c there are some of us who have forgotten what that b t 22 Jguestion cas. i tj { 72,lj Ifil I MAIATESTA:' I could repeat it, I think. 1, 15 [ TIi2 ACTING CI?AIIGI.4 H: Uculd you try? i b 20 IR, IRIXIESTA: 14y question was that Mr. Enfer p V l 7!!;ihss s1 ready identified an 18.1 mill increment in the Net U
- :n=:.e:i va:.nc- a .. me. -- a n. n.eenru.:n xn: -- wmana. ea. srs sz
- 1640 018
II l Hafer-Cross 121j 1 Energy Clause as the amount necessary to restore the Compsny 2 ; to its pre 'IMI-2 status as of January 1st, 1981 as far as itsi 1 3 ; Net Energy Clauso goes. i I 4 f And I suggested that would be. appro:imately ~
!! $15U million in additional revenues from that clause over its ,
i .0-16 6 ) existing lovoi for 1980, and Mr. Hafer apparently agreed.
.i .
l.
'll He may disagree at this time.
8 I altio identified or referred to Mr. Hafer -- t
?, TE ACTING CHAIRMAN: Is this all one qusstion? -
10 l 1R.' MAIATESTA: Well, I'm just setting it up, 1 l 11 ' sir. i 1
~
12 Hop can he answer that THE ACTING CHAIRFAN:
) z3 question yes or no?
It unuld take half an hour. 14 1R.1&TATESTA: I think once I explain it I can 15 , ask a yes or no question. I just want to restore Mr. Hafer -- 16 um ACTING CEAIRMAN: Well, can we have a couple 17 t like that, questions that require yes, no, th*.nk youi 18 MR ' 1%IATESTA: I wish we could. I wish we 19 could. 20f THE ACTING CFAIRMAN: Mr. Malatesta, your time l' 21!! is drawing to a close toany.
) "I
?.t h 1R MiTATESTA: Uc11, I'll ask n very simple f i.
t
'5hyesornoquestion.
I
?/.'- BY MR. IETATESTA:
hi p,, , 23 Q Mr. Hafer, you've heard me refer to the various
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(j Hafer-Cross 122 I { i f! costs and you've referred to them yourself. Is it your h 2l- testimcny tcany thst it could cost apprcrimitely or at lenst ! 3 $250 million in additional revenues for Met-Ed to be restored! i
.-) i to its pre-TMI-2 accident status?
i 5 A No. g { h I 64 MR. IMTATESTA: That's the inst question I i l 10-17 t 7 j have of Mr. Hafer today. I will reserve the right to further S cross-examine him at a subsequent tiu;a. I also reserve the 9 j . right to cross-examine Mr. Graham at a subsequent eine. l
!! i 10 l TE ACTING CHAIRMAN: Ccasissioner Shanamsn i t t 11 ' has a quantion of you, Mr. Mclatesta.
l' l 12 o 2-COICIISSIOER SHal& MAN: your underlying questions, but Mr. Hafer's underlying answers It seems that not only 14.; there was an underlying assumption in this last question and i 15 ! answer perica that TMI-1 would be back on line September 1980, I I i 16 ! Are we going to be getting into the basis for thnt nasumptionj' 17 i IE.' HATATESTA:~ Well, Met-Ed has submitted
?.
18j exhibits thrcugh Mr. Arnold (phonetic) that will get into s 1 9 !l t h a t a s s u m p t i o n . I 10d IR. RUSSELL: His testimony covers the TMI-1 I U 21g restart si.tuation and its present status before the NRC. l C ) 22.jj TE ACTING CHAIPJEN: At this point -- yes, sirj' il ' 23'[ Do you have a quection? M MR, BOTERS: Yes, sir. I'd just like to ' M L 23 j respond to that, t.:c'Mi%C!! c ?*f.* Ct*/v*.. '?;C. .17 !!. LOOXWC1CW MC = HAR7t!S3U:tC', PA.17512 1640 020
es
})
p 123
's 1 Since the issue of TMI-1 and the NRC 2 l proceeding was raised, it seems -- if that's a relevant aren l l
3 , of inquiry -- I would suggest that it is -- it seems to un i 1
.f that in light of the fact that Mr. Hafer was responsible for 3 1
5Il the drafting of and the considerations that went into the ! 6 Petition, that it would be appropriate to receive testimony i
?* from him on that subject at this tinn.
8 l ! THE ACTING CHAIRMAN: At this time? LO-18 1 l f i MR BOWERS: At some time. l 1 ; 10 THE ACTIIG CHAIRMAN: Duringtheseproceedings?f
! j A
1l 16t. B0iERS: Yes. I'm prepared to ask those ' m"
,o
)i questions I
right now if the Coc:aission wishes to do so.
^#
l THE ACTING CHAIRMAN: I'm wondering whether you
*A L
can hold. 15 Specini counsel to the Conznissioners for the 10 purpose of thase proceedings is Mr. McClaren. Mr. McClaren 17 has, nt our request, developed a series of questions which he ' 18f wishes to lay before the parties. 4 1Ch Do you have copies of them? 0 20p MR, MC CIAREN: No. I just want to place on I ti ! 21ll the record a couple of requests. 1. 13l! THE ACTIIS CHAIRMMII Do that. i i 2h . MR. MC CiAP.EN: Mr. Russell, the Com:nission, in , 2f its Noveuhar 16th pro-hanring order, requested that certain i 25 i data be placed on the record, specifien11y four .vonr projectic;is
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It i 1' 124 f { 1 of significant actions by the companies, sources and uses of 2 i funds, revenues required from ratopayers, and revenues that j i 3 would be required from securities financing. Do the ' i 4 l Respondents plan to put that data in as a specific stateent i i 5 ' or exhibit, and tinen would you expect that to be avnilable? ! 0-19 ,, D IG. RUSSELL: Well, as I indicated to you in-7 , formally and as I indicated, I think, to the comission at a { 8 pre-ha=. ring conference, Met-Ed and the GPU sys tem was this I 9 ; past number of week s in the process of trying to put its j 10 i budgetprojectionfor1980andbeyondthatonacurrentstntus!.
- 1 11 ! Tnst situation has reached the point where runs to cover such i r
12 I projections can now be made with some reasonable satisfaction C 13 as to the presumptions that are cranked into them. ar {- 14 But one of the rac1 problems is, What assumptions l 15 . is the Comission interested in seeing? ITnen you say I 16 " required revenue levels", that can mean many things to many i 17 l people. IG l Row, we are open to any suggestions as to what 19 the Commission would like t o see by way of assumptions l 2D reflected in those forecacts, both by way of base rates, as i i i 21 call as energy clause revenues and uhon any change with 23 ! respect to them may tako offect. n ,
'/J:$ Eccause the nbility to finance is certainly n l C I M ! function of your revenues. The ability to construct is i
M 25 ' likewise a function of that, and the matters nre all inter-f!CIGOAC: r; r/At:LW.L. flic. = f T Fl. L'JORt*ILLOW .%*L - EU.:tR103UttC. ;%. t 7113 i640 021
r 125 ('- 1 connected and integrated. 3 i So if ycu unnt to give us a full rein to let 5 , us pick all kinds of nscumptions and unke runs through this ! 4 l uhole sequence of events and gi.re them to you, we ore nov 5 in a position to do so. If you htve any ptrticular strong 1 6 i preferences as to the assumptions you'd like to have cranked
?
? ' into tham, we'd be happy to accommodate your views.
8 1-2. MC CTAREN: Mr. Russell, I think the 10-20 . 9 . essential purposo of having this data.is for an analytical 10 ' tool. It would ba useful to have the Respondents prepare it 11 - reflecting what they believe to be the correct essumptions n \ d e\ so that the Comission has the benefit of being able to
)
13 ll evaluate the Company's management judgment as to what it's i 14 ! facing over the next few years, and, in addition, to state 1 15
. the assumptions clearly so that it becomes useful to change 10 the assumptions to see what impact thay have. We can pursue 17 that as well.
18 12) RUSSELL: Well, tinat you're saying, then, 19j;i is you want our assumptions and our judgments as to what 20l; this Uczmission ic going to do in thic proceeding -- one of 21 l the precent proceedings before this Comission as to whether J2.' or not TIII-1 ic included or excluded from base rates and at c i D tinat tima in 1930 that inclusica or enclusion will manifest M itself. You want us to ecim an assumption as to what this 25 {commissionisgoingtodecideinanotherproceedinghfors
, ; e : w.= u mem ru=. - e n. x.e:r:.w.m .we. - m.nms:ino, m. m ra 1640 023
i I 126 1 l' this Ccamission right now as to the energy clause l i
<g le
{ l 2 this Co=ission trill permit to be collected by Met-Ed during i
.9 1980.
.) And if you're satisfied to have our assumptions 5 or our preindgments as to what this Comission is going to do l
\
10-2; 6lonthoserespectiveitemc,wellandgood. We'll give you our 8 1 7 estimates, I guess, without pre judice on anybody's part as to ii e' t/nat the Comission will in fact do. 9j MR.' MC CLAREN: Mr. Russell, we're asking for, I l' i 10jf number one, the companies state what significant actions i 11 will be taking place, and that's clearly within your ! t l's ' possession better than anyone else's; your projections and O 13 ' your sourecs and uses of funds, and I would assume that your 14 financial people are prepering such projections routinely, 15 although perhaps not over a four-year period; your assumptions l as to the revenues required from securities financing, and ' { 17 l again I would assume that your management would be making j l 10 e chase kinds of projections, although perhaps, again, not over ;i J 19 ! four years. l l 1 M.1 And you make ohnterar assumptions you think are ; i 21i 1 reasonable as to tyhne rate relief will be granted, but in f9etl l 2,I.ytherequestinforwhatratereliefyouthinkisrequired. i p. 23 [ In other words, the question or the data reauestl G I 1<.]I is intended to elicit' your estimate of what the ratepayers I 8
~
m 9 25 ) are going to have to contribute to this company over the next I f.*C";27.C2' e T.!AT:C;t.*.. !*f0. - f.7.":. LCc'*W1 low AVL = I!AT:li!DJU!tC. FA. t7812 1640 024:
x 127 T n~ j f our years . 9 j . 2l MR RUSSELL: Wall, again, what I must tell youl li i 3 it. Meclaren, is that what this company -- nmong -- shall we 4 l go back a second? 1
)
5'l Among the maior events that you want to have t t t - 6 ; some information about are securities issues. Now, 10-22 7 securities issues in any permanent sense are very clearly n i 8 j function of earnings, and earnings are very clearly a P l function of revenues. 10 : How, again, all of this com back to the 11 point I'm raising: What ass =ptions are to be cranhed into i 12 I this system with respect to base rate revenues, with. respect 13 I to energy clause revenues? And they are crucial to any ji 14 ! projection. 15 ; We are clearly in a position to make the runs
't 16 j based on the assumptions that nre to be selected, and we're 17 simply saying to the Commission, If you have some iden as to 18 l the assuaptions you would like to have reflected, without i
19p prejudice to the Commission's prejudgment or otherwise, as to 23 ' what the runs may shcw, we'll be glad to do them for you in 21 ; accordance with your preferences. 22 , It may save time instead of having to redo them 22.I c after you sec uhnt tre may have selected as the assumptions F ; k 2( and ycu think 1 hey cey not be realistic or desirable assump-t 25 ltions. n:i- .ew n =:.-.erx.. n. - = r:. t= =m:a :.e:1 :.v=. - n:mmeuna. r m s: y _% ._ 1640 025
f 128 { 1 t IG. EC CIAEN: You make the assumptions, it . 3'; Russell, and state then clearly, ! l i
$(i ER RUSSELL: All right. If that's the Com-l-
i 4 i mission's decision, we will --
! I 5 TE ACTDIG CHAIRMAN: I think that's the second :
6[! time we've articulated that request to the Respondent. i i 0-23 7 12. RUSSELL: Well, I think we've stated tMt i f 2 8 . we're in a position non for the first time to be able to malm. ' t , 9 jtheseruns. ! I! 10 MR EC CIAREN: l It might also be useful if therel p 1 11 j were some correlation -- at least comparability to ths 'tinds l 12 [ of figures and schedules you prepared in this Exhibit A-2. ' O 9 13 l I'm specifically referring to things like Figure 2, Tabic 2, ! i i 14 l and Figure 3, where you've projected your short-term debt + 15 balance. 16 Let m also ask, Are you preparing or perhaps in 1 I? i response to an interrogatory a breakdown of the data that's 1 13 j presented in E::hibit A-2? I'm thinking of the columns which i 19 d appenr in the first two or three tables of short-term debt i li I 104 requiremats other than deferred energy. Will there be a j li 1 21 l presentation of chat goes into those numbere, whicharestated! I 2% l simply es monthly amounts? l P i
} 10.. GPJJ!nM: Sac, I think I cc.n hsip that. Thatl D 23lb 24I! util be shown in my testimony, ie. MsClaren.
i I g I 25 ER MC CIAREN: Frc. Grahsm, with respect to the u ru.w e rumn.. m. -:.~ :1. i.e=em:.wnve. - warueet:aa. n. :m:: 1640'026
n 129 1 revolving credit ngreenent, there aremporting requiremnts 3' under that agreement to your agents or the maior banha, nre l t t 3 ', there not? ( 43 ER. GRArelh Well, to all of the banks, yes. 3 to-24 i ' 51 IIR MC CIAEEN: Can the companies readily mke t 6 I those reports available to the Cc;nnission for placennt in 7' this record if it's appropriate? l 0 MR.3 GRAHAih Yeah. The reporting requirennts Pj are for incredible voltmas of material. They seem to want t; 10lj copies of everything. Tney get press releases. Thay get 11 . reports to the United States Departent of Labor under 12 l ERISA. 13 There is no, for instance, periodic summary dhi or anything like that. 15 1 MR. MC CLtJRENi There is no restrictions, then, 11 , on making those public, I take it? Tt -
- 12. RUSSELL: I think no can make them i
18 availabic for inr.pection and copying instead of using them 19 l as an exhibit and have to run off reams and reams and reams
- 20) of paper.
t 21/ IE. GRAFldh I would cay in the six months sinc o 2?.!'j the revolving credit's been put togethat there's probably beeni p 22[ close to two foot of Interial sent to the banks, to each of k T4 l tha 45 banks. So I would be happy to make it available, but i 21! an awful lot of it is just that they seem to ask for copies 1
, . , . .:mx:: n eenm.t mc. - m:. 2.: rmu.e u r.vr. - mrxesse. r.s ima a . ,. , .1 1640 027
h i I 130 i { 1 of everything, j 2d E. EC CIAREN: All right, ifall, we can make j ll l 5j a specific request later. Thank you. .' i i 4] TE ACTING CIBIRMAN: Mr. Russell, we will . 5 } conclude nee, but ycu will be ready to do what temorreu i 1 0 l morning? ' 10-25 t l
? l E.i RUSSELL: I just unnted to review ef.th the U ! Cc= mission what we would contemplate to have available to 9 see if there's any further coments or questions.
10 17e would propose to have Mr. Esfer here 11 tomorrow, Mr. Sims, Mr. Newton, Mr. Schleiker, Mr. Ihtff, 12 and Mr. Carter to the extent any or all of them are neces-1..0!i sary for -- 14 TE ACTING CHAIRMAN: Could you repaat that i 15 list? 10 NR.' RUSSELL: Mr. Hafer, Mr. Huff, Mr. Sims, [
. e 17 ; Mr. Newton, Mr. Schleilmr, Mr. Carter.
i 16] TE ACTING CHAIRMAN: Do any of the parties i 19 j have any careents or questions? E0h E. BARASCH: Mr. Chairman, I just point out !
'i l' 2'.; from the Consumer Advocate's point of view it's doubtful 22t that r.nch effoetive cross can be done with any of those i
! i
- 25 [ people tcmcrrow. Perhaps ne'd have a feu questions, but i b 2F I there ren117 hasn't been nn adequate opportunity to discover i
! g 25 ; and prep we.
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1640 028
q li ; 131 ; So we won't probably hcve very much for any s 11 ! t
, c 7.; of thoca people. Perhe.ps scre quantions if we can come up i 3 ,'_ vith cozething tonight. t
,1 i
9 UR. RUSSEIL: Ucli, the sub' ject m9ttor of 1 , t 5 i their testicosy is not anything that's new to the parties i 10-26 i ! 0 ! tine got tha Petition bsch on November the lat. These . i , i . 7 tritnessco are simply supporting the respective areas of the ,i 6 i
?ctition for which th2y cupplied data: Mr. Hafor to formu- !
I 1 9 Inte the overall picture. 10 l TE ACTDiG CHAIRMAN: Very well. We will f li i l cdjou: n at thic tim 2, to reconvene in this room comorrca ' 11 lI, . 12 ! cttnn c.m. I %s ! 13 (Whereupon, at 4:59 p.m., the hearing l 1 S1 in the above-entitled matter was cdiourned.) i E I 15 - i
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- m. 1 OERTIFICATE 39 d
il 5g I hareby certify that the proceedings and 3 (i.l ovidence are costained fully and accurctoly in the notes N enhen by me on the hearing of the within cause before tha n i
- 0. ;! l: Penncylvania Public Utility Cocmission and that this is a )
f i Il' 4i[correcttranscriptofthesaco, a 8'I MOERBACE & MARSHAL, Iht. Ej i 1 10 i By_ , N [%j a Official Reporter B y,,_ [ 't O 31 orttet i aceorcer 14 i \2-ID 19 i d, Roperted by: i 15 Janas P. O'Ucra f Deborah K. Hickey, R.P.R.' 16.! Mohrbach & Mcrshal, Inc. '.
!! 27 Korth Lochaillow Avaqus!F/,l'i,'fi[il h'l6il y . Ii1, 17!j Harrisbars, Pennsylvanigj:1,7112m);!lhiM U'! ' ' ' '
1: 1%e s ti ) i-10y i-q (The foregoing c rtifkation ~ of this tranceript 6cco not e.pply co .say reproducticn of the snu:e by any n:asns i cnless under tha diract centrol r.n5/cr supervision of the i O :U. ic2rtifying rapcreer.) i
- l 29 ,
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/ . 2 THE PENHS'.lLVAUIA PUEL:C UT:LITY CCD ISSION 3 - - __
4 1-79040308 - Pennsylvania Pablic Utility
;/I.n re:
Corniscion versus Metropolitan Edison Company, Sj; et al. C Further hearing.
? _____
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\ Harrisburg, Pennsylvania
/ 9 December 11, 1979 i 10 '
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15 . Pages 132 to 278 l 16 : 17 : I 16 i 19 < 20 21 , 22 MOERBACH 6: MARSHAL, INC. , 27 North Lietwillow Avenue 22- L.rr.:sturg, Fenusylvania 17112 e
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! I 1 Sefore 2 THE FENNSYINANIA PUBLIC UTILITY COMMISSION 3 -- --
[ 4, .In re : I-79040308 - Pennsylvania Public Utility Commission versus Metropolitun Edison Company, 5 et al. I 6 Further hearing. 7 ----- 4 6 9 , Stenographic report of hearing held in Hearing Rocm No. 1, North Office 10 Buildinc. Harrisburg, Pennsylvania, , i 11 Tuesday, December 11, 1979 12 at 10:15 o'eloch a.m. 13 ----- 14 i BEFORE: MICHl.EL JOHUSON, Acting Chairman SUSAN SHANAMAN, Commissioner 15 l JAMES H. CAWLEY, Commissioner
! LINDA C. TALIAFERRO, Commissioner 16'!
li APPEARANCES : 17 h
' SAMUEL B. EUSSEL, 23 QUIRE 18 ; ALAN M. SELTZER, ESQUIRE W. EDWIN OCDEM, ESQUIRE 19 lRyr.n, Russell & McConaghey
! 530 Penn Scuare Center 20 ' P. Ca. Box 699 '
! Reading, Pennsylvania 196c3 I 21 pf For: Metronolitan Edisor Co. & Pennsylvania Electric Co.
22 JOSEPH J . WLATESM, JR. , ESQUIRE
! G-28 Ucrth Office Building 23 / Hr.rristurg, Panns,"1vania 17120 d For: Pcnnsylva;2ia Public Ub.'.lity Cormission Trial Staff ,
M ' ( L' ,, D T U j[r M !', , .
'.If l' * *J l-AM 8 DW W .. ,,::3
- 1 StCHftE/.CH C M AP.SH AL. INO. - lf' I4. LOOICWILLOW AVE. - 6; ARRIS CURG. PA. 1711 P.
1640 032
m o m-++ -- ==>e - - . m es a.% -.-.geime-ee4 . e ,aw-. . . - - . s 13 3 E Ii i 1: APPRARAMCES (CCNI'INTEDh s 2 d TJ.RRY B SELEOWITZ, ESQUIRE g Taidoff, Ranger, Selkowitz & Adler, P.C. 3 l 3552 Old Gattysburg Road l Camp Hi.11, Pennsylvania 17011 4 ! For: Thron Mils Alert, Inc. l 5LMEURICEA'FRiTER, t ESQUIRE ' i McNeos, Wallaca & Kurick 6 i P. O. Ec2 1166 j j Harrisburg, Pennsylvania 17108 l 7 For: St. Regic Paper Co., et al 8 G l DAVID Mi BAPASCH, ESQUIRE .
; 1425 Straaberry Squerc !
9 l Harrichtwg, Pennsylvania 17127 Fcr: Office of Consucar Mvocate 10 JOHR E0 ERG, ESQUIP2 11 i R. D. 7, Ec 305 l~ York, Pennsylvanic 17402 12 Fcr: Eclly Ecek; Deep Run Fars 13 . PATRICIA SMITH i Bar 52, R. #1 14 ' Etters, Penncylvania 17.M9 For: Rawberry Township 'IMI Steering Committes 15 ICJISE DUFOUR 16 ' Bc= 10 Ocks,... Pennsylvania 19456 17 , For: I.ir.arich Ecology Action 18 AISO PRESERN 19 STTEN A) MC CIAR N, ESQUIRE Deputy Chief Counsol 20 Retas Divicion - Lan Bureau G-19 Ncrth Offico Scilding 21 Ecrrisburg, Pennsylvania 17120 Sp cial Ccun:3c1 to th2 Cc alasica 22 ,
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F N b i 25 ; i-tOHftBACH a MARSHAL. It!1 - 27 N. LOCKWILLOW AVE. - H ARRISBURG. PA. 17113
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1640 033
G4- a f , 1 INDEZ TO WITIESSES 3 2 l 1 3 l RESPOIiDENT$ DIRECT _ CROSS REDIRECT 4 jRobertH,Sims......................... 140 143 170 5 ; Edmund Newton, Jr...................... 177 182 - 1 1 6 i Ernes t W. Schie f.ker. . . . . . . . . . . . . . . . . . . . 230 232 - i 7 , Bernard H. Cherry...................... 236 240 - 8 : 9l 10 ' f i I I 11 l 12 , e e i
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s 13 6 {o 1 !,l tie ACTING CFRIRITAN: Good morning. I suppo E R
- 2. l! that un cca recuse. I usvar thct3gitt that I usuid live to ft 1 I,[ sco eno acy omn you couldn't haar ma. The usual ordar of 0
.:[ things ic -- and, John, you'll h ar ca cut, John ,
ft 54 (unintelligible) -- that at certain tinas all you could hocr - I f j uns me. *
't 7 l Of course, I don't want that to be tin case, I Bfeitbar. Is this a heppy compromiso, John? Do yen think I a .
En!! can be Encrd? . _1 ISb VOICE: Very nicely.
- 11 y, THE ACTIEG CI9.IPlnH: Thank you, John. Yan t2 i sec, the Chair is seching to reach an accon::tenction with ,
13 l ths (unintelligible) and Stato. ,
! t r
vr i Mr. Racscil? - l 13 j 52. RUSSEIJ : If the Cc:n:nission please, you , a ? 10]. ncy recc1*t. ce the session -- at the time of the close of the ;l F f 17l session yacecrecy it was contemplated that Mr. Hafor would - I
- r. i 18;! be here tcScf cad Mr. Grahcm weald ha here tomorrow. After t
e'
'd!', the ceccion th2rc was -- cnd since the session there's been h . I i 1 5' qf scna disccccicn by ocuasel, cnd sc a counsel have expressed j:
71l the vie.t- that in croca-cramining with respect to tha general !
- ,,) picturo ccsc;:icted with tilic petitica, that there uns so.
t t
.~S raluccat::c tc crecc crcW.nc eno of these witnesses without
( ' i the prcecnca cf the othsr so thet chethar it's tiu matter i 22! g;,ttcg , tea e7m c1,uy,, gutc3 t, p,tc= , tty ung,y 3y, L-- mrm : - e actr... ::1. .- r, . .,..m- .r rei f.w - :!r.: e r.c :. 3,y,,, d{ 9 f '%f
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137 4 I t ' { g n or the financici enttera under Mr. Graham, thay could got anf t g 7 !!.; anc;4er enc way or the other fram one of the witnesses. i 1 jf ' Sfy . Tic *ro very happy to try to acco=codato that (
. viou, and ca offer several alternative arrangorants. Ifthef
< hl 5 h, Commicsion canto It Ecfor lure today, we've arranged that
. t
, 6 i tro can have him lure this afternocn. If the Commission is 1-2 a !
7y uilling to unit for a joint performance again on their part I ,
- ,n, 1
' ,r! toscrrct:, no ecn have both cf thoc bare tonorrow, i
i: . F j! If F.r. Hafer is not requested to bo bare i n i 10 h individually thic afternoon, then us would propose to mke . i e f Ilp m:::imum use of the hacrint; tima to bring in a further stit-1 12 i nasc, It , Cherry, so we enn fill today as thoroughly as we pl can. i {, h 14fi So w2 ash the piccsure of the Commission. il 15 ll Should we have both of them here tomorror, or shall wo, as j 16l l?we prericucly contemplated, havo Mr. Hafer here today, this fl 17! cfterncen, cnd Er. Grahan here sapcrately tomorrow? u IE[ IIE ACTING CIBIPFAW: Er. Russell, I regard l If P i
] this cc being coro tnnu carely the placcure of the Con:nissior,,
i 2~-[{ for the comranicace cud probicas that cay confrcnt tha , l ' 21l!t partioc. 1, t
.4y I'll in';uire of the Staff chat your reaction i N, to it , Eus cil's propcacI. ic.
L.1.! IG., I?.1AESTA: Ife11, IC . Russell has alrecdy $ M;j discussed tita catter with us, and sco agree it would be e h e n nr reu n.1me.: me. -n c. r.o:wuow .w .- m.cmrone, m ime
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3 . 130 q .- =. I'd fk preferable to hava Mr. Ecfor cad D.. Graham togetbar cinec a
- i t
their direct testiam., y uns presented together. 2' ' n 51 TE ACTIN 0 CIEIRM6H: And ycu therefore would - t . 4[ be a5rceabic to his calling Mr. Cherry? y Sh IEJIGIATESTA: That would be fine with us, , 1-3 0 6 1{ cud we'll tcH: to Mr. Hafor and Mr. Graham tomorron.
?
? ; TE ACTDiG CIRIRMAN: Consumer Advocatc?
3 6 IE. BARASCH: Uo won't be having any further d F cross of Ecfor er Grahan this week, co it really dcasn't p 101l = tter. As far as Mr. Cherry is ccucerned, I uculd just i1,i point cat, chother or not we ocaid be able to coni:uct full G .
.'2 h cross uith Mr. Cherry this afternoon -- I definitely couldn't' i
13 f, be held to tiut. But es have no objection to that. Y. TEE ACTING CIEIRMAN: You're not going to be ' I 15 ) held to cuything beenuce less than a uceh's tinn has elapsed 16 l - cince you ceu his materici, and I promised ycu that you uculd 17 lbcv;it. Any of the otlur parties? l 10 i 1:R. SELK0WITZ: No objection. - il 19 Yes, ma'am? TE ACTIU3 CILIRii4N: 20 j,i 19. SMITH: I elli hcve some questicus regard i y i T1li ing -- for Mr. Enfer, so I'll hold off till temorrew, I guess?. EU TIE ACTIKO CH&IR'iaH: Mr. IInfor at.5 Mr. Grahar - M[ could be evciltble temorrop? ,
~
2 IE. IiUSSELL: Yes, cir. TiiE ACTING CIRIRMAN: Does that resolve your ux.n.cn c. m.wv: me. - a r:. t==::v:::.:.ev: w. . - mmw.mc. n 1mu o*
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W 1640 037 _ wen wA1L1h V @\ n -- -
1 139 ( E: . ( 1 probica? , 7, jf 7G. S2ETH: (Gos turo) . c L. . < Sj T. E0TdU ..J objection. 4 j THE, 4GT11:G CrulIR14.H: My colleaguec? t ? 6l COI2" IDER TALIIGERRO: No objection. .-4 6 {f I TCS ACTIEG CHAIIUMH: Ho objection. Mr. 7 j Russell, uc ll proceed that uay, than. i { p - Sy Ba. rsSSELL: All right. We will proceed to i 9 f! call a nuc6cr of the uitnesses cho cupplied detailed data in h a ' 10 P, timir rocpcetive arocs of recponcibility chich Messrs. Hafer . h 11" cnd Graiun tien used in prosenting titair overall picture. '. 0 12 j Mr. Sica. ( u
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F2 E0DERS: Mr. Chairmen, enn I just simply j fh il i M cicrify for ny c:m bansfit, is this the only change from the l t i 15 0 schedula of the cppearance of witnesses that is going to be i i 16[ cnde for today and tomorrc;7 from what was set forth by Mr. I s 17ll Encsell yacterday? i j' I
))
15 L2. FESSELL: The only change, as fcr as I'm , 19! ! cuare, in tint we till have Mr. Cherry here this afternoca j f 20; inctead of hs.ving Mr. Ecfor here today. ID . Hafer will be : If i 21 Imre tonornca, j
; i 22 : 1.R. TOIERS: 13 . Arnold will be appearing i
;c :, eencrrc:7?
M MR. RUSSELL: Yes. $ 2s , l' '
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Sins-Direct 14 0 r, t.
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,5. [! ROBERT H. SIMS, called cc a wi.tness on fi bp bebilf of tha Respondent, tectified ec follows:
A - !! oa
.$ DIRECT EXAIEMTION 5y BY IGL. EUSSELL:
p 1-5 5{i Q Will you state your nce and cadress, please?
* ;l A Robert H. Sinc,100 Interpace Parkway, d
01, Parnippeny, Ec;7 Jiersey. - h 9p
- a. EDSSELL: I'm sorry. The witness hasn't i
10 ', yet been sworn. I'm sorry. 11 [ (Ritness sucrn.)
- 12 dlk FfIEl. RUSSELL:
i 13 O Now, under cath, Mr. Sima, is your nam and l l'.' I cddrecc atill the cam? i, .
.L;* Jt Tec.
j l 10 Q Mr. Sims, I shoa ycu a statement which hac l
} (
.a ' boon mvhed for identification ao Ibt-Ed/Penalec Statemnr. I 1G[ cnd ash you rhet~mr that has been prepared by you or under .
19 i your supervicion. , e 10 !! I:. Toc, it hac, l 27 l Q If I cerc to ech you todcy the same questiens T..i that anpct: in time ecstanent, t:on16 1:he ans::cr0 b2 the staa
?? ' cc thosa contcins.d tiero? '
F . 2/r!, . 1, - A Tec. they would.
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t d: ** ! Q Hr. Sims, cculd you describs briefly the ! l ! me.w e msw .. me. -- = r. :.c u .=.c.nv:. - m nr.i x:m, v r7: 22
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Sire-Direct 141 g _ _ - _ _ , P ( 2f i
!i substance of ths. testinony on your part as contained in j 2 .!l that statecant? .
L A The testimony describes basically the effort If!!
- f. j that GEU has made to obtain alternative sourccc of energy I 5' as centrasted to the normal supply from GPU in order to 11 I 6! provide c checpar cource of onargy. j 1-6 7 . They basically involve two paths, if you willi t
l Cd One is that thrcugh PJM by different cont actual arrange- I h f!j ments eith PJM -- a special arrangemant, f.f you will -- l i! 10 0 which could produce a lower cost on the part of our custo- i a 11a $ cars. ! 11 i The second path is to explore all the out-C 13 i i oide areas cutaide of tim PJd pool ubere there might be i O i i 14 some source cf energy which would be cheaper than buying ! i 15 from PJM. Those arrangements actually encompass areas as l 16 ! far west ac Illinois, as far north as Canada, and even on2 f i 17 l company ulthin PJE l i f 13 ] But they do have sono adverse financial l-a I? i implications in the senac thet under ocan of these arrenge , i : i 1 SO g mants it'c recascary to pay in advance, as contrasted to I, 11[p tha noreal billing precedu c, chich, of course, would cost i t M.p coney. l t !
... ;t Q And you, ac Vice-President of Power Supply ,
2.' li of GEU Service Cc poratien. care in charge of those efforte h 25 ! A That's correct. I t:er : u.ca nune::..: n:c.- r r. :.ocem .cw e,ve. - treu.:sevne, rA rma 1640 040 .
r Sina-Dtrece 142 0 - h i 1!! Q And thace efferts hcvc oncer. passed what parica
. i; .
2 ; of ti:n? , N
- Sc A T'c ey started almost ittedictely cfter the TMI it d
.$p accident cad cro ceill continuing. In the case of the out-i (
5 1 aide purch:ses, those are going on. They were effective -- t
- i 6 i secreed cetually on May the 6th er 7th, and it continued on ;
! t 7 l through theca various arrangeur .ts. .
i 8 l The cork with the PJM p:wer pool to try and ! i P{ arrange a icxer cost agrcocent was reached and uas brought h
.O p befcre thi.s Cerrlission in Octcber, cud ce received an order b
11 t which approved it from the standpoint of Pennsylvania, - a 12 ! It .will probably be filed with the Cc= missions 13 j in the State of Maryland and the District of Colunibia this
,ls 1
j week by the etro companics in that area, who are also part of 15 i> the PJif pc:rer pool. It could be too companies who would be i 16! providing oo:z: of the poner at 1crer cost. - i . 17 Q I.'ere there any possible cources of economic ., i 16 j powar chi.ch ycu did not investigate and utilize on behnif of ; f 19} the GEU companics cince the accident at TMI? : P p 20 r. A Hot to car knowledge. We analyzed many sonrces 21 of power, not all cf which ecro economic, including up > d 22[ tincugh Ka ; Tork, Eew England. Cancda, ce far west as
~ t
- 3 !,' Illinoic . And cc go cny further would have been uneconcaic.
4 !
.M ! There ucs no entra parer availabic to the south}
a )} through the Virginias becauce of their own power, which ware t:tcxnca a w..r:s? u mc. - a n. t.c mv1u.ow r.ve -- :-1=:s=r.o.11. t111= 1640 041
e Sims-Direct 143 1 1 similar to a;srs; that is, a shortage. In fact, they were , h 2 competing with us in buying soma of the power that we did get. 3 So we looked at everything within sevan or 4 eight hundred miles, where the economics limited the 5 practicality of it. And anything that was available that was 6 cheaper we went after it. 7 MR. RUSSELL: I believe that's all we have of 8 Mr. Sims at this tim. 9 TIE ACTING CInIRMAN: Mr. Malatesta? 10 1:R. MALAESTA: I have only one or two questions 11 at this tim . 12 C 13 CROSS-EXMENATION O 14 BY Nt MiTATESTA: 15 Q Mr. Sims, on Page 4 of Statement I at the very 16 bottom you refer to the processing of your proposal to 17 eliminato tha split savings provision. Eas that now been 18 filed? 19 A It has been fikd with this Commission, and we 20 received a decicratory order from this Cornission. The 21 Pennsylvania Pouer & Light part of the deal was also fikd at ! 22 the sam tima and approved by this Comission, but the 23 Maryland Cocmissien and the District of Columbir. Comission ( 24 and perhaps Virginia also have to approve it because of the g 25 adverse effect on the companies operating in those states. NMTMDACII O MAMS!!AL. IfTC.-!!7 TL LOOKWILLOW AVC. - MtJUZIDDUMS, PA.17312
.w 1640 042
= 4 Sims-cross 14 4 1 And that is in the process of being filed, t 2 Q Do you know when it will be filed? 3 A I was told they expect to file it this week. 4 Q Are you familiar with or have you ever had 5 cimilar experience in dealing with those commissions on a 6 similar issue? 7 A I have had no dealings with those con: missions. 8 Q Prior to this? 9 A Not even nou. That's a function of those 10 companies to get it approved by their con: mission rcther than 11 us. 12 Nou, once that has been received, than it will 13 be filed with the Federal Energy Regulatory Connission in I
. 14 Unshington, which has the final jurisdiction over interchange 15 power contracts. -
16 Q And who makes the filing with FERC? 17 A The PJM pool as a whole files it as a pool 18 document. 19 MR. M1ATESTA: Those are all the questions I 20 have. 21 THE ACTING CHAIRMAN: Mr. Barasch? u MR. BARASCE: I just have a feu questions, Your' 23 Honor, ca well.
~
24 -BY MR. BARASCH: 25 ,_ , g,{, Cood morning, Mr. Sims. I turn your attention MOHMDAC*r! & Mart?NAL. INC. ~ 07 N. LOCKWILLOW AYL= HARRISEURG, PA.1711 A
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Sims-Cross 145 ( 1 to Page 3 of your testimony. I think it's about the third g 2 sentence of the answer to the first question appearing on 3 Page 3. There you indiente that most of your PJM-scarced 4 ener5y is expansive because it coms from already high cost 5 oil-fired generating units, is that correct? 6 A Yes. 7 Q And now, as is evidenced by this petition to 8 change the PJM agreement, the PJM companies are willing to 9 sell that energy for a profit of only 10 percent above cost, 10 is that correct? 11 A That's correct. Ynat is, subject to the 12 limitations. C 13 Q Sure, I understand. In your 1980 forecast e 14 that w;.:s considered as part of the case by Mr. Esfer 15 and Graham yesterday, you assued that 10 percent level of 16 profit ca those sales? 17 A I'm carry. I didn't hear you. IS Q You romanfoor yesterday, sir -- C A I wasn't here. 20 Q 17 ell, .haar with me. Yesterday Mr. Hafer and 21 Graham wore teihing about the short-term debt problems of the 22 Company, Is it your understanding that only a 10 percent 23 profit on FJM purchaces nas considered in determining pur-24 chased pozar erpense for the 1980 year? g 25 12. RUSSELL: I think that this is somthing MCMACH & MARSHAL. !?ic. = 27 N. LCC1Gv!LLOW AVE = FJUUtICBURC. PA.175 la
- 1640 044
Sims-Cross 146 1 that really is directed to Mr. Hafer, but I believe the 2 record could show that Mr. Hafer indicated that that wac the 3 assumption for purposes of the projection attached to the
/, position and he got that basic 10 percent, cost plus 10, from 5 the contractual arrangements that Mr. Sims had worked on.
6 MR. BARASCH: Thank you. 7 BY MR. BMLASCH: 8 Q Mr, Sims, do you know how much louer your pur-9 chased pcmer costs would be at a cero percent profit, just at 10 cost fran PJM? What difference would that make to the Company? 11 A I don' t have those figures bere today, but tho 12 difference between normal cplit savings and reduction would 13 reduce our peger cost by apprnzi stely $24 million a year. 14 Q Is that for Het-Ed alone? 15 A No. 16 Q It's the system? 17 A It ces 24 at the tice we started. Because of th r 18 increase in the price of oil, ne're now looking at 32 million 19 c year savings under this proposal. 20 Q That's for GPU7 21 A That's for GPU as a whole. 22 Q And you don't kncu how much more of a savings 23 would go on top if we went all the way to zero? ) F 24 A No, I do not. That questica of buying at zero 25 is one that we would like to have but nobody else is willing btO!:Itc/,c:t a f4AftCMAL. INC. = 27 H. LOC 1:YTILLCl*t AVI*. - HA2tRfC3U;".3, PA.17112
~
1640 045
Sims-Cross 147
.c 1 to talk about. g
- 2. Q I gather you were intimately involved in the 3 negotiation process with PJM.
4 A That's correct. 5 Q I wonder if you could enlighten us. Why was it 6 that the PJM companies were so unwilling to give that up? 7 Is it just a simple question of profit, or are there other 0 considerations? 9 A Well, in general, in all of the states in which 10 the PJM companies operate, the energy adjustment costs are 11 relatively similar, I wouldn't say identical, but similar 12 in the sense that the cost of purchased pcwor minus sales, 13 and so forth, goes back to the custemers. 14 And a customar who is selling power to GPU and i 15 gets a profit of 30 percent above their cost when they sell 10 power to GPU -- that f1cws back to their customers. 17 Well, obviously, they do not like the idea of 18 giving that up any more than we like to have our customers 19 have to pay that high cost above -- profit above cost. 20 Q ict ma ask you a question. Would you agree 21 with the assumption thct there would be an additionn1 i V ; $32 mill'.cn of profit for these companies if they didn't , i 23 modify the PJM egreem nt? Or are thero other options that { 24 could be available -- g 25 A There are other options which we have taken, wennucx o :nnen: mc.- u x. r.eexw::.t.ew ar - anaissuna p 7 2
Sims-Cross 14 8 1 which are, namely, to buy power from the outside. 2 h Pai proposal is on the basis of buying 3 everything from PJM, which is in effect a sure way of getting 4 power. In the meantima, cur outside purchases have 5 effectivaly done the same thing in terms of reducing the cost 6 to our customors. 7 But all of the purchases from the outside are 8 on an if, as, and when availabic basis. For example, we 9 started buying from Allegheny Power System on the 7th of May, I i 10 and ue anticipated, from our discussions with them, that ; 11 power would be available through at least ti.11 December. 12 As it turned out, shortly after that -- and I 13 can give you the exact time if you want -- they had some i I 14 problems with a stack liner on one plant. They had then j i 15 lost tuo generators on the Harrison Plant, and obviously 16 they were not in a position to supply us any power. 17 And under the contract it was only if, as, and 18 when it was available. So that dried up overnight. 19 & othar cources, such as Au:arican Electric I-20 Power to the west of them, Columbus and Southern Ohio, 21 Illinois Public Service, Indianapolis Power & Light, and } 22 those various systems to the west have had similar type j 23 tituations. And uhen it's available, we'll get it. (~ f 24 Q I can well understand that ftom your point of 25 view the advantage of the PRf sale is a certainty of supply. f.!CE":RACH C; f4A*tsHAf INC. = ?J N. I.ccKYl17.1.ovt AYC. - IIArtstiS3URG, P, L DT I' 20 OL7
- y. o ;
Sims-Cross 149 1 A That's correct. g 2 Q But to look at the flip side of it, isn't therc 3 a rather substantial benefit to PJM to the extent that they
/, have a certainty of a sale, which, if they didn't cut their 5 profit margin to you, perhaps you'd go elsewhere to make 6 those purchases?
7 A Well, I think that is the reason it gave them z. 8 little incontive to be able to make the arrangement. 9 You could put it this way: that from their 20 viewpoint it's better to get 10 percent of something .than 03 11 or 40 percent of nothing. And when I say "of nothing", that's 12 on the assumption that we were buying on the outside, as C 13 contrasted from the other PJM companies. O 14 Q And certainly, if you didn't have any desirable 15 economic crrangement with PJM, that's exactly what you'd do? 16 A Our philosophy is basically that we'll buy 17 either from PJM on the -- once tha agreement is approved and 16 in effect at the cost plus 10, or we will continue to buy from 19 . the outside, whichever is cheaper. 20 Q Do you knew boa much of foregone savings will be 21 sacrificed by Pennsylvania eccbors of the PJM interconnect if 22 this agreemant is approved? 23 A Tnat uns part of our testimony in the filing 24 that was made uith the Pennsylvania Commission when we asked g 25 for approval. I can dig those numbers out for you if you want 24CICDACH C IJA!!sMAL. INC. - E7 !L LOCXWRLOW AVE - HARRISDURG, PA.17112 _ _ _ _ .1- _ _ _ - - - -
.J6.40.048. --
Sims-Cross 150 1 them. l s 2 Q If it's very simple, I will appreciate that. 3 TE ACTIIG CHAIPEAN: Mr. Barasch, while Mr. 4 Sims is caching this information for you, I'm wondering 5 whether you could help the Cornission in your interrogation 6 to ascertain whether or not this power that's being con-7 sidered is chove the quantities of purchased power from PJM 8 usually made by Met-Ed or the Mat-Ed group, or whether this t 9 i is -- would be part of the normal purchases. 10
- 12. EARASCH: Fine . I'll inquire.
11 TE ACTING CH41RinN: I think that that's a 12 point uhich bears on this entire matter involved. 13 1R. EARASCH: I'll endeavor to do that, sir. 14 la. RUSSELI: Do you have the data, Mr. Sims? 13 TE WITESS: Yes. 16
- 12. RUSSELL: Would you supply it, please? (
17 TE WITNESS: In the projections -- and these 18 are obviously projections based on estimated fuel costs, ' 3 estimated generator availability, and so forth, which is all 20 you can do when you look to the future, is to make these 21 ostimates. 22 It would affect Philadelphia Electric to the 23 extent of cn increase of $1 million a year in their fuel cost, g. 24 Fennsylvcnia Power & Li;;ht would be $14 million; and GPiJ's 25 case, minus $32 million projected for the year 1980 on the 7 OfftBACH & MAftEHAL. INC. - K7 FL LOciGY:LLOW AVC. - HMt:t!GEUttG,.FA.17312
Sima-Cross 151 2 assumption that all purchases are ecdc from PJM. h 2 1R. BARASCH: Thank you very c:uch. 3 BY MR. BARASCH: i 4 Q Prior to the accident, Mr. Sims, assuming that t 5 TMI-2 had been available, GPU would have been a substantial 6 net scilor on the PJM interconnect, in that correct? 7 A We would have had an excess amount of capacity, S and the amount of sales would have depended on the econocic 9 dispatch of PJM. 10 Q Do you have any idoc, based upon the various 11 operating systems at the Company, that you :cohably would 12 have been a substantici net celler due to a large amount of C 13 nuclear-based power? # 14 A I wouhl defer that to Ted Newton of System i 15 operations, The dispatching function comes under him. j 16 We would have erpected to be a seller. I don't 17 know about the cord "oubstantial". I'd question that a little 18 bit. 19 Q That's okay. 20 A You see, in normal dispatch you could be in a 21 situatica where you're buying on peak and selling off peak, 22 and the net of it is the ensuer to yotre question, which is 23 uhat makes it difficult. b 24 Q. Fine. But if ue were to attempt to quantify the h 25 amount of pour that you will be buying from PJM in the event
!(OURtrACH 0 f.!ARSM AL. INC. -;":" M. LosnV!:. LOW AYE- HAR*.!BEURG, PA.17112
_ ;, _., . 1640 050
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Sims-Cross 152 1 that this cost plus 10 porcent from the change is approved by 2 FERC, uculd those be quantitics that you would characterize 3 as substantially above quantition that otherwise would have 4 been purchased from PJM7 5 A very definitely. 6 Q Jould you quantify that in your own fashion? 7 A The projections to replace the loss of 'mI 8 po:cer indicated 7,000 gigawatt hours for the year of 1980, 9 and these studies that I just gave you the cost figures were 10 based on that projection. 11 Q Maybe you could help to put it in perspective. Do you have any idea what a normal level of purchaso from 13 PJM would be so we can see how that 7,000 compares? 14 A With both TIE units on, I suspect we would have 15 been a net seller to PJM. And again, these projections do not 16 take into account any outside pool-to-pool transactions. 17 Q In terms of total sales, how many gigawatt hours 18 of sales does GPU make in the course of a year? 19 A Well, we haven't been making many because of 20 TIE . 21 Q No. I think -- I'm sorry. I think you're mis-22 ' understanding. I cean your retail sales. We're just going 23 to put things in perspectivo. 24 A I'm sorry. I don't have that information on 25 retail. No!"t".ACH O &!AMCHAL. !?lc. = 3:7 N. LOCKWitLCW AVE = HARR!85URG,.PA.17112 _. n 2ru _ _ _ _ .... .. -- -. - - -
-1640-051 -
Sims-Cross 153 ( 1 MR. PJmASCH: Perhaps for the benefit of the 2 Co:nnission, if there's no objection from Mr. Russell, I have 3 an Exhibit A-4 that the Comission might want to refer to to 4 put this matter in perspective. You were inquiring about hou 5 much above normal icvela this would indicate. For the twelve 6 months ended December '80, on the second column to the right 7 it indicates -- 0 BY MR PlaASCH: 9 Q Mr. Sims, do ycu have that czhibit as wel1Y 10 A No, 1 do not. 11 ER.' PARASCH: Perhaps counsel could provide 12 that to you. O. 13 KR. RUSSELL: This is not an exhibit that Mr. -- 9 14 in Mr. Sims' arca. And if you want to ask questions with 15 respect to it, I suggest you ask the witness who presented it. 16 Nt. BARASCHi I wasn't even proposing to ask a 17 question, Mr. Russc11. The Comission, I thought, was hoping 18 to get a relative understanding of how much of an increment 19 of purchased power would be purchased by PJM, and Mr. Sims 20 indicated 7,000 gigawatts. 21 TE WITNESS: That is what is covered under the 22 PJN proposal. I would expect in 1980 our total purchases 05 23 interchango porer wculd ha somuhere in the neighborhood of 24 11,000 giganatt hours. 25 ER BARASCH: All I was trying to establish -- fJO*M3ACM & !?ARSMAI INC. ~ 27 N. LCCKW'LLOW AYt" - NAMESBURG, FA.171I A _ ._. _ _ _. _.1 _ _ - - _ _ _ -
. - -16 4 0- 0-5 2- -
s Sims-Cross 154-1 and perhaps, Fr. Russell, you can onlighton ce -- that Exhibit 2 A-4 would indicate that retail snies for Met-Ed,for crample, 3 for the tuelve months ending December '80 tecre cpproximately 4 8,000 gigawatts. I'm just -- gigawatt hours. 5 I'm just trying to put things -- unke sure we 6 have things in relative terme. Eac thtt correct? 7 MR. RUSSELL: That's what the exhibit indicates, S yes. 9 BY Ift. EAIMSCH: 10 Q Mr. Sims, you indicated that under the PJM 11 modification there's the opportunity for 7,000 gigauett hours 12 being purchased. Do you have any idsa what's the likely 13 cmount of purchase that will be made by GPU to handle replace-14 cnnt power? 15 A The total purchases by GPU for the year 1980 16 bave been projected at around 11,000 gigawatt hours. The 17 73 000 is ::aricum under the PJM proposed contract, which really 18 is an acticato of the replacccant power of TMI. 19 Now, who we would actually buy it from is 20 purely a matter of what is available from the outside versus 21 PJM and tchichever one is cheaper. 22 Q If we turn around and say, Who are you buying it 23 for, de you he.va cny iden hou you'd break that out? ( 24 A Within GPU? 25 Q yes. JOTEtDACM a F.*An311AL. TNC.= 27 M. ! CCt:%T. LOW AVI*. - HARRIC3URG. PA.171I A 1640 053 s._ _ _ ___ __-. . . _ _
4 Sims-Cross 155 { 1 A The short ecmpany in GPU is primarily Jersey h 2 Contral in terns of interchange. What we've done is bought 3 this po:rcr on the basis of replacement for TMI and bought it 4 in proportion to the ownership of TMI. 5 TE ACTING CEAIPliW: Mr. Sims, why is there a 6 projection that the 7,000 gigawatt figure would grow to 7 11,0007 8 TIE WITNESS: Eleven thousand is our projected 9 total needs for interchange purchases during the year. The 10 7,000 is the estimato of the quantity that TMI would have 11 produced during the same parted of tim based on the capacity 12 facter, and so forth. C 13 G And it's up to 11,000 -- 1100 megawatts in any 14 given hour and up to 7,000 gigawatt hours for the par. 15 That is the limit that the other people put on it, saying in 16 effect this special arrangement is-limited to the equivalent 17 of TMI. 18 So they're saying, For the loss of TMI we will 19 allow you to buy this much at cost plus 10; if you buy more 20 than that, norra11 conditions prevail. 21 12. RUSSELL: I might just interject, if I may. 22 'rEE ACTING CFAIPEAN: That's the kind of infor-23 cetion I was seeking. 24 HR. MSSEII: Mr. Sims, the 7,000 gigawatt h 25 hours is with respect to what company or companies? MCI!n:ACH & F3AF13NAL INC.-27 ti. LCCmV:LLOW AYE. - HA!:n!23URC, PA.17112
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Simo-Cross 156
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1 THE WITESS: All of PJM. 2 MR. ESSELL: And how much of that would be 3 attributable to Met-Ed alone as a 50 percent owner of THI? 4 TE WITESS: Fifty percent of it. 5 MR. RUSSELL: All right. I think that's part 6 of the picture that should be brought out. -2 7 IE. BAPASCH: Thank you, Mr. Russell. 8 THE ACTING CHAIRMAU: Let's go over that again. 9 Did I hear you say PJM7 10 TE hITNESS: Frcm PJM. But Met-Ed would buy 11 50 parcent; Penelec, 25 parcent; and Jersey Central, 25 percen :,
- 12 the sar:2 --
13 TE ACTING CHAIRMAN: In other wards, the GPU 14 figure is 7,000? 15 THE WITESS: That's correct, yes. 16 MR. RUSSELL: And the A-4 figure that Me. 17 Barosch referred to was Met-Ed alone, which would be -- the 18 counterpart of 7,000 would be 3500 as against the A-4 figure. 19 THE ACTING CFAIRFAN: Thank you. 20 BY la. BAPASCH: 21 Q Just one other question, Mr. Sims. Will you 22 turn to Page 4 of your direct testimony? In the last sentence 23 of that first comalete paragraph you state: "In this con-(. 24 nection it might be noted that the PP&L agreennnt will 25 terminate when the proposed revision of the PJM agreement
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Sir.a-Cross 157 ( 1 becomes offective." h 2 I wonder if you could explain why that is and 3 who requested it. . 4 A That was a condition that Pennsylvania Power & 5 Light put on the ceceptance and cgreemant of the PRI proposal. 6 In othar uords, as a member of PRI and one of the supplying
? companies, they said, We vill not continue to sell you 8 Martins Creek energy at cest and will participate in the PJM 9 special agreement, and they filed with the commission here 10 for that discontinuance of that offective with the PRI agree-11 ment.
12 Thank you. IE. F1GASCH: Those are all the C 13 questions I have at this tima, Your Honor, e 14 THE ACTING CinIPJ%iN: Yes, sir? 15 BY NR. SELK0WITZ: 16 Q Mr, Sims, my naun is Larry Selkouitz. I repre-17 sont Throc Mile Island Alert. Just a few questions about the 10 cost plus 10 arrangement. 19 I take it, sir, that GPU won't stcrt to see the 20 benefit of that, and therefore its custo:nrs, until it's 21 approved by FERC, 22 A That is correct. 23 Q And can you tell m::, cir, whethor there is a 24 requiremont beforc FERC that it be approved by each of the h 25 constituent secte or district ecmmiss2.ons before you submit F,7Cl:RUACM f4 MAftrtTAL. ft:C. = 27 N. LC"InVILLOW AVE'. - HAMr.tCDtJRC, PA. $71la 1640 056
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\ Sims-Cross 158 1 it to FERC for approval?
2 A No. That is not a condition of FERC. It is a 3 condition of the people who made the agreement with us, 4 namely that before they would consent to the filing before 5 FERC, that they would have the approval or consent of their 6 specific state regulatory commissions because of the effect 7 on their customers. 8 Q Thank you. Also, to clarify the last part 9 which you were discussing with Y . Barasch, the 11,000 10 gigawatt hours that you see as the total purchases for 1980, 11 7,000 is the maximum that you can buy at the cost plus 10 y 12 from FJM7 13 A That's correct. 14 Q But you might in fact buy the other 4,000 from 15 FJM at the split savings arrangement or you might go else-16 where, depending on where you could get the best deal? 17 A That's correct. In other words, the total 18 requirement can be all PJM under the two conditions. It 19 could be all from the outside. It depends on what's avail-20 able at chat cost. 21 Q Have you made any projections or attempted any 22 studies on uhat the probable mix of your purchase of the 23 4,000 will be? (;, 24 A It's impossible to guess what will be availablo,< 25, both inside and outside. For erample, Salem 2 is a nuclear UCHRDACM a MAftSMA* fMC. = 27 N. LOOKvat.OW AVE. - HARRISBURG. PA.17111 1640 057
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S Les-Cross 159 1 plant which is owned by Ptblic Service in Philadelphia, 2 Atlantic City, and Deh::arva in which wo have an agreer::ent 3 with Philadelphia to pick up so._n of their share of it. 5 4 This was made before the nii incident. 5 In early projections that plant was expected 6 to be on line several months ago. Because of delays by the 7 NRC, it now appears that plant will not be on untti next i 8 year scratims. 9 Salem 1 is another nuclear plant which was out 10 for a long outage. And whenever there is a plant such as 11 that in PJM that is out, that affects the cost of PJM as a
- 12 total and in turn affects our cost, C 13 g
So the cost that we would buy at or the company
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14 we would buy from uill go up or down based on the overall 15 availability of generating equipment in the pool. M At the same tic:2, the outside has similar tfpu. 17 of probicos. And one day it's like this, with the outside 18 high and PJM low, and the nort day it's the reverse. 19 We don't care sinere we get it. We just take the 20 chenpost. 21 Q P.cw often do you mahe that calculation as to 22 what's cheapest? Is it donc daily? l 23 A Ym Gassert in car System Operations m2kes that b,_ 24 projection every Friday, both on the expected PJM running ratel i h 25 and what is available in the outside world and com:aits for MCimDACM D M.Vts?'AL. INC.-27 TL LccIW"'. low AVE- HAftRTSEURG. FA.17182
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Sims-Cross 160 1 the short-term purchase of that tico. ' i 2 If it's not available or so sthing -- if they 3 lose soma equipmant -- then it's canceled and the demand 4 charge is canceled also. 5 m. SELK0WITZ: Thank you. I have no other 6 questions at this time. - 7 THE ACTING CIEIRIGN: The other parties? t 8 BY NS. SMITH: 9 Q My name ic Patricia Smith. And just speaking i 10 as a custoner, I'd like to have a scenario. Let's say your ' 11 customers in York County would go with a privately-o:sned l 12 g utility. Uculd that really cut back your need for buying 13 power elceubere? You're talking about what, over a Fcandred 14 thousand custa=ers in York County? 15 A I'm not familinr with that area to that extent. 16 In other words, I'm not familiar with the number of customers j i 17 in Ycrk County, for example. ' I 18 Q But i.t would cut down the purchased power? l 1 19 We'll do anything not to open that plant. That's sdiy I'm here 20 cs an intervoner, and I'm just interested in all kinds of 21 alterna*:ivas. And we're chacking. We're really doing om-12 hom2 cork. 23 So let's say we uould go uith a privately-cwnad : 6 i 24 utility. I 25 A What do you mean by a privately-owned -- MCEtDACI: & MARSMA: (NC. --I"7 N. LCCF:WILLCW /.YZl. = l'.ARFi!E3L*RC. F%.17152 to c ! 1640 059
Sims-Cross 161 p 1 MR. RUSSELL: If tha Commission please, this is $ 2 certainly not within the scope of Mr. Sims' direct testimony. 3 And if it helps Mrs. Smith, we would stipulate that if Met-4 Ed's load is reduced, it would certainly cut do;m on its 5 outside purchases. 6 TE ACTING CFAIRMAN: Mrs. Smith, do you under-7 stand what Mr. Russell has just said? 8 (Off the record momentarily.) 9 TIE ACTING CHAIRMAU: Mrs. Smith, are you 10 satisfied with Mr. Russell's answer? 11 IG. SMITH: Somewhat. Mr. Barasch wants to 12 help me out, frame a question. May he, please? He wants to C la- pursue it -- e 14 ER. BAPASCH: W. Chairman, if I could be of 15 help to Ms. Smith, I think that she's trying to inquire -- 16 and maybe I could phrase the question a little more elegantly. 17 TE ACTING CHAIRMAN: That's not very gallant. 18 MR. BAFASCH: I'll take the shoe out of my 19 mouth. . 20 TE ACTING CHAIRMAN: Continue.
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21 BY 12. BAPASCH: 22 Q Mr. Sims, do you Imo; how unch of the overall 23 Ect-Ed load would be attributable to service to York County? 24 A No, I do not. h 25 ER. BARASCH: Mr. Russell, do you know who the MC:T 12ACH & f.1AftSMAL. INC. == n? N. Loc:nYtLLew avz - narairzmusc. na. iriin ms 1640 060
Sims <ress 162 1 witness would be that that question could be directed to? t 2 IE. RUSSELL: I don't know. Mr. Carter is here. 3 We can see if we can find out. , 4 Mr. Carter indicated one would have to go bach 5 and look at the loads in the various substations in the York d area to com up with som indez as to what is the load 7 picture in the vicinity of York. 8 The companies don't plan their system on the 9 basis of service to a given community. They plan their 10 system on the basis of service to an entire area. So to 11 isolate the load to a given municipality, for example, is
- 12 not the simplest thing in the world.
13
- 12. BARASCH: Mr. Russell, would it be possible 14 to identify how many customars are being served within a 15 definitive geographical area and then provide us with the 16 average amount of consumption for that group of customers?
17 I think that's uhat Ms. Smith is trying to find out. 18 12. RUSSELL: I would be glad to provide this 19 data, Mr. Barasch, Mrs. Smith. It's not somthing that we 20 have in our hip pocket that[ue pull out ard give to you right 21 off the bat. 22 THE ACTING CH11RIGH: Mr. Barasch, Mr. Russell, 23 I think, has conceded that to the extent the Company would 24 require to make fewer purchases of power from outside sources. 25 outside its own system -- ostensibly in one occasion, for nenmea nimuu me. - n u. teexwm.ow er. - mamam, i. i
Sims-Cross 163 1 erample, due to the diminution of sales, retail sales, to h 2 custo:cers in York County, to that extent it would be -- it 3 would require fewer purchases from PJM. 4 So he's conceding that that would have an impact',t 5 yes. But if you want an cract one, lir. Russell -- ) 6 MR. BARASCH: Ec's suggesting we should direct 7 that to Mr. Carter. 8 THE ACTING CHAIPJi4N: Do you have any other 9 quostions, Mrs. Smith? Counselor? ! 10 MR, FRAER: My nam is Maurice Frater. I 11 represent St. Regis Paper Co=pany and other industrial 12 customra of the utilities. C. 13 BY MR. FRATER: e 14 Q Itc. Sims, is it correct that the new agreement 15 with the PJM companies for the cost plus 10 percent pricing 16 is based on the productive capacity of TMI-1 and -27 17 A Yes. 18 Q And is it correct that energy purchased under 19 that agrectant will be allocated between the three GPU 20 utilitica on the basis of their ownership of TMI-1 and TMI-27 21 A That is correct. 22 Q Now, in the pre TMI-2 event forecasts for 1980, 23 what aas the enticipated pctror -- onergy requirements of the b 2( three GFU utilities in relacionship to their ownership of $ 25 TMI-1 and 'IMI-2? MOH7tEAci! a f3AF:3 MAL. INC.- "7 IL LCcr.YILf.OW AVE. - EtJ::trEsuMG, PA.17112 1640 062
Sims-Cross 164 1 A I do not have that information for 1980. 2 Q Is it available? 3 A I would assume our forecasting people would have j 1 10 4 it. 5 THE ACTING CHiIRMAN: Can you repeat that last 6 question, sir? 7 MR FRATER: Commissioner, let me explain the 8 point. I suspect that the ownership ratios of the TIE plants 9 between the three GPU companies is not identical to the ratio 10 of power consumption by each of the three GPU companies, a And I am simply asking the question of what is - - 12 whether tbsse ratios arc identical. And if not, what is thi 13 impact cf the casumption that purchased energy under the new 14 PJM agreemnt should be allocated between the three. GPU 15 utilities on the basis of the ownership? 16 MR. RUSSELL: Well, the nart witness we propose 17 to call is Mr. Newton, whem Mr. Sir.s has already referred as 18 Vice-Prosident of System Operations, and I believe matters 19 referring to load and capccity of the system and with respect 20 to the several companies probably could be more productively I 21 addressed to Mr. Newton, who we will call next. 22 MR. FRATER: That's quite satisfactory to me. 23 Tii3 ACTING CREIRMiH: Before we leave this, Ict
@' 24 m understand uhnt you're coeking. You're seeking to get I 25 information on whether or not the o:raership -- percentage of NCHRBACH Cr MARSHAL. !NC.--C N. LOCKWFLLOW AW.= HARJt!SBURG. PA. 27111 4 O t- 1640 063
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Sims-Cross 165 p 1 ownership in TMI by the three affiliates of GPU did in the h 2 past determine their purchases from PJM because you have the 3 answer that it does in effect have a bearing upon their 4 ability to mako purchases at a certain price from PJM under !.1 5 this rieu agreement. Is that what you were acking? 6 12. FRNIER: Yes, Commissioner. Iet's take c 7 bypothetieni situation. If, for example, Jersey Central is 8 a 25 percent owner of tha TMI facilities but vouM have con-9 sumed 50 percent of the energy produced by the TMI facilities: 10 then we have a completely different relationship in the 11 energy consumption than in the cunership. 12 And then we need to look at the benefits or the G 13 O disadvantages that flow from the existing split savings PJH 14 agreccent er benefits or disadvantages that flon from the new ' 15 plus cost 10 percent PJM agreement. That's all I'm pursuing. 16 TE WITESS: I think, if I may cent, you 17 have to recognize that the owning company of any generation
;C always heaps its 1 crest cost generation for itself. If it 19 has excess, it does not sell its lowest or everage. It cells 20 the highect ccst available.
t 21 So any company always keeps its lovest cost I 22 generation for itself for its own customers cud makes avail- 1 23 able its creess for scio. It's a bcsic principle, e 24 BY MR. PFATER: h 25 Q Uc11, Mr. Shns, what does that mean within the IdOHRDACH 2: f tAUCHAL. INC. == !:7 !!. LOCI: WILLOW AYE. - EAnnr35URG, PA. 878 53 1640 064
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Sims-Cross 166 1 GPU system and the operation of the three GPU utilities as a 2 pool? 3 A The sam thing. If a GPU subsidiary has excess 4 power available, it haeps its lowest cost power for its own 1 5 customers and sells the highest cost power available to the 6 other companies. This is true in all power pool dealings, 7 internal and external. O Q So hypothetically, if Jersey Central were a net 9 purchaser within the GPU pool, it would be buying energy 10 generated by a high cost oil-fired unit as opposed to buying 11 energy generated by a low cost nuclear unit? Is that what -- 12 _ A That's correct. U 12. FRATER: Thank you. 14 TEE ACTING CIMIFl%N: Any other questions? 15 Mr. Malatesta? 16 Im. MAIATESTA: Could I ask a few more questiont ? 17 TIIE ACTING CInIM&N: Ycu certainly may. 18 FR. MAIATESTA: Thank you, sir. 19 BY FR. IEIATESTA: 20 Q Mr. Sics, was the projection in the PJM agree-21 cent that Met-EJ or GPU would lose 7,000 gigawatt hours of 22 generation from the unavailability of both plants, 'IMI-1 and
- 23. -2, baced on Th7.-1 baing unavailcbie for the entire yacr of C) 24 1980?
25 A That's correct. 2 j} /i A N
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Sims-Cross 167 { 1 Q One thing I don't understand is if, as you say, h 2 GPU would have been a net purchase -- cr net seller of energy 3 in the PJM interchange with both plants available -- you did 4 say that, didn't you? 5 A I said I thought they uoald be a net seller. 6 Q If that's the case and if the only change is 7 that the olants aren't available, why do you anticipate 8 needing 11,000 gigawatt hours of power fro:n the PJM inter-9 change?
% A That's based en the n:aintenance schedule, 11 availability of all plants in PJM, and load forecasts which --
12 load increases affect that. In other words, 1980 loads are O 13 higher than 1975 loads, so that in itself accounts for some O 14 of it. 15 Q So does that reann that GPU would not have been 16 a net seller under your now present forecast? 17 A I think they would have been a net seller, yes, 18 if the plants were on. 19 Q And yet with the plants off, you're losing 20 7,000 gigawatt hours but having to purchase 11,000 gigawatt 21 hours. That's where I -- 22 A For 1980, yes. 23 Q That's where I got stuck. 24 A I realize it's inconsistent. Perhaps Ted can $ 25 explain that a littic bit. McM"iBACH C MARCHAL. INC.= A7 N. LCCKWILLOW AY!*. -. HAnntCEUMC, PA.17152 1640 066
Sics-Cross 168 1 Q There is a problem there. In your bast s 2 guesstimate, let's say, would there have baen a erket for 3 the PJM generation that GPU is going to purchase in 1980 -- 3 4 the 7,000 gigawatt hours specifically -- if GPU hadn't pur-5 chased or agreed te purchase those? 6 A I could answer that batter if I could knov 7 what's going to happen next yacr in terms of when Salem's 8 going to be on the line and som other questions of that 9 nature and whether ue have any coal strikes, oil embargoes, 10 or not. 11 I think that there's also a possibility of 12 sales to outcide pools that have to be considered, and it's 13 not a question that you can answer in that sense. 14 Q Well, under normal circumstances, absent a coal 13 ctrike or an oil embargo or southing of that nature, does 16 PJM sell all the pcuer it generates? 17 A Oh, no. Because you don't generate 60-mill 18 energy ob don't need it a r ycu can't sell it to somebody else . 19 By the cama token, if you can buy something 20 cheaper from somabody, you buy the cheaper stuff and don't 21 generate the high cost energy. It runs strictly on economic 22 dispatch.
}
23 E. mIATCSTA: Those cre all the questionn I I C\ 24 have at this time. - i 25 TIIS ACTING CHAIPJnN: Thank you very meh. At I4C3*mACf; th TfAftS7'AL. lifC. == lJ II. LOCXWILLOW AVE l, = ffATUt!C5tmo, PA. t'If 12 _~__.-m.__--- . . _ . - . - - . . -.
s Sics-Cross 169 ( 1 this moment the Chair will declare a five-minute racess, h 2 (A recess uns taken from 11:05 a.m. to 3 11:23 a.m.) 4 TE ACTING CHAIIWAN: Mr. Russell? 5 IR RUSSELL: Is there any further cross-6 examination of Mr. Sims? 7 IR. SELKORTZ: No questions. 8 TE ACTING CHAIRMAN: I wanted to ask you a 9 question before Mr. Sims got away. I don't know whether 10 Mr. Sims can answer this. I had asked the question before 11 and requested that Mr. Barasch help me with it. I think he 12 mecut well, but I don't have the answar. O' 13 I think the Commission would really like to knor O 14 a little more about the 7,000/11,000 gigawatts chat are in-15 volved in the agreen:ent with PJM. The 7,000 gigawatts 16 represents power that otherwise would have been produced by 17 TMI-1 and -2, is that correct? 18 TIE WITNESS: No. In other words, with the I 19 outage of TMI-1 and -2 the increased purchases by GPU 20 amounted to 7,000. That is not the total replacement for 21 n!I for the reason that our own generation picks up soma of 22 it and in some reduced sales. 23 So it's a not effect, if you will, of the 24 cutage as far as GPU's concerned. h 25 TE ACTING CHAIRMAN: All right. Let's talm it
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Sims-Redirect 170 i thic way: It's the net effect of the outage at 1 and 2? 2 THE WITESS: Right. 3 TE ACTING CPAIRMAN: The 4,000 gigawatts in 4 excess of that represent the need of the GPU utilities above 3 5 the 7,000 gigawatts? 6 TE WITESS: I'm told that's an old budget 7 number. The budget's been revised since that. My figures go 8 back to the ti. mas where we started those negotiations in 0 April and May, and I understand the budget has been revised 10 since then. So that number is probably lower now. 11 MR. RUSSELL: Mr. Newton, the next witness, I 12 think can fill you in on the up-to-date picture with respect 13 to that. 14 TE ACTING CHAIRMAN: All ri.ght. Fine. Mr. 15 Russell, call yotn witness, please. 16 ER. RUSSELL: I just have one or two further 17 questions for Mr. Sims on redirect, if I may. 18 TEE ACTING CHAIRMAN: Go ahead, sir. 19 20 REDIRECT EXAMINATIO T 21 BY MR. RUSSELL: 22 Q It has been brought out on cross-examination, 23 Nr. Si.ms, that the agreem nt modifying the PJM agreement to (.. 24 provide fcr cost plus 10 percent purchases contemplated that 25 TMI-1 would not be in operation during 1980, is that correct?
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Sims-Redirect 17 1 (~ 1 A That's correct. h 2 Q Does the agreement modifying the PJM agreement 3 have anything in it which pertains to the restart of TMI-1 6 4 during 1980? 5 A If TMI-1 is restarted prior to the end of 1980, 6 the agreement would terminate at that time. 7 Q I see. So it's the end of 1980 or TMI-1 restart, G whichever is earlier? 9 A Whichever cosas first. 10 TE ACTING CHAIRMAN: Mr. Russell, does that 11 presuma that a restart of TMI-1 would provide the GPU 12 companics with that 7,000 megawatt need? C 13 .TE WITNESS: Perhaps I can anseer that.this e 14 way: With TMI-1 and -2 both on the line we were -- had excess , 15 but the PJM companies didn't care about the fact that we 16 might have lost sorse sales. Th2y were only looking at what 17 we had to make up in tei.ms of purchases. So that 7,000 again 18 is a net figure. 19 They also felt that -- , 20 TE ACTING CHAIPM?: But it represents need? 21 TE WITESS: Yes, net need. 22 TE ACTING CHAIRHAN: Net need by the GPU 23 companies? 24 TE WITESS: Yeah. They also felt thst if you $ 25 looked at the $24 million a month figure which was projected fiCITREACII ft ITARSHA! INC. - 27 N. LocKWII.LcW AYL - MAnntsIURG, PA.17112 1640 070
Sims-Redirect 172 1 back when this was being negociated, that if TMI-1 came bach, , s 2 that would cut it from 24 dcun to about 10 million. And i 1 3 that vaa the biggest part of it, and that's all they were 4 willing to talk about. They weren't willing to halp us 5 beyond that point. So that was the reason for it. 6 Ncu, that 24 million, of course, has grown to 7 32 million because of the increase in oil prices, and so 8 forth. 9 THE ACTING CEAIRMAN: In other words, PJM is 10 saying to you, If both units are down, we're going to ha more 11 generous; uc'11 recognize year need at 7,000 gigawatts net: if, houever, TMI-1 comes back on line, this will reduce your 13 need frou having to pay 24 million a month to 10 million a l 14 i month, a2d at 10 million a month that's a problem you'll have ,' 15 to deal with and that's the most we'll go? 16 12. RUSSELL: We'll discuss the thing further 17 at that time as to what they uill then do. 16 TIE WITESS: Yes.
- 19. TfiE ACTING CHAIRMAN: So there's really no 20 relaticunhip betteeen the two separate sets of conditions, 21 isn't that right?
22 ER. RUSSELL: I'm not -- ! 23 THE ACTING CIMIRMAU: There's no relationship (~b' i 24 between the 7,000 figure, 7,000 gigawatt figure, and the need! 25 of cug -- f CIMDACGI O MARLTIAL. INC. = 17 N. LCCKWILLCY? AY." - MARRICEURG, PA.' 17112
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a - . . . . - . . . _ . . _ - _ . _ _ - . _ _.- Sims-Redirect 173 f 1 MR. KUSSELL: The TMI cutput. There's no h 2 specific correlation between those. 3 TIE ACTING CHhIRMAN: That's chat I'm trying to 4 find out. Thank you very n:uch. 8 5 MR. RUSSELL: Thank you, Mr. Sims. 6 ColefISSIOER SILANAM'G: Just a minute. In the 7 ownership agreement for TMI among the GPU companies, were 8 there any underlying assumptions as to percentages of con-9 sumption of the power that would be output from TMI? 10 TIE WITLESS: The-ownership is 25/25/50. The 11 output is 25/25/50. The costa, the expenses, everything is 12 25/25/50. C 13 ColeIISSIO1EE SIBNAMAN: Okay. Thank you. O 14 THE ACTING CHAIRIEN: Let me just ask a question 15 following that. ?enalee seems to be the healthiest of all the 16 three companies, and frequently it's a selling company when 17 the other two affiliates are buying companies, isn't that 16 right? 19 TIE WITESS: That's correct. 20 TE ACTING CHAIRIEN: It is entitled to one 21 fourth of the production -- one fourth of the benefits and the 22 responsibi.lities connected with, associated with, TMI, Con-23 sidering the feet that they dcn't need that particular power 24 for their own use -- I think that's a wrong assumption. It h 25 would be cheaper than thair coal-fired, even. MWJAOM n MARGEAI INC. - WIM. LocKYt!LLCW AVI" - HAPJt182UP.0, PA.17112 I . n n . --- . - - . . . .--.-----..--,.----.~..--~----s gf._ .
Sims-Padirect 174 1 TIE WInESS: That's correce. , 2 TIE ACTING CHAIRMAN: Then they would sell the t 3 coal-fired elsewhere. Now, the same thing applying to your 4 agreement with PJM. Since the need of each of the affiliated 9 5 utilities is different on2 from another and therefore 6 different circumstances, I think that the Jersey Central hss 7 a greater need even than Mat-Ed. Certainly, far less than 8 Penelee. 9 The 7,000 figurc, if offective, would be made 10 availabic on the basis of their -- the entitlement of each 11 of these affiliates in the PJei -- in the THI, is that correct? 12 e TIE WITNESS: That's the way we've been working, : U yes. 14 THE ACTING CFJLIRMAN: Now, this notwithstanding IE the fact that there own fuel need may be different from that 16 relationrhip? 17 TIE WITNESS: That's where your economic dis-18 patch co:ro into it. In other words, if you have a unit 19 that's chap, you keep it and you sell the mere expensive one. 20 If you don't have any and you have to buy, yc42're buying f 21 somebody else's mere czpensive than their alternative. 22 But in any event, it's always the lowest cost 23 unit that is being run. t F i 24 TIE ACTING CIIAIR12U: Int us assum that where f 25 Penelee is concerned, all of its units are providing Penelec
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Sims-Redirect 175 ( 1 with power at a cost less than what PJM can provide by h 2 economic dispatch. It to nevertheless entitled to one fourth 3 of the 7,000 Can it allecate or resell its assigned share 4 to the other two utilities? 5 MR. RUSSELL: I don't n:enn to inter. ject unduly, .0 6 but Mr. Newton is the witness who's put in the GPU agreement, 7 power pooling agreement, the PJM agreemnt, and has System 8 Operations under which those agrocents function, and I thinh 9 that perhaps he can respond to you more specifically in the 10 quantifications associated with the operations. 11 TIE ACTING CMIRK4N: Ho'll be here tomorrow? 12 NR. RUSSELL: He's bere next, next witness, Mr. O 13 Newton. O 14 Is there anything further of Mr. Sims, then? 15 TIE ACTING CHAIP24N: Not from toe. 16 ER, RUSSELL: All right. Thank you, Mr. Sims. 17 TIE ACTING CIl4IRMAN: We have parties that we 18 didn' e have before. Do any of the parties have any questions? 19 NR. Pl.FASCH: Mr. Chairman, I assum Mr. 20 Russell's about to call Mr. Newton to the stand. Is that 21 correct? 21 MR. RUSSELL: Yes. 23 MR, BARASCH: If I could just take one momnt, 24 take care of an administrative detail. And perhaps counsel, h 25 advisory counsel to the Commission, could instruct me how you MC 1ttI:ACII O ETARSHAL. INC. = .*7 N. LOOKYt1LLCW AVE = NAruttsEURG. PA.17113 __ , . - - - - - - _ - -1640 074. -- -..
176 I want to handle these matters. 2 I have a second set of interrogatories that I'm 3 about to serve rather than by mailing to the Company. I was !.1 4 wondering, Does the Co:r. mission wish to be provided with 5 copies of interrogatories that we're serving on them? 6 1R. MC CIAREN: Yes. It would be useful to 7 have a copy of that. 8 1R. EARASCH: I'd like the record to note that 9 I've distributed to all counsel for the other parties present 10 - a document entitled " Interrogatories of the Office of the 11 Consumer Advocate, Set 2," consisting of five questions y 12 numbered 10 through 14, and I'm going to hand a copy to Mr. 13 Russell. 14 THE ACTING CHAIRMAN: While you're doing that, 15 can we state for the record the Commission would appreciate 16 receiving copies of any similro- documents circulated by any 17 of the parties? 18 COMMISSIONER SBANAMAN: Would you also serve a 19 copy on the Secretary so it goes through the normal process -- 20 IP., BARASCH: I'm not sure what procedure 21 . you've baan using so far. Whatever you'd like. And all 22 parties not present today will be served by mail. 23 ns itCTING CHAIRMAN: Mr. Barasch? f 24 1R. BARASCH: That concludes anything I had. I 25 just wanted t.o note for the record that we served the M.h"R12ACH 3 ffARCMAL. INC. = 27 PL T CO:3VELovt AVE.- HARRISDURG, PA.17151 ON 164LO.75.._.-
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Neuten-Direct 177 ,e i documents . h 2 Tile ACTING CIRIRLEN: Mr. Russell, will you 3 please ecli your next witness? 4 12. RUSSELL: Yes. 5 FE. OGDEN: We will call Mr. Ecwton at this time..
'6 1R. RUSSELL: 15ay the witness be sworn?
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8 EDMOND ISTTON, JR. , called as a witness 9 or behalf of the Respondent, was sworn and 10 testified as follows: 11 12 DIRECT EXAMINATION O 13 BY FR. OGDEN: 9 14 Q Would yo2 please state your narre and address 15 for the record? 16 A My name is Edmond Kewton, Jr. My business 17 address is Bar 1018, Reading, Pennsylvania. 18 Q And by whom cre you employed and in what 19 espacity? 20 A I'm omployed by the GFU Service Corporation as 21 Vice-President of Syctem Operations. 22 Q Mr. Newton, I show you what has been e.arked for 23 identificatica as M2t-Ed/Penelec Statement G and ask you if 2/, that was prepared by you, h l 25 A It was. ttt I?RBACTI O M/JtCWAL. INC. ~ 27 N. LCCICY/!LLOW AVL = H?.Rft!@*JRG, PA.17112 1640 076-
Newton-Direct 178 1 Q Are there any corrections you wish to make at 2 this tim to the statemant? 3 A There's one minor typographical error on Page 4 11. About three quarters of the way down, that long answer, 5 there's a duplication of Subparagraph (c), so that the words, 13 0 "and (c), the inclusion of demand components of the cost of 7 purchases", should be stricken. O Q And if I were to ask you the same questions S today as are contained in that statement, would your answers 10~ be the sace? 11 A They would be. 12 Now, Mr. Newton, there's been marked for identi-Q 13 fication in this proceeding Met-Ed/Penelec Exhibit A-2, and 14 I would direct your attention at this time specifically to O Figure 5 in that exhibit, Appendix B, and ask you if that 16 figure was prepared by you or under your supervision. 17 A The basic data came from my department. I have 18 no specific knowledge of the preparation of that exhibit, 19 but the data is consistent uith our data. 20 And is that figure described in your direct Q 21 testimony? 22 A Yes. I refer to it. 23 Mr. Newton, I will show you what has been Q 24 marked as part of Exhibit A-2, Appendix B, Table 3. Were 25 any of the components of that table prepared by your or under MO!1RDAC*f & Mt.RCHA: INC. - U IL Loc.TWILLoyt AYL - KAP.Ric3U30, PA.171 tr. t 4 g
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Newton-Direct 179
<} 1 your supervision? h 2 A Yes. We prepared in my division the inter-3 change energy cost included in the first columa, " Energy 4 Costs, Millions". We're responsible for the preparation of 5 interchange costs there.
14 6 Q And do you clso refer to that table in your 7 direct testimony? 8 A I do. 9 THE ACTING C EIRE N: This is what, Table what, 10 now? _ 11 MR. OGDEN: Comissioner, it's Table 3, 12 Appendix B of E=hibit A-2 C 13 S BY MR. OGDEN: 14 Q Now, Mr. Newton, I show you what has been 15 marked for identification as Met-Ed/Penelec Exhibits G-1 and 16 G-2 and ask you, are those exhibits sponsored by you? 17 A Yes. I sponsored both of those exhibits. 18 They're the basic interchange agreements under which the 19 GPU systen and its subsidiaries operate. 20 $ Q There's also been marked for identification 21' Met-E4/Fencine Exhibits G-3, G-4, and G-5. I show you those 22 exhibits and ask you whsther they were prepared by you or 23 under ycur supervision. h 24 A They were. 25 Q And are those three exhibits further described ideHR::ACH & fdAftSHAL. INC = 27 TI. l.c KWlf.t.oW AYr. = HArtntasc5so, PA.17112 16.40 078
Newton-Dir$ct 180 1 in your direct testimony? 2 A Yes, they are. 3 Q Mr. Newton, would you just briefly summrize 4 for us the ccatent of your testimony? 5 A My testimony is directed to the support of the . 15 6 interchange component of the total energy cost figure which 7 Mr. Hafer submitted and also to identify and describe tha O two basic agrecztants under which the entire system operations 9 nnd all of the interchange transactions flow as the back-10 ground for the short-term agreements which Er. Sims has 11 testified to.
,. 12 This further amplifies his testimony and 13 quantifies the transactions and the savings that have flowed 14 from the short-term transactions, as well as from the PJM 15 special transactions.
16 That generally is the purpose of my testimony. 17 Q All right. Mr. Newton, just two further thingc. 18 A question was asked of Mr. Sims this morning with respect to 19 the selling er purchasing status of Net-Ed or the GPU system 20 if both 'M_ units care operating as contemplated. Could you 21 respond to that? 22 A It is my understanding that the most recent 23 forecasts made for the accident were to the effect that we 24 were just about on a balance; possibly selling a little bit i 25 on the not basis to the outside, but not a large amount. fdONRDAC*4 O MAREEAL. INC. - KJ N. LCcxW:LtcV? AVE. - IIARRfSEtJfte. PA 17112 1640 079
Newton-Direct 181 { 1 Q Mr. Newton, I assema you've heard the various 2 discussions this morning taking place with respect to the 3 7,000 gigawatt figure relating to the PJM special purchase. 4 Do you have. anything to add at -this tim with respect to 5 that diecussion? 6 A No. I believe Ur, Sims accurately described 7 it. It represents the ineren: ental change in interchange 16 a purchases from PJM in the absence of the TIE units as . opposed 9 to having titem cvailable and . reflects something different 10 than the total of some ten or eleven thousand gigawatt hours, 11 which sculd be the total output of both TMI units. 12 Q Would you just explain what you mean by C 13 nincremental"? II A Well, in this case I e an nothing more thau 15 the difference botueen one case and the other, the increment 16 in going from the purchases with both TMI units in, running, 17 and the purchases with them both out of service _. 18 ICt. CGDEN: That's all we have on direct 19 examination at this tirca. , 20 THE ACTING CHAIRFAU: Mr. Malatesta? 21 , ER. MAINIESTA: Mr. Newton or Mat-Ed has sub-22 mitted quite a bit of data through Mr. Newton's tostimony, 23 and we hrven't had an opportunity to review all of it 24 thoroughly. And I hava a few questions now. And of course, 25 I reserve the right to examina Mr. Newtou at a subsequent ETCHRDACH O A*.AMSHAL. IMO. .- 27 N. Loccnr!LLovt AV!f. - HAMn!* BURG, PA. 57I S A L6.10_q80
Newton-Cross 182 i i date. 2 3 CROSS-EKcVIII& TION 4, BY MR ISIAESTA: 5 Q Mr. Newton, in your direct testimony you said 6 that the total output for 1980 for the two TMI units was l7 7 about ten or eleven thousand gigawatt hours? Or would have 8 been? 9 A Would have been, yes, sir. 10 Q You were present during Mr. Sims' testimony, 1 11 weren't you, sir? 12 A You're referring to the testimony he just gave? 6 13 Q Yes, sir. 14 Q Did you hear Mr. Sims say that the total output 15 would hcvc been 7,000 gigawatt hours? 16 A I understood him to say that that was incre-17 mantal purchases from PJM. Or if he did misstate it earlier, 18 he clarified it in his redirect. l 19 Q So the 7,000 is what the expected output would 20 have been? 21 A Ib, sir, it isn't. 22 Q But the agreemant with PJM for 10 percent plus 23 co::t as opposed to the split savings is fer 7,000 gigawatt 24 hours? 25 A That's correct, taOf!RDACH O NAftSHAL. INC. = E7 IJ. LOCXWILLOW AVE. - Sut_RftiS5URG, PA.1715 A
Newton-Cross 183 /~ 1 Q Now, what is the 7,000 figure again? h 2 A It's the difference between the amount of 3 energy we expected to purchase from PJM, GPU in total, with 4 both TMI units in service and what we vould have expected to 5 purchase with both THI units out of service. That is the 6 7,000 gigawatt hours. 7 Q I'm still not sure I understand. We have a 3 figure of 11,000, which is what ycu expect now to purchase 9 from PJM, is that correct? 10 A No, sir. 11 Q It isn't? 12 A It's the total need, which we will get from G 13 O scoe source, of so:ae 11,000. 14 Q Now, would you have had any need for any of 15 that 11,000 gigawatt hours if both plants were available, 16 bothTMiplants? 17 A As I testified a mount ago, we would have Men 18 about on balance if we had both units available. 19 Q So you would have naeded none of that 11,000 1 20 gigawatt hours? 21 A We uoald have bought on occasion, sold on 22 occasion, but on balance we would have been even.
.:3 Q Do you agree there's come inconsistence between 24 what you're non saying and what Mr. Sims said, at least inso- h 25 far as ha said that the agreemnt uith PJM was based on~ the f.10!Clu AO'4 2 Mt.RS!!AL. IrtC. - 27 N. LocmV!LLOW AVE. - HARRISBURG, PA.17112 1640 082
n-- Nowton-Cross 184 1 amount that would have been generated by the two plants had 2 the accident not occurred? 3 A As I said earlier, I didn't understand him to 4 say that. But if ba did misstate himself, there would be a 5 difference and I think it's been clarified both by Mr. Sims 6 and myself. 7 Q Mr. Newton, could you turn to Figure 5 in 8 Appendix B, Exhibit A-27 9 A Yes, sir. I have it here. 10 Q Conid you just brief2y describe what Figure 5 11 represents? 12 A Well, as I state in my testimony, the PJM 13 running rate is the maximum incremntal cost -- I'm using 14 increantal here in a slightly different sense than I did 15 earlier - is the maximum incremental cost of any generation 16 running on PJM at a given moment. It varies from minute to 17 minute, hour to hour, but it does represent the highest cost 18 generation increment loaded at thet particular tim. 19 And if 1 might digress slightly and just wax 20 slightly padantic, it is a fact that uhen a power pool is 21 cperating on a given incremntal cost where every unit is 22 loaded either to that cost or less than that cost and has 23 p nothing between wh2re it's running and the incremental cost, 24 you br..e achieved maximum economy. 25 That indeed is what we do within PJM. So this McNREACH D MARSHAL, FMC. = gy N. LocKWrLlow Avr.'. - HA:tRigrUne. PA.17112 1640 083
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Newton-Cross 185 [ i p 1 represents the average -- Figure 5, that is, represents the h 2 average of the total of the increciental running costs in 3 those periods. 4 Q Is 31.7 mills per kilowatt-hour the estimate 5 for 1980, or is that for 19797 6 A That's the 1979 estimate. 7 Q so this doe n't purport to project what the 8 cost woc.id be in 19807 9 A No, sir. 10 Q If both TMI plants had been available through-11 out 1979, would t hic be a lower figure than 31.77 12 A Yes, it would have been slightly lower than C 13 O that, bearing in mind that this is an average and that 14 spreads a great many numbers across one year. But it would 15 be slightly lomr. 16 Q Now, this cost reflects the average cost per 17 kilowatt-hour of every kilowatt-hour of generation by every 18 plant within the PJM system? 19 A No, sir. It represents, as I said, the top, 20 the highest, incremental ccst running at every momat of tir 21 PJM interccanection, and then that's averaged across a month, 22 a we.ek, or a year. 23 It does not represent the everage of all of the 24 generation, but whai: it is is an approximation of what the h 25 split saving billing price is under norval operation within MOH.e.CACH & MAfts!tAL.1NC. - 27 tL LOCKY/tLLCiv AV3ll. = 1EARR!SDURG,.PA.178 8 2 .e_ o._ _ _nm . -~. ww., . .
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Newton-Cross 186 1 . PJM. 2 It is not prccisely that, but it is a 3 reasonable appro=imation of it. And it was so presented
/, here to demonstrate what has really happened to the running 5 coat and therefore to the PJM purchased cost -- or rather 6 interchange purchase cost.
7 Q Can you describe briefly what the reasons are S for the fluctuation in the graph? If they're simple. If 9 they're very ecmpicx, I guess you better not. 10 A Tfoll, there's such a multiplicity, but I might . 11 point out the rapid risc from '73 to '74 was a direct result 12 of the OPEC oil embargo and the resulting prico increases. 13 These, as Ye, Sims I think has mentioned 14 earlier, represent largely in PJM the cost of oil generation, 15 oil-fired gonaration, in many cases flavored by C.T.'s or 16 base load oil in the East. 17 ER. RUSSELL: Ifould you explain what you mean 18 by C.T.'s? 19 TE IIITESS: C.T. 's, excuse ca. Combustion 20 Turbines, which are traditionally and in fact the highest 21 cost generation we have available to us, 22 B'l Mt. MA.IlIIESTA: 23 f Q Mr. Sins, you probably answered this quastion, r 24 but I have a rather dense skull, so I'll ask it in anothar , 25 way. Is this cost the cost of power that would be available B'C'!GDACM Q MAft9Mt.f INC. - 747 N.1.0cmVIT 1.oW AVE- HAftNIS3URG. FA.178 IS .p _g _w _ 164.0.aas em*0..%8 pg -
_ _ _ _ . . _ _ ._. .___..__1 ._ _ _. _ _ _ _. _ _ . . _ _ _ _ . _ _ . Newton-Crocs 187 (~ 1 for interchange, or is it power that's available for use by 2 cccipanies that cre generating its or both? 3 A Well, it's an approximation of the interchange 4 price that uould be experienced on the average. Now, you 5 will recogni=e that during the course of a given day, on 6 peak -- although we've got a 31.7 figure here or 25,2 in 7 1978, during paak periods many days that running cost will B be up in the 60 or 70 mill range, and off peak at three 9 o' clock in the morning it may be down to 8, 9 mills. 10 So it varios through those runnings, and then 11 it varies seasonally. And then this represents merely an-12 average. Gs 13 Q Since this figure can be affected by the O 14 availability of the TMI units or any other units within the IS PJM system, are there any assumptions built into the figure 16 for 1979 regarding the availability of TMI units? I guess 17 you assumed they were unavailable since they were. 18 If you were to project it to 1980, do you have 19 any idoa ehnt that 31.7 figure would look like in 1980 or 20 the mills par kilo:ratt-hour figure would look like in 19807 21 A I think it uould increase by some 15 percent, 22- reficcting oil prices, which I think is likely to happen to I 23 us. Or worse. 24 Q Worse is going to happen to us, or worse than 25 15 percent? IWCH:trACI-! O M/JISMAL. INC. - 27 N. Loc!n*/ILLow Avr. - ItAttR!s2U7tG, PA.17112 1640 086
.. - -. -. a - -. - -- _ _- - _ - -__ - . Newton-Cross 188 1 A Worse than 15 percent. That's a pure -- I'm 2 not an e= port in this field. That's just an educated guess 3 from somabody who's fairly familiar with this whole setup.
/r MR MAIATESTA: I don't know what that makes e 5 if you're not an ezpart, so I won't comment.
6 We don't have any other questions of Mr. Neuton 7 at this tima. 8 TE ACTIIE CHAIRMAN: Well, if it's agreeable 9 to the parties, I'd like to recess now for lunch, to return 10 at one. We will resum with the interrogation of Mr. Newton. 11 (Tha lunch recess began at 11:54 a.m.)
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3 ; i 4 (The hearing resuned at 1:13 o' clock P.m.) 5 , EDIEND NEWTON, JR., resumed. 6 THE ACTING CHAIRMAN: Mr. Russell, I think
'l i 7 ; tnat when we had adjourned Mr. Newton had been cross-examined j I
B j by Mr. Malatesta and he had indicated that he had no further I p { questions. Is that correct, Mr. Ihlatesta? 10 l 18. MALATESTA: Yes, sir, that is correct.
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I 11 j THE ACTING CHAIRMAN: All right, do you want i 12i to reconsider that answer? (" 13 13. MALATESTA: Well, sir, subject to the h 14 questions of the other parties, they may trigger some -- 15 THE ACTING CHAIRMAN: But at this moment you 16 are quite content? 17 MR. MALATESTA: Yes, sir. 1g THE ACTING CHAIRMAN: You have exhausted your-1.9 self? I' I 29 MR. MALATESTA: I wouldn't go that far. I t 21fhaveafergoodhoursleftinme,Ihope. 22 THE ACTING CHAIRMAN: The Consumer Advocate? 23 I! IG. BARASCH: Mr. Chairman, we have no b " L 24l questions of Mr. Hewton at this time. Perhaps at a later 25 date we may.
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Hewton-cross igo h ' l 1 THE ACTIUG CHAIRMAU: firs. Smith? j l' 3 (No response.) j i 3 THE ACTING CHAIRMAU: fir. Frater? l 4 BY MR. FRATER: Q Mr. Heuton, I will ask you the same series u of questions relating to the allocation Of the cost of purchasad
' energy under the new PJM arrangement, that is, the cost pliz.
7 10 percent arrangement, being on the basis of the ownership 3 g of the TMI plants between the three GPU utilities. My question still stands: is that a reasonable 10 { I way of making that allocation of the energy costs? And if so, g what is the basis of the judgment that you made? A I think it is indeed a reasonable basis for 73 g - allocating the purchase to replace TMI on the basis of the' l I g
. ownership of TMI. That is fundamental, it seems to me, just g on that very narrow issue.
g We do not necessarily allocate the cost in exactly that way. What ne are doing, and we are going to g make a minor change in the way we had heretofore treated it, at the time the PJM special goes in to make it perfectly 20 2,r cle'ar that the opportunity to buy the pro rata share of the
,2 replacement energy for Ti4I is given to the companies but 1,
, I they have the right of refusal of that, and if they do not !
fo) e need it or cannot economically use it, they will pass it l I g along to one of their sister companies. i
!.T.T:nr./.Jr A t.27.!! SEAL I!!S. -- f.7 2 . LOcnW!!.Lo*.*/ AY:". - ILL'in!$EUnc, P4% 17f12 1640 089
~ . .
- - = - - _ _ - - . - - .
_ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ._1_ _ _ _ . _ _ _ _ _ _ _ Newton-cross 191 i t 7 Fcr example, if Penelec has the opportunity g 2 to buy soma of an outside purchase and it can economically utilise that purchase and displace some of its own higher 3 ,
,j ccst generation either to one of its sister companies in GPU 5 or to PJM, it will do that, and then in the next instance, 6 l Met-EdandJerseywillhavetheopportunitytotaketheir i
'j , share plus a pro rata share of anything that Penelec has D released, and so on.
9 I think it is an eminently reasonable way to 10 allocate the replacement energy. 11 Q Is it correct to assume that if TMI-1 and TMI 2 12 had opercted in 1980 that those plants would have been base 13 loaded to the full extent of their operating capacity during 14 their en line operations? 15 + A That is correct, and that, I might add, 16 would have produced approximately the 11,000 gigawatt hours we I'J have talked about several times today. gg Q Is it also correct to assume that economic 19 dispatch within the GPU system would have allocated that 20 base loaded TMI-1 cnd TMI-2 capacity to each- of the GPU l 2;,i companien on the basis.of their ownership of those plants?
}
g;, ; A That is correct. It would be a very unusual 1 25 j circumstance when any of that base loaded energy from the 24 nuclear plants would be released from the owning company g i 25 system. They naed it all. TIOCCACM 0 !!Mt3MI.L. f:sc. a= 27 FL LOCKWELO'.V AVC.= !!A3ntS::URG, FA.17t te. 1640 090
Heuton-cross 192 l
, 1 MR. FRATER: Thank you.
MR, SELKOUITZ: No questions. 3 4, THE ACTING CHAIRMtJT: Commissioner Taliaferro'.4
}
. COMMISSIONER TALIAFERRO: I have no questions.I v
THE ACTING CHAIRMAN: Commissioner Cawley? 5 l 6 COMMISSIOUER CAULEY: I have no questions. 7 THE ACTDIG CHAIRMAN: Commissioner Shanaman? 3 COMMISSIONER SHANAMAN: None at this time, g i THE ACTL!G CHAIRMAN: I have a question of 10 Mr. Newton. 95 : BY THE ACTING CHAIRMAN: , 12 Q Mr. Newton, does the PJM regard the GPU r 13 as a single entity and does it allocate to GPU an amount g equal to, let ur say,100 percent of the ownership of Three 15 Mile Island, or are the sales made by PJM to each of the y affiliates of GPU on the basis of their ownership entitlement rights? 17 g l A So far as contractual relationships, operatiorjal gg relationships, and all other ways, PJM regards GPU as one go entity and treats the group as one. Any sale made by PJM to 9,.;..
) GPU is acde to GPU uithout regard to which one of the 7.zj subsidiary companies ruay be buying. }'
!) .
2M Q. The GPU acts as a little PJM with respect [ b-g, to its three affilictes? 25 A That is a fair description, yes, much more neunaxen e x..::c:m. :e.-n 1:. tecxwn.t.ow Ave. -immuszuao, . A. imn 1640 091
ileuton-cross 193
. T q
( .;, closely coordinated than PJM and much more closely managed, $ 3 but yes. l 3 Q The determination would be made how much z, power ought to go to Penelec and how much ought to go to 5 Met-Ed and to Jersey Central based upon conditions prevailing 6 at that particular moment and the cost of the power, is that y
- right?
U ' A That is correct, if I could just qualify L p i slightly. In meeting the PJM dispatch to the running cost 10 , over every . hour each company does indeed generate a certain 11 ] amount,isrunningcertainequipment,andafterthefact 1 12 i there will be a determination of whether they were generating G 13 to meet the GPU load or whether there was any sale to the e 14 outside, assuming that we were short and were not selling, I 15 we were buying, then the deficiency from PJM under normal 16 conditions would flow to the company that is short once the 17 entire GPU dispatch is met, h j is Q Mr. Newton, the sale of purchased power by , i 19 ' PJM to GPU is a single transaction which is subject to FERC ! 20 approval, is that correct? ! 21 A Tnat is correct. 22 . Q Does the FERC intervene in the manner in l 1 l 3qj which GPU distributes the power among its three affiliated 24, companies? h 25 A Tney have the same degree of jurisdiction
*tc!!r.UACH c f?.Ar.rJ E. !!'C. - 27 N. I.CCX'.Y*LLOW AVE = IIAP.R!SOURO. PA. !?!11 1640 092'
-. . - - - - - -.. - - w ---- - - - - - - . _ _ _ . - - . . - - . - . . - - Newton-cross 194 I
.. over that as they do over --
A ( Q So there is a double jurisdiction? 3
- A Tnat is correct, a
Q You are being regulated at the PJM to GPU 4 5 level anc then from GPU to the affiliated -- 6 A Tnat is correct. 7: Q How on the split saving, by economic dispatch g there is a determination made that GPU needs power at a g certain level which can be filled by PJM, is that right? 10 A That is correct. 1; Q We have then this transaction going and power 12 supplied one day. The following day the cost of oil rises, 13 and correspondingly the cost of PJM affiliates to generate 14 electricity would rise as well. That is possible, isn't it? 13 A That is possible. 16 Q If PJM were to in fact generate this power. 17- But it is involved with PJM in this transaction and the power gg coming from PJM at a certain cost which is subject to split 19 savings would then go up, wouldn't it, the cost, because the 20 cost of oil would have risen, and yet the same power from the gy same sources, and e.t the selling end there is no real increase 22 in cost, but at the purchasing end if the purchasers were to i 23 undertake to generate that po; er there would be an increase. px
;4[R So you have an in::reased cost as you apply the split savings 25 theory. And the seller would receive more for its split I - re:nmc. .ca e, w.r.sar., me. - m:. 2.oc:aviu.o s me - unmner.o, n. m =
.t. ,
1640 093
_ _ _ . . _ . _ _ . . _ _ _ . _ _ _ _ _ _ _ _. n. .._._.___..m__. . _ _ . _ . . _ .
/, .
Newton-cross 195 3 savings but the buyers would pay more and the energy rate g 3 cost would correspondingly go up, isn't that right? 3 A Tnat is quite a long question, sir. There 4 was one statement you made that I think was incorrect. I 5 believe you must have misstated it. l 6 Q There may be nrny.
'l A You said that the price of oil en PJM would ,
8 go up one day and the next day there would be an increase in F the cost to the purchaser but .no . increase in the cost to the 10 seller. Tnere would indeed be an increase on both ends. Q I said, I thought, that there would be no I 12 increase to the seller if the seller were not using oil. O 13 A If he were generating that from coal, that e 14 is true. 15 Q Eecause we have a good portion of the fue3 16 coming from PP&L, isn't that right, and most of their pon er 1? l is generated by coal-fired installations? 18 A That is correct. 19 Q So isn't it possible that to the seller there 20 would be no higher costs in generating tbe power to be sold 21 on the second day, but as to the buyer, becauce the cost of 22 # oil had risen, their anticipated production costs would be 23 increased and co the split savings would be applied to these
- 1. l (C 24 ' two figures, one being the same and one being higher, and the g 25 seller would benefit by that increase, the purchaser would be
?tch?AC310 Mr.50:!AL t!;O. = 27 IL L30!CWILLOW L*:f. - MfaK!35URO. FA. 37112 1640 094
- - - - - . - - _ . - - - n -- . - - - - . . . -
Newton-cross 196 pe.lalized by the rise in the price of oil, but there would 3 3 be for the ratepayer contemplation of having to pay a higher 3 energy charge, is that r'y;ht? A That is correct. There would be one offset, 4 f 5 the increase to the customers, the ratepayers of the buying 6 company would be precisely offset by the flow-through benefit 7 to the customer of the selling company. 5 Q Will you repeat that? I didn't quite get 9 it. 10 A To the extent that the savings component i 11 ' increased, under the assumptions you make, there would bc 12 an increr_ sed receipt by the seller and no increase in its 13 costs. The entire receipt of that sale would flow directly 14 through the energy clauses, and allowing for the time ~1ag 15 in billing, there would be a benefit to its customers exactly 16 equal to the increased charge to the customer of the buying 17 company. gg Q That is w'aere the seller is concerned and j i' 14 that seller does not happen to be GPU. I am more concerned 20 with the automatic increase ubich comes about by using 21 i energy produced at a cost which was no different than it 22 uns yesterday when you bought it but is higher to you today 23 because the cost of oil has gene up, and happens to be one (s of the determinants, and yet you are using energy from the 24 25 same source. I think you have indicated that under those tscuen:.:n e, runa:n suc.-en. t.c:m::u.on z.ve. - wauucune n. sm=
.%.;{) ,
~ 164Q_095
Newton-nrnna 197 k ? y set of circumstances what I describe could take place. O c '
. A That is correct, yes, sir.
2
,, Q Uow heu, Mr. Newton, does the new agreement c
change that, if it does? 4 5 A To the extent that the purchasers are ascribe { a 6 as replacement for TMI, that replacement would be made at j tj lcostplus10ratherthansplitsaving. So if the cost did a not go up, the purchase price would remain exactly the same o , and the alternative production cost, which no longer enters 10 the equation, would go up following the oil prices. ig Q That applies to t he first 7,000 gigauntthours'.? 13 A Or first 1100 megawatts per hour. They are 23 the same number. We are limited in a given hour to buying h
.14 1100, and a total of 7,000 gigawatt hours.
I o Q For a total? g A Yes. Q But it does not apply to the difference 17 hcurs ig between 7,000 gigawatt / and 11,000 gigawatt hours? 19h A That is correct. 20 Q How are those 4,000 gigawatt hours sold? , 21 A They would be sold on the split saving basis , unless w2 could buy them from an external pool. 22 33 Q Unicss ycu did not have to use them, buy b5 them, but if you were to rely upon that -- 25 A If we bought them from PJM that balance -- f2H?l:AC*r5 O ETAKcHA*. !!:c. 17 N. LoCXW!acW AVL-. MAnflic3UKG, PA.17112 1640 096 _
. w - - - - - - - - . _ . - . - - - -
Newton-cross 198 Q I had heard earlier what I thought was i
' ' reference made by one of your witnesses, Mr. Russell, that 3
, this plan, the cost plus 10 percent involved the proposition
;)
that the purchases by GPU uculd be made exclusively from PJM. Is that correct, that you would give up other sales? o
,. A It is not correct that we would give up any e
other opportunity to make other purchases. We will take all we can get from the outside as long as it is more advantageous 3 g kthanthecostplus10orsplitsavingsasitmaybe. Q S it is p ssible that an opportunity could 10 7.j j present itself which would be even more advantageous than g not only the split saving but the cost plus 10? g A That is correct and we will take advantage f every bit of it we can get. 14 g THE ACTING CHAIRMAN: I thank you for that g clarification. I have no further questions. Commissioner-p Shanaman apparently has discovered a question.
, BY COMMISSIONER SHAIWIAN:
.tG to Q When you projected your . energy costs for 20 .
1980, wnat assumptions did ycu make concerning the purchases y from PJM for Met-Ed and Pen lec? A Well, in determining what those purchaser 33 w uld be it is a re.th r 1 ng pr cess. If I might just kind 23 (- g of skim over it we put into a cceputer program the loads that 2 we e::pect to have, we put in all of the data se have on the u :nno:.=u unen= n::. -mi. weantu.ovn.vz. - nw.ma=na, n m ua l 6 ' 1640 097
_. __ _ _ _ . m _ _ . _ _ _ _ _ _ Heaton-cross tog generation, the units we will have, their maintenance 7' I h o schedules, the expected energy cost or costs from those 4-units, and then we run those programs -- this is a program i a .. g thattreats all of PJM's equipment, so-called production
- cost program -- the end result is that we get an output i a
g that shows from that program the generation of our own in 7 megawatt hours from cach plant, the difference between g generation and load. g If we have any firm purchases, we reflect those in the program. And then we end up with a set of data , 10 gg shouing the FJM purchases by GPU and the cost of those pur-chases, all flowing out of the same program. p 13 The fuel prices we put in there are the h 3 incremental cost of, the generation and all of those are part f the input reflecting the best estimates our technical 15 16 people have and fuels people on what the cost of fuel will 17 be, what our maintenance schedules will be, et cetera. S all of those come out of this same progran 10 go and that is the way we estimate. It is not a manual process. Q Based on that., what is the bottom line? Is 20 31 Fenelec coing to be purchasing much of this PJM power? , i A Fenelec will be purchasing some of it. I p, i t g,p don't recall whether ne have a calculation of that special i S 2 purchase ascribed to Penelec per se. I can give you overall figures for Penelec 25
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_ _ . _ . . - _ 164_0 0_98__ _ _
Heuton-cross 200 1 3 for our 1980 forecast, and this is based on the various 3 assumptions in thnt forecast, which, by the way, included 3 the assunption that THI-1 would be in service September 1,
<; 1980. l 1
5 Over the year we had estimated that Penelec 6 would be buying from PJFi 1006 gigawatt hours and delivering 2 something in the order of 376 gigawatt hours, 377. So 8 Penelee would have been a net purchaser in 1980. 9 Also Penelec vould have been purchasing some-10 thing like 813,000 megawatt hours from the short term purchases. 11 So Penelec would have been a net purchasing company in 1980. 12 But how tach of that was this .special PJM purchase, I don't r~ 13 have. 14 Q At one point I think we ware told that you 15 were pro;iecting PJM purchases to result in a net savings of 16 ' 32 million. Did you project on the basis of the 32 million 17 or did you use another figure? 10 A The 32 million is the difference between 19 the purchases from PJM on a split saving basis and on a cost 20' plus 10 percent basie. 41 Nou the forecast I was ouoting from here 1 23 reflecta all of the PJM purchases as being on a cost plus 23 10 percent basic. In that forecast _ there was no distinction b 24 betueen split savings and cost plus 10. It uns treated as i 23 all cost plus 10 f001C2 ACM 2: f.!A".OMf.L. !!!C. - 27 !*. LCCm71LLOL' N.'%. ~ !".ACZ23UMO, PA. I7M$ 1640 099 _ . ___.,, - - . . , ..--,,.w..
Hewton-crosG 201 1
, Q How much of this would be purchased by
,r s Mat-Ed? What is your assumption on that? And to finish ,
, it out, what about Jersey?
a
, A Met-Ed under the same assumptions would
-r purchase 1,202 gigawatt hcurs from PJM and sell approximately g 208 gigawatt hours to PJM, and Met-Ed would purchase 1 millier 7
1 577, that is purchased power, short term purchases. Jersey g Central would have purchased in our forecast 4,097 gigawatt
,-! hours frem PJM and would have sold 99 gigawatt hours to PJM, 10 and in chort tern purchases, 1 million 892 or 1,892 gigawatt l .d. j hours.
73 Those are the relative numbers in the (. g3 e 1980 fore. cast. g y,y Q I suppose what has me a little confused on 15 the $32 n.1111on figure is this letter of October 18 to the 16 Commissicn. 'Enere is a certificate of service that it was g sent to all the parties. It indicates on page three that the estimated savings to the GPU companies in 1980 from the 10
., q, i PJM proposal would be approximately $!.O million rather ths.
20
$32 million resulting from the PJM study.
A Is this on page three of that letter? 20 33 , R Yes, the first full paragraph. 23 A Well, the predicate of that statement there (1, f. was that the purclnses from the outside, the short term v .u. . , purchases.would continue at the level they were in July, g 23
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_. _. _. _ _ ._.___.m ... . . _ . _ _ _ _ Newton-cross 202 t i August and Septertber when we were getting very large 1
~
, i opportunities to purchase from the west, principally fron
, Accrican Electric Power, and their neighboring companies.
2 4 If that level of purchases had continued 4 g with its result nt savings, the opportunity to buy from PJM and to tais advantage of this cost plus 10 percent special 6
,. purchase would have reduced the $32 million saving down to e
g, ten. 'Ihat is the meaning of that paragraph. g, 4 You are saying that outside purchases will g not continue at that level presumed in that paragraph? . g A Ho, I am virtually certain they will not. 12 Q What is the benis for that? You have been 13 told that they won't supply it or what? p,:, A Mr. Sit:s has testified to this. They have yg sought out every opportunity of achieving the purchases 16 ', with the resultant saving and continuing them, and I believe p Lhey have been told specifically that most of these purchases g will no longer be available. L g i THE ACTINC- CHAIRhnN: Do any of the C mmissi nors have any further questions? 20 COIG4ISSIONER TALAIFERRO: I have a question. 3 j DY COISIISSIONER TALIAFERRO: 2m4 5 1 Q IIr. Neuton, with respect to Figure 5 -- 2 led e* : el y, li here andhad I think the Consumer Advocate counsel and the some questions -- with respect to the incremental 25
* &!CE :::AC11 Q MA?.C *.A !NG.--T !!. LCCla"/C.* CW AVf - PJ" J:nlSEU?:G, PA.1711:1 1640 101
Hewton-cross 203
, cost for any unit running on.PJM, that is what that chart C'-
l was reficcting, correct? 2
, A Yes, it is. The average of those incremental a
i Costs.
/j. ,
,, 4 As I understand it, most of the figures that a
6 w re being discussed today were projections by your company. 7 1< My question goes to, for example, on that chart, is it g ! possible to show for some of the historic years some of the n
~
, projections that you had made and then the actual costs to l
get, for exanple, the range of accuracy or error between the g
. projection and what actually occurred?
1 A Referring to Figure 5 only, we do not
)
g routinely make any projection of what the PJM running rate $ g l is becaure it is subject to so many variations. g What we do make projections of, the inter-g change cost buying price, and those can be conpared with g actual, to give you the same kind of a general representation, g But the data shown an Figure 5 is not routineJ y g forecast. It may have been done for certain special studies 20 but not as a routine matter. CO GIISSIONER TALIAFERRO: That is all. 2..1. ; J THE ACTING CHAIRMAN: Counsel to the i gy Commissioners has a few questions of Mr. Hewton. I: {'- 24lU EY 103. McCLAREU: .g 3 Q. 12r. Newton, are you fcmiliar with the
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~
Hewton-cross 204 i P presentation the companies made when they requested that the J. Ccmmission approve this purchase crrangement with PJM7 { A l
,, I am generally familiar with the petition, 0 ,
ycS, Bir. . Q One concern I think the Commission has is D l etermining whether the projections there are comparable to 6 the projecticns that are now contained in the company's 7 g presentation in this proceeding. One specific instance I I i
- p. would like to know if we can relate is this. Perhaps the
; n st basic assumptien underlying the estimate that there uvalC 10 '
l
~q l be a $32 million savings over split savings by this cost plus I
g ' 10 purche.se was that you would only make, I believe, 200 13 megawatt purchases outside PJM7 p A Tnat is correct, that is one of the basic 15 assumptions. 16 Q Have you made that armie assumption in your
., projections here, not only in your exhibit but in the other '
17 zhibits supporting the petition to increase the energy cost 16 y rate? 20 A Tue purchases that were reflected there, g ' the gigaratt hcurs, the megawatt hours for those purchases are shown on my Exhibit G-3 in detail -- 37 Tce problem with that is that when the 33 f Q I
, presentation was made on the sale arrangement we were only
.w 23 given resulting figures, the conclusions, the savings under rmurmreu a w.n:n : :=. -n ::. :.ocan.t. eve xa:.-:-=armu, n. m m
.-- ., -n. g,. _ _ 1640 103
Newton-cross 205 1
) the acsunption of the 200 megawatt outside purchase was c~
t i can you relate the assumptions you have made e 3}{$32million.
,
- here in terms of potential savings? Is it $32 million, half a
of it, only a small fraction? 'Ihat sort of thing. A Tne assumptions we have mc,de in our forecast g. reflected on Exhibit G-3 are purchase of in total MO short 6 term purchase, MO megawatts, 200 from Ontario Hydro,140 7 g ; megawatts from Jamestown, und 200 megawatts from Allegheny p Power System. II w that is forecast constant through each 10
.g L ncnth of the year. So there are, indeed, MO megawatts g reflected.
O u rn the October 18th 1etter which Comniesioner e
- g. Shanaman was asking about, in the second complete paragraph on g page three, the assumption that was referred to there, a tota:
f MO megawatt hours per hour. Tne 1980 savings to the GPU 16 i l p : companies under the PJM proposal would be approximately 30 g j million rather than the 32 million. I y So we did indeed run a sensitivity run of 20 increasing the purchases from 200 to M0 and the reduction
)
g jinthePJMspecialpurchasesavingswentfrom32millionto l 22 j 30. r: IIow the MO negs. watts is what is reflected
~
7f i 74 l in all of our other data, reflected in Mr. Hafer and Mr. d g Graham e s exhibit, A-2, Table 3 I believe it is, in his
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- -- - - - - -,, _ . _ .,n,. n .,1640.104 . .=
Heuton-cross 906 Exhibit A-3, my Exhibit G-3, the 440 magawatts of short 1.
,i oP, term purchase.
,, I So the sensitivity of thin 32 million saving a .
l to increccing that purchase is not large in going from 200 l 5 Q In y ur presentation in this proceeding in 6 : support of an increase in your energy cost rate you have made g assumptions of PJM purchases which would be equivalent to p generating a $30 million savings over split savings. A I am having a little difficulty with that 10 l f; statement. So far as we are concerned in GPU we are not g generating a $32 millionsaving or split saving. We are g reducing our payments by that much, that is the split saving 7,;, I component. . g Q In your presentation here you have assumed 16 a 440 megawatt per hour purchases external to PJM, is that g correct?
.jg A Tant is correct.
.g. 4 Tne letter from Mr. Sims dated October 18 20 states that if one assumes 440 megawatts per hour purchases 37 external to PJM, the projected savings in 1980 would be 30 4.4
{millionratherthan32,isthatcorrect? g2 , A Tnat is correct. g e ( - Q Mr. Heuton, in the petition filed by Met-Ed 24 25 and Pen lec for a declaratory order approving this purchase
.i :
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-- . . - . . - - - - - . - _ - - -. - . .. - - -.-.. - . _ . - .. ~ .. - .. .
Newton-cross 207 y t'- 1 l arrangenent with PJM, it appears, I believe on page 19, I within Paragraph 23, the Respondents' statements of how the g
,. benefits of those purchases would he distributed within GPU,
.a The statecent appears there that initially the energy avail-4 abl from PJM und r the PJM proposal will be allocated among 5
6 the GPU conpanies in proportion to their respective interest 7 in TMI. If, however, at any hour one GPU company cannot 3 economically use such energy to serve its own load, it will p relinquich such energy to its affiliates that can economically i 10 use such energy. 11 l In that paragraph you go on to project that 12 a reasontble estimate of the benefits, distributien of benefits 13 would be appror.imately 35 to 45 percent to Met-Ed, 35 to 45 $ 14 to Jersey Central, and the balance to Penelec. 13 Have you made that assumption in your 16 presentation here of the energy costs that Met-Ed will incur? 17 A we have implicitly made that assumption by the basic assumption that all of the PJM purchases reflected gg , in our forecast will be at the cost plus 10 percent basis, 20 the special purchase provision, 33, Q That is not the question. The question is, l l what ascumption have you made allocating the total GPU benefit 22 ' 1 23 1 to Net-Ed? h 24 A I said we had implicitly reflected thr.t because, as I answered rather lenghtily earlier or, our entire O 25 lar!!MUAC12 0 ..A!:Citt.L. It*C. = 27 !?. f.CCitMLLOW AVII. == IIARRt35'J3C, PA.17112 1640 106
Newton-cross 208 1 t forecasting proccas, this producticn cost program inherently a 3 ! reficcts the purchase by let-Ed of whatever is cening in fron-l 3 PJM that Met-Ed needs, and it reflects it at the cost plus 4 10 percent basis. 5 So it is implicitly reccgnized in there, I 6 but we hr.ve not explicitly said 35 to 45 percent would accrue 7 to !bt-Ed., It is just inherently in there. G Q You are not being responsive,!!r. Newton. 9 . Can you no.i or at some later time quantify what percentage i 10 I of GPU benefits you have assuned will flow to Met-Ed in your 11 projection of energy costs for Met-Ed over 1980? 12 ; A Tnere is on my Exhibit G-5 an estinate of 13 the saving from the PJM special flowing to Met-Ed. That is 14 the only place that that is explicitly addressed in this case 15 that I an aware of. Everything else, it is implicitly a 16 reflected in the forecast figures. 17 I fear I can't be any more responsive than 18 that. , 19 ! EY ColGiISSIONER SEANAMAU:
~. -
20l( Q Didn't you say previously that the 7,000 21 gigawatts was reflective of 200 megawatts outside purchases
- 27. and that the cssumption that you are making here in this 25 case is for 440, so therefore if that is correct, then e- l 14lj G-5 would not accurately reflect the savings to Pet-Ed?
I 25l A Tae 7,000 gigawatt hours seens to be a source I msn=r.en a :7. ter.:.u.1::=. - a ::. :.c=:w U.0W AY2. - I: 2;us;"ma, M. t'd i:
,c.
n
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Newton-cross 209 I, { 1 F f a gm.t deal f confusien to us. That number has a fairly g g limited meaning. The critical number is the 11,000 gigawatt hours that would be cbtained from the TMI units, both of them. 3 Hou of that, with and without THI production 3 cost runs were made and they indicated that the change in g purchasec from PJM on the split saving basis were the 7,000. 7 The other 4,000 came from increasing GPU's own generation or 8 , reducing the sales it otherwise would have made. 9 That really is the basic meaning, the 10 increment of PJM purchases that are attributable to the y,1 loss of the tie units so far as PJM is concerned, and if we 12 did buy that full 7,000 from PJM, on a cost plus 10 percent C 13 basis as opposed to a split saving basis, the saving would ; e 14 be the 32 nin ion. 15 Now we will indeed be buying from the outside 16 as much as we can get. We think we are going to get 440 17 megawattc frcm the outside. The 440 megawatts would have gg some impact on reducing this 32 million saving. It would 19 reduce it, we think, to 30 millien as stated in the October 20 18th letter. 21 But the 240, going from the runs that were
, made in tietermining the special purchase, which included 2,.;, t, 25 200 megavatts, and the increase of 240 to the 440 level only pj,; produced a $2 million decrease in that savings number. g 25 tiO3i1DP.Cl: C. ?. ?,E Cit.*.E. It:C. = C7 t*. i,.DC1;V1:1.1.OY AVL = UADRISDt!".Q. PA. t 7t 12
, 1640 108
-. .- ~. ._ - -
u . - - . . . . . . - . - . - . . Newton-cross 210 i jBY12.MetLAREN: s 4 3 Q Mr. Newton, on your Exhibit G-5 yea estimate e
, ! the Met-Ed savings from the PJM special purchase beginning i
l with 1,200 gigawatt hours. Wculd you tell me what percentage 4 5 that 1,200 gigawatt hours is of 7,000 gigawatt hoars? I A That is 17 percent, approximately. 6 i l Q Doesn't that mean then that you have assumed 7 l 8 that Met-Ed will only get 17 percent of the total GPU package p l of PJM pcuer? I
.nj A First, I think I should explain that the 11 l,1 million 2 that we have there comes out of our production l
12 l cost runs and is reflected in Exhibit A-3, for example, and 13 .on page 6 of 6 in Mr. Hafer's Exhibit A-3 for the year 1980, 14 12 months -- 15 BY COMMISSIONER SHAHAiutN: 16 Q Wait till we get there, please. A-37 17 A Exhibit A-3 18 G Ok"Y-1p , A Page 6, the 12 months ended December 1980,
.g j L for Met-Ed the interchange purchased from PJM is 1,201,673, gg and then there is intercht.n;se sold to PJM, and there are p . purchased power numbers on there, too, but the 1 million 201 23 i was rounded to 1 million 2 and utilized in G-5 where it does indeed represent only 17 percent of the 7,000.
25 Eut what is reflected in all of our costs are 5:c tICAc?f C. flAnSMJLL, INC. -C'1 E. LCCm'.*ILLOW AVs*
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Newton-cross 211 g the energy forecasts and'the costs thereof produced by all g 2 cf our budgeting process, our production cost programs, which 5 implicitly show that Met-Ed will be buying only 1 million 201 4 in total from PJM in 1980 under the other assumptions in the 5 forecast. 6 So we have implicitly reflected all of that 7 in the budgeting process and through all of the numbers in 8 the case. 9 How what we have done on G-5 is attempted to 10 arrive at an approximate number of what has been reflected in 11 here, but we have not made that assumption basically, it is 12 just a product of the process. 13 BY MR. McCLAREN: M Q Hr. Newton, perhaps you want to take it under 15 advisement, but it would appear to me that the presentation 16 the companies have made as reflected by your witnesses' 17 answers is that you have assumed a $30 million savings over IG split savings in purchases from PJM and have arsumed an 19 allocation of only 17 percent of that to Met-Ed. If that is 20, erroneous, perhaps ypou would want to try to do something to 21 clarify that misunderstanding. 22 IB. RUSSELL: Mr. Newton has indicated that Uj that is that the figures ccme out to. I think the witnesses r, Z; 24 have alsc indicated it is the basis upon which purchases are g 25 allocated accug the companies and that is what it comes out tc . mere.cu e. stussm m:.-m:. s.c:xem.i.ow in - uxmanu.w, m. sms 1640 110
- a.-- - . . . - -
Newton-cross gyg gg TdE WITNESS: I might be able to shed a littic 7 bit of light on it. I was reminded that in our forecasts as g of Septeriocr 1 we assumed that TMI-1 is back in service and
,9 so for the last four months of the year Met-Ed purchased 5 virtually nothing from PJM and therefore would have achieved 6- virtually none of this specini purchase saving, y Tha purchases are heavier in the forepart of 8 the year. So that will explain sone of the drop off of 50 9 ' percent ratio to the 17 reflected.
10 BY THE ACTING CHAIRMAN:
~, Q I don't think, Mr. Newton, that you have I 12 clarified this to the satisfaction of the Commission. You 13 say that because of an expectation that TMI-1 will be back 14 on line August 1,1980 -- is that correct?
15 A September 1. 16 Q September 1 3 Met-Ed did not make four months' 17 time purchases under the special arrangement to which it 18 might have been entitled, is that correct? 19 A It would not have needed the purchases if 20 TMI-1 -- or uill not need them -- if TMI-1 is back in service l 21 i and it fc11o ts that there vill be no savings from any special 22 ; purchase arrangement available to it. 23/ Q Are you suggesting that this explains the 17 m I 24' percent figure? 25 A I think it does. Tne fact is that when TMI-1 ECErrf.O!! th MAROP % !!JC. == 27 !i. f.CCI:Yll .LC"! 7.*/J" . = !*AECISEURG E% 171f A 1640 111
Newton-cross 213 { 7 goes back in, $32 nillion savings that was avnnnble with h g both units cut of service will be reduced in itself. Wo 5 made no estimate in here explicitly of what that saving 4 would go to. That is a fall 12 months 1980 estimate 5 assuming that TMI-1 does not t.ome bach in service until y January 1, 1981. 7 If it cosas in earlier, there will not be 8 the full $32 million. But the figure that we use to derive l P the Fat-Ed in:puted share reflects TMI-1 coming in September 1 10 and that produccc the figure of 17 percent that seems to be 11 in some question. 12 We have implicitly reficcted all of the C 13 savings that are available plus the availability of the unit. O 14 THE ACTING CHAIRMAH: Will the reporter read 15 back Mr. Hewton's answer to my question? Wait a minute. 16 EY THE ACTING CHAIRMAN: 17 Q Mr. Newton, would you s' r w.rizo? You indicate d 16 in your last answer that the 17 percent estimate of the 19 allocation to Met-Ed out of its 50 percent entitlement or 20 100 percent entitlement for the entiro company was predicated 21 upon your belief that TMI-1 would be back on line September 21 1, is that correct? 23 A Yes, exactly. 24 Q And this is how you cxplain such a low $ 25 utilization by Met-Ed amounting to 17 percent.
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Hewton-cross 214 e 1 l 1 MR. RUdSELL: Was that a question? j s 3 THE ACTING CHAIR 1IAW: We are at ease. I
- g. , characterized his answer. He agreed that the characterization 4 was correct.
5 BY MR. McCLAREU: 6 Q Mr. Newton, could you tell us what percentage 7 of the PJM purchases by GPU are assumed to be allocated to D Met-Ed during the 9 months when TE-1 is assumed to be eut 9 r of service? I 10 i A It will take me a few minutes to calculate 11 it but it certainly can be done very readily. 12 THE ACTING CHAIRMAH: We will bear with you. n (Discussion off the record,) 14 15 THE ACTING CHAIRMAN: We will have a five-16 M te recess. 17 . (Short recess.) 18 19 THE ACTIUG CHAIRMAN: We will return. 20 I think we recessed at Mr. Russell's suggestion at a point 21 tchere yor. were being asked, Mr. Newton, to make your 22 a
. calculation.
23 THE WITHE 3S: Yes. I have made those l p~ 24;+ calculaticns. 25 THE ACTING CHAIRMAN: Let's lay a basis for this. NCHnDAOM D t.*.AC3N/J. INC.-7/ N. J CCTatl*. LOW AYE. -I'J #.RIS:IURG, P".17:iA l .. __
__ _ _ _ _ _ _ _ _ . . _ _ .________m_ _ _ _ . _ _ _ _ _ _ . _ _ Newton-cross 215 p g BT MR. McCLAREN: g 3i Q Will you tell us what it is you have the 3 calculations for? 4 A The question had to do with the fact that
- 5. in the full 12 months of 1980 Met-Ed's purchase from PJM was 6 only 17 percent, which you were comparing to the 35 to 45 7 percent figure included in the October 18th letter, and I 8 pointed out that we really had TMI-1 in service from 9 Septe@er 1 on, and therefore the 7,000 was no longer an 10 appropriate number.
11 So I was asked to figure oub what their 12 percentage of that PJM purchase was for the first eight 13 months of the year, and I have done that, and for the first If eight months Met-Ed's share of the PJM purchase only is 20 15 lpercentinsteadof17. 16 Now that number itself does not tell the 17 full story because that is just the amount that Met-Ed would 18 have gotten under cur forecast from PJM. But the fact is 19 that during that same period, the full 12 months of 1980, 7.0.' rot-Ed got 37 percent in megawatt hours of the other energy 21 purchased, that is the short term purchase, its share of the 22 l short term purchase was 37 percent. 2S Q Is this from other sources? 24 . A It is from the same Exhibit A-3. g 25 Q But I mean is this from PJM? A No, this is not from PJM, other companies. taCf'23AC?t 0: W.~2*.!!AL. INC. -- 27 IL LCC'4WILLOV/ AVC -. !W121!DECne, l'A. 57812
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Newton-Cross 216 1 THE ACTING CHAIRMAN: Proceed. Proceed. I'm ( 2 SoTry. 3 TEE WITNESS: Now, there's another thing that 4 tends to make this a littia hard to understand. The 32 5 million figure for the savings on PJM was based on runs made H. 6 for PJM using their assumptions, including for GPU a 200 7 megawatt purchase of short-term, and that produced also the 8 7,000 gigawatt hour incremsntal purchase. 9 How, our October 18 latter, which ran a 10 couple of sensitivity checks on that, was based on our runs 11 not using eractly the same estimates, not using the same 12 input data. So therefore, they're us totally consistent 13 there, although close. 14 And then our forecasts which are reflected in 15 this case and all of the askings are based on our own esti-16 mates, on our own programs, which don't necessarily have 17 cractly the same input data as the PJM program. So they're 18 not totally consistent. 19 THE ACTING CHAIEMaN: Can you point out to 20 uhat extent they are not consistent? 21 THE WITNESS: Well, one of the things where 22 they are not consistent is the fact that we have TMI-1 in 23 our studies here from September 1 on, and they had TMI-1 out p 24 for tha full twelve' months. 25 They reflect 200 megawatts of purchase from the I@f"*A**CH C MA7tS7t'.L. D*C. -27 M. Locim'!LLOW AVC. - HAFRIGEt!3tC, PA.17812 e .
~~
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Newton-Cross 217 l 1 outside, tinareas we have 440 represented in all of our runs. g 2 So those two areas on tha surface are incon-3 sistent. Based on -- it doasn't n: nan inconsistent in an
,} invidious scuse, but rcarely in the sense we put different 5 input dcta, knew more at the time we ran this than we did 6 otherwise .
-2 7 COMMISSIONER SHARAIGN: In the 6.9 mill charge 8 or increase that you're requesting, does that reflect the 9 17 percent or the estimated 5.5 million savings as you show 10 on your Exhibit G-5? 11 TIE ITITIESS: In referring to the 6.9 increase, 12 I take it you're referring to Mr. Hafer's. O' 13 CGfilSSIO2ER SHAIFdGN: I think I'm referring O 14 to the Petition for Modification, which indicates that you're 15 , requesting the Comnission to authorize a levelized nst energy 16 cost adjustraent charge increase of at least 6.9 mills per 17 kilowatt-hour, effectiva January 1,1980. 18 THE WITNESS: That 6.9 mill request reflects 19 the totc1 onergy cost shown on Tabis 3 of Exhibit A-2 20 How, included uithin that total energy cost 21 are the interchange costa -- 22 HR. RUSSEIlL: 17111 you hold on a second till 23 they get a chance to get tha exhibit? C 24 ne AcTum CaAIamn: traat exhibit is this? g 25 DE WITIESS: Thi.s is Exhibit A-2, Appendix B, MC!mDACM Q FdAMONAt IllC.a E7 fL LOCKWILLOVI Am= HARRf 92tJnG, PA.1711A 16 UL_l L6__
.~
Newton-Cross 218 1 Table 3. 2 TE ACTING CHAIRI&N: We're ready. Proceed, 3 sir. 4 TIE WITNZSS: Total Et-Ed system energy coat 5 for 1980 is 183.6, shown on the first column there, " Energy -3 6 Cost, Millions of Dollars". Included in that number are the 7 interc.hange costs that I have been discussing, which show on 8 Exhibit A-3, Page 6. 9 fne third from the last column of Page 6 of 10 6 of Erhibit A-3 is that hundred eighty-three million six 11 hundred thirty-one total energy cost. 12 CO:@iISSIOER SMANAMAN: And that reflects the 13 purchase of the 1,200,000 megawatt hcurs from the PJM at the 14 estimated savings of 5.5 millica, as shown in your Exhibit 15 G-57 16 TIE WITNESS: Well, it reflects -- yes, that 17 would be the case. It reflects that 5.5. 18 It also reflects the purchase of 2 million -- 19 or 2,462 gigawatt hours from the outside, and I might nota 20 that that purchase is at a rate of slightly under 37 mills, 21 as compared to the PJM rate of something like 46 mills. 22 1R. Mc CIAREN: Mr. Newton, am I correct in 23 understnnding that your calculations and tha calculations in p 24 support of the 6.9 mill increase assume that Met-Ed will 25 receive the 1,200,000 magavatt hours of PJM purchases, which itOIMDACH & MAf!CWAL. INC. .*T7 N. LOOKWILLOYI AVE. == HARRISEURC, PA.17112
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Newton-Cross 219 1 is roughly equal to 17 percent of the assumed PJM purchases? h 2 TIE WITNSSS: That's correct. 3 HR, IC CIAEEN: That's correct, okay. And you 4 said that of that portion of 1980 in which you assumed TMI 5 would be out of service, Met-Ed's share of those purchases -4 6 would be 20 percent? 7 TIE WITtESS: That's correct. 8 MR. MC CIAREN: And that you've assumed Met-Ed'n 9 share of short-term power purchases to be 36 percent of the 70 total available to GW? 11 TIE WITFESS: Thirty-seven percent. 12 NR. EC CTAREN: Thirty-seven percent. O 13 I'd like to make a request for a calculation O 14- from the Respondents on bahalf of the Commission -- for the 15 cc:mnission, rather -- that you make available ths calculatican , 16 the basic calculations, you've presented in support of the 17 6.9 mill increace; casuming, however, that for the first 18 18 months of 1980 that Mat-Ed receives 37 percent of the PJM 19 power and, in the alternative, raceives 50 percent of the 20 PJM power so that with thoce tuo changed assumptions we can 21 see the effect on your requested level of increase in the 22 energy cost rate. 23 Is the request clear, Mr. Newton? b 24 THE WITIESS: I believe you did say for tha $ 25 first 18 months. I'm sure you meant the first 8 months.
- NCTIM2ACM Q MARSMAL. INC. = 27 N. LCCKWILLOW AVE. - HARR:53URG, Pt.173 la
._ .~ n . mmma mm r=mm wpm - -
. . . _ . _ _ _ . _ . _ _. m _ _ ______.-- _ _ _ . _ . . Newton-Cross 990 x 1 MR. MC CIAP.EN: For ths first eight months, 2 that's correct. For tbs period in which you've ascumed that 3 Met-Ed gets 27 parcent of the PJM purchases, assucc, in the 4 alternative, they get 37 percent and, in the alternative, 3-5 5 that they get 50 parcent. 6 TfE ACTING CHAIRMAN: We can have this when, 7 Mr. Newton? 8 TIE WITNESS: Certainly by next weelt. I would 9 hope we could have it in the mail before the end of this week, 10 We'll just have to go back and analyze what needs to be done. 11 I think it will be a rather short job. 12 THE ACTING CEAIRMAN: All right. The Com-13 mission will direct the Court Reporter to make available 14 transcripts of all of these discussions comencing with the 15 mou nt that Mr. Meclaren first posed the questions to you. 16 We will have copies of this interchange distributed this week 17 to all of the parties and copies of Mr. Newton's recalculatior s, 18 The two will come together to all the parties. 19 Do you have a question, Mr. Barasch? 20 IEt." EARASCH: Is the Comnission finished with 21 its questioning of Mr. Newton at this tima? 22 THE ACTING CHAIPJEN: The' Commission is not 23 going to hold Mr. Neuton in hostage. You may have him. r=, 24 MR. BARASCH: I'm not sure I want h'" , but I 25 do have a data request that I'd like to make at this time, if t1CIIFl LEACH O MAftENAL. INC.= E7 N. LOCKWILLOW AVEL = ftAftRISBURG FA.17112 1640 119
s, Newton-Cross 221 i fs 1 I could. g 2 THE ACTING CHAIRlnN: All right. Will you 3 please make your request?
/, BY MR. BARASCH:
5 Q Mr. Newton, during the cross-examination -- I 6 shouldn't say during the cross-examination. During the -6 7 examination conducted by the 5arious comissioners and Mr. 8 McClaren, you seem to have been referring to som month-by-9 mooth papers you must have had in your possession containing 10 data for Jersey Central and Penelec. I imagine they must 11 be in a form similar to your Exhibit A-3. 12 Would it be possible for you to make those s 13 papera available as n data request, if you could provide it $' 14 to the Consumr Advocate? And perhaps other parties would I 15 be interested as teoll. I don't know. 16 A Surely. 17 THE ACTING CHAIRE4N: The ComissLon included, 18 I trust. All right, Mr. Barasch. 19 , MR. BARASCH: Thank you very much. 20 THE ACTING CHAIPJEN: 10 . Malatesta. 21 BY MR. WAIATESTA: 22 Q I just have a few probably confusing questions, 23 Mr. Newton. Sinco everything else that icent into the de-h 24 cision cud the crecution of the contract with PJM seems to g 25 have been based on the campanies' respective ownership of the MCHRDACH & NAft077AL. tNC. = 27 N. LocKWILLot? AVE - HARRISETJRG, De t 17112 1640 120
Newten-Cross 222 1 TMI plants, why is the allocation of the generation from 3 that contract not based on the sam percentage ownership? 3 A Would you clarify which contract you mean? 4 Q I man the contract to -- well, I guess it'.s 5 not a contract. Perhaps that was an improper word. But 3-7 6 the agreement to do away with the split savings for the 7 7 million -- cr 7,000 gigawatt hours, 8 A Well, that agreennt is between PJM or the 9 parties of PJM, which includes GPU as one. So there's 10 nothing included in that agreement relating to how it gets 11 split up among the GPU companies. That's entirely a clause 12 under the purview of the GPU agreement, which is my Exhibit U G-1, and its various pro 7isions. 14 Q Ist ma ask you this -- and this may be a 15 question which Mr. Russell would probably have asked instead. 16 But if in fact Met-Ed were to take a larger share -- first, 17 turning to Exhibit A-3, on the 6th page, 6 of 6, in the 18s third line from the bottom, the " Total Energy Purchased 19 (Net)" for the twelve months ended December 1980, I assume 20 that thtt 2,46 million megawatt hour figures is a set figure, 21 that that's your projected figure regardless of what happens - 22 nell, assuming your projections are co:Tect, obviously, But 23 that is a fired figure, isn't it? fg 24 A It's an assumed figure, yes. 25' Q But that's how much you expect to purchase in f407mDAct! O MAft3HAL INC. *- 2TN. LC CtnVILLovr AVIL - HAftR:SCURG, PA.17111 m'M i 1640 121
Neuten-Cross 223 , z-l { 1 1980? How, you've taken that from various sources, including g 2 1.2 million negawatt. hours from the PJM agreement. 3 A Well, may I correct that statemnt? I looked 4 at the wrong line. The figure a million 576 above it is 5 what we estimate we will purchase from the outside, and 3-8 6 that's the relatively. fired figure. The difference between 7 that and the total not energy purchased is the "PJM And 8 Other Transactions", and those are the products-of the -- 9 our program. That. is, all of the variations of generation 10 available, and so forth. 11 Q Not. Of course, this whole ezhibit assums 12 that TIE-1 is going to be back in operation on September 1st, 13 1980, dcasn't it? 14 A That's correct, yes, 15 Q Well, assuming that your assumptions are 16 correct, if in fact you were to, rather than with that whole 17 interchange and other energy purchased, that whole segment -- 18 if you were to take power away from other sources and instead 19 purchaso it under the PJH agreement, wouldn't that make the 20 overall cost to the company greater than the way you now hava 21 it arranged? 22 A Considerably greater, It.would certainly be 23 the difference battisen the 37 mills that I referred to b 21 earlier and tha .46 mills from PJM, multiplied -- g 25 Q So even if you were to do so and get a greater E1073!UACH O MArtCHAL. INC. == 5.7 N. LCC1CW!:1CW AVE. -- HARRISDURG, PA.17112 n _, ~ 1640 122
Newton-Cross 224 1 share of the savings from having a cost plus 10 percent t 2 instead of the split savings, the net cost to Met-Ed would 3' still be greater if you were to take a greater share of 4 power from PJM? 3-9 5 A That's correct. 6 HR. ETRIESTA: Those are all the questions I 7 have. 8 TIE ACTING CHAIRMAN: Are there any other 9 questions? 10 At this point, Mr. Russell, the Comission has 11 requests to uske of you and the parties. There have been 12 references made to documents that are not part of this D record. They're part of other records and, in some instances , 1A* I believe, are parts of submissions to represent submissions U to this Comission. 16 I wonder whethat we could, with the consent of 17 all tha parties, incorporate into the record all referenced 18 materials. 19 E . RUSSELL: I would be happy to cooperate 20 if we cculd have an identification of what docuents we're talking about.
-, THE ACTING CHAIRMAN: We'll pinpoint it down 22' further, Mr. Russell. Referring to the prior record and the rr '
24 filings at this dochet into the current docket, its in-25 corporation. MOMR2?.CII A MARCHAL.130. = 27 FL LCCICWILt.OW AYE - MARnf95URG, PA.171IR _b , _ _ _ _ _ _ _ _ . . _ _ _ _ _ _ _ . -w wy_ _m -- -
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__ m _ Neuton-Cross 225 { 1 12. BARASCH: Mr. Chairman, when you refer to 2 the prior proceedings, are you referring to, if I could call 3 it, TMI Phase One proceedings we conducted back in the 4 spring? 5 THE ACTING CHAIPJEN: Yes, sir. 6 IE. BARASCH: Those are all the same docket 3-10 7 numbers, the present proceedings, as I understand it. I 8 was operating under the perception that this was merely a 9 continuatica of that proceeding and that therefore the 10 docuents contained in Phase One were part of the record 11 already. 12 MR. RUSSELL: I certainly didn't have that O 13 idea. I cartainly didn't have the sam impression that all 14 the stak data in tha last case are incorporated automati-15 cally into this proceeding. 16 THE ACTING CHAIRMAN: If it is in fact the 17 sam decket number, the record continues. What I'd like to 18 know is if there is any raisunderstanding about this fact. 19 I thank Mr. Barasch for pointing that out. This is the same 20 docket number. 21 MR. IUJSSELL: Surely. There's no question 22 about the fact that it's docketed at the sam number. 23 TIE ACTING CHAI1UEN: That's correct. We're 24 asking that that record continue. h 25 , MR. RUSSELL: I think we would like to have a MORftDACM & MAP.EMAt INC. -- E7 M. LocKWILLoW AV3f. = HAPJt!S2tJ!tG. PA.17511 1640 124__ _
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Newton-Cross 226 1 little opportunity to reflect on that, Because that record s 2 is a couple of feet long, and I think most of it is pretty 3 much out of date, stale for these purposes, 4 THE ACTING CHAIRK4N: I think that I've indi-5 cated that we have an interest only in those matters that 6 have been referenced here since yesterday. -11 7 IE.' RUSSELL: Well, perhaps the simplest thing 8 to do ir just look at the transcripts when we have tham, see 9 what has been the subject of references, and then see where 10 we go after we have so identified the various doctanents. 11 THE ACTING CPAIRFAN: May I ask the parties to, 12 by next Tuesday, have n coment to make on the suggestion of 13 the cond.ssion? 14 Mt. MAIATESTA: Could I ask the Chairman how 15 this will help the Comissien? The only reason I ask is 16 because under normal circumstances each party would be 17 responsible for moving whatever exhibits they like into the 18 record. I'd prefer to keep it that way rather than have a 19 consensus admission. 20 THE ACTING CHAIRMAN: You don't want us to 21 save any tin:e? Would you rather have a ruling from the 22 Comission? 23 IE. FAIATESTit: I'll do whatever you like, sir. O, 24 It doesn't matter to me -- well, it does matter. It's a 25 preference. But it's not something that I'm golug to go to Lt02CtP.ACH a NAf!SHAL. It!C. -- 5"7 IL LOCXWILLOW AVE. - HAKR!SBU!tG. PA.17312 1 1640 125
Newton-Cross 997 I the mattresses over, h 2 TEE ACTING CHAIR 114N: We've asked Mr. Russell 3 to have a comment for us by next Tuesday. 4 IE. EUSSETI: All right. 5 THE ACTING CnA1rRMAM: And next Tuesday we my
. 6 have a ruling to mke in response to your -- is it an ob-3-12 7 jection that you're making?
8 1R. FAMTESTA: .I couldn't call it that, sir. 9 THE ACTING CMIRMAN: I wouldn't call it that, 10 eithar. I'm wondering what it is. 11 ITnat is it that our Trial Staff is requesting? 12 MR. IMMTESTA: It's verbal thinking, I guess. O 13 TIE ACTING CMIPEAN: Mr. Barasch, do you.want 9 14 to add to this confusion? 15 MR. BARASCH: I was hoping to clarify things, 16 I hopa. Is it the position of the cammission, of the Chair-17 man, that we have incorporated generally all matters from the 18 first phcse of the proceedings? 19 THE ACTING CHAIRMAN: I will ash Mr. It:Claren 20 to clarify that, please. 21 1R. MC CIldEN: Would the counsel for the 22 varicus pcrties have on objection to t~m Co:snission ruling 23 , that filings at tin June 15th order and filings at this 24 docket subsequent thereto are in essence pleadings in this $ 25 proceeding and therefore part of the record so that we would
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Newton-Cross opp. 1' not be incorporating in nacs the factual evidence in the t 2 last case? But beginning with the order of June 15 and the 3 subsequent pleadings to include the company's petition for 4 approval of the PJM sales. 5 Im. EDSSELL: We would have no problem with 6 that suggestion. 13 7 IEL. BARASCH: I have no problem with that 8 suggestion, Mr. McClaren. I'd just go a step further. There 9 have been references in the course of cross-examination to 10 exhibits from the previous proceeding, and I was trying to be 11 responsive to the Chairmsn's suggestion that documents be 3 tied in. 13 We referred to some Graham exhibits earlier 14 that were from the previcus proceeding. I thought the re-15 quest had been to exhibits that had been introduced in the 16 last proceeding as well, 17 THE ACTING CRAN MAN: Do you find yourself 18 uncomfortable with that? 19 la. BARASCH: What we have now is , fine. It's 20 a question of how unch beyond that you'd like to go, 21 THE ACTING CHAIRYAN: Only that which has been 22 referenced here. 23 IR. SELK0WIIZ: Mr. Chairman, there is so:sewhat N f 24 of a problem in that there cre parties to this phase of the 25 proceeding who were not parties to the first phase of this uenr.nen a rumu inc. - r.7 n. .oexvnu. eve av::..- HARMNR e 1 IX
_ ___ _ _ _ _ . . _ . .__ __..m _ _ . _ _ _ _ _ _ w Newton-Cross 229 . I J g ! proceeding or the earlier proceeding,. whichever way you want . 2 to have Lt. h 3 Therefore I wculd ask that if we are going to 4, incorporate by reference acecments that are part of the 3 l prior record and parhaps only these that are menticaed and 3 -14 6 1
! relied cn by any of the witnesses, that, at the eerst, some 7 ( record of that be circulated to all the present parties; and, s at the bact, copies of those docunents be provided to parties 9 ; hercin cho unre not parties at that tisce.
10 Othersise, those of us who were not around gg j earlier vill not really have access to that information. I 12 , TBE ACTINJ CHAIElaN: Now, next Tuesday, we I 13 ' vill have avsilable for you a list of those documents which O i j I have referenced now. We util entertain any objections at G 14 t 15 l that ti.ca and further suggestions, and we will make a ruling. 1 16 , 19..' SELMITZ: Thank you. 17 12.' RUSSELL: You will then not want a list i 18 from uc. The conmission will have a liee that it will want I i 19 ! com.cnts on, is that correct? I 20 N ACTING CHAIRFEM: That is right, We find 21( no parti':uler joy in reg: iring you to do what we have 1 22 announced that we will dc. But we'll find other tacks for 23i yea; don't worry, Mr. Russell, i p,[ Ecfore uc relcase Mr. Newton -- 25 El MMATESTA: We have not finished h l scam.ca ,, m..unu me. - 27 N. LOCKWit. LOW AVE. - HARR!f BURC PA. 17112 1640 128
, ,x Keeten-cross pan 1 interrege. tion of the other parties, have ue?
g 2 ; E J FPATER: I have no further questicas. 3 ' NR. BAP4SCH: We just htrve no questions et this 4 time, Mr. Chah'un,. 5 TEE ACTING CHAIRISN: Mrs. Srcith? I 6J MS. SMITH: (Ers. Smith shook her head.) 7 MRt FPATER: We, Ye=r Honor, I 8 ! IG.' SELROWITZ: No, Yetzr Ecnor. 9 TEE ACTING CHAIEMN: F2, Russell, do yos have 1-15 l 10 l any further recross -- redirect? I 11 i EJ EDSSEII,: Not at this time, i 12 l TEE ACTING CHiIEGE: You're excused, Mr. 13 , Newton. Thank you very stich. I 14 l (Witness creased.) 15 TEE ACTING CHAIE RN: Mr. Russell, your next 16 witness, please. 17 HR. CGDEN: If the Cominsion please, we would IS call Mr. Schiciker at this tima 19 20 EPJEST W.' SCHLEIEER, called as a witness 21 l on babalf of ths Respondent, uno svern and 22 tastified as folloca: 25 , (' . 25 I MCERSACH & MAtlSHAL. INC. - 27 ft. LOCKWILLOW AVL " HARRISBURC. PA. 17312 i 1640 129
Scbleilmr-Direct en- --- . 1 , DIRECT WJIIl@ TION
^ 2 BYFil.OGDENi T
( 3 Q Uculd you state your full naca and address for 4 the record, picace? 5! A Ernest W. Schicilmr, 2000 Pottsville Pike, 6 Recding Pennsylvania, 3-16 7 Q And by ubem are you employed and in what G capacity? 9 11 I'm employed by the Petropolitan Edison Company' 10 j an Vice-President of Consumar Affairs, 11 l Q Mr. Schiciker, I show you tinat has been unrked 12 for identification in this proceedings as Fet-Ed/Penelee i 13 Statcrant H and ask you ubether that was prepared by you, b 14 A It wac. ' i is Q If I were to ask you the same questions today 16 4 as are contained in that statenont, would your answers be 17 the camo? 18 A Th2y would. 19 Q I show yet also what has been marked for identi - 20 fication as Est-Ed/Penelse Exhibit H-1 and ach you whather l 21 ! that act prepared by you or under ycur cuparvision. I 22 i A Ucder my sapervision, yes. 1 23 ! Q And io that exhibit identified in your state-24( mant? 25 L It is, es 3xhibit H-1. h MOHREACH f: FI AP.EM At.. IIIC. - 27 N. LOCKWILLOW AVE. - 14ARRISBURG. PA. 17112 1640 130 1 meer- -- wm*w. a-~-
d enic uter-cross 232 1 Q Fr. Schleiker, could you just brisfly outli.ne 2 l what is in your testitreny? d d 3 ' A W il, the purpose of my testimony at this 4 tica is to support the basis of the 1980 a gawatt heur 5 sales forecast as it appears in Columns 2 and 4 nn Table 3 3-17 6 l of Appendix E, tinich wac the petition which Met-Ed filsd i 7 ! seeking changet to the Kat Energy Clause, i I 8 l MRJ OGDEN: That's all we have at this tie , 9 .; Your Honor, on direct. 1 10 MR. MEIMESTA: I have no questions at this 11 tim . 12 . TPI ACTING CHAIPMAN: Fr. Barasch. 13 MR. BARASCH: Thank you. 4 14 15 CROSS-EEAMINATION 16 l BY MR. BARASCH: 1 17 Q I just have a feu questions at the mrmeant, 7.8 Fr. Schleihcr. As I understand it, sir, ycc provided the 19 I 1980 sales forecasts of gigawatt hours that appears on I 20 Table 3 of Appendix B of Met-Ed/Panelec Exhibit A-2_. l 4 21 That's the petition to mcdify ths fuel clause. Is that 22 correct, sir? 23 j A That's correct. I Q That tchla shows an apparent chcage in tha r 24 j( 25'y relationship hatueen retail sales and total snies bad.;een b MO!ME ACH #: MARsMAL. INC. - 27 N. LOO!! WILLOW AVE. - H AR5d1SBURG. PA. 17112 n.1 3- 1640 131
-w e w- . w-we* ,. *=newww- . -. _.sm w emy . . , , , . ., arve ersr-w-- y e-m r= -=wsme,==werm. - -
Schieihcr-Crosc 233 , 1 l1979 and 1980, at least as I reed the table. Is that correct, 3 2 ! sir 7 J~ s ! a hu 3 i, A That's correct. 4 l 0 To illustrate, it sbcus 94.1 percent being the 4 5 ' percentcge of retail cales for 1979; is that correct, sir? 6 i A Correct. i 7j Q And en everage, the projections then would be 3-18 8 l for 96.7 parcent percentage retail sales in 1980, is that i 9 j correct, sir?
?
10 l- A Thnt is ccrrect. 11 Q A clunga of about 2.6 percent. Could you 12 lc=plcin uhy that percentage changes? i 13 i A The ratio of retail sales to total snies is O 14 changing hocacse in March of 1980 we are scheduled to trans-9" 15 fer service to Ecrchey Elsetric Company from our facilities 16, to Pennsylvania Pc:Jer & Light, who purchased Hersey Electric I 17 l Company, and therefore our total sales are going to decrease 18 scrathing in the area cf 200 reogamatt hours. 19 la.' "cARASCH: I have no further questions at 20 this tino, Hr, Chairman. 9 21i ?.iE LCTIEG CFAIEiH: Iirs. Smith? 22 j E3/ SMITH: No questions. 25
'EF. ACTIIG CEAIPKN: Kr. Frcter?
1 34 j 2 / FR E R: Ko questions, Your Honer. 25 ERi SETIci?ITZ: Ib questions at this tine, Your h SA OMP.SACH O t4ARSH AL. INC. - 27 N.- LCCKY11LLCYi AVE. - H ARRISBURG. PA. 17112 1640 12
i
. z3e 1 iEonor.
1 2 THE ACTING CPAIR)&N: Colleaguas? iir. IfcClaren7 i 3 ; Mr. Ruscell, will Ec. Echleiher be available 4 fnextweet? 5 l IE.* RUSEELL: This is the 18th and 19th, I l 6 j believe, are the dates, aren't they? i 7 j TE UhSS: Yes. I can be available, 3 -19 i 8 IE. RIISSELL: All right. Ec can be made 9 , availablo, t 10 I TE ACTING OHAIILEN: Pardon n:e7 i 11 Fai EUSSELL: Yes. He said be cotzid be made 12 i availabic. I 13 -
, THE ACTING CHAIRFAN: Ha could be made avaihbla.
14 We'll let you know sufficiently in advance. 15 You have to cosa frcca -- 7 16 TEE WITESS: Reading. 1 17 j TE ACTING CIBIEMAU: All right. We'll have a 18 ;I five-minute recess now, please. 19 (Witness excused.) 20 ! (The recess began at 3:05 p.m.) 31 , i z2 (The Transcript continues on the following pp.) 23 : i! 24l b' g 25 i i MONMEACM & M.% FISMA!.. INC. - 27 N. LOCKWILLOW AVE. - MARHissuno. PA, tyt13 i 1640 133
235 yg THE ACTHIG CHAIRMAN: Mr. Russell, I am 2 l wondering whether we could restore Mr. Schleicher to the 3 witness stand for a metent, if he is still here. 4 MR. RUSSELL: I believe he has left. We Will 8 8 if "8 C8" find hic' 5[ g , THE ACTING CHAIRMAU: Have your emissaries y returned? O HR. RUSSELL: Not as yet. Perhaps if you 9 would let us know, if it is an item of information, perhaps 10 we could help. Or is it something you want his testimony 11 with respect to? 12 THE ACTH!G CHAIRMAN: This is with respect 13 to his testimony. It is very brief and just a question to 14 resolve our problem. But he is going to be available Tuesday " 15 LE. RUSSELL: He will be available next week, N 16 and perhaps by tomorrow afternoon we could figure out what 17 timetable you would like to have, which witnesses for the {
\
Ig, two days next week, and he uculd be available on either one 19 .of then.
~
20 Shall ne proceed with Mr. Cherry? 21 22 BEREaRD H. CHERRY, called as a witness on 23 i behalf of the Respondents, having been duly sworn according b 24 to law, was eranined and testified as follows: g 2s
!.!C:iEflACH a MAnf.*L% D*C. == 27 N. LCCn%*!Lt.ov/ AVL = HARRf32:Unc, PA.17112
- _ _._._. _ _ _._ 16.4.0_134 4 _._
Cherry-direct 236 DIRECT EXAMINATION 7
' BY MR. RUSSELL:
2 1 Q W117 you state your name and address, please? 3 ; A Bernard H. Cherry, Bedford, New York. 4 5 Q By whom are you employed and in what capacity' 6 A GPU Service Corporation. I am Vice-President 7 in Charge of Corporate Planning. 8 Q I show you a document which has been marked p ; for identification as Met-Ed/Penelec Statement E and ask 10 whether that has been prepared by you? 11 A It has. 12 Cl If I were today to ask you the same questions 13 appearing in that ctatement, would your answers be the same 14 as those contained in the sta,tement? 15 A substantially the same, yes. g- Q Substantially the same? 17 A Ye8-18 Q Are there any significant areas of difference" 19 A No. 20 Q I show you exhibits which have been marked 21 for identification as Met-Ed/Penelec Exhibits E-1, E-2 and 22 : E-3 and ask you whether they have been prepared by you or I 23 l under your supervision? I '~ A Yes, they have. 24 . 25 4 I also show you Tables 4 and 5 which are eanno.tcu e, r.txasan. ins.~n n. s.DCKWM.I.OW AVC,- MMSEURC, PA. IM1A l
'640 135 _
-....-....x - . - .- - .
Cherry-direct 237 j > { attached to Appendix B of Met-Ed/Penelec Exhibit A-2 and ash [l p s 1 you whether they have been prepared by you or under your h 2
! supervision?
3 A Yes, they were. Q, Could you go through those several documents G ., of Penelec Exhibits E-1 through E-3 inclusive and the Tables l 4 and 5 I have ljust referred to and describe briefly what is 7 represented on those several documents? A Yes. Let me start with Exhibit E-1, which is a review of the performance of Three Mile Island-1 in an economic term versus a coal or an oil citernative plant which might have gone in service in 1974. g We have done a retrospective evaluation, g
. that 10, what the coal or oil plant generation would have cost in that tirm period versus what Three Mile Island actually did cost, and then have done a prospective evaluation in terms of future projections, a comparison between those same three alternativos.
18 In the 1974 through 1978 period the service 19 .go _0 of Tnree Mile Island saved in fuel cost /the customers of 4 Metropolitan Edison and Pennsylvania Electric about $70 million versus a coal plant, and if the Three Mile Island unit had 1,7
, been an oil plant, the savings would be about $250 million.
For futura projected cost, that is, from the C , d
. current time through projected end of life of the Three Mile e
22 14Cl!KDAOf f 0. f4An22fAL. INC. - 57 M. I.OCI3ft:. LOW AVE. - Hart.M.tc3URG P/ 17112 3 1640 136
_ - - - -. _ - . - - - - ---- -.. - - . _ ~ . . -. Cherry-direct 238 g Island plant, the energy generated from Tnree Mile Island
' would be abcut 50 percent of the cost of a comparable coal I
2 3 plant which had gone hto service in the same time frane and 4 would be only about 25 percent of the cost of a comparable 5 oil plant which had gone into service in that sane time 6 period. 7 In addition, Three Mile Island displaces 8 almost 7 million barrels of oil per year. It has ' performed 9 very well during the period it was operating. 'Ihrough 1978 10 it was one of the leading performing nuclear units in the 11 United States with a capacity factor in excess of 75 percent. 11 Even if the plant remains shut down throngli I 13 the end of 1980, its c2nrmlative capacity factor through that 14 time period would be abcut 56 percent which would give it a 15 capacity factor close to-the average of U.S. nuclear units. 16 As a final piece of data, as of August 1979 17 it was the number one capacity factor nuclear unit in the 18 state of Pennsylvania. 19 Turning to the other exhibits, Exhibit E-2 20 is a retrospective and a prospective look at coal costs in 21 Metropolitan Edison, and can't dwell on past costs which 22 begh about 1970 and show the trend in coal costs from 1970
,1 23] through 1978 moving from about $10 a ton to $33 a ton. I t' # i 24 think what is important for the purposes of this proceeding 25 is just to indicate that the projection of coal costs that f.toHIUSACH a M/.C3*ULL. INC. -W N. LCOKYR* LCW /VC. - f*.ARRh22URC. PA.17312 iti f, L !.
1640 137 e .-
Cher.m.J-direct 239 thc.
~
- g. we are using in/ filing begins in the fall of 1979 at a level g'
\. 3 of about (134 a ton and we are using an anrraal escalation rate of about 9 percent for the increases .in coal costs through the 3 4 end of 1980. Turning to Exhibit E-3, we have a similar 5 6 i 1cok at the cost of oil as precured and projected by y Metropolitan Edison and that shows in the early 1970's a 8 delivered oil cost of about $4.50 a barrel., running on up c to the current time of in e:: cess of $25 a barrel. 10 For purposes of this exhibit we had assumed y,1 escalation rates of about 15 percent annually beginning in 12 June of 1979 13 This exhibit does not reflect the disruption N 14 in the oil market which we have recently seen resulting 15 from sone of the Iranian activities and soms of the more yfy recent OPEC activities. We would expect in further revision 17 of this er.hibit .to see the oil prices contained here going ig up in the range of 10 to 20 percent. 19 I think that is a sunwary of the. testimony 2() I which I am sponsoring currently, Mr. Russell. 21 MR. RUSSELL: I believe that is all we have 22 of Mr. Cherry at this time. 23 TiiE ACTIE3 CHAIRD.B: Mr. Malatesta? b' 24 NR. NALATESTA: As we did yesterday with g il 25 Messrs. Graham and Hafer, we will defer initially to the T.fiXUiTAct; a &*J.KCNr.L.1;IC. = ;.7 *.1.CCISYt:.:.OW AV2. - RAnn!0DURC, !'A. 375 f f. c=< .e- v, .. -v,~- .
- , e ma..a-a.www.y ,ygy>; 7, .
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Cherry-crcss 240 l i E Consumer Adve; ate's office for cross-examination. 3 KR, E?RASCH: I have just a few questions 3 ' at this time, Mr. Chairman. 4 CROSS-EXAMINATIOH 5 BY MR. BARASCH:
, Q Kr. Cherry, is it your claim that Fat-Ed i
customers have received substantial benefits from TMI No.1? g A The testimony which I am presenting indicates
! that the retrospective economic benefits which have been 10 i l passed to the Met-Ed customero through the fuel adjustment clause hcVe been significant.
g g Q On page 2 of your Statement E you indicate g that from September 1974 to December of 1978 TMI-1 saved
$72 million relative to a coal plant, is that correct?
la A That is correct. Q I would like to get into a little bit of i,t ,
! detail on that.
18 i f A Certainly. 19 1 1 20 1
* #1"** # *11' d 7 " h" * "h"* h*** D**" th' coaparative costs between nuclear at TMI-1 and your comparative
,1 4
coal plant since December of 1978, from December of 1978 to December of 1979, particularly in terms of capital and energy
,3'.
J ( i costs? Hoa does that comparison shape up now? 24 .' A Are you asking if I were to sit down today l F.;C4t!CAC1! & T4A:!*fIE. !!!C. - 217 !!. LOCXVrJ.LOVf /.VIL = EAtt!t!CLUKC, PA. *715 A I
,n
- u. .,r-i 1640 139
Cherry-cross - and do a prospective evaluation of, say, coa 1 versus nuclear? f I' lI h [! Q I au saying that your testimony stops at , 3 December of 1978 and shows a $72 million savings at that j, point. , 5 A Tnat is ri 6ht. 6 Q We are now a year later than December of y 1978. When you crank in both the additional fuel costs that I g have been incurred since TMI-1 has been out of service, what gl happens to that $72 mitrion savings? 10 , A We have not included in the testimony here 11 the first quarter of 1979 during which the plant was operatinf, 12 at least part of that time. Tae outage which we projected C. n m111 extena through scgte=coer of 1980 wou1d erode comeuhat S 14 that retrospective saving. We can provide the degree which 15 i that gets croded. i 16 I am further suggesting, however, in the 17 last centence in the paragraph, that our projections would 16j indicate that over the future operation of the plant, should 19' the plant operate at about a 65 percent capacity factor -- 20 which is substantially lower than that at which it is operated -- 21 wo wou1d expect to see a significant continued benefit to y, the Met-Id customers through the operation of that plant, 1 33 most of vhich is due to the fcot thc.t a good fraction of (; 4 34' the total costs of delivering energy from a coal plant are 25 associated with the coal itself, and coal is subject to
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.- - - . . - - _ . . . - - . - . - u - - - - .
Cherry-cross 242-g g inflation and escalation and those costs, therefore, are : ( 2- to a much grester degree subject to economic pressures than 3 the costs associated with a nuclear plant. 4 Q To put it simply, you would not argue with 5 my suggestion that since December of 1978 those cost savings 6 are decreaning as every day goes by. 7 A It is true that when a nuclear plant is not 6 operating that that cost advantage, whien we have indicated F is retrospective, is creded. 10 Q So that if you were to make such a cab:ulatic 11 for me right today there is very little doubt in your mind 12 that the cost savings would be substantially less than $72 13 million today? 14 A I might quarrel with your choice of sub-l 15 stantially less, but I would not quarrel with the fact that 16 it would be less. 17, Q Fine. Also you just mentioned now that 18 coal is more subject to escalation and inflation. Hasn't 19 the cost of uranium also been going up recently? 20 A No. As a matter of fact, the cost of El uranium has been Soing down recently. 22, ' HIE ACTIUG CHAIRMAU: Tnat is very obvious. 23 Taey have no customers. Uill you please expunge the laughter r 24 from the record? 25 l , *; .
, , . !JCIC.CACM a rut".DI*.".:
. It!C. - C" M. I.CCT.*!!*-*.CW AVC. - MART'fS2URC, PA.17312 1640 14l
Cherry-cross 243
* ** U*
p s~ 1 O 3 I Q Could you clarify that last answer? When you, 3 say the cost has gone down, are you ta'lWg about uranium or l yellow cake, the actual the pellets sitting in the reactor, 4 5 or what? 6 A Tae cost of uranium since the Tnree Mile 7 Island accident has dropped, and when I say uranium I am 8 referring to yellow cake. We see the market has softened over 9 the last six or sovon months by perhaps as much as 10 or 15 i g percent. 11 Q To get back to your comparison of the coal 12 to a nuclear. facility, hon many magauntts in size is the coal O u p1 ant which you used in your study 2 4 1( A We are using a proxy coal plant which would 15 be the semo size as 'Zhree Mile Island. 16 Q Tant would be 800 megawatts? 17 A Approximately. yg Q What was the capital cost of that coal plant? 19 A. The capital cost of the coal plant was con-3ry m sistent with the cost of ?acilities which were constructed in j gi l the same time frane as the Three Mile Island-1 plant. If you 27, want a~ number we can give you a nufoer in terms of dollars 23 per kilowatt. h 24 , 4 I would like to knou the value of that g 25 hypothetical plant. m:nnen a u..a ne.:.. ex -m:. :.ocuvm.t.cw Av . -1:n r.:mac,
. n. ima 1640 142 .
__ _ _ _ _ . _ _ . . _ _ . - ... _ . _ _ _ _ . . _ _ _ _ _ . _ _ _ _ _ . . . _ . _ _ - _ o._ Cherry-cross pg l 7[ A Sure .
~
2 Q I think you have answered my next question. 3 It wculd have gone en line in 1974? 4 A Correct. 5 g Q In your calculations what assumptions did 6 you make about the cost of coal since 1974.? 7 A We used as a proxy for the cost of coal an S , average of the cost of coal that would have been required to p ; meet the then current sir quality requirements consistent 10 with that which was actually paid by Metropolitan Edison, 11 , which we believe represented a reasonable estimate of the 12 carket during that time period. 13 , Q Uhat assumptions did you make on the avail-M ability of that coal plant? 15 A We assumed the plant would run at the same 16 availability as 'Ihree Mile Island in that case. Whatever 17 . availability TdI ran at, ne a 'sumed that the coal plant would i 16 j run at that same capacity factor. i 19 We tried to make as reasonable a comparison 20 between the two alternatives as possible. 21 Q Carrying that a step further, Mr. Oberry, 27, . would you also be using the present plant avai2nbility of 25 l Three Mile-1 now in that comparison or did you presume the 1 - 24 coal plant continues to operate during the period March 28, 25 1979 to the present? nc nzaen wasnn mc.~m. x.ocrm.:.cn.wa.-nutruounta, n smn 1640 143
Cherry-cross 245 i
; A For the pro;jection of availability over the g
2 lfuturelifeweassumedanavailabilityofbothunitsof65 3 percent for the balance of the operation of the plants. 4 As I indicated, as of today, including the 5 outage which has been incurred, I think the~ cumulative 6 capacity factor of Three Mile Is1cnd-1 is about 60 percent 7 right now. 8 Q Did you assume the same useful life for that 9 coal plant as for THI-17 10 A I believe we did, yes, sir. 11 Q Why did you use the same number of years? 12 A Well, again, although it might be at some 13 variance from some of the established regulatory practice 14 that wo have used in filings, we felt that in order to 15 mininice the differences in the comparison it made sense to 16 uso similar lifetimes, shriar capacity factors and so on 17 for the tuo units. IS Q What was the useful life period you used for 19 ' TMI-1 for purposes of the study? 20 A I believe it was 30 years. 21 Q Is that representative of what a typical i 27, lcoalplcntinsts? Has your experience been that coal plancs 2J: Y last 30 years? b 24 A Coal plants can last more than 30 years if g 25 that is what you are driving at.
' FCOECAC71 O IC"M. At !!E == E7 II. LCOK%V.LC71 AVI:. - f*.if.REGEUltG, Pl 171 f 2 1640 144
Cherg-cross g46 s g Q Thank you. I refer you to page 2 of your j t i g[ tectimony, please. There you indicate that TMI-1 saves , 3 6.7 millien barrels of oil a year. A R26ht. 4 3 , Q Tinec $25 a barrel as you suggest that would 6 not a savings of about $168 million, is that correct? 7 A That is correct. B Q Included in your notion of cost savings have 9 yeu included the offsetting cost of nuclear fuel in that 10 computation? 11 A Netted against the M8? 12 Q Yes. 13 A Ho, 14 Q Have you also considered the diff;rential 15 of capital and t:aintenance costs between coal and nuclear 16 facilitics in your calculations? 17 A No, that only includes the cost associated is with the 6.7 million barrels of oil. 19 Q Anywhere in your study have you cranked.in 20 the differential $n capitcl and maintenance costs that 21 exists between coal plant and nuclear plant? 22 A Yes, tie have included those differences in 2.5 both the retrospective and the prospective evaluation of l 74 total costs asccciated with the various alternatives. , i 25 Q Have you included any provision in your studies l T.1C1mDACM & f* F.". DL*.L. !** . .?* F1. T.COr.*?;t.* CT7 AVE. = IM:12iGRV AG, FA. !7112 1640 145 -
. . . - - - . . - _ . _ - - - _ _ . . . _ . - - - n .-
Cherry-cross pg7 for the cost of dismantling TIE-1 at the end of its useful g 1if 7 2 a A Yes. Q Enat did you use as a basis for that? 4 A We used as a basis for that the approach 5 6 that was validated in the proceedings before this Cc=nission, and as I recall, it calls for a current dollar reserve of abet 7t 7 g 10 percent of the initia.1 cost of the plant. p Q Similarly, Pz. Cherry, is there any provision 10- in your study for as yet incurred nuclear waste disposal costs? y; , A We have included in the nuclear fuel costs 12 that are contained in here an estimate of the cost associated O 33 with the disposal of nuclear fuel per data which was published 4 g by the Department of Energy about a year ago. . g Q That is over and above whatever expense you 16 have incurred to this date? n A That is included in the prospective nuclear 16 fuel cost, yes. g Q Mr. Cherry, in your view is TMI-1 providing 20 ' a present economic benefit to Met-Ed ratepayers during the 21 period of time which it is sitting idle? And if so, what is 33 the nature of that benefit? 23 A That is sccething of a philosophical question, b p , I think. I think it is my view thct the unit has provided g 25 past economic benefit to the customers and is clearly capable ,
- McG3AcM & MA!2tL*L*J Inc. - At I". Lociclin.LOY7 AVI.*. =1 TAG't!S3UAO, FA.17112
' ~
1640 146
Cherry-cross 949 1 of providing future econonic benefit to the customers. 2 Whether or not the investment which has been 3 made in Three Mile Island-1, which was made in 1974 and which 4 currently exists today, whether or not that is providing an 5 ! instant benefit to the curtoners I think is one of the key i 0 questions which is being reviewed by the Commission today,
? and I don't believe that I an in a position to make a judgment' O
on that, on the instant question. 9 , Q For the present terms, I am not asking you to 10 take a legal position on the proper treatment of TMI-1, for 11 the present terms as a person with considerable background I
; in the crea can you identify any direct benefit to the 13
*~
! customers et the present time from that plant?
14 MR. RUSSELL: I tMnk the witness has answered
-~
rd j the question. N MR. BARASCH: Is that an. objection, Mr. Russell? l 17 Is. RUSSELL: I think so. It is repetitious. 16 He has anauered the question. O TEE ACTING CHAIRMAU: The Chair sustains Mr. O i Russell. i II 3
- 13. EARASCH: I have no further questions 22 at this tirae.
l THE tCTING CHAIRMAN: Mrs. Smith? J 2#)i! i! E? ES. SMITH: Q I am Patricia Smith. Ny humble questions, ; ICC1JNAC'I a MAfttMAL.12:C.-O P N. :.0CKY."tLCW AVE - HAnn:DDUrt3. FA. 27112 : 1640 147
Cherry-cross 249 5 I really would lihe to ebnlinnge the price you say of uraniumi {. - r g-g has gone down. Could we got back to that? I will be happy 3 to research it. The price before March 28 and today. 4 A Sure. 5 Q Rather than Just take yoJr word for it. 6 A I would be happy to discuss it now if you
'l would like.
S Q Eut I don't have anything at my fingertips 9 and I don't mind researching it. 10 A Let me give you the basis upon which I made 11 the statercnt. We have researched it. In the development 12 of our claim with the insurance company for Three Mile - 13 Island-2 replacement, we had to do a market survey over the ' 14 last couple months, and the price of uranium, the spot price, 15 if you vill, which had been about $43 a pound Just prior to 16 the accident has softened to the point where, depe.nding on I'l who you talk to, it could be as low as $37 a pound or maybe is 18 l cs high as $39 to $40 a pound, but it clearly /not $43 anymore . 19 I should further indicate that prior to the 20 ' accident the price had been increasing at a modest rate over 21 tine in the area of 2, 3 percent a year over the last couple 2 f years. So not only has that increase stopped but rather it 1. 23 has turned around and we have non seen a slight decrease, b 24 Nevertheless, in the calculations which I g 26 have put together bere we have shown an escalation in uranium L:C.T.3ACII c. P.tAnGi:E. !!ic. = 3r/ !!. I.OCKV!D.I.oW AVI*. - FJr.ntsatJRC, P.417112 1640 148 . _ . - =
Cherry-cross 250 g prices from the $142 or $43 a pound level at a rate of about 2 8 percent a year compounded out into the future, so that we 3 have not reficcted the current market softness in the evaluatien l
/, which we have done, although I Just point out that is a fact 5 which we observe today.
6 Q I believe you also made a statement about 7 cervice of TMI No.1 to the public in the past was very good, 8 safe, et cetera. 9 A I did not make any comments en safety. 10 .I did comment on the availability of the unit. 11 4 I am very concerned about the safety aspect, 11 needless to say, and I do have a few things that did go wrong i 13 with that pinnt. My point is, thi+%g of opening it in 14 September as Ket-Ed wants, it is still constructed as TMI-2, 13 correct, cimilar construction? 16 A I guess I am not the witness to comment en 17 that. I believe the plants were designed by different IG architect-engineers and were built in different time frames. 19 It is not clear the atatement you make is 20 absolutely correct. They are the same nuclear steam supplier. 21 The planta arc of different power levels. TMI-1 is a slightb 22 lower poter output plant than TMI-2, 2d' Q But the same operators would be operating it? 14 A Again, I am not the witness to comment on 25 that.
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Cherry-cross 251 p 1 13. RUSSELL: Mr. Arnold will be here tomorror g 2 , to talk about the present status and the restart with respect 3 to TMI-1. 4 THE WITNESS: I think it is a matter of 5 ; record that over the first year or year and a half of t 6 l operatien TMI-1 was the number one plant in the United 7 States in terms of on line availability. I think you would S have difficulty in refuting that, because I think that is 9 j correct. i 10 BY MS. SMITH: 11 Q The first year, 1974 you mean? 12 A The first 12 to 18 months of operation of O 13 the plant it was the number om plant in the country and 4 14 otill at the time it was shut down for refueling in 1978 15 it ranted in the top three or four plants in the country 16 - in terms of availability.
"? Q Like I said, I was more interested in the 10 safety aspects. I have a lict of things that have gone 19 1 wrong since 1974.
20 1 A I am also interested in the safety aspects 21 but I an not the witnass to testify on those matters. i 22.j Q, Taen I just want totake a comment, too, in d 23P addition. You said TMI Ho.1, its benefits. As far as I r C 21 am concerned, its only benefit is it is good psychologically g 25 to have it closed down. Thank you. MCEZI1ACH ta tdA'ts:1A! Ir:c. 2 71.'. MT/It.!.CW AVT. - HARRIS 3URG, PA.17f 52 i 16~40 150
Cheny-cross 959 El BY MS. DUFOUR: 3 Q I have a few questions of Mr. Cherry. My 3 name is Louise Dufour. I represent Limerick Ecology Action. 4 Can you tell me on what capacity factor your econcaic 5 comparison between nuclear and minemouth generation was 0 based upon done during the 1960'c? 7 A I believe it was done based on about a 65 0 percent capacity factor, but I thhh we would have to go back o to those. You are referring to some of the much earlier N studies that were done which led to the decision to put 11
.I'hree Mile Island in place?
12 Q The ones you cited in your testimony.
'3 A I believe it to be 65 percent, but we could 14 go bach to those reports and find out exactly what it was.
Q Well, if you would, it would be appreciated. A Sure. 17 Q Are you aware that the Atomic Energy Commissico 18 comparinens on nuclear economics are based on an 80 percent 1 9 capacity factor, the former Atomic Energy Commission? 20 A Tney certainly could have been in that time AI frame. N'i Q Have you heard that operating history of 2~5 !
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nuclear reactors indicates that the average capacity factor E h for reactors is actually about 42.7 percent? 25 A I have not heard that nor do I believe it. '
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Cherry-cross 253 I y Q There have been studies which show that , g g during the first two to three years of a reactor's operation 3 that it t:C;es time to iron out problems within the reactor, 4 and then the nsxt three to six years there seems to be a 5 relatively high capacity facter, followed by breakdown and 6 fatigue in parts of the reactors. I will be happy to -- 7 A All I can point cut is my understanding that 8 the industry average capacity factor for all units is abcut 9 59 Percent. 10 Q Could you provide the data that ycu are 11 citing in say-ing that? 11 A The scurce of that data is the so-called O 13 naC orar soch hue we wou1d be happy to provide the data for 4 14 you. 15 Q Back to the price of uranium, even though you 16 indicate a softening of the price relatively speaMng since 17 the accident, isn't it true that since the economic comparisons 18 of nuc1 ear versus coal generation costs were based upon 19 g uranium prices at $6 a pound in the late 1950's? 30 , A Sure, those ecst comparisons were made on 'M 21 basis of six to seven dollars a pound because that was the Ti. ' price of uranium at that time. Houever, the price of coal 4 33 ! at that time tras about $5 a ton. So we make the compar1oons b 24 , in light of the information we have at the time and we update g 25 the comparisons as new information becomes available. Mo;L"QA:l! tt t27."411t%. IRC. - 27 N. f.OCKWILI.olY AV2. == }LL Alo Vi1G, PA.17113
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cherry-cross 254 1 1 Q Tne industry has been updating the economics 2 of nuclear energy based upon the drastic increase of uraniun 3 from $6 to $43 4 A Excuse me? 5 Q Tae industry overall has updated its figures 6 with the subsequent increase? 7 A Yes, the evaluations which are being done O today reflect not only the increase in the price of uranium I 9 ! from $6 or $7 a pound to $40 but reflect the increase in the 10 price of coal from $5 or $6 a ton to $35 or $40 a ton, so 11 that c11 of those current inputs are factored into the 12 evaluations which we now do. U Those current evaluations would still show 14 some nodest benefit based on expected economics for nuclear 15 energy and for coal. 16 Q Do you have any idea as to why there was such U a drastic escalation in the price of uranium since the last 18 1960's? 3 A I can speculate as to why the price of 20 uranium went up. 21 Q Would you do that for us, please? 22 A j Sure, uranium as an energy fuel was subject M to rany of the same marketplace pressures as otner energy M fuels, and I think it is interesting to note that the major 25 price break in uranium occurred just following the 1973 oil , F.OE1EACH O PSAOO!!.W IMO =f.7 t'. LOC' Ctrl!.:.0%* NN. = NARRIDEURG, PA.171t?.
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Cherry-cross 255 embargo when oil prices took off. I think there was a C g, recognition by people in the various energy fuel markets
, that it made sense to try to . buy ahead, and that buying 3
ahead in the uranium industry caused some pressure on the 4 price, caused the price to move. 3 6 Now there were other factors which contributed 7 to that. I am sure you are aware of some of them. The a contracting practices of the Department of Energy, at that p time I believe it was the Energy Resource and Development 10 Agency, for the enrichment component of nuclear fuel changed 11 and required a substantially longer forward commitment en the 12 part of ut111 ties for enrichment services than had previously O 13 been the c=ee and this caused utt11eien thet had previeue17 6 14 been not as long or not as well committed tot ard uranium to
?f, suddenly become a little more nervous about forward supp11es.
16 So there was some market pressure that had 17 not been anticipated at that time. 18 Additionally, the situation associated with 19 the Westinghouse uranium activities began to come to the l 20 i fore at that time and what had previously been thought as - 21 a portion of the' niarket which 'das covered by supply, it 23 became obvious to a' lot of pecple was not covered, and that 23 added an additional burden of pressure to the market. b ,y I It is tv judgnent that the last two things 25 , I have indicated, the Westinghouse component and the ERDA , ru m.exc:: e w.unu n:c. - a rr. r.oexwn.t.orn.vr -. mRMOURC, PA.17182 _i__ _ __ _ _ . _ _ _ __ _ 1 6 4. 0_ F _. ...,
Cherry-cross 256 l l I 1 component of the urnnMm picture were somewhat less important (- 2 than the overall psychological change in the approach of the 3 buyers in the uraniun market to try to get longer term 4 commitments. 5 It is tay judgment that is what resulted in 6 the major price increase in uranium, as it did in coal as well .
? ,
Q Ih. Cherry, are you aware of the fact that 8 several countries, excluding the United States, got together S , to fix prices in the beghming of the 1970's, and that is i 10 one of the reasons why Westinghouse has to face possible 11 default? U LE. RUSSELL: Could we have that question 13 ) repeated, please? 14 - (Question read.) 15 THE WITNESS: I think you are speculating as 16 to a number of things which have not been concluded in the 17 forum that I am aware of. I know there have been discussions 18 ! in various courts and so on as to whether or not there was a 19 uranium cc.rtel operating. In terms of what impact that 20 i cartel may have had on the U.S. market I am not aware anyone 21 has reached a judgment that, A, there was price fixing, or B, 22jjI that price fixing bad an inpact on the Westinghouse situation. 29 fEfMS.DUFOUR: 24 Q But nonetheless that is being litigated at 25 this moment so that we can't tell what the price of uranium ICCfC.3Acit 0: MMLCE*1. I ;C.-17 N. I.OO.MLLOW AVE - Hf.RRGDURC, PA.171f 2 h T "C
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Cherry-cross p57 g will be in the future. , N 2 A I cm not sure the question which you raise 3 is being litigated at the moment. I know the Westinghouse 4 discussions are still going on. But I don't believe the i 5 ' entitrust price fixing is still going on. I believe that 6 has been concluded. 7 Q It has been the Judgment in iny readings that 8 to conclude the case Westinghcuse was actually going to get 9 out and I realize this is speculative that they are going to 10 have to -- 11 la. RUSSELL: I really think this kinr1 of I 12 speculation does not contribute anything to the resolution C 13 of the proceedings before us. I would object to any further 14 ' pursuit of such speculation. 15 THE WITNESS: Let me just observe that I 16 while one can specu2nte -- 17 THE ACTING CHAImiAN: The witness overrules IS ' you. 19 20 (Transcript continues on next pege.)
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21 22l 23 ': i 24 k 2s :! r.mnu.cu a run:ni.t. me. -a n. r.ec::vn:e evi c.t. wrat:une, m. im-1640 156
Charry-Cross 253 l 1 TE WITESS: I think ycu can speculate on what l q 2 might happan to the uranium mrket. Thara's no indication 3 i tebatsoaver that the desastic U. S. mcrhet had been rigged in i. 4 lenyway,hasrespondedinanywayotherthanasupply/dersand 1 5 ! hind of a situntion. 1 6 On the other hand, I think it's quite clear 5-1 7 I ti'.se the oil trarket is operating in a cartel mode, and that i I 6 ic, of cotrcsc, one of the citernatives that we have and that's 9 { one of the resscus why our replace:aent energy costa are so i 10 j high. 4 11 I think if you look at the oil price rack-up 12 ' tinich I've she:m, ycu'11 see that over the last year the g 13 , price of oil to Estropolitan Edioen has just about doubled, Mi i 14 ' sod that's causing us and the enctemers a lot of diffienity. 15 TE ACTING CHAIREAlh Ms. Dufour, the Com-16 mission has been quite generous in its permissiveness. And 17 uhile we enjoy the diclogue and what it contributes, never-18 ! theless tha Cnamission is a creature of dccuments, papers, 19 l and not h enn beings. I 20 -
..f.you want to bring to this Comaission any 21 j documant which t:ct1d support the contention of ycuro and 22 l bnve a citness introduce this, tre uculd admit this into the 23 I record.
i 24 ; But actacily, there's nothing of an evidentiary b T i 25 . nature shcut thic proceeding. And I will not ask that it be
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Charl.y-Crocs 259 , I i i ctricken, but certainly I razat request that unicas you cro { 2 ; willing to p::ceced in acecrdance with our trcditional re- O 3 ! quiremonta, uc cannot continue with thio kind of permissive 4 dialogue, notuithstanding tha willingness of the witness, 5-2 5 )i whom ycu apparently have encimnted to overrulo his client -- 6 he is the client -- his ceansel'c admonition. 7 ITnat sey you, Mc. Dafour? 8 l 1s , pupogn: Iell be happy to comply with you. 9 I'm so new to this that I'll juct have to learn as I go along, 10 and I'll do ac you ach. I caderstand. 11 , TE ACTING CFJLIRFELN: You are invited to bring 12 to this coraiscica, to thace prcceedings, documante that woult 13 be admissibic. b, $ 14.i IE. DUFOUR: I'll da that. I J 15 l TE ACTING CFAIRYAH: If you do that, please 16 l serve them on all parties, cnd we'll have them admitted. 17 fDoyouhaveanyotherquestions? 18 l IG.' LITSCDR: Just one, to change the subject. I 19 Just one last question. f 20 ' BY 15. DUT!OUR:- 21 Q Mr. Cherry, are you awcre of the National, 22 Science Foundation study conducted in conjunction with Do:: I 23,l Chenical r.:hich fcund that industry, through cogeneration. k 24 cculd ca70 680,000 bcrrele cf oil a day, ot- tha equivelant 25 of 30 th:tsand-megawatt nuclear reactors? $ IdoliN3ACH f: M ARSHAL. INC. - 27 N. LOCKWlLLOW AVE. - MARmSBURG. PA. 17112 I 1640 158
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Uterry-Oross 260 i I i A I'm not art.ra of that specific study, I am 2 ; aucre that there are sose cogsnarction opportunities in the 2
- 3 l United Statoc that perhaps cron t being pursued as aggressively 4 l as they could bc.
5 l HS.'DUFOURt That's all I have. 1 6 l; TIE ACTING CI?AIP11&N: Thank you. Are there any 7 l other qu.setiens of ths witness? i -3 6 E. FRATER: A couple of very brief ones, l t . 9 l TIE ACTING CHAIRMAN: Mr. Frater. i 10 i BY E.- PSATEih 11 , Q E. Cherry, Mat-Ed's yellowcake purchasing i 12 ; prneticos - prior to the accident chat proportien of yellow-l 13 ! cale supplies were purchaced on spot market transactions? h .14 l A Hone. Tiell, I should amend that. A very small : 1 15 fraction. I think in the e:nrall procurement activities of 16 yellowcato for Iset-Ed out of -- or for GPU. Oct of chout 17 , 5 million pcunds purchased, I.think we had about 400,000 4 18 l pounds of spot material purchased just in the period prior .
- 19 to the cecident.
20 ! Q And in this rcecrd today you have quoted spot I ' 21 ; pricos ranging from 37 to 40 dollars a pound. Fibat was the : 4 22 lcomparabletermcontractpricesatthesametima? 25 A Well, I gave the spot prices as kind of a 24 l mnhet surrogate. In car invastigaticus, tne recent investi-25 gations, tra did loch at more co=prehensive scopas and MOMRBACH C: MAhSHAt IMO. - 27 N. LOCKWRLOW AVE. - M ARR!SelfRG. PA. 17112
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Charry-creas 261 , 1 ! associated td.th lenger term purchasec, and the base frca i {, 2 f which thoce longar term purchases sculd have startou cas O 3 l consistent with the spct unrket price. 4 l For crample, if we had gone to lock for a long-5 l term contract purchase just prior to tha accident, the i -4 6 l starting point could hsyc been $63 a pound, and that number 7 l s:ight have beon esecisted according to sons formla. At e I i 8 il tima a nonth or no ago if no want out und looiced for that 9 came hind of c situation, the base ctarting point for that I 10 contreet ecald have been reduced on a b'nd of a pro rata 11 ; basic, again escalating according to scme for:aula, 12 So I m:ust say that I was sosawhat surprised is at the degree to which the marhet had softened over the 14 perled beenuco the indication that we were getting, at least 15 istediately after the accident, was that there was little 16 change in the uranium erket. 17 Ci With respect to Exhibit E-2 relating to coal, is the coal pricos represented on that exhibit -- do they reprea 19 sent an identieni mix and grcac of coni from 1970 through 20 19807 21 A Ko, they don' t. 22 ! Q Would you c= plain to us where in those 23 exhibits there in a changa cf ecal standerd? 24 It I believe that in the mid 870s - '73, 874 -- 25 we bagan tightisding up en the sulphur content of the coal McHRDACl! & M#.RSSl AL. lHC. = 27 N. LOCMWILLOW AVE, = NARRIS BURG. FA. 17112 i f.
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Cherry-Crosa 262 1 1 that uo tere purchscing, and cno of the componento of the r s. 2 i msjer price jump batueen '73 and '74 is associated with 3 l tighter cpecifications for the coal. 1
-1 : Yne stendard of the quality of coal from '74 5, on out through '80 is the sceo.
5-5 i 6 1 Q Uavc you any reason to beliew that the i 7 t failure of 15t-Ed to excreise the coni option na opposed to f G the nuclear option would have any impact one way or another i
? on these coci prices quoted in Exhibit E-27 l
1 10 ,l A I think you con speculate either ucy, Ona il can speculate that Three Mile Isined 1 eere a ecci plant. 12 That could add total detaand for Pannsylvania coal and 13 l therefore increase the price beecuse there was a stronger 14 starket puch. i 15 i Eut I believe tha cocnterargument could be i' 16 made also that perhaps that usrket might have been re-17 vitalized by r,cre action. 18 ; So I think that the numbers us have repre-19 sent kind of a rocsonnble middle grcund. I wouldn't choose 20 , to speculate what impact a coal Three Mile Island 1 might 21 have hcd on these coal prices. 22 Q With respect to Exhibit E-3, is there cny 23 chcnge in thn grade of oil hatueen 1970 and Dece:6er i980 repcrted on the c hibit? 24ll h 2s I A Agate,1 believe in the mtddie '70s - +7s to VCHT3ACM C; M ARCHAL. II:C. - 27 H. LOCKWILLOW i VE. - H ARRISBURG. PA. 17112 i f 1640 161 _
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Crcrry-Cross 263 , I 1 l '74 perica -- there uns a tightoning up on sulphur content I {- 2 in the oil which Ibt-Ed was bcrning. However, again, as in $ 3, the coal casa, the quality of the all from '73 through '80 4 i is unchanged as it relates to culphur. 5 Q Uor, with respect to the '73 '74 changes dis- ,-6 6 , cussed in bot.h Exhibit E-3 and E-2, we recognize there a 7 l cignificant chcoge in p: '.ce in each caso. Are you testifying 8 that the change in quality in the only contributing factor 9 to that changs in prica? 10 A Ho. 11 Q HoW. 85ain with respect to Exhibit E-3, the oil 12 ! exhibit, ucaid the censureption by Met-Ed of oil as opposed to
'l 13 l nuclecr fac1 have had unch of an impact upon the prices that O 14 are quoted in that exhibit?
6 15 h Since the prices for oil chich Met-Ed is paying 16l nre largely derived from prices fired by OPEC, I think the 17 answer to that is no. 18 Q h~ hat grade of oil are ne referring to in 19 i Exhibit E-37 l
,3 A I think E-3 is a mir of No. 2 and No. 6 oil.
31 l Q With respect to the 6 oil. component, what i 22 lpercentageisthatmin? 23 f, A I'd have to get that nuricr for you. I don't 24 lhaveitctmyfingartips. 25 Q Does tin No. 2 oil cr/ce with the OPEC set price $ P'0 V t3Ac h S: M ARSHAL. fHC. - 27 N. t.OCKVI:LLOY/ AVE. - HAF RISBURG. PA. 17182 1640 162
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Cnerry-cross w+ i 1 j more closely than the No. 6 oil er vice versa, or do they 2 both move in the sam relationship?
'i. !
3 l A The 2 oil han tracked the OPEC postings, I i 4 l believe, more closely than 6 oil. I thirdc the predminant 5 share of oil that we're talking about here is 2 oil. -7 6 , Six oil has been subject sosauhat more to local 7 l n:arket than tuo oil has, so the two oil has more closely 8 tracked ths OPEC posting and the changes that are inflicted 9 i on uc by OPEC. 10 Q Can ym2 give us an eran:ple of a largo base land 11 generating facility fired predominantly with No. 2 0117 s 12 MRi RUSSETid You mean in Net-Ed's system? 13 ER. FR&ER: Anyahore in the United States. I 14 , TEE WITNESS: 1 cannot fediately give you coe. . 15 I believe there are some in the southwest. 16 BY ER. FRAER: 17 Q Are you suggesting that a 2-oil-fired base load 18 unit is a typical oil-fired unit? 19 A No. 20 ER.' FRATER: Thank you. l _ 21 TE ACTIliG CEAIFdAN: Do you have a quattion? 22 BY IEt.' SEIlWITZ$ ' 23 Q Kr. Cherry, if I could direct your attentian 24 i to Paga 11 of your ctatcc: cat, ycn indicate -- in the middle N ^
. 25 '
t,here s a question, "In addition to the economic bcuefit of
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Cherry-cross 265 , 1 l TMI-1, is there any other beacfit," end of quote. 2 ( Am I correct the econc:lic benefit to which you 3 are referring there is the savings, so to speak, of not having 4 to burn higher priced alternative fuels? -8 A I'm carry. Could you rapaat the question? 6
! Q Is the economic benefit to which you rofer or i
7 l is referred by that question the benefit of foregoing the 8 I utilisation of highar priced niternative fuels? 9 g 7,g, 10 l Q Can you tell un, sir, currently is Metropolitan 11 . Edison enperiencing any of that economic benefit by virtue of i 12 l THI's existence? l 13 A I think that's cubstantially similar to the g 14 question ehich Mc. Basasch aslied ne, and I believe I answered 15 it at that ties. 16 Q Well, any I have the -- I take it, sir, then, 17 that's your answer to my question, that you've already 18 anstcered it. 1
- A It's my belief that I've already answered it.
20 I - j M1.4 SEIKO"i4II2:- ConM I ask the Chalmen to j - eI l please direct the answer to my question, which I think is 22 far more apccific than was Mr. Barasch's question, using the 23 ] term "ecenamic bencfit" in whatever the manner the witness 24 himself has used it and by his definition. 25 And I cioply want to knew if, by his definition,, McH,13ACH & F3ARSH AL. INC. - 27 N. LCCKWILLOW AVC. - MARRISSURG. PA. 17112 1640 164
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1, that particular ocenomic benefit is still being generated 2 l instead of electricity. t 3 E,' RUSSELL: I think the question's repatition i 4 : and the distinction that has been cited is an indis,tinguish-5 l abic distinction. 1 -9 6 ; TEE ACTII;0 CIEIRE4N: I don't know uhother this
?' is the uitness tfao can provide the informatica. I'll direct s l him to answer your question if ba has the information.
i 9 i TEE WIZESS: Can you restate the question for i 10 I E37 0 i. 11 l Et.' EELK0EIT2: Sure, rathar than go back in i 11 lthetranceript. i 13 { BY ER.' SEIX0WITZ:
@ .14 ,
O By whatever definition of the term "econtxaic 15 j benefit" which is used in the question which you then i snouered, is TMI-l presently generating, to borrow the term,
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16 17 that sara econcaic benefit? 18 l A As I indicated in response to Mr. Barasch, the i 19 j unit has generated econonic banafit in the past. It is 20 currently shut down. And in my judgment, there is no reason 14 211 why it couM not ganarcta economic bsnefit in the future, t 22 ; Q Well, ce have the pr.st, sir, and we have the 23 i future. 10:y I infer that se do not have it in the present? d , 2<. L At the point --
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( ' 25 i 10..' RUSSELL: Really, this is c est and cause I t.!OI*CG ACH C. M ARCHAL. INC. - 27 N 1.C OKWILLCW AVE. ~ MARRISRURG. PA. 17172 ,
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Charry-Croc a 267. . I 1 gane . What counsel unnec to infor is up to counsel. I don't C 2 l think it's roepensible -- O 3 i IE.'SELKOWIIZ: If the witnesc eculd have 4 4 i ansucred the question, ac directed by the Chairman already -10 5 l once, un couldn't hcvc this cat and mouce gacs, Mr. Russell. I 6 It's e very sic:plo < question. 7 l BY MR. SEIEG7ITZ: I 8 Q Is that econocic banafit being generated today, l 9 or isn' t it? 10 ! A I think I've indicated that, in my judgment, 11 the unit has aconomic benefit. It has produced economic l! 12 j benefit in the past and can prodtsee economic benefit in the 13 future. And I'm being as responsive as I can to your g 14 question. 15 TIE ACTING CIIAIINN Mr. Cherry, I think we 16 both understand the questien that's being as7md of you. Let 17 n:a paraphrase it. I don't insist that you answer it. If you 18 d have the information, then you should answer it. If you do 19 not have the information or feel yourscif unqualified, please 20 recpond in that unnner. 21 Ycu're being asked whether or not, in the same 22 frate cf refc* ence as is contained in your testimony, the 22 tora "ectncel:: bencfit" cf TMI-1 -- is there any economic 8 24 : benefi.t cf TiG I to anycne -- to the Ccmpany, to the rate-h_ ! 2s jpayer,e: the cor_ontry -- ce ehtc present mouene, now, 4?2o7 t 9
,.m m c m m _ . me.- o x.so m m.ee m .- m ,,,..o o.,.m . , ,m 1640 166
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cr.orry-creas too t 1j TE IU.THESS: Tcs, I believe there is. 2 - TIE ACTING C%IEEMT: Fardon n:e? e .I 3 TE krnsSS: I believe there is. I 4 l TE ACTING CIMIPJnH: You believe there is, f 5 } , Mll sELK0WITZ: May I continue, sir? i-i.1 ; 6 ! BY MR i SULKOWITZ: 7 1 Q ' fee question then beccu:es, cir, Hou nuch? i 8 e l Ist's say for November of 1979. How n:nch econo::2ic benefit, p , as used in that sentence, han bson generated by the existence 20 of TMI-l? 11 A I believe the occacmic benefit that we now have , i2 i acsociated t71th that ~oaccfit is the opportunity fsr fnt.ure 1 13 l savings, and I conidn't give a quantitative answer to your h) l 14 j question. 15 Q Bach on, I believe, the first page you secte 16 the purps:es of your tectin= rey ao being twofold. May I ask, 17 sir, if it is alao the intentien of the presentation by you 18 of yor testimony to cscist in percanding the Corazission 19 that beenuse of theco past and potential future benefits, l 20 ; that Tiroa Mile Islanc iInit No.1 should continue to be the i 21 f cebject of rates of castecars of these ccapanies? i 22 j tB.; RUSSELL: I think, if the Cornission please, i - 23 I this itind of cucurantn.tivo question is not going to contribute 24 cuything to this pecocedin[;. It'= crsutant ctiva, cnd I ash (
- 25. f that it bs etriciten.
MOHF.E ACH C, M A3SHAL. INC. d
*7 f.,
LOC % WILLOW AVE. - HARRIS 3 URG. PA. 17112 1640 167
Cherry-Cross 269,, , I i
- 1) 331.' S3LZ0iETZ: If I cicy respond, first of all, j
(' 2 i I guess I don't understand hcw it'e argu:nentative. Itut I'm 3 , simply trying to determino, if parhaps core directly -- and 4 i I'll rephrcse the question, Mr. Russo11. 5 , E Y M R .I SELKOUITZS 6 i Q Ic your testimony, Mr. Charry, precented only 3-12 ; 7 l for factuni centent, and thot'a it? i S A My testimony is provided to give sese contert
? cnd bacl ground for the proceedings which are under way. 0 .e 10 j of the quectionc uhich ir noa boing discussed and, as I i
11 l understand it, the first question chich we're disecssing is 12 lacccciatedwiththeovarcyfilingthatMet-Edhasmade, i 13 j In order to provide soz::2 context to that 14 filing, a request that Met-Ed custe::mrc pay souc additional 15 incrc=mnt of cost for energy, I believe -- we believe that 16 it cas cpproIreinte to provide a yardstick, cnd that is to 17 indicate that there have been past benefits. 18 Q It's not submitted, sir, for anotbar issue 19 - that's being concidered by this Conmission ubich has to de 20 ! vith the inclusion of THI-1 in rate base? I . 21 IC. RUSSELL: Well, this witness has stated 22 l uhat his testincay 10, ard it's there. It can be used for i 23 , any purpece invciving any of these procesdings. i 4 24 ! E 's irdiented thnt the initici position of it b k
?.5 j is ccnnected teith the cittac application, and he's also MON.45ACl! O LtAT:CHAL. INC. - J-* 14. LOCKW!LLOW AVC. - H ARRisBURG. PA. 17112 1640 168
_..___m._ _ _ _
, ,, Cherry-Crosc 270
?
I : identified the balance of the testicony that 'ne's submitte6 [ 2 l New, what is the issue that ic to be raised with rospect to 1 3 that cituation? 4 ,! MR. SELK0;JITZ: i7c11, Mr. Russell, thanh you. 5 I was just trying to make scre I didn't ask the questions i 6 j beyond tha scope of Mr. Cherry's testimony. And you've car-i 7 ' tainly clarified that for rae, so I don't think my next ques-Oq tion is beyond the scope. And perhaps you can object and 1 9 instruct ca if I'm incorrect. 10 BY MR. SELKGWITZ: 11 Q Sir, if for nor:a reason TII-1 simply ceased to 12 crist on March 28th, would it be your opinion that until the 13 cumulative capacity factor of that unit dropped to a 55- or 14 60 percent levn1, it should still be -- or it wonid still be 15 Providing benefit to the custca ra? Ic A That question is so hypothetical that I de 't 17 believe I can be responsive to it.
~
18 ; MR.' SELK0WITZ: That's all the questions I have
}
19 j right no:,', sir. Mr. Malatesta. 20 THE ACTING CHAIRE4R: 21 12.1 I W GESTAi Thank you. 22 BY MR. MAIATESTA: 23 ! Q Hr. Charry. turning to Paga 2 af Stateent A, 24 l you estiente tint the difference batuems
- aal-Jired plant 25 that cate on line in September '74 an? a uules: pinut et tbs Mg -{1BACM & MAftSHAL. INC. - 27 N. LOCKWILLOW AVE. - HARRISPURG. Pf. 17112 L* ; F ;
1640 169
Chsrry-Cross Z /1 . . 1 1 ; saa tims -- or 'IIE-1, in thi.u particulcr case, a specific C 2 nuclear plant -- would be about $2 biliton over 30 yonrs, is 4 3 , that correct? 4 A That's ccrrect. 5 . Q And at the sace tino you say tivtt the saving 5-14 1 6 ; that have a1 randy occurred ac of Decoder Sist,1978, 7 !:! comparing a coal-fired plant, a hypotheticci plant, and TMI-1 1 8 are $72 million? 9 A That's right. 10 Q No:7, why ic the average savings per year over i 11 l the 30-year period about $70 million, while the historical 12 savings per yect are about $16.6 million? 13 A I think it has to do with the -- with two G. things. First of all, the nu. clear unit over its first 14 15 couple of years does not show quite the economic benefit i 16 q that it decs over the later partien of its life. 17 Secondly, it has to do with the projections of 16 inflation that are buiI.t into the costs. And I think the 19 difference is a cenbination of the two factors. 20 Q But these nu6ers, these savings, I think ycu 21 ; testified initially -- and parhaps I'm incorrect -- cre only i 22 savingc attributable to fuel cost flowed through the Not
&; Eners;y Ulanse. Is thct correct?
- r. ..
24 i A Yes, but they have netted against them the 25 cifference in capital ccet as t ell. Thace items are differcut f McH.*!!ACM ts f?AMSHJ.L. IMO. - 27 t:. LOC eWILLOW AVE. - HAftRISBURG. M. 17812 l I 1640 170
, ,, Uncery-cross 272 i
1 1 in revenue requiremnts. l k 2 : i Q So ycu've included capital costs ttithin these 3 l projecticaa? 4 A Yec. I'm sorry if I misled you. 5 Q And within the historical figures? 6 i A Yea, that's right. It reflects the difference 5-15 ; . 7 l in revenue requirec:ents of tie two options. So it does 1 e include che feet that the initici cost, the first cost, of 9 Three FJ.le Island is higher than the cost of a coal plant tinic h 10 , could have gene in cervice at the cam tin:c. 11 Q Thnt'c c cost, of course, that's borne through-12 out the life of the plant? And that's how you calculated it? 13 I A Yes, 14 Q So in othar words, if a coci pisnt cost 15 $10 millica and a nuclear planc $20 cillion, the return that 16 tha company earced on that difference is cciculated in bere -- i 17 l cud that the company will earn? I 16 i A Any of the associated components of revenue 19 requircr_nts cro reflected in those numberc, yes. . 20 l Q Do your proiections for the cost of uranium i 21 ' over the futcre 25 years of this projection assume a further 22 softening of the urcnium market? 23 h f A Ib. I think I indicated that ce started with
- I p." a current urfact prico of about $43 a pound and esenlate6
(( 25 j I that at G porecnt n year. Not7, that is slightly 1cuer than h, MOHEGACHt: MARSHAL. !HC. - 27 N. LOOKWILLOW AVE. ~ H ARRISBURG. F A. 17112 1640 171 = ,,, m 4.pp 9 _ m _W M4WW MO *"N
chserv-Cross 273 - - i f 1 l the eseclatien rate which oc used for coal. We used a 9 { 2 percent cocalation rate for coal. So there is sem small O 3 differential escalation in the esesistion. 4 122UaL11ESTA: I have no further questicna of 5 , Fr. Cherry at this tim. I 5-16 6 )1 TE ACTIUG CHAIRMAN: Any of the othar partiosi 7 l Cemissioners? Comissioner cachy, you have sece questions. 1 8 l COEESSIOSER CMEEY:. M*. Charry, correct sta if 9 I'm wrong, I fhd your figures on Page 2 wry interesting, 10 but before I think they cca be useful to us, you have to 11 reduce it to a cozcon denominator. That is, a cost per 12 kilowatt-hour. 4 13 You have given us, in Exhibite E-2 and -3. the 14 cost of a ten of coal and a barrel of oil. But b= fore you car 15 l arrive at your figures, you unct, I think, assume' a typical 16 coal-fired or oil-fired generated plant. 17 Can you prrside us with your calculations to 18 support your figures? And, sore importantly, can you project 19 them through the end of 1930, as you have done with year 20 ; capacity forectsts? 21 ' TE WITESS: Concissioner, are you talking noe d 22 ! about the figcres chich are stated in the middle of Page 2, i 23 the -- 24 CCHESSIONER CAULEY: Yea, I am. 25 j TE WITIESS: Tes. Ce can certainly provide the I
' #C;-T.2ACF C. ?.tAMOlfAL. If4C. - 17 f t. LCO. fWILLOY! AVE. - HARRf$9URG. PA. 17112 1640 172
Cnerry-cross z/4 I basis for those figures, and we can provide them in a mills
% 2 Per kilowatt-hocr or on a mills per hilceatt-hour basis, if 3 l that's the basis upon uhich you vould lilm to see tham. We 4 i certainly can do that.
5 CO2EIISSIDE2. CN1'Yi And will you state your
'6 ! basic assu:sption as well?
7 l TE WITIESS: Yec. 8 COSiISSI0IER CEFEY: I note that has not -- 9 I'm used to seeing them at the bottom of exhibits, and I i 5-17 to 3 don't see them here.
}
11 l Also, I'm wondering how you can project a 12 saving of $10 billion on an oil-fired plant 25 years hence, 13 given the present international situatien.
- b. 14 TIE WITEESSi Well, speenlating into the 15 future ic easy. Yet just meim an assturption and turn the 16 d
crank. 17 We've used what ne think are some reasonable 18 : projections as to tinare the oil market might go over the next d 19 i 20 to 25 years, and co've tried to do it in a manner which 20 is canaistent with the coal and uranium prices which we've 1 used. 21l 22 j Ciently, these casturptions are subject to all 1 23 hinds of cpeculatica, and I wouM be the last one to sit
! hare and cny that I can cutgc2cs th2 oil market even cix 24, e( ** .
23
- l. monens fro = ucu.
I _. *'tj ' h CHn3ACM C r.* AR5tlA'.. INC. - 27 N. LCCiCWILLOW AVE. - H tRRISCURG. PA. 17112 1640 173
Charry-Crecs 275 i 1 j What we're trying to do is to put these things 1 { 2 4
; into kind of a comparabic contort so we can try to make same $
3 j maesurerent, rather than just throwing up ctr hands and i 4 ! saying, Gee, we don't knou what's going to happen, and there-i 5 l fore ce can't make any judge. ants. i 6 j COMMISSIO!CRCAWIEYi Chay. Will you tenke a i 7:l projection of thane savings through 1980 with your assumptien' I 8 , Do I understand yes're going to provide us with that?
-t 9 TIE WITsss; yes.
li 10 COMMISSIONCR CAWGY: That's all I have. 11 i TIE ACTING CHiIntAN: While you're doing this 13 ;i for Cc:ariscioner Cauley, can yea givo us any information on
\
13 ' the relationship botueen the three basic fuels in terms of O 14 Btu costs or million Stu's? w 15 16 (Trcnceript continued on next page.) 17 18 t 19 I 20 I f 21 22 i i 25 l - p 24 ! 25 h . _ ,._ e _ ~.m., .-e, . - ,
. - m .... . . ,,m 1640 174
,, _ _ _ ~ ,... -: -
-_ _ _ _ _u.
Cherry-Cross 276 1 THE WI'INESS: You would like the fuel costs 2 stated in terms of cents 'her million BIU? I 5 THE ACTING CHAIRMAN: That is right. 4 THE WITNESS: . Certainly. 5 -
' 'MR. FRATER: Mr. Commissioner, if that 6 information is going to be provided, I think if it were to 7 be of any use to us we also would have to have a heating E rate or conversion rate to electric generation to add to it, 9 because just going to BTU's is not going to provide us with 10 sufficient information to use that information properly.
11 THE WITNESS: Commissioner, we will attempt 12 'to provide all of the underlying assumptions required to go U from the basic input data to the numbers as projected, just
- If as we used them.
15 THE ACTING CHAIRMAN: With all of our help 16 we will get you to give us a constructive productive state-17 ment. 18 THE WITNESS: I appreciate the help. I need 19 j all I can get. 20 THE ACTING CHAIRMAU: Thank you very tmich. 21 Do you have any further -- 22 la. RUSSELL: I have no further redirect of 23 lMr. Cherry. We hs.ve one other witness who was on the list 24 for today, Mr. Huff. His testinony is not lengthy. However, 25 I could give two alternatives. He has a conflict tomorrott. l
- f ucunucu ns.ncur.: mc.-mi.ta=~m:u.o:: 2 -zuT:8TBn.f75
\
277 g We can either put him on today or he will be available next .h 7 2 week. 3 THE ACTING CHAIRMAH: A half an hour do you 4 think? 5 12. RUSSELL: I think it would be a fraction 6 of that. It would be just a couple mimites in terms of direca. 7 What there would be in the way of cross, of course, I cannot 8 tell. 9 la. BARASCH: Mr. Chairman -- 10 THE ACTING CHAIREAU: Mr. Russell, it is the 11 i judgment of the Consission that the Commission needs more 12,1 time to prepare itself for Mr. Huff's testimony, in order to b 13 minimize the amount of time it will tale. If IG. RUSSELL: All right, he will be available 15 next week. 16 THE ACTING CHAIRMAU: Hext week will be 17 fine. Is there anything else to be said at this time? 18 (No response.) 19 THE ACTING CHAIRNAU: Can you teli us, Ye. 20 Russell, who you plan to present here tomorrow? 21 12..nUSSELL: Tomorrow we will have Mess's. r A., g Hafer, Graham, Arnold and Carter available. 23 ! i THE LCTEG CHAIRMAN: Hafer and Graham will . t C 24 raturn? g, 25 l 12. RUSSELL: Yes. ,
=ent:uca n recan., i::e. -:7 n. 2.oc:sen.:. eve . v=. -uruuszunc, re. sm:
1640 176
s -
- .s.
278 y : THE ACTING CHAIRMAH: In addition to them we v 2' will have -- 3 IE. RUSSEIIL: Mr. Arnold and Mr. Carter. 4.' THE ACTING CHAIRMAN: There being no other k 5 questions or announcenents or requests, the Commission will 6 y declare this testing adjourned to reconvene here in t1g 7 room tomorreu at 10:00 a.m.; I 6 I 0 I 10 (The hearing was adjourned at 4:35 o' clock P.m.) 11 13 1.r 1640 177 15 16 17 18 il 39j zo 21 22 N'l & 2<- 25 1 . j . I nc pos c:: : :acm.t. :::c. - n r. s.ocrms.:.ori ;.vr - nr.nrcr::no, rA. t7t m m:,
. _ . . _ . - _ - , . . , . - ~ . , _ - . . . . _ . . . . . _ . _ . , . . . - . . , , . . - - . . - _ _ _ . -
kh ( 1 --coo-- k
- 2. l li l Oi r ,
I hereby certify that the proceedings and ; I 4 l9levidencearecontainedfullyandaccuratelyinthenotes 3 j ;f taken by ne during the hearing of the within cause, and that f 0]pthis is a true and correct trcn::cript of the same. r- \ i t
'o i q MOHRBACH a: MARSHAL, INC. ;
r,1: e
'l '
By //S p bb 59
~
V JAIES P. O'HARA
#,[
, By M d)/
DEBORAH'K. HICIEY, gR j G w m.n-qq , *
'! l ..p 27, i
15 (The forescing certification of this transcript "il.does not apply to any reproduction of the same by any means l l
- ri:l .
h
~*l unless under the direct control and/or supervision of the
#~-]b
.. o
' certifyino, reporter. )
k:1 <j i 20ji j n i m.
--l!Date I i; !
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2n!! , l L -: a a u .n u u:. n e r =.- .e u .a m .: ..o. n u - :c a, = a ur.o. vi m m i 1640 178
3 I i 1 Before I
- s. !
2 ' THE PE15SYLVANIA PUBLIC UTILITY COIGIISSION . 1 i 3 --ooo-- l I 4 In re : I-79040308 Pennsylvania Public Utility Commicsion i versus Metropolitan Edison Conpany, et al. l
- ?
Further hearing. 6 --ooo-- Y Harrisburg, Pennsylvania O December 12, 1979 ; 9 --oOo-- 10 11 ! Pages 279 to 443 12
- O , . .
13 14 15 i 16 l ,1 \ 17 10 1E-20 21 MOHRBACH 6: MARSHAL, INO. 2% 27 Horth Lcciorillow Avenue .
- l Harrisburt;3 Pennsylvania
%l? 17112 e .;
.j;$
!I
- LSl' ,
p i i '* Ex::F./E ' I;/. CE.8 *,;* O - C I.', M C',t* Q 1'spgga i . ;'a mp,g, ref 3*/310 74 ',
. 1640 179
- _- - - . - - - - - ._. - - - . . - n.
279 ' { 1 Before h 2 8
'IHE PERUSYLVANIA PUBLIC UTILITY COMMISSION 3 --oOo --
4 In re: I-79040308 - Pennsylvania Public Utility Commission versus Metropolitan Edison Cocmany, et al.
'l Further hearing.
6
--ooo--
7 8 Stenographic report of hearing held in j Hearing Room No. 1, Horth Office Building, 9 Harrisburg, Pennsylvania, 10 Wednecday, Decenber 12, 1979 1,1 at 10:17 o' clock'a.m. 12 O u -- o -- 0 14 BEFORE: MICHAEL JOHNSON, Acting ~ Chairman SUSAN SHANAMAN, Comminsioner 15 JAES H. CAWLEY, Commissioner LINDA C. TALIAFERRO, Commissioner 17 __oco_. 18 APPEARANCES: 19L SAMUEL B. RUSSELL, ESQUIRE ALAU M. SELTZER, ESQUIRE 20' W. EDWIN OGDEN, ESQUIRE l
'Ryan, Russell & QConaghey 21 530 Penn Square Center P. O. Box 699 22 Reading, Pennsylvania 1%O3 For - Matropolitan Edison Conpany and y* /
Pennsylvanic Electric Company y'. 2s NCP*KZ: ACE: t f4AnG:JA* 111C. -27 N. LOO.EWILLOW AVE - MARRISU'JRC, PA.17112 1640 180
cuo e a i 1 { APPEARANCES: (Continued) ( 2
, JOSEPH J. r/Jf. TESTA, JR., ESQUIRE 3 ! G-28 Ecrth Office Bailding
, Harrisburg, Pennsylvania 17120 4 j For - Cornission Trial Staff 5 l DAVID M. BARASCH, ESQUIRE 1425 Strawberry Scuare 6l, Harrisburg, Pennsylvania 17127 l For - Office of Consumer Advocate 71 l MAURICE A. FRATER, ESQUIRE S l g:does, Wallace & Unrick P. O. Box 1166 9 Earrisburg, Pe.nnsylvania 17108 i For - St. Regis Paper Co., et al.
10 l ALAH LIEDER, ESQUIRE 11 Central Pennsylvnnin Legal Services
. 10 South Prince Street 12 Lencastor, Pennsylvmin 17603 l
; For - Senior Power Action Group, et al.
13 ! . l GERALD GORNISH, ESQUIRE 14 12th F1cor Packard Building
; Fn11adelphia, Pennsylvania 19107 15 i For - Citibank, U.A., Agent Chemical Eank, Co-Agent 16 9
EIUCE ECKERT, ESQUIRE 17 Suite 512 q One Plymouth eating 18 : P2yacuth Meeting, Pennsylvania 19462 l For - Pennsylvania Fcandrymen's Association s.ao 4 PA'BICIA SMITH 20 Bc: 52, R. #1 Etters, Pennsylvania 17319 21 For - Hewberry Township 'DII Steering Committao 22 . LOUISE DUFOUR Box 10 33 Oaks, Pcnnsylvania 19456
'I For - Limerick Ecology Action c- 24 l l
25 4 i LtCHRDACH O MARSMAL. INC. - 27 N. LOOKWILLOW AVE. - HARRIS 3URG. Pp 17112 1640 181
2U1
, t .
i I 1 APPEARANCES: (Continued) C ,
, G JOH17 BOWERS, ESQUIRE 3 i R. D. #7, Box 388 York, Pennsylvnnin 17402 4 '
For - Holly Keck, Deep Run Farm 3 Inc. 5 l IALSO PRESENT: 6 j ,
! STEVEN A. McCLAREN,, ESQUIRE 7 i Deputy chief counsel ,
I Rater Division - Law Buree.u
- 8) G-19 North Office Building
, Harristn.irg, Pennsylvania 17220 Special Ocunsel to the Cneminsion 10 l
11 I i 1% l
^
'3 I C ! O 14 !
I J 3 i 16 l i 17 l 8 18 1 1 19 20 i l 21 I i 22 i 23 ; i 3A g O 25 i i
.aottnaAct! e NARSHAL. INC. = 27 N. LOC 1CWibbOW AVE. - HARRISBURG, P.k 17t32 1640 182
282 , 1 INDEX TO WITNESSES 2 RE- RE-RESPONDENTS DIRECT CROSS DIRECT CROSS 3 Robert C. Arnold . ....... 286 291 4 Fred D. Hafer ......... 353 355 372 374 5 377 6 John G. Graham . ........ 353 355 372 374 377 8 9 10 11 b 13 14 15 16 17 58 19 20 21 22 23 24 25 inct!POAct: A MARG 4A! INC -27 IL LOOKWII.1.or? AVC = ffARrJ32URC, PA.17182
- s. .;( ! .I- !
gg f g j p 3 __ _ __
2 83 ' INDEX TO EXHIBITS { .t 2 MET-ED/PENELEC IDENTIFIED
,1 Y'
A-9 - Document entitled Projected Short-Term Debt Balances for Cash Requirements Other 6
't Than Deferred Energy . . . . . . . . . . . 2814 n
T A Document entitled Response to Consumer g Advocate Interrogatory Set I, No. 8 . . . 2 814
'i g HSK g i No.1 - Internal unmo dated 7/9/79 .. . 401 No. 2 - Femo and order of the NRC dated 10/16/79. 402 10 No. 3 - Letter dated 10/23/79 . . . 403
.~u.
7.2
)No. 4 -
I
. . . 425 O 13 i e
$'t 15 16 IT
!.6 19 20 2.1 j i
6,f ri lb, p
- b. 24 $
[ 25 t'.CS:rm/.Ci* Fa mat:Ct?AL !!'C. - A*/ Pi. Lom3Y%LOY.' /.VC. - ITARm35URG, PA.17113 1640 184
. - . . , . . . . - . , . - - - . . - - . _ , , . - , . , .-_ _ -.-... - --.. . . - . . - _ . ..._r . . - , - - - . ~ - .
28!1 THE ACTING CHAIRMAN: Good morning everyone.
'. j 3 ,il We will resume this hearing which is,,zero plus three. Mr. (
u 3 Russell, are you prepared? IG. RUSSELL: If the Commission please, I 4 f 8 5 have handed to the reporter three copies of documents which 6 I ask to have marked for identification as Met-Ed/Penelec
~
? Exhibits A-9 and A-10.
C, f (Met-Ed/Penelec Exhibit A-9, entitled
Projected Short-Term Debt Balances for 10 Cash Requirements Other Than Deferred Energy /
was produced and marked for identification. l'.t Met-Ed/Penelec Exhibit A-10, entitled
-2 I Response to Consumer Advocate Interrogatory s .
Set I, No. 8, was produced and marked for I# identification.) 14 4 13 MR. RUSSELL: We have, as I indicated yester-l 4
% l day, several witnesses available for testimony today. They 17 . include Messrs. Hafer and Graham who were on part of Monday, i
18 and also Mr. Arnold, who is available today for the first 3 time. Has the Comanission any preference as to which ones they would like to have called first? 31j THE ACTING CHAIRMAN: Why don't you present il them, Mr. Russell, in the order which you believe is con- [
%}!!
_ %. cistent with the flow of your case. l 24 MR. RUSSELL: I would say Mr. Arnold is in o
#g
& charge of Tnree Mile Island, he has many duties to perform
'1(+2ACM b t.fA.T*DL,1;;0. .- c' !!. T.COE/ELO77 f.VI . - IMRf:.frEUKG, F,i 178 tr.
1640 185
285 '
. ,; down there, and if there are no objections we will call him h 2 and let him get on his way when he is finished.
3 THE ACTING CHAIRMAN: Will he be testifying 3
<;. on the first matter of the tripartite consolidation, namely,
.4 your request for relief in your energy cost rate?
6 MR RUSSELL: Mr. Arnold's testimony will
? obviously cut across two of the proceedings, namely, the 8 petition for a clause change and also the issue of the stctus 9 of TMI-1.
10 l So far as the petition is concerned, we thin 1t i 11 that his testimony as to the status of TMI-1 and its restert 12 is relevant in that it shows that Met-Ed has done everything O la within its power to expedite the greatest possible reduction 0 14 in its energy costs, namely, the early return of TMI-l to 15 service. 16 So to that extent it is relevant to the I? petition as well as to the second issue as to the TMI-1 18 status. 19 THE ACTING CHAIRMAN: Call your witness,
'O- Mr. Russell. 3 21 MR. RUSSELL: Mr. Arnold.
5% I t i 23 ROBERT C. ARNOLD, called as a witness on i 24 i behalf of the Respondents, having been duly sworn according h 25 to law,. was examined and testified as follows: MOIIJ/ CE O IdAR33fA!.. IPC. - 27 ff. L.CCla7:LLOW AVf." = ifA?.RISBURG, PA.1711A 1640 186
Arnold-direct 28o x l ' l y, ! DIRECT EXAlHHATION (- i 2 BY MR. RUSSELL: l l 5 Q Will you state your name and address, please? ! 4 A My name is Robert C. Arnold. I reside at 5 7 Fernwood Trail, Mountain Lakes, New Jersey. 6 Q By whom are you employed and in what capacity]
? A I am employed by the GPU Service Corporation 0 as Vice-President responsible for the generation area, I am' D also Senior Vice-President of Metropolitan Edison Company, 10 and in these combined positions I head up the Three Mile M Island generation group.
12 Q I show you a document which has been marked 13 for identificaticn as Met-Ed/Penelec Statement D and ask yrm If whether that has been prepared by you? 15 A Yes, sir, it has. i 15 Q If I were to ask you today the same questions 17 I that appear in that statement, would your answers be the same lil as those contained therein? 19 A Yes, they would be. 20 Q I also show you documents which have been 21 g marked for identification as Met-Ed/Penelec Exhibits D-1 r HJ through D 14 inclusive and ask you whether they have been f 23! prepared by you or whether you are sponsoring those exhibits? 2'i . A Those exhibits were not prepared by me but 2k ,, yheg yelgte to testimony that I will give, and I am sponsoring f4C:4E3ACi! a I.MRi!8.*.L. !:70. - C F . LCC16V!LLM.' AVIl - HAftRIrIUP.C, :;A. t 7112
.. n 1640 187 a .
287' Arnold-direct 1 them in support of that testimony, g { . I Are those several exhibits described in ycur g I Q 3 Statement D? A Ye s , s ir, they are . 4 THE ACTING CHAIRMAN: P2. Russell, who assumey p 6 responsibility for the preparation? 7 BY MR. RUSSELL: 6 Q Will you describe briefly what the exhibits y f,are? And I believe the Commission then could understand the 10 reason for your sponsorchip in the absence of your having 11 directly prepared them. A Exhibit D-1 is a letter from Metropolitan 12 13 Edison Company to the Nuclear Regulatory Commission, making 14 a commitment to give the Nuclear Regulatory Commission ample 15 advance notice of any intent to take Three Mile Island Unit It is a matter of public 1 out of a cold shutdown condition. 16 17 record as are the other three exhibits. Exhibit D-2 is also a letter from Metropolital; 13 19 Edison Company to the Nuclear Regulatory Commission and it 30' identifies those activities which Metropolitan Edison Conpany 21 intended to complete prior to the operation of TMI Unit 1. 230 That letter uns dated June 28, 1979 23 Exhibit D-3 is an order from the Nuclear O* 24 Regulatory Commission directing that Three Mile Island Unit 1 , g 25 remain shut down until completion of hearings. x:n~:r?.:n a um:m., mc. -a n. to:xv.w on r.v1. - amam, n. sma - 1640 18_8_
Arnold-direct 288 i ( y Dthibit D4 is also an order from the Nuclear
- 7. .
Regulatory Cot: mission which sets forth the issues to be con-sidered in the conduct of hearings prior to the startup of
.e..
.g.
Unit 1, or in support of a determination as to whether or y not Undt 1 wi?.1 operate and also covers related matters. 6 MR. RUSSELL: Any further questions by
'/ Commissioner Johnson?
THE ACTING CHAIRMAN: No. I will wait until 8 9 after the parties have had a chance to cross-examine Mr. 10 Arnold and perhaps they will ask some of the , questions that l 11 the Commission is concerned with. Do you have any further 12 direct? a IS MR. RUSSELL: Yes. I was going to ask Mr. 14 Arnold to briefly summarize the substance of his testimony. l I D THE ACTING CHAIRMAN: Before you do, I wculd Ii like to make one statement to you and to the parties. This l 16 17 , concerns the status of exhibits and statements that we are , 18 considering. 19 In past proceedings involving Met-Ed, involvir4g other respondents, we have permitted reference to and examina 20 21 tion of, cross and recrocs and redirect of all these offerings 3.9 without determining that these exhibits or statements or f, 25 offerings are accepted as part of 'the record, waiting until 24 the close of the proceedings to then accept or reject any of 25 the offerings. This is what we propose to do in this instance ,
' emue:r a tv.w:m: um. - c.n:. 2.eexm:.i.ow ave. - n.u.msnune, m n::
1640 189
Arnold-direct 289 T* I y ll unless there are some outstanding or remarkable objections I g
- 2. i to that process, !
l 5 You are about to examine Mr. Arnold on 4 , D-1, D-2, D-3 and D-4, is that correct? 5 MR. RUSSELL: Mr. Arnold has indicated that , c he has described each of those exhibits in his testimony.
? We had him also describe them orally briefly for the benefit 0 i of the Commission. I 9 THE ACTII!G CHAIRMAU: Then tay comments arS 10 appropriate. We have not accepted these. We have made 11i references to them. The acceptance or rejection of any i
E' statements, testimony, exhibits and so on vill take place 13 l at the conclusion, with all the parties being given an 1417 opportunity to either object or to waive any objection to 15 the offerings. 16 Is there an objection to this procedure? 17 MR. RUSSELL: It seems to me that is the 16 normal course of events, that evidence is submitted and then
.19 .! just before any party closes its case a motion is made to V offer in evidence the various. documentary evidence that has 2,1 been submitted. At that time rulings can be made.
Md THE ACTING CHAIRMAU: Your answer is that you 0 El ti do not object to this procedure being followed by the Com-M mission. How about the parties? g 25 1E. MALATESTA: No objection. i
' P.tCb"';EA03 o f/t.R3 ";L ;;fC. =* %7 I . %Ccr/*;;.t.OVf /a".J. - I'micrt;!!c, FA. *7112 1640 190
Arnold-direct 290 MR. BARASCH: No objection. y' 3
- 18. FRATER: No objection.
3 MR. ECKERT: No objection. 3
- 18. GORNISH: No objection.
4 Im. BOWERS: No objection. 5 THE ACTING CHAIRMAN: Very well, that is the N
'I way we will proceed, and will you please therefore, without f 3 any further interruption from me at least, continue.
I 9 BY MR. RUSSELL:' 10 Q All right, do you have the last question, 11 Mr. Arnold? Briefly summarize the substance of your testimony. 12 A The purpose of my testimony relates to five J First I attempted to 13 aspects of Three Mile Island Unit 1.
'If present a chronology of the events concerning TMI-1 since 15 the accident, to sumrize the requirements that currently 16 exist for the restart of Unit 1, to report on the actions 17 that we have taken to satisfy all of these restart require- l l
10' cents, fourth, to report on the present status of the pro-1 19i, ceedings before the Nuclear Regulatory Commission that relate:
- 30. to the restart of Unit 1, and fifth, to illustrate that Met-4 2? Ed has been responsive and is committed to the restart of 2?.l!! TE Unit 1. !
2F ? MR. RUSSELL: Taat is all we have of Mr. ! i y .
~ Arnold at this time unless you care to have a little more :
29 I 25 detailed explanation of his written testimony. , metztn., e. u.t.n ..t. n:c. -sr n. s.ee.:va:.t.cr c.2 - we.rmeur.e, n. m rm
.-.16.4.0J91 _ .
Arnold-direct 291-2fy ' 1 I THE ACTING CHAIRIRU: No. You are conducting $ 3 your case, Mr. Russell. I MR RUSSELL: I am saying that is all we have 3 g* i at this time. You look puzzled. i 1 THE ACTING CHAIR!MH: No. I am prepared to 5 5 ask the parties to proceed. Mr. Malatesta?
? MR. IGLAT2.STA: Yes, sir, I have just a few questions for Mr. Arnold at this time and perhaps othe2s at a j 8 ;
1 subsequent time. 9 10 21 CROSS-EXAMINATION 12 BY 18. IMTESTA: C Mr. Arnold, are you primarily responsible O 13 Q f l',; for activities at Three Mile Island at this time? l 25 A Yes. 16 Q Does that include any cleanup involved 17 with TMI-2 or TMI-1? Ifl t A Yes, I am responsible for all the activities i 19 n31ated to the Three Mile Island nuclear generating station. 7.0 Q In the course of your activities are you
.i_
t responsible for determining what costs will be incurred by i
- 2.h Met-Ed or GPU in cleaning up THI-1 or TIE-2?
33 l A If by cost you mean the estimate of the G 4 I e: pense associated with the activities that are involved I h 26 25 in the preparation of Unit 1 for restart and the decontaminat$ en L of Unit 2, the answer is yes,nor.we n. ca
- g. r.ccan.s.ew e ws:w., me. r.r.r. - ru.::rn:=..e m. rma 1640 192
-.c. .. . -. . - - _ . -_-______ _
Arnold-cross 29') L i' I i I Do you make the actual monetary estimate f l Q ; 2- yourself? n i u , A I do not personally. My staff does that.
- i 4* Q And do they refer them then to you?
& ; A Yes.
i 6 i At this time are you able to estimate the
; Q 7 total clean-up costs associated with the TMI-2 accident of
; March 1979?
9 ! A I have not given any direct testimony on that. N I realize that, sir. But I'm just trying Q
'i If to find out who would be the person to ask those questions 12 of.
A We have been doing cost estimates on the u clean up of Three Mile Island Unit No. 2, and our current U best estimate is that it would be in the order of $275 million. 16fl Q And that would be to restore TMI-2 to a normal 17 operating cond?. tion? 18l A Ho, it would not. That would be for its l I decontamination. We estimate the reconstruction to return ;
#y to normal operation would total, with clean-up costs, about 4 1' Wi $400 reillion.
4 i
'~'?. 9 Q Will there be any costs incurred to bring , TMI-1 back into re-start condition?
h l A Yes. 2 And would they be in addition to the $400 mill, ion?
.t ,Q
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. _. _ _. 164_0 193 _
Arnold-cross 300 C J.' A Yes. O I 3 j Q And do you know what they might be at this 3 time? I 4 A We have cost estimates on those related 5 ' expenses, and they are related to the preparations necessary 0 for re-start. I anticipate that we will be submitting 7 testimony later in these proceedings that relate to those
#3 costs in detail, and I suggest that perhaps it would be n
~
cppropriate to defer that question. 10 Q Are you responsible for negotiating with the Il ' insurance ccrriers with regard to insured costs in the TMI-2 O 2 . acciaeaet g 13 A I am not responsible for taking the lead in u.
~'
I'm responsible for providing the technical staff that. 15 support for those negotiations. 10 Q Is Mr. Geherty responsible for the direct 17 negotiations? 10 A It's my understanding that he is interfacing to
~ with the insurance companies directly on that.
N ' MR. MA1ATESTA: Those are all the questicas l
?
~1 ! I have at this time.
li 2Ah THE ACTING CHAIRMAN: You have no further l l ny)i
- questions? Consumer Advocate?
{ # ,'- BY MR. BARASCH: e 1 25 Good morning, Mr. Arnold, Q f.!CNR!"*A"J!
. D. *.*/OtGM.U !? :7. - J:'T II. LCC*T.*!*40Y.' N/:*. ~ !*JJt1EURC. P/ 171f 2 16LO 194 7- .
. . . . ~ . . _ - _ . . . _ . _ . -
Arnold-cross 301 1 i A Good corning, sir. ( 5 2 , Q I just have a few questions at this time. 3 l Mr. Arnold, at the time that the Three Mile 4-Island No. 2 nuclear accident occurred, TMI-l was not 5 producing power at the moment, is that correct, sir? 6 A That is correct.
? Q Why was the plant then off line?
3 A The plant had just completed a scheduled 9 refueling period. It was scheduled to return to critical 10- operation on the day of the accident. It would have, had 11 it proceeded in accordance with the schedule, been producing 12 electric energy within a very few days after March 28th. O U TMI-1 to a Babcock & Wilcox reactor, is that Q 14' + correct? 15 A yes. 16 Q After the accident is it correct that other j d ' Babcock & Wilcox reactors were ordered shut down by the 'TRC7 ' 16 A Yes, sir, it is. 19 { Q Do you know anything about -- I am asking , I 20 i this question since you're a person with considerable 21 experience generally in the nuclear area. Do you have any ! Lj idea why the NRC ordered those other plants shut down? . i li __ U] A There were a number of other issues raised I by the accident at Three Mile Island Unit No. 2, particularly 2'.' ! 25 with regard to emergency feed water system design and the
*tCMTf.Ct le f4AkEEAI 1300. == J./ ;:. I.0cKW:LLOW Av.* - MA!!ntsgyMs. PA.17tta
-1640 135 --
Arnold-creas 3 0 2.__ ( 1 training of operators. ! h 3 The varicus B & W owners proposed to the Nr.C 3 the actions that they intended to take in response to the ! l 4 concerns that were identified by those companies and the URCl 5 from the very early lessons to learn from the TMI-2 accident. 6 Those letters from the various utilities were 7 turned into orders in effect, issued by the Nuclear Regulator y E Commission, and in most cases they required a shut down for E a relatively short period of time until certain portions of W those actions could be completed by the various ovaing 11 companies. 12 Q Well, specifically regarding emergency feed
## unter systems, I assume the NRC also was in communication 10 with you regcrding those systems at TMI-1. Is that correct?
10 A Yes. 16 Q Did you also respond to the NRC with a 17 suggested program for correcting those problems? 10 A Yes, we did. 19 Q And that was included in our June 28th letter D as one of the areas which we intended to address, and we El i described in that letter the way in which it would be it 23 . addressed prior to the re-start of Unit 1. Now, the NRC --
? #~7, ! A Encuse me, sir. Just to clarify, the June M 28th letter I'm referring to is Penelec/ Met Ed Exhibit D-1 --
25 excuse me, D-2. NCICdCAC'! e Mt.nc!!AL. !!JC. = %*/ r!. LCC tW!!J.oW INC. == P1.RRIGuUUC, Fl.1718 A - 1640 196
Arnold-cross 3_0.3 , I Q Thank you. Now, since the accident NRC has ( 1 3
- permitted these other Babcock & Wilcox reactors to start, l, S is that correct?
[ A Yes, sir. S Q What's your understanding of why TMI-1 is 6 being treated differently by the NRC7 I 7 I A I think the Met Ed/Penelec Exhibit D-3 and C D-4 provide information relative to that question. N in the NRC order of July 2nd, which is 10 Exhibit D-3, they identified that the NRC lacks a reasonable . 11 assurance that the facility can be operated without endanger-12 ing the health and safety of the public, and that was the 13 basis for the July 2nd order. 14
- They went on to say that within 30 days they U
lwouldspecifyindetailthebasisforthatconcern. 16 That additional specificity was subsequen_tly 17 provided ir the August 9th order, which is Exhibit D-4, and 18 I they identify in there a number of concerns that they have 1 19 . about the operation of Unit 1 which they believe have a very + 1 I 201 significant difference in their degree of asaurance of those f 21 j particular items vis-a-vic other B & W reactors. 32 And on my direct testimony, page four, I :
~ 25!! iterate the four areas of concern that are identified in i
!! l MI the August 9th oroer. .And if I could just read it into M ecor --
l the
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L - ;.' . 1640 l97
- . -- -..- -.- = - . - - _ . - - .
Arnold-cross 504 { 1 Q Please do. , h 2 ! A Quoting from bottom paragraph on page four, Sj.they are as follows: "1. Potential interaction between 4 Unit 1 and the damaged Unit 2." l 5 l, Q could I stop you there? i 6 A Yes. 7 Q And inquire? With TMI-2 out of service at 0 the moment, I gather there are systems in TMI-1 that are i . useful as backup systems for the antiged nuclear reactor 2. 10 Is that correct? 11 A Well, that is true, but there's also the face 12 - that some of the systems, by design, were installed as shared O .t 3 systems, particularly in the radioactive vaste treatment area, G 14 'so that the cleanup could not proceed without utilization of 15 some Unit 1 services -- excuse me, Unit 1 systems without 10 modification to the Unit 2 systems to . Eve an equivalent C capability. 10 And that requirement was part of the August 9th 19iorder. - 20 Q And have those modifications been made yet? 21 A They have not been completed. They are unde:.vay . I 221 Q Could you continue? I M i A Yes. The second area were questiens about the 2'h manar,ement capabilities and technical resources of Met Ed, h 25 , including the impact of the Unit 2 accident on these resources wemem u:uaw me. -a n. scexm:.r.cw .we. - 1:cuesuna, w train - -- 1640 198
- = .
Arnold-cross 305 1 and capabilities. ( 2 , Third was the potential effect on Unit 1 of 5 operations necessary to decontaminate the Unit 2 facility. 4 And fourth, deficiencies in emergency plans 5 and station operating procedures. 6 Q Thank you. If I could try to summarize some-Y thing, Mr. Arnold, would it be fair to say that TMI-1 is O
; presently out of service for what amounts to two distinct I
f* reasons. One is its physical proximity and interrelationship 10 l with TMI-2, and the second is the fact that the licensee for 11 TMI-2 is identical to the licensee for DII-1? 12 If either of those circumstances were not U' extant, do you think that you'd be able to re-start TMI-1 14 at this time? 13 A 1 don't think I'd agree with that. I don't 16 think that the holder of the license is, in and of itself, 17 a vaason -- 13 Q I'm not suggesting that. I'm sugge:cing both 3 of them. 90' A If what your question implies is making the 21 hypothesis is TMI-l was located five miles away from its 21., precent location cnd TMI-2 was not so translated and in ics
.,3 new location it had a different company holding its operating' '
' I
- > license, it uculd then be permitted to operate, I guess if N that had been the case prior to the accident, then probably
- normen a mr.mw_. c:e. - =r x. i.c exw:u.on mm. - mamsnma, zw iri ra
_...m , . 1640 199 __ _
Arnold-cross 306 f, ( A[ h the answer to your question is yes. i I h 3 Q I appreciate the candor of that answer. 3{ A What it would be su'2 sequent to the a_ccident i i I' one could hypothesize. I don't know. But the other thing ( 5 I would add to that ansuer is that thct does presuppose that 0 i the NRC treated that hypothetical in the same manner that they 7 have treated the actuality of the other B & W plants. B Q I guess what I'm trying to get at, if we 9 change those tro variables, wouldn't that do away with the . l 10 ' i only differences between TMI-l and the various other Enbcoch 3 11 I & Wilcox reactors, or am I missing something? _ n
~
A No. I would presume that -- as I have under- g t stood the hypothetical you've established, you've said that
] mI-1 was equivalent to, say, the Davis-Besse plant of Tolcdo n
*~ l Edison or equivalent to the Rancho Seco plant being operated 16
, by Sacramento Municipal Utility Department in respect to its '
N I displacement or. distance, some distance between Unit 1 and
' g . W I Unit 2, and was under a different organization for opera _-
4 e, tion,that we would presume it would be treated as those two
)excmplesweretreated. j 4
I would presume the answer to that is yes. 1
! Q You had no comw.nicction from the NRC that ,.c !! ! '"' j would indicate any other variables other then. those two, !
b
- would you? h 25 -
A No. But I don't have anything -- 1.tO*. TAC 71 C. F.!A:t!!!N= ;; c. -f.;' ;t. LC 0::WN:.OW /.V:'. = lif.;tn!L2U tc. FA. G'I f 2 _ 1640 200 .-
Arnold-cross 307
~
i ( 1 Q Have you had any written or oral communication . 0 with the NRC that would indicate there are other considers-E- . tions other than those two? I 4 A No, but then I don't know that we've really i 5 j ever explored that type of hypothetical situation. There 6 are clearly a number of items which the NRC is requiring us t 7 to complete prior to operation that they're permitting other E B & W reactors to complete while operating or subsequent to further operation. But none of those that I can see that 10 ' we're having to complete prior to operation are issues that 17 are unique to 'Ihree Mile Island Unit l's design. 11 , Q Fine. Thank you.
, 1
^# Mr. Barasch, in your j THE ACTING CHAIRMAN:
I 14 l question of Mr. Arnold, when you talked about proximity of l 10 Unit 1 to Unit 2, did you, by any enc ee; a an the use of II shared facilities? T7 MR. BARASCH: My question, very directly, 10 Mr. Chairman, referred to both the physical proximity of D the two units, as well as the interrelationship of various 2 systems that are common to both 'DfI-1 and 2, and I think M that was Mr. Arnold's understanding of my question. THE WITNESS: Yes. I presume that if they Lll a !! were displaced. there could not be shared facilities.
- <j t
%I
' THE ACTING CHAIRMAN: Are there it effect now D any facilities that are shared that are not available to
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^
N 1640.201 _
Arnold-cross 30y { ; , Unit 1 because of the presence of pollution, polluted water? h 2 MR. BARASCH: I believe I've asked that S question, and I think Mr. Arnold's answer was yes. 4 i BY Md. BARASCH: i 5 I Q Is that correct? 6 A I guess the record would have to speak for i 7 1 itself, but I did not understand you to ask that question. 3 Tne answer in that no Unit 1 facilities are f restricted in their availability for use with Unit 1 as a 10 ' result of the Unit 2 accident. The Unit 1 fccilities are
<.1 l fully availabic for supportive operations, other activities, i
12 lforUnit1andarenotcurrentlyimpactedbytheaccident C> 13 fortheconditionsthatareexistingasaresultofthat 9 i I4 i accident. 15 l 1 think, if I could perhaps just elaborate 16 on that, that the NRC's concern is that subsequent actions 17 during the Unit 2 cleanup should not lead to cituations there 20 the Unit 1 facilities become less available or impacted in 78 some uny by the Unit 2 cleanup and are thereby made less available or unavailable for Unit 1 operations. ! 20[ i 21 It's a future-looking concern much more than ; l, 22 q a current concern, and it is also kind of a hypothetical 1
*E ;! . case of the "what if" types of scenarios, not that we fo: eree
{ il 24$ any requiremo_nts during the cleanup of Unit 1 that would , h 4
%5 impact on -- excuse me, the cleanuo of Unit 2 that would i f 0330AC: a !"8E* rf.:. :::C. - 2*' 1L L?cE !I. LOW /NE. - lIAM't!CT*.J30 PA.1711C 1640 202
Arnold-cross ;;09_, 11 l s 1 in feet have an impact on Unit l's sy. stem availability. t f 2 Q Mr. Arnold, if you could get a hold of 3 Exhibit A-3 of Mr. Graham and Hafer, I want to ask you a 4$ question about that, il 5 A I have that exhibit available to me. I au l 6 not familiar with it, I might comment. I 7 Q Well, I think what I'm going to ask youabout 6 the exhibit I think you will be able to answer, I. hope. 9 If I look under " Nuclear TMI" under the
]l i 1C' ! " Internal Generation' heading, I see -- in July, August, l
11 i September I see negative megawatt hour figures appearing 12 at 'IMI. I was wondering, as a person who has responsibility 13 l for that plant, if you could explain uhy we would see F"i negative generction at 'IlfI. I 13 A The generation that's~provided in these types 16 of exhibits are net generation. That is, they're the 17 generation that's available from the station and are the '. 16 result of the gross generation -- what's generated by the
~
19 I generator itself -- less the station service load -- i 101 Q Whatever power is consumed by the station i. 21 icacif7 23!! A Yec, cir. So these negative generation n - l
i' numbers represent the electrical energy consumed at the i I 1 29 facility itself.
U Q Just so I make sure I understand this, we have 4 s n:ermo.. n a w.: ca. mc. -u n. :.m:mu.cw avz. - runnerm m. m sa u f
. 1640_203
Arnold-cross 310-A 1 1 no generation at the facility at the moment, neither 1 or 2, @ 1 2' correct? 3 A That's correct. Q So what that number represents is merely f. ( zero minus the amount of power going into the plant for f l 6 service to the plant? 7 A rnat's correct. The net generation'is a i G negative value since there's no offsetting Eeneration from 9 1 i the generators at the site. l 10 MR. BARASCH: Tnank you. That's all the 11 questions I have for Mr. Arnold at this time, but we may l very well have more later, Mr. Chairman. Q 13 h 13 THE ACTING CHAIBMAN: Thank you. Mrs. Smith? _ 14 MRS. SMITH: Yes, I have some questions. B'l MRS. SMITH: 15 16 Q Good morning, Mr. Arnold. 17 A Good morning. j 18 Q The first question is I know Met Ed did I 19 ' pursue transformation of Unit 1 to coal or oil. I want to j 20I know the status. Have they dropped it? Is it on hold? 11 And what will force them possibly to convert? 23 1! A The studies that we've been doing on conversica J 25E; to coal or other fuels have been only related to TdI Unit No.
, 24 2, as far ac I cm sware of, and I'm quite sure that they have h 25 not included conversion of Unit 1. Tnere is no reason at thin -1
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1640-204
Arnn1d-rvnea 31.Qd , _. .. y l ,
\- :'. j time for us to be looking at the coal or oil fuel source for 3 lTMIUnit1.
3 Q At this time? 4 A Taat's correct, s !
! (Continued on page 311.)
6 I 7 C D 10 11 , Jq l
} .
~ i 13 7.('
15 16 17 l 18 19 , 20 21 22 ; i
- 25 3, j i 25 I i
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*.e 1640 205
Arnold-cross :;11 { g Q I ask 1;y next question relating to manage- h 2 ment. Are you aware of 23 incidents that occurred when 3 Unit No.1 opened up in 1974 over a period of about three, 4 four years, at this time, that 23 incidents occurred, sone 5 very dangerous?
$ A I don't know that I woald agree with that 7 characterization and I don't have a tally with me of the 6 reportable incidents, which I presume what you are referring 9 to by incidents, those items which we have during the course 10 of the operation of Unit 1 reported to the Nuclear Regulatory 11 Conninsion in accordance with the technical specifications 12 for the unit. .
O 13 Q I have about 23 incidents. Is it possible h 14 that more occurred and they were not reported? 15 A I think I can say with confidence that all 16 of the events at Three Mile Island that were required by car 17 technical specifications to be reported to the Nuclear 18 Regulatory Commission were reported. 19 Tae nature Of events at the facility that 20 require reporting are defined by the technical specifications 21 and the regulations. 2?, Q For your position on Taree Mile Island do 2?i you need a surveillance program? 2/r A Yes, ma'am. h 25 Q May I ask your budget? A*0!mDA?E D ff.AMMAL. INC. ~.*'*l' II. LOCKVALLOW AVE = IU.RRICEURC. FA.12'1; 2 640 206
Arnold-cross 512 1 A I think I would like clarification as to 2 what you are including in the characterization of a surveillar ca 3 program. 4 Q To be specific, are you as part of your 5 surveillance program checking into -- I guess I will say it -- 6 antinuclear groups in the area? 7 A I am sorry, I was interpreting surveillance 8 in a technical sense. Some of the instrumentation and equip-9 ment, inspections and calibrations are called within our 10 I technical specifications surveillance requirements and I 11 answered your question initially in that context. 12 If you are talking about do we have a 13 surveillance program in terns of some type of review or 14 audit of people or organizations in the area around Three U Mile Island, the ansprer is no. 16 Q We will go back to the incidents I was 17 referring to, October of 1974 through May 1977. I will be 13 very specific. October 3,1974, are you aware there was an D unplanned radioactivity release caur.F by inadequate design? 20 i A I am not presently familiar with the details 21 of that event because I just have not reviewed it recently. El I was very much aware of the event at the time it happened 23 and was responsible for the investigation and the reporting 24 of that incident. U Q 'Ihen you probably are not aware that a fer
, ud;mnce c rm=uc, me. ,~, n. :.o:rrat.:.ow ac. - w.nmenuac, n ima 1640 207
Arnold-cross 313
- C.
^
weeks later, October 24th, there was another unplanned radio- g active gases release due to operator error. 2 A I think the answer is I was aware of the incident at the time, and with the opportunity to refresh my memory on it I am sure I would be able to identify a
"" d*#"DI* d*8#" # #" 1 "# * * # ""
6 Q Are you aware again two, three weeks later g on November 20 of 1974 there was a security violation? p A I think, Ms. Smith, all of those are report-g able occurrences, and I think if one were to look at the g documentation, I was the one that signed the letter to the g URC that provided the official notification to them of the C u =curren=e end the circunstances and the corrective aceim 9 g, that we would take as a result of that experience, and g consequently, I was familiar at the time with each of those g events and the details surrounding them, and I think I would be quite capable of answering specific questions on them with yy the opportunity to review the records. AG g Q I will go one step further. When we reopen g Unit No. lycu can cuarantee me these thirgs won't happen g again that I can sleep at night? A I guess I can't guarantee you either thing,
}Mrs. Smith, 3
a , (: g Q I don't know if you can answer this question, g if you can't, tell me who can: is the nuclear industry funding 3 FICERLACH e4 MARSFAL, COC. -F !!. LOCKWELCW AVE. = l*ARRIS2tmC, PA.17112 - 1640 208
Arnold-cross 314 t Met-Ed or these hearings in any fashion? ( A The answer to that, to the best of tny 2 knowledge, is absolutely not. Q To the best of your imowledge, okay, thank 4 you. Tnat is all I have at this time. Thank you, Mr. Arnold, THE ACTING CHAIRMAU: Ms. Dufour? MS. DUFOUR: No questions right now. g THE ACTING CHAIRMAN: Mr. Frater? BY MR. FRATER: 9 Q Mr. Arnold, did the start-up procedures relating to the start-up of TMI-1 contribute in any way, directly or indirectly, to the THI incident? g A Wo, cir, they did not. 13 MR. FRATER: No other questions. Thank you. g THE ACTING CHAIRMAN: Are there any other 15 g queations? MR. LINDER: Just one, Mr. Chairnan.
,,8 BY MR. LINDER:
Q Mr. Arnold, this is Alan Linder speaking. g g We represent the Senior Fower Action Group of York. The questio 2 I have with respect to your Statetent D is I did not notice any particular details in it regarding plans for g fuel disposal and waste disposal once TMI-1 is put back into operation. Can you elaborate on what plans there are for. fuel disposal? g g momucu uncut., um. - n N.1.ccxmu 0W AVE. - EREDURG. P,8.1 I
.~ . , v. .
0 209
*I
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Arnold-cross 319 A Yes, the current situation is that spent fuel g at comIr.ercial facilities must be stored on site and we do 2 y have storage capability at TMI Uni'. No.1, either existing now or capable of being provided, that will give us space 4, f r St ride Spent fuel to the mid-1980's, as I recall. 5 Tne industry has been given assurance by the 6 federal government that the federal government recognizes the 7 g responsibility they have to provide for the long-term storage 9 or disposal of spent nuclear fuel, and they have identified their intent to construct away from reactor fuel storage 10 facilities pending processing of fuel for long-term disposal, 77 y and it is our expectation that the federal government will C 13 have those facilities available in a time frame which would meet e our requirements. 14 In the event those are further delayed, we 15 16 would obviously have to make other provisions for the storage 37 of spent fuel, and we have various studies under way that 18 1 k at what alternatives are available to us in the event 39 that the federal facilities are not available when we would need them under the current plan. 20 37 Q Do you know the status of the federal government's plans or its facilities? Do you know at what l 22 23 stage they are? b 24 A I am not current on those, g MR. LINDER: Thank you, Mr. Chairman. 25
,* 71 f f.
IJCMUSACM D HARsi!AL. Iff0. = 27 FL LOCKVOLLOW AV2. - HARM 153U
Arnold-cross 316 1 THE ACTING CHAIPMAU: Are there any further 7 y questions by the partie.a? 3 BY lEl. BO' 4ERS: Q My name is John Bowers and I represent two 4 3 Metropolitan Edison ratepayers. I would first like to call 6 your attention to a statenent you made beginning on the 7 bottom of page 4 of your prepared statement, continuire on . No nuclear plant S to page 5, which states, and I quote: g licensee, whether operating a B&W unit similar to TMI-1 or 10 otherwise, other than Met-Ed, has been required to submit 17. either to formal hearings or to the protracted delay facirs 12 Met-Ed before being allowed to restart or continue operation v 13 of a nuclear unit. 14 Now cy question in relation to that statenent 15 is whether or not it is your position that there is no factua: 16 . or logical basis for treating the Three Mile Island Unit 1 17 facility differently from other Babcock & Wilcox nuclear 1g reactors? A I think there is a factual, and therefore, 19 20 I guess, you vould say logical reason for having a different 31 set of concerns about Three Mile Island Unit 1 than are those that would apply necessarily to other B&W units. I thint 33 33d quite clearly the proximity of the Unit 2 facility to the ! 1 24 Unit 1 facility is an issue that does have to be addressed O,
~ ~ 25 ' "in, considering the start-up of Unit 1.
I
- roer.cren r, emo. me. -ar n. i.oc: w:u. ora.a. - minmezur.c. m. mic
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Arnold-cross 317*
-), I think also it is clear that the fact that $
3 Metropolitan Edisen Company had the accident requires some 3 examination of our capabilities to operate safely. 4 I think the issue that I would take is that 5 a hearing and no operation prior to restart was the necessary 6 proceeding or the necessary process by which rastart could 7 de authorized with adequate assurance of safety. . 8 I think those items which do apply to the 9 TMI Unit 1 situation could be adequately addressed without 10 the necessity for the protracted hearing process that is 11 i currently mandated by the Nuclear Regulatory Commincion, 12 and that we could have completed not only the items that O 13 were required of other B&W plants but completed additional e-what M items which we identified from/we learned from the TMI-2 15 accident ao being desirable to increase reliability of 16 operation prior to start-up of TMI Unit 1, and those things 17 are indicated in Exhibit D-2 and the letter to the NRC of 16 June 28 which identified those things, and we made those 19 commitments to correct those itema before restart. 20 I think we also recognize that the situation 21 called for a greater concentration of the management and 22 , technical resources within the General Public Utility system f ! i I 23 i and we accomplished that objective. (. I V 24 I think relative to an earlier question from h M Mrs. Smith that we have taken very extensive and very substantive
- McHRDAOi Cr 1.tN".33IAL. !NC. = W IL LOCKWII.1CW AVI!l. = ftARRIC2t:KG, PA.17117.
1640 212
Arnold-cross 318 actions to bring to bear on the operation of TIE Unit 1 the ( 1 2 management capabiliy, the management commitment, and the S resources necessary to fulfill that commitment for the safe 4 operation of TMI Unit 1, and that we have also brought to 5' bear on the cleanup of Unit 2, which is a peripheral issue 6 but still one of interest in terms of operating Unit 1,
~7 resources, capabilities, talents from across the country to 0 ascist in dealing with the very special problens that TMI 9 Unit 2 presents with regard to its cleanup.
10 I think that we could have provided a basis 11 . for the URC r2ing the decision that adequate assurance did
" exist for the safe operation of Unit 1 through other mechnnists w
U in the hearing, we could have completed those activities that N would have given that assurance by the end of 1979 if that U had been in the cards in terms of the proceedings that would 16 have been fo11 cued, and we would be in position to provide 17 the energy from TIE Unit 1 that everybody recognizes is needec 18 for the custcmers of Metropolitan Edison Company and that we 19 think should be coming from the operation of that unit. 20 If I understand your testimony correctly, ! Q I 21 you would agree that the items specified in the August 9 ! f . I 22- Nuclear Regulatory Con: mission order, and which you reiterde ; I N ' on page 14 of your testimony as being, quote, peculiar to
?A the TIH facility, provide at least some factual and logical basis for treating TMI-1-differently than other B&W reactors
- 3:onttrACM G f t A*t:"1VL, INC. a= ft? M,1.OOftWILLOW AYE. = HARFl!SELinc. FA.17182 -
1640 213
Arnold-cross 319' but that you disagree. with the extent and the magnitude of g that different treatment. 2 A Well I think it is not only that, but many of the things that we arc being required to do before we start 4 1 unit i are clearly outside the four areas that were identified 3 as the basis for being concerned abcut the operation. We are accomplishing many modifications on TIE Unit 1 which are being 7 g required of other B2cW units but are outside the scope of these four areas of concern and are not being required to be g accoEplished on other units prior to continuing operations. g Q Would it be possible for you to provide us with a written list of the items which you believe to be g C .u outside of the scene of the comnission's concern es expre. seed 9 g in its August 9th order? g A Yes, it would be.
,, g Q Thank you.
A Excuse me, let me clarify that they would g not necessarily be outside the scope of the Commission's g g order of things to be accomplished prior to restart, but they would be outside the scope of the four itens identified in the order as a reascn for lacking the necessary assura:.ne
,1
.r.
that TMI can be operated safely, i.e., outside the scope of g those four items that are on page 4 of my testimony and which (~ were lifted directly from the order. g
,g. Q I understand, yes. That was the sense that
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Arnold-cross 320 I had in mind also. Does the unfair or unjustifiable 1 k treatment that Metropolitan Edison is. being subjected to by , 2 the iTuclear Regulatory Commission cencist in the mere fact , of being required to undergo a full and adjudicatory hearing as a condition tothe restart of TMI-1? A I think the issue becomes a little bit more complex than that. Clearly the umbrella under which many 7 activities are being Carried out that relate to the Itstart f 3
, of Unit 1 is the August 9th order, and really its predecessor
- l order which stated that hearings would be held prior to the l restart of Unit 1, so that the governing action, as it were, ,
is the decision by the Nuclear Regulatory Commission to g v' g require full hearings and review and decision by the Nuclear Regulatory Commission, which is also a unique or, let me say, g an unusual method or unusual approach taken by the Nuclear g Regulatory Commission, so that that decision on their part g
, is, in tay opinion, clearly the controlling event that has determined that we will not be able to restart TMI Unit 1 before the third quarter of 1980 at the earliest. -
g Once that decision had been made, then the*= had been many other decisions made which required us to under-21 take actions and particular plant modifications which, had
, , - they been decided upon in and of themselves independently of s.1 any order, would have stretched the time requirement beyond g
,. the end of this year, but which are not being required of NORRHAcN & MAltCHA* 1EC.- 25 IL LOCmVILLOW AVE. - HAGIUSEURG, Pt 17517.
') '
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Arnold-cross 421 other B&W reactors before operating, so that I would presume g that absent the July 2nd and August 9th orders we would have 2 been able to comolete those modifications concurrent with
~
3 operation of the unit as well. 4 TE ACTIIC CHAIRIGH: Before you proceed, the question you asked involved the characterization of treattent of Met-Ed by the Nuclear Regulatory Commission. g MR. BOWERS: Yes, sir. THE ACTING CHAIRMAN: I think you said 9 4 something about its being unfair or discriminatory. 10 . MR. BOWERS: Yes, sir. g THE ACTING CHAIRIMN: I don't know that we b g3 have anything on the record by the coIqpany that characterizes h the treatment by the NRC as being unfair or discriMnntory. 1,1 g IE. RUSSELL: I think we do. THE ACTING CHAIRMAU: Mr. Russell, is this what you want the Commission to conclude? MR. BOWERS: Could I ,just briefly respond. g Commissioner Johnson? On page 12 of the company's responne to this Commission's September Elst order to show cause, and 20 with reference to the Three Mile Island Unit 1 reactor, the ! titic of the section beginning with Paragraph 18 on that page reads: The discriminatory action by the NRC. 33 h 18. RUSSELL: That is precisely the point co ' g which I had just made reference. 25 NCMItSActI r. MAttr.HAf.. INC. = .".? M. Loct:WILI.oW AVE - MARRICURO, F/w 17112 - 164~0 2'6
_ _ _ . _ _ _ _ _ _ _ . . _ _ _ . . . _ _ . . . . _ _ _ _ _ _ _ _ . ~ . . _ _ _ . . _ . Arnold-cross 322 1 THE ACTING CHAIRMAN: I just want to emphabizd ( this, ad emphasize also this is a far cry from the testimony 3
,, you indicated this witness would be giving us with respect to a
segment one of these proceedings, namely, your request for energy c at rate relief. 5 6 IE. RUSSELL: I think I have stated that as a very essential component of our need for relief with respect 7 g to recoupment of energy costs is a demonstration that Met-Ed p has dons everything within its power to achieve the greatest l 10 reduction of energy costs which would be the early return of , TIE-1 to service. That is the biggest thing that can be done 17 12 to reduce the energy costs of Met-Ed's customers. v 13 Mr. Arnold's testimony has demonstrated that 14 Fet-Ed has done everything within its power to achieve that 15 result. And if incidentally the reasons for its not going 16 back on line happen to be the fact that the NRC has treated TNI-1 in different ways than it has treated other B&W reactor 17 yg rwners, that is part of the picture. 19 We are not asking this Commission to decree g that the HRC was discriminatory in its action. But these are 21 the facts as we see them and we are presenting them to this Commission as to why TE-1 is not presently bacs on line when 3 23 we have done everything in our power to see that it can get y back as early as it is possible to get it back. 25 THE ACTING CHAIRMAH: Well, this Commissioner htcli"tDACH Q MAftSHAI IHC. =27 !!. f.CCPX4Lt.CW AVP., = ftWfttCDUllO, PA.1711:t 1640 217
Arnold-cross 323 ' y
, seems troubled by that conclusion. We will have more to say g g about it when we enter into the discussion for a show cause 3 order on Unit 1.
Do you have any more questions? HR. BOWERS: Yes, sir, I do. 5 45 BY 15. B0HERS: y Q To go back to where we left off, Mr. Arnold, 8 I understand and I agree with you it was the August 9th IEC 9 order which imposed upon Metropolitan Edison the requirement to undergo these hearings. However, I would assues from your 10 11 testimony and the other material that I have just made reference to that it is your position that it was that C 12 13 decision which lacled justification in either fact or logic, e 14 the decision to require Metropolitan Edison to undergo thase 15 hearings. Is that in fact your position or not? A I think I would say that it is my judgment 16 17 that that selection of process of providing adequate assuranc o 13 was unnecessary and inappropriate. If that means that I 19 don't believe the facts or the logic of the sittation support go issuing the order, then I will accept that as my conclusion. 21 I do not thirJc it was necessary proceeding this way. 22 Q Are you familiar with the guidance that the 23 Huclear Regulatory Commission had before it from its legal y4 staff with respect to the legal requirements that; apply to tha g 25 situation? MCHR31.C2; & f.:AKEi!AL. IMO. = 27 II LOOKWILLOW AVI*. = }rAnnIS3URG, P/.17112 - 1640 218
Arnold-cross 324 I may have been geners.11y h (~ i. A No, sir, I an not. fnmiline with thou at an earlier time but I do not recall 2 them now. 3 Q In a memorandum dated July 9,1979 to the 4 Nuclear Regulatory Commission the Executive Legal Director of the Commission indicated as follows: We further consider the hearing as one -- 7
,, HR. RUSSELL: If the Commission please, this O
witness has said he is not familiar with any legal requirenen us g under the HRC's staff views and I think it is inappropriate g under these circumstances to endeavor to try to cross-exanine him with respect to those staff views. v THE ACTING CHAIRMAN: Mr. Russell, just a g g moment ago ycu were telling me that this witness was qualified to make a judgment on whether or not the NRC's action was g unfair and discriminatory. You used that as a basis for
.t 6 linleing that to your request for energy rate cost relief.
Now by what process does this same witness g become not qualified to further deal with whether or not s u e een a ed on m e, 2e legal m es mae 20 are involved and so forth? You have concluded that he was g qualified to make these judgments, and unless you can clarify
! what the difference is between his previous answer and what
/A l h qualifies hin to make that kind of a judgment, I don't know g whether we are going to accept any statement from him on this ,
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325' Arnold-crosc , g second question. t $ 2 !!R. RUSSELL: Are you finished? 3 THE ACTING CHAIRMAN: Proceed. MR. RUSSELL: Mr, Arnold has just responded 4 5 in cross-examination to the factual basis as he sees it for 6 the conclusion that the !bt-Ed situation with THI-1 restart 7 was treated in a substantially different way factually than 8 all other B&W reactor owners were treated, and he has given 9 that and he 1c totally competent to do so. ; 10 What this questioning now is endeavoring to i 11 do is to question him not on the factual basis but on the 12 legal conclusions as to whether or not procedurally something O _ 10 is or is not legally proper, and that is a totally different e 14 situation and it is not something which is properly put tc 15 thic engineering witness. He is not a legal witness, he is 16 an engineering witness. 17 THE ACTING CHAIRMAN: Mr. Russell, I am most 18 reluctant to debate this matter with you. It seems to ma that. 19 answering the question of whether or not the HRC treated !bt-20 . Ed or TMI differently from its treatment of other plants 21 similar, built by the same engineering company and so forth, 22 is a catter of fact. But the conclusion that that treatment 23 was unfair and discriminatory, which this same witness saf.d, 24 with your concurrence, is not a recital of fact but a con- $ 25 clusion and represents a position of the ecmpany, a most 2.toMK3/.C1: & MARCP.Af., L*1C. - 17 N. f.OCIGY1Lovt AVT - MARRISUtJRG, Pt 371 f A 1640 220
Arnold-cross 326
)
y itaportant position which you claim is germane to your request 2 frc t rate improvement. I can't see how he is qualified on the one 3 hand to make a judgment based on information available to 4 him and to everyone else, and not qualified to answer the 5 g seccad question put by Mr. Bowers. MR. RUSSELL: I think I have stated my 7 g position as clearly as it is possible to atate it. I don't p think there is any point in restating it unless you would like to have me do so, that there is a distinct difference 10 11 between factual issues and legal issues, and he has testified 12 to factual issues, and this question is asking him to give a w 73 legal opinion with respect to matters that he said he is not g familiar with and he is not a lawyer to begin with. THE ACTING CHAIRMAN: Will you repeat your 15 16 question, Mr. Bowers? 17 MR. BO'JERS: Yes, Commissioner Johnson, but gg before I do I would simply like to throw in another con-79 cideration here. 20 At Paragraph 9 of the cc:npany's response to the THI-1 order to show cause Metropolitan Edison said as 71 22 f 11cus: Although the legal staff of the NRC advised the URC that it had discretion to adopt other procedures, the 23 7,;. IiRC elected to adopt the procedures set forth in its order 25 of August 9, 1979
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Arnold-cross 32T So it seems to ne that matter has been 1 { placed at issue, it is a factual tatter, and I believe 2 that it deserves to be ventilated. a IG. RUSSELL: Therefore you can ask an engineering witness a legal Conclusion 7 6 HR. BOERS: I am sorry, sir. THE ACTING CHAIRIMN: I did not hear the 7 8 tail end of Mr. Bowers' statement. 9 MR. BOERS: In the present context, given the nature of Ita'. Arnold's tecticony and the manner in which 10 the company is addressing the issue before this Comnission, g I believe that it is appropriate to address this particular C u issue a1ons the sines that I am attemptina to do so in inz O gf, cross-examiDaticn. 15
- 13. RUSSELL: And I have made my objeetions and stated the reasons, 16 g THE ACTING CHAIRi&N: We will stand at ease for a moment, Mr. Bowers, I had asked you last to restate yg
;9 your questien. You said you would, but first you wanted to
.g make this other statement. How would you restate the questior J.
, over which we had this brouhaha.
IB. BCGERS: The problem is, Commissioner 3 g Johnsen, that I was interrupted halfway through my question 2g. by Mr. Russell. v , f TrIE ACTING CHAIRMAN: Let's hear the half of 25
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Arnold-cross 328 it up to the interruption. g 2 (The following was read by the reporter: 3 Question: In a memorandum dated July 9, 4 1979 to the Nuclear Regu3atory Co::: mission the 5 Executive Legal Director of the Cor::nission 6 indicated as follows: We further consider the 7 hearing as onc --) 8 9 13. RUSSELL: Could we have the preceding 10 , question? I think that would give the context of the 11 question that was then being posed. 12 THE ACTING CHAIRMAN: Yes, I think so.
'~
(The following was read by the reporter: 14 Question: Are you familiar with the guidance 15 that the Nuclear Regulatory Commission had before 16 it from its legal staff with respect to the legal 17 requirements that apply to the situation? 16 Answer: No, sir, I am not. I may have been 19 generally familiar uith them at an earlier time 20 but I do not recall them now. ) 21 2g MR. B0iTERS: Commissioner Johnson, I am simpl3 23 i attempting to ascertain a factual matter here as to whethec 29 or not the statements in the document from which I was quoting 23 were taken into consideration by Mr. Arnold in presenting the FCOKRI3AC:i :n MAES!!AL. !!L* . = C7 N. t.ccKWILLcw AVZ'. -I!?.Rn193URG, FA.17112 1640 223
Arnold-cross 328h
;l
' testimony that he has presented to us. That is all. I am $
not anl:ing him to give a legal judgment as to whether the 3 statement is an appropriate one or not. 3 THE ACTING CHAIRMAH: You have heard Mr. Russell's objection. For the time being the Commission will 5 6 defer reaching a conclusion on this matter, but we will be prepared at an early date to give you our view and our con-7 a clusion and our request or no request for compliance with p your question. We will be at case for a few moments. 10 11 (Transcript continues on Page 329.) 12 0 13 9 14 15 16 17 IS' 19 20 21 22 23 c l 24 l O 1s FAONMDACM C; M#.ItsMAf 1NC. - 27 tL Loc 2"#!LLOW AVC - MARRt3EURG, PA. *7812 1640 224
329
,, I l.
-L A 1l (The recess ended ac 11:35 a.m.) 3 THE ACTING CHAIRMAN: I Inst explain that I am iI i 3j not a lawyer. I am surrounded. by four lawyers, which is a i 1 lot more than being surrounded by one. That's an inside joke.i 4 5 And you are not a lawyer, are you? 6 Mr. Bowers, can you tell the Comission what 7 you seek to accomplish by this line of interrogation and 8 where you cre hearied? 9 Ycs, sir. I MR. BCNERS: i 10 THE ACTING CHAIRMAN: What you seek to f tv i 11 accomplish. , i O MR. BCLTERS: My concern is to indicate that v T3 there were considerations -- 14 THE ACTING CHAIRMAN: Can you speak into the
)
I 15 mike? 16 MR. BOWERS: Yes, sir. Ify attempt and my 17 concern here is to ind.icate the extent to which there vers 16 considerations and factors that were not taken into account 19 by Mr. Arnold in making the statement that I quoted at the 20 outset of my cross examination no him with reference to the 21' treatment of Metropolitan Edison by the Nuclear Regulatory 22 . Commission concerning the re-start of Three Mile Island Unit i 23 I 1. That's the purpose of this line of questioning. 24 THE ACTING CHAIRMAN: Tile last question wt.ich D you attempted to put to Mr. Arnold, which was interrupted -- k'.
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Arnold-cross 330 i 2 7 will you state that question fully. And then, Mr. Arnold, 2 ' you will have an opportunity to make any challenge you wish. l 3 ' BY MR. BOWERS: 4 Q My question began -- THE ACTING CHAIRMAN: Mr. Russell, I mean. 5 6 BY MR. BOWERS: 7 Q My question began with a quotation from the 6 ; document that I identified in my previous question, which 9 was a namnrandum dated July 9th, 1979, from the Nuclear Regulatory Cwksion Executive Legal Director for the
~
10 EE Comission itself. l 1 U The quotation is as follows: "We further Q 13 consider the hearing as one ' required by statute,' to which u
-- the adjudicatory provisions of the Administrative Procedu e U , Act apply, which would be required by the Atomic Energy Act !
16 i if any person whose interests should be affected by this 17 suspension proceeding should request a hearing." 18 And my question is -- to Mr. Arnold is whether 19 or noc that statement or the fact that that statement appearecd 20 in a memorandum to the Co m ission was taken -- 31l THE ACTING CHAIRMAN: Please specify uhich 3 ! commission. I N' MR. BOWERS: The Nuclear Regulatory Commir:sion ( i c i 24 -- whether the fact that that recoutmendation, that legal N opinion, was made to the Cornmhsion was taken into account ac>:w.cn a er.num c:c.-e n. s. cm:.z.cw m. - mmmno. m. rytm 1640 226
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Arnold-cross 331 , i R3 1 by Mr. Arnold in preparing the testimony and specifically 2 in preparing the statement that I quoted at the outset of 3 my Cross e:lenmittation. l MR. RUSSELL: Can we take it bit by bit? 4 5 COMMISSIONER TALIAFERRO: Mr. Chairman, may I 6 ask Mr. Bowers a question? 7 THE ACTING CHAIRMAN: Yes. 8 COMMISSIONER TALIAFERRO: Mr. Bowers, are you 9 , suggesting that Mr. Arnold or the Respondents had in their 10 . possession that memorandum of an internal legal department i i 11 l to its administrators? Are you suggesting that? i U ! MR. RUSSELL: If the Commission please, J I3 perhaps we could take it bit by bit. Could we ask Mr. 14 Arnold if he was aware of any such document? 15 COMMISSIONER TALIAFERRO: Right. 16 MR. RUSSELL: Are you aware of any such 17 document? 18 THE WITNESS: I'd have to look at my files E to be sure, but I believe that I did have a copy of that 20 document. ; i 31 COMMISSIONER TALIAFERRO: You did? I
;G i THE WITNESS: I beiieve I did, and I believe i
23
]Ireadthatdocument.
24 COMMISSIONER TALIAFERRO: That's all I wanted 25 to know, if he had it.
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Arnold-cross 332 4 4 1 MR. BOWERS: Did you wish me to further 2 , answer your question? S COMMISSIONER TALIAFERRO: I just wanted to 4 know whether or not Mr. Arnold had a copy of the document {
}
5 you were referring to in the first place. d THE ACTING CHAIRMAN: You have an answer to 7 your question. 8 Will you repeat the last answer? 9 THE WITNESS: My answer to the last question 10 as to familiarity with that document is that while I would 11 i want to check my files to verify C.t, my recollection is that 1 I did have a copy of and did read the document that's being Q 12 D , referenced by Mr. Bowers. ,, 14 TdE ACTING CHAIRMAN: Procee'd. 15 BY MR. BOWERS i 16 Q So my question, simply restated, is whether 17 or not this particular statement in this document was taken 1B into account by you in preparing your testimony today and 19 specifically in making the statement that I quoted from your 20 testimony at the outset of my cross evamination. 21 THE ACTING CHAIRMAN: To what? I 22 ; MR. BOWERS: Which I can quote again. (~, 25 THE ACTING CHAIRMAN: Yes. Please do. 24 MR. BOWERS: Beginning -- 25 THE ACTING CHAIRMAN: You can characterize it.
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-- ~ ~ - ~ ~ - _ _ _ . .. _ _ _ _.__ _ _ ._ . _ _ _
Arnold-cross 333 I q 5 1 MR. BOWERS: Yes. It says: "No nuclear 3 plant licensee other than Met Ed has _een required to submit 3 either to formal hearings or to the protracted delay facing 4 Met Ed before being allowed to re-start or continue operationg 5 of a nuclear unit." 6 MR. RUSSELL: Can you respond to the factual 7 ' question, Mr. Arnold? 8 THE WITNESS: Yes, sir, I believe I can. I 9 think I'd first have to say that I'm not at all confident 10 that -that particular sentence is not taken out of context 11 as quoted by Mr. Bowers. 9 But let me go on to say that the Company did 13 prepare and file with the Nuclear Regulatory Comission 14 . argument for handling the Unit 1 issues in a different menner 13 that would not result in the protracted delay that is result-10 ing from the way in which the current process will develop 17 and that I was very n:uch aware of the filing by the Compcuy 18 of that argument with the Nuclear Regulatory Commission in 19 the process of preparing this testimony. 20 BY UR. BOWERS: 21 Q Yes, sir. I guess what I was trying to de 21 was to focus both of our attention and the attention of 1.he M Comission purely on the requirement that there be a hea):ing di e and that I was going to get into the question of the w nner i t <, . , I 45 in which such a hearing would be held and the procedures that I r==: xen o em:r:ut e:e..-n n. s.ccm.r t.ow m:. - mrm:ana, n. rm a I 1640 229
3N, Arnold-cross -(. 1 would be followed in the context of such a hearing. That I 7, would like to leave as a separate matter. g 3 You specifically make reference to formal 4 hearings in your testimony. I 5 A Prior to start. J Q Prior to re-start. And that was the focus 7 of my question, specifically on that issue. 8 A And it is my understanding -- and my testimony 9' reflects that understanding -- that the NRC was not required 10 to hold hearings prior to start up. 11 Q Thank you. Let's go on to the very next issue g 11 that I just indicated was my intention to get to, and that g 23 I would do so in the following manner. 14 It is also your position -- and I would assumes 15 based on what you've said that it is -- that the discrimhtory ( 16 or unfair treatment that you suggest.that Metropolitan Edison 17 has been subjected to by the Nuclear Regulatory Commission 18 also consists in the procedures that are being followed in 19 ! the hearings that the Nuclear Regulatory Com:nission has requi2 e'd l i, Metropolitan Edison to undergo. Would that not be a correct 20 Il statement? 2',/ A I don't think I'd charecterize it quite l 25 that way. I think there were -- there were available to the , 24 Nuclear Regulatory Commission alternative proceedings which f 1 25 could fulfill their legal obligations that would not have I i
- nemu.n e w.,cu.: m -mu emu.ouve. - emui=me, m sma -
1640 230
335 Arnold-cross r I Tk.-7 1 the same impact on the length of time before TMI Unit 1 2 would be able to operate. # 3 There were proceedings used with other B & W I 4 reactors which did not result in such delays, and there is 5 nothing unique about the design of TMI-1 in the areas that 0 ' were addressed by the orders to the other B & W reactor __ 7 , owners; and that the net effect of the way in which the TMI-1 i o V I t re-start is being handled I would characterize as discrimina S ' tory. 10 TdE ACTING CHAIRMAN: Before you proceed, Mr. 11 Bowers -- Mr. Arnold, you said in answering this portion of 12 , the question, this last portion, that it was your opinion 13 that the NRC had available to it other legal remedies, 14 approaches, then the one it selected. 15 THE WITNESS: Yes, sir. 16 THE ACTING CHAIRMAN: What is the basis for 17 that opinion? Are you a lawyer, sir? 18 THE WITNESS: No, sir, I'm not. ; h s 19 ' DIE ACTING CHAIRMAN: Who advised you that 1 I 20 , that was the cace, or was there no advice? t 31 THE WITNESS: There are attorneys that we 23 used for our Nuclear Regulatory Commission licensing procenscea 1 23 ; ! traich I work very closely with and which I worked with in t 2i[j their preparation for us for the filing with the Nuclear i 25 Regulatory Commission arguing for alternate approaches, and .I g r.c:mu.:n s. u. a:w rue.- a r:. re:wna.ow me.- r.xtmano. n. im2 1640 231
Arnold-cross 330 i {8 1 it is that effort and that filing that is the basis for the h 2 judgment that I've indicated. 3 THE ACTING CHAIRMAN: Tbnnk you. Continue.
- f. BY MR. BOWERS: :
5 Q Assuming, simply for the sake of argument, that - 6 Metropolitan Edison would have to go through some sort of 7 hearing, in the answer to this Conmission -- the Public Utility C Commission's Order to show cause relating to the Three Mile 9 Island Unit I reactor, at P tragraph 8 you say that, " Respondent:s 10 agreed that it would be desirable to have a hearing, prior to 11 the re-start of TMI-1." 12 THE ACTING CHAIRMAN: Will you repeat that? O 's O We had a little interference. 14 MR. BOWERS: Yes. At Paragraph 8, Page 5, it 15 says, " Respondents agreed that it would be desirable to have 16 a hearing prior to the re-start of TMI-1." 17 MR. RUSSELL: Are you cross examining the 10 - witness with respect to his testimony? 19 MR. BOFERS: Yes, sir. I'm simply prefa'ce;-- 20 - MR. RUSSELL: Ind you are requoting his 21 testimony to him? 23 l MR. BOWERS: Ne, I'm quoting a previous I 2Elisubmission by your Company. 24 MR. RUSSELL: Well, would you inquire of the h 20 witness whether he's read that, whether he prepared it, whetheir I r.:cmucn a exm: me. -mr. i.ecxmu.ew evr. - tu.ansmuna, n. mia 1640 232
- - . - . - - - - . ~ . . . . - - - - - . - ._. -
Arnold-cross 337 p i i I i he's prepared thereby to respond in cross emination with L 2 l respect to it? 3 MR. BOWERS: I wasn't going to ask a question;, 4 directly concerning this particular document. 5 MR. RUSSELL: Well, you're asking him to d respond to quotations that you're making from the document, 7 so why don't you do him at least the court 9sy of asking him E whether he's seen it, whether he's read'.it, whether he 9 prepared it? 10 MR. BOWERS: I guess I'm assuming that if 11l this is a submission that is made by Mr. Arnold's Company 12 that he would be'. constructively, if not actually, familiar 13 with it. 14 MR. RUSSELL: I think, in all fairness to 15 the witness and the Commission perhaps we should inquire 40 whether the assumption is correct. 17 THE ACTIUG CHA N.AN: Mr. Arnold, are you 10 familiar with the document that. Mr. Bowers has described? 19 THE WITNESS: I am familiar with it, but I 20 have not read it, sir. 21 THE ACTING CHAIRMAN: But you have not read
- 13. ; it? !
it ! 25'i THE WITNESS: I have not read it. I e l l M THE ACTING CHAIRMAN: I think Mr. Bowers can i i 23 inquire of the witness, since he has expressed en opinion on emmer ram:s:w_. n:c. - n n. r oc=ve:u.cn Ave. -:wunszune, n. ima 1640 233
Arnold-cross 338 1 the matter of hearings, whether he concurs with his Company's 2 i statement as it is contained in the cocument from which you 3 have read. MR. BOWERS: Yes, sir. You're indicating 4 5 that that would be an appropriate -- 0 THE ACTING CHAIRMAN: That would be an 7' appropriate. 8 MR. BOWERS: -- area of inquiry? 90 THE ACTING CHAIRMAN: Since the two statements 9 10 l vary, two positions vary, which does he, as the witness 11 selected by the Company to be expert in this matter of TMI-l i i O 2 and start up and so forth. Proceed, g U MR. BOWERS: I trill read the entire sentence, li' because I think that's important. At Paragraph 8, quote: IN "The Respondents agreed that it would be desirable to have a i 16 ' hearing prior to the re-start of TMI-1, but they also urged 17 the NRC that the procedures employed by it proceeding, during i 16 and following such hearings should be such as to permit an 19 ' early re-start of TMI-1." 20 BY MR. BOWERS: 21 Q Would you concur in and agree with that 23 ) statement? t 23 A I would agree with that, and I guess I'd like ( 24 to clarify tshat apparently has been thought of as an incen-25 sistency with my prior testimony. And that is that I de not - uomr.cn e nu aan., m:. - a n. r oe,:wn.x.ow avr. - emnrx.suac, n. nu m - 1640 234 ._.
Arnold-cross ~~ 339
- r. {
i think that that hearing, proceeding, was required to be I. ( 1[ 2 conducted by the regulations that would govern the Nuclear S Regulatory Commission. 4 I do not have any difficulty in endorsing 5 the Company'c position as to the practicality of having i 6p the hearings on an expedited basis prior to the operation 7 of Unit 1 and expediting the proceedings that are associated U with having a hearing. 0 Q But you would associate yourself and agree 10 with the specific statement that I read to you that it would 11 be desirable to have a hearing prior to the re-start of ! 1E TMI-l? d g3 THE ACTING CHAIRMAN: Mr. Bowers, you're enkir& I'I' i that one section out of context. I 15 ; MR. BOWERS: Yes, sir. At'first I -- 16 THE ACTING CHAIRMAN: You're taking it out i M,, of context now.. That statement, if you continue to read 18 it, is not an unconditional statement of a position, but 3 rather a qualified, contingent upon the performance of what 20 remains in the rest of that sentecue. 21 : Now, if you're going to refer.to that, refer 23 to the entire statement.
,. , E d{ MR. BONERS: Yes, sir. My own position would ,
i l'! be that for the purposes of clarification, that the two parts [ ,
*5 are segregable and separable for the purposes of clarificaticp.'
I acewm e. wm:v.: mc.- en:. i.ow.v=.t.muvr. - w.rt:nnuac. re trt re 1640.235
Arnold-cross 340 Is that your position? h 1 THE ACTING CHAIRMAN: 2 MR. BONEPS: Yes, sir. I
?
3 THE ACTING CHAIRMAN: Do you want a ruling 4 from the Chair? 5 MR. BOWERS: Yes. 0 THE ACTING CHAIRMAN: The Chair disagrees, 7 respectfully, and asks you to consider that statement in 6 its entirety. 9 MR. BOWERS: Well, our previous question did 10 ask Mr. Arnold's response to that statement in its entirety, 11 cad so I feel the record is complete with respect to that. 12 THE ACTING CHAIRMAN: Thank you. Q 3 l BY MR. BOWERS: 14 Q With respect to the question of procedures 3 to be followed in such a hearing which the statement in its 16 entirety which I just read to you addresses, I would once 17 again like to quote to you from the document to which I 10 quoted before. 19 This quotation is as follows: "TheCommission! i 20 : must" -- and this is the Nucleac Regulatory Commission. "The Con: mission must follow its own regulations in determining I 21 l 22 d what procedure should be followed in the conduct of this l 6 p 25i ! hearing. Accordingly, there are rules in Subpart G of 10 0.F.[t. 24 of Part 2 which apply to all the types of hearings described U in Section 2.700 would be applicable to this proceeding." f;DNWOA Cl4 0 MAftsfi% II!C. = A7 3L ! CCT.Y/It. LOW AVE = FLU:RISEUr.C, P/s.1/112 7 1640 236.
Arnold-cross 341 k i Tnat is to say, the proceeding that is to be 3 held is the condition to the re-start of 'Dil-1. MR. RUSSELL: And from what document are you 3' 4 reading? 5 MR. BOWERS: The same document -- 0 MR. RUSSELL: The same legal staff report? 7 MR. BOWERS: Yes , sir, the document that Mr. O l Arnold indicated that he had seen at some time in the past. 9 BY MR. BOWERS: 10 Q So my question to you is whether or not that El statement was taken into account by you in your opinions U with respect to the procedures that should be followed or U should not be followed in these hearings conducted by the I 14 ' Nuclear Regulatory Comnission. U , A I think it was testimony -- and if not, I'd 1
?-
16 ! like to make it so now -- that that document per.se was not { . 17 taken into account in the prescration of my testimony, while 10 lt my recollection is that I have read that. And the more you ; 3 refer to it, the more confident I atn that I've read that .. ! 20 . document. 21 My testimony tzas prepared in the context of Ahjj the effort I was involved with at the time we made filings
't ~
d with the Nuclear Regulatory Commission in argument for a 24 different approach chan was being taken. U Q I understand. Thank you, very much. I'd
=!
McN00.t:1! 4- f *.A*;;!iAI. % a- L7 N. LGOMY.*:LLOW AVE = IWafCOUMt 181* 178II. 1640 237
Arnold-cross 342_ q e t Z like to shift to another subject now if I could. The Cow an; h 2 is presently decontaminating intermediate- and low-level -- 3 I think it's intermediate- and low-level vaste water -- rath, 4 the use of a system called EPICOR II at the plant site, is 5 that correct? 6 A Yes, sir. 7 Q And is it not also correct that the use of
" that system was authorized by the Nuc1 car Regulatory Commis-F sion in an order dated October 16, 19797 10 A Subject to check on the date, it was clearly 11 -- the authorization to use it was granted by an NRC order.
U Q Are you generally familiar with the contents O "" of that order? 9 14 A Yes, sir. U Q Subject to check, on Page 14 of that order
~
10 I would like to quote to you Paragraph 2,which says as 17 follows: " Licensee shall maintain suitable tankage at DTI-1 16 that could be used to store waste water from TMI-2 at an 3 appropriate state of readiness should. additional storage 20 capacity becc.ne necessary." 21 Are you familiar with that language from the 23fj NRC c .er? 2IIli A Yes, sir. ;
- I; ;
C h 24 Q Is that storage capacity presently being rande I U . available, as specified in that portion of the NRC order? r.:em= a:a .w.uw., c:c. - :r ::. i.o=en.:.ow u.v - rumstvr.o. m. m =
.m- m. m -
1640 238
Arnold-crose 363-- i I 3j A We are complying with that condition within Z the order, yes, sir. i 3 Q What impcet does the reservation of that {
}
4 storage capacity have upon the ability of the TMI-1 reactor - 3 to return to operation? o A I don't think it has any impact at all on 7 l the ability of TMI-1 to operate. 6 Q could you specify the facilities that are in l P fact being set aside in compliance with thic paragraph, 10 describe them? 11 A There are three fairly large tanks, approxi-12 ,ately 80,000 gallons capacity, in the Unit I auxiliary V E building which are used to store water that is em enminated. I4 It's also a pctential source of makeup water to the reactor 16 coolant system for Unit 1. And these ennh I'm referring to 16 are in the Unit 1 auxiliary building. 17 We are comitted to keep a minimum of one of 10 those tanks cvailable and to work in the direction of pro-19 viding a seccad tank available for meeting contingencies as 20 indicated uould be necessary by the August 16th order. 21 Q Are these tnnb referred to as bleed tanks? 22 A Yes, sir. 23 Q Eow ncny such tanks are there associated with 24 the THI-1 facility? 25 A Three. ucza .e : e ruman n::.-e x. _coxm:.t.cyn.v :. -::e,nue::uxc. n msa - _- _ o.
- e. t. : . ! 1640 239
Arnold-cross 346__ i r 1 Q And you're sf.ating that one of those have l O k i
%1 been set aside and that a st.cond one is in the process of l 3 being set aside, is that correct?
4 A It is either in the process or has been made 5 f--hasbeenemptiedandisavailable. I'm not sure of its ; 6 exact status today. 7 Q Do you recall a letter that you wrote to O Mr. Vollmer of the Nuclear Regulatory Comission on October l E 23rd, 1979, relating to this question? 10 A- Yes, I do, and my recollection of what I gave 11 comitted to in a way of space is what was in that letter. 12 U Q Yes, sir, that's correct. .I would, however, g like to draw your attention to Paragraph 3.of that letter, g'r' in which you stated as follows, quote: "It's understood 15 that the full capacity of three Unit 1 bleed' tanks will;ba 16 required by Unit 1 to support THI-l's startup, current 1'y 17 targeted for April 1st, 1980." 10 ME. RUSSELL: Could you show the witness-the letter tc which you're directing hi~s attention, pleasei 20 IG. BOWERS: Yes, sir. I 21 ! THE WITNESS: Yes, s5.c.
.I M l BY I4R. BG7EES:
E ' Q Could you reconcile, if you can, the apparent 24 inconsistency between your earlier testimony that those tsaha o'c
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would not be necessary for the operation of TMI-1 and the
- .wwev a ram:n.. nc. -mu.cea::.x.en xa. - tunwnno. n. sn s:
_J. ._ _ ._. . 16.40 240 .
Arnold-cross 345-I l w 2 j paragraph just quoted to you from that letter? j k ; 2 A Yes, sir. The order of Auguat 9th, which saidi S there had to be completes independence, implied to me that g I 4- being required to have space available in Unit was a contingency 5 ' for' Unit 2 water storage requirements was not consistent with, 6 the August 9th order, 7 And therefore, prior to us being able to say 6 that we were ready to start up, we would have to have Unit 1 9 in compliance with the August 9th order, we would have to 10 have made other provisions for storage of water from Unit 2 11 then the Unit 1 bleed tanks. 1A So it is not a case of where the Unit 1 bleed d $
- b- tanke were set aside and their dedication to Unit 2 impacts
~ 14 advs.rsely on the safety of the operation of Unit 1, but 25 rather that it's inconsistent with the separation of the tuo 16 facilities that was called for by the August 9th order. - 17 And I think it has nothing to do with a 18 specific that the storage brings up against the general F recuirements uhich was imposed, I believe, on principle so l 20 to speak, and without necessarily looking at any specific 21 ; kind of cross-utilication, but just that the Unit 1 plant i SE} was not to be opereted without -- or with any need for itc it M! facilitiec on the part of Unit 2. It did not necessarily 11 24 imply that any such need would make Unit l's operation uncafc.. 23 I Q But at the present time. giver. requirements Y^ ^ ucz:tucu s t, ;:.c=:.: c:.~. - w n. s. scam.~ w :,x. - sw.m:sna. n. :ma
-1640 241
Arnold-cross 346 ( 1 as you underetand them in the August 9th NRC oder, the 2 use of those TMI-1 bleed esmks in the manner that they're 4 3 presently being used is inconsistent with the operation of 3 'D1I-1; vould that be a fair statement? 5 A Incensistent with the conditions of the i August 9th order?
? Q Yes, sir. Would you agree with that?
8 A Yes, sir. That's what Paragraph 3 was 9 intended to say. 10 Q I underctand. I have a further line of 11 questioning -- 11 THE ACTING CHAIRMAN: Before you proceed, g 1b. Bowers, do you knew whether ce not this letter is part
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13 ; Ef of the record? 15 MR. BOWERS: In this proceeding? 16 TIIE ACTING CHAIRMAN: In this proceeding. 17 El. BOWEPS: No, it has not been introduced . 10 into evidence at the present time. 19 THE ACTING CHAIRMAN: But you have referred to 20 it. We're going to request you to provide either the . I
- 21. Consission with a copy of it --
t li . 2M MP.. BOWERS: Yes, sir. I'd be glad to. 23 THE ACTING CHAIRMAN: So we een make copies U l
?AJ for all of the parties. And then we're going to ask you to i
; g 1
have it -- request that it be admitted into the record, 25l neam : c, m. ::.u, me. - a re. i.::xrne.cw r.vs -:=am:: car,. tvac t
._ _ : _ 1640'24~2'
Arnold-crosr, 34,7 4 1 I Im. BOWERS: Yec, sir. 2 THE ACTING CHAIRMAN: What we want you to do S is to mark it for identification. The matter of whether or 4 not it will become part of the record will be decided on as 3 1 per my previous statement. 6 FR. BOWERS: Is there an appropriate identifyirg 7 mark that the Commission feel would be appropriate to use? 8 THE ACTING CHAIRMAN: We're off the record 8 1 9' for a moment, please. l 10 (Off the record from 12:03 p.m. to 12:04 p.m.)! l i 11 , THE ACTING CHAIRMAN: Continue, sir. 12 . BY MR. BCWERS: ' w y2' Q Mr. Arnold, I have a couple of additional 14 questions with regard to some of the assumptions with regrrd
.M to the 'IMI-1 reactor contained in your Company's motinn for 16 modification of the Levelized Energy Adjustment Clause. l 17! Now, in that an area that you feel would be i i ,
26' appropriate to address questions to you, or would it be l a 3jappropriatetoaddressthemtoeitherMr.HaferorMr. Graham, . 30j. who were perhaps closer to the actuni drafting of that 'dcau-
't 2'!. m t?
22d 12. RUSSELL: They were the ones who sponsored a
'il that petition. And they're here today, and I would think 5
Tdj.! that would be most appropriately addressed to them. y 2 f.' Mii> MR. BOWERS: Fine. I will defer that line h l ;40n.uc.0 J c f *;.r.r::3.*.. ; ::. -ny FL L :::w:LLoit /c - :t.tn: J;pstC, t% 5732!!- - 1640 2'43
Arnold-cross' 34 [ 1 . { 7 of questioning until they're on the stand. . h
)
% ! THE ACTING CHAIRMAN: Very well. I t
3 MR. BOWERS: I have no further questions. I 4j 'lIIE ACTING CHAIRMAN: No further questions. 5 Yor will, Mr. Bowers, take care of those documents to which j 6 you have- made reference so that they can be identified for 7 the record? 8 i MR. BOWERS: Yes, sir. I can do that over 9 the break and then, at the comencement of the afternoon 10 proceedings, simply identify them. Thank you. The hour 1E' THE ACTING CHAIRMAN: is nou five after twelve. Who would be your next witness? O 13 y y HR. RUSSELL: Messrs. Hafer and Grnhmn. e
. 1,
#'t '
THE ACTING CHAIEIAN: I doubt that we can 3 dispose of the questioning and our interest in Mr. Graham l Id , within the next half hour or three-quarters of an hour. So 1 17 if it does not meet with overwhelming objection, we'll adjourn 16 now for lunch, to resume at 1:00 o' clock and proceed with 19 your next witness. 20 Tnenk you very much. ! 21 l THE WITNESS: You're welcome. f 22 } (Witness excused.) 1 (-.. Tl (The lunch recess began at 12:06 p.m.) .+
' 24 3 '
25 uom=n a :m: c.:., me. a n. wcm :.or: e.v .-aam:::me, ri insa
. 16.40 244
Arnold-cross 349 ( 1 --o00-2 AFTERNOOT SESSION 3 . 000 - 4 (The hearing restmad at 1:12 o' clock p.m.) 5 6 THE ACTIIG CHAIRMAN: We will resume our afternoon session. At the conclusion of this morning's 7 Crwrinsioner Shannman 6 session /had requested an opportunity to put a question to p Mr. Arnold. 10 ROBERT C. ARNJLD, resumed. ' 11 BY COMMISSIOER SHAHAMAN; , l - 13 Q Mr. Arnold, what is the average down time ; o O for TMI Unit 1 when it was operating, I mean like for 14 maintenance and/or refueling? U A My recollection is that the total complete , 16 outage of the unit was in the range of 16 to 20 percent, that 17 is, periods of non-generating time and not including periods ; 18 of time which the generation might be less than en11 bad. 19 Q Can you give that answer to me in terms of , 20 an average time period per year? 21 A The annual outage during which refueling und 22 major maintenance wculd be accomplished generally wac achadulei D i for seven to nine weels. That accounts for something in the i f 24 order of 15 to 16 percent. There was probably on the average, 25 , since TMI went commercial, another 3 or 4 or 5 percent or f NomAC 11 a SAAR3UAL INO, = E7 E. LCCIWP.LLOW AVC = H/.ERI:2VitC, PA.17112__ 1640 245
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Arnold-cross 350' perhaps another two or three weeks of time in which the unit g wa ff the line in between cajor reftleling outeges, and that 2 would be aggregated in a half a day, several day, perhaps 3 couple of week kind of time period because of problems coraing g up that would require the unit to be off the line for correctNe 6 maintenance in an unscheduled annor. C01BIISSIONER SHANAMAN: Thank you. 7 g BY THE ACTING CHAIRMAN: Q k. Arnold, I wonder whether you could 9 q indulge me a question. Before we adjourned for lunch one g of the parties counsel had asked you about the negative g number in your Exhibit A-3 3 A Yes, sir. Q And I wonder in connection with a question 14 g I am going to ask you, whether you could repeat your answer g as to why you have a negative number for three months, July, August end Se?tember of '79. 17 g A Tne unit continues to require operation of 19 systems, pumps have to be run, lights provided, other kinds
; of electrical loads which are supplied by what we call the station service transformers, and the electrical energy that 21 is supplied to loads from the station service transformer is 2.2 74 norac].ly subtmeted from the total amount of energy 'that is C 74 generated by the generators to deternine what we call net g 7.5. station output, and when we provide generation numbers by I f2C:- ltN/4;" 6 IMAC*1%. IICC. ~ 27 IL LOCDi/3107J AVZ. - IIARf1LC3URG, PA.1711f.
1640.246
Arnold cross 351 stations we provide the net number, that is, the gross or s 1 3 total generated power minus the station service load.
'When the total generation is zero, then the 3
station service lead makes the n3t a negative number. 4 Q Thank you. I thought this is what you meant. 5 6 Perhaps you can enlighten me, then, as to why in October and 7 November there is no negative number, in December, as a G matter of fact the 11 months up to your restart. 9 MR. RUSSELL: I might mention, Commissioner 10 Johnson, this is not one of Mr. Arnold's exhibits, this is 11 one of Mr. Hafer's and Mr. Graham's, I believe, and I think 12 you will see just in looking nt it that the only numbers J 13 for nuclear are those for the actual experienced months. 1(. The projected portion of it does not have any nunhers in for 15 station use for TIE. 16 Messrs. Hafer nnd Graham will be next on the 17 stand and perhaps you can ask any question of them, because 18 it is their exhibit. 19 THE WITRESS: If I may volunteer, if the p.0 question is will there continue to be electrical loads at 21 TMI in those time periods, the answer is .yes, and I can i 22 l certain]y testify that we will be util$ sing electrical 23 ! energy on TMI Unit 1 during the shutdown condition. 2/g As to why the exhibit was prepared in the 25 way it is I cannot answer that. McNn5 ACE O MAP.3HAf FNC.-27 M. LCOMWi!.LOYJ AV7 = H/.nRISEtJRG, PA.1711f. 1640 247
_ _._. _ _ _ _ _ . _ _ _ _ _ ~ . _ . _ _ -. - .._. _ _ _ _ _ Arnold-cross aq2 THE ACTING CHAIRMAN: Is it possible that r 7, this exhibit was prepared before October?
/r MR. RUSSELL: This exhibit was prepared and presented this past Thursday, so it was since October and the 4
October energy cost data was available and was reflected in 6 THE ACTING CHAIRMAN: Therefore there should , have been a negative number for October. g g MR. RUSSELL: I am sorry, A-3 did not yet g have the October innrher. A-5 was the update which did shoir the October namber. Page 2 of 3 of A-5 shows the October g actual number. O u TaE ACTmG CHiIRMiN: neve you eistributed e those yet? g, g MR. RUSSELL: Yes. THE ACTING CHAIRMAN: You have a negative g number for October but in your update you have no negative number for November, December. You have a six-month total.
.t B y Im. RUSSELL: Which is the total of the first four months actual.
THE ACTIEG CHAIRMAN: First four months? al MR. RUSSELL: Yes, g i THE ACTEG CHAIRMAH: Is it proper for me to I g conclude that for the remaining 10 months there would be t g g " negative number? 14CiffJ' 3/G & MMtO!!A! IEC. *.7 Pf. LOCIGYILI.CW AVE. = I!ARE!CZ UttC, PA.17112 1640 248
353 Arnold-cross 1 1l 18. RUSSELL: I think Mr.' Arnold has i s i
?. responded.
3 THE WITNESS: Yes, there will be a negativ 4 nunber in actual experience. 5 THE ACTING CHAIRMAN: Tnen we can expect to 6 have an update which would -- i 7 18. RUSSELL: We vould propose periodically 8 as the data becomes available to update what we have giver 9 you thus far, to show all the actual that is available. 10 i THE ACTEG CHAIRMAN: I trust that your 11 update will be in the form of a projection rather than iD 12 an historic manner because I can't believe that we will be U in these proceedings for the next 10 months. Thnnk you 14 veiy much, Mr. Arnold. 15 MR RUSSELL: Thank you, Mr. Arnolfl. Kestrs. 16 . Hafer and Graham. 17 18 FRED D. HAFER and JOHN G . GRAHAM, recallt.:6 as 19 witnesses on behalf of the Respondents, having been previous 13 20 sworn according to law, were examined and testified further 21 as follows: 22 ) 2f8 f DIRECT EEAIIEIIATION y 24 BY MR. RUSSELL: D ' Q Mr. Graham, I show you a document which has ICCHTISA::W & M?.f1EMAI., INC. .T/ It ! 00XW:7 T.oW /.VC. -lits'WG: U:to, PA. f 78 52
Hafer/ Graham-direct 354 - - t 1 been marked fer identifi ation as Mat-Ed/Penelec Exhibit A-9 g 2 and ask you whether that has been prepared by y?.2 or under 3 your supervision? A (Graham) It was. 4 5 Q Would you describe what is contained on that (, and what is the occasion for the presentation of that exhibit 5 7 A (Graham) In Exhibit A-2, which is the 8 petition filed in support of the change in the energy clause, p in Appendix B to that filing there were two tables which had 10 a line as to all of the uses of short-term credit other than 11 _ deferred energy. I was asked to supply the detail of those i 12 ' calculations. Ezhibit A-9 sets forth that detail. 13 18. RUSSELL: I believe the Cnmminsion may 14 recall Mr. ItClaren requested this yesterday. 15 THE ACTING CHAIRMAN: That is correct.
*$ I BY MR. RUSSELL:
17 Q Mr. Hafer, I show you a document which has . 16 been marked for identification as Met-Ed/Penelec Exhibit A-10 , 19 and ask you whether it was prepared by you or under your 20 supervision? 21 A (Hafer) Yes, it was, gg ; Q Cculd you explain briefly uhat is represented 33 8 on that exhib5;c?
/
24 A (Hafer) Yes, Mat-Ed/Penelec Exhibit A-10 is g 25 a response to an interrogatory of the Consumer Advocate MOPR3ACM A Matts!4AL. !!!C, = %714 LOCICWILLOW AVC. = HARRISDURG, PA.17112 1640 250
Hafer/ Graham-direct 355 i g requesting an explanation by Met-Ed on how the old clause I 2 deferred energy balance is being amortized and at what rate 3 I it is being amortized. This is the deferred energy balance which existed prior to inplenantation of the new statewide 4 , i 5 energy clause found by the comminsion as appropriate in I.D. 6 214* l y Ac this response indicates, Met-Ed is i 8 amortizing this at a rate of .745 mills per hilowatt hour p per month or at a rate of between five and a half and six v 20.l nillion dollars a year based on approxinately 8 million 11 gigawatt hours of sales per year. 12 MR. RUSSELL: Thank you, that is all we have 13 of these two witnesses. 14 TBE ACTING CHAIRMAN: Mr. Malatesta? 15 COMMISSIONER SHANAMAN: Might I interject, 16 before we get started, I hope your wife is still speaking to 17 you. t 18 I THE WITNESS: (Graham) Ba: ely, j + 19 TEE ACTING CHAIRMAN: I might indicate for
'1 -
20 the record that this is not the appropriate tribunal or forum 21 for such pleadings. Mr. Malatesta. 23 ! {l CROSS-EXAMINATION ET MR MALATESTA: r M[jf Q Mr. Hafer, could you please turn to page 8 1 15 l of Statenent A. Moh'. TAC t e idArtcHAt., !!!C. - %7 M. LCC;rW.'1.I.CW t.'.'E - IIA!!r!!S2tfitG, PA.17112
.. 1 -
_ _ . _ _ _ __ i 610_25L
Hafer/ Graham- cross 356 -
._ A (Hafer) Yes, sir.
g Q It is the end of an answer that begins on the preceding page and in that answer you use the phrase, DE 3 replacement energy and estimated about $14 million per mohth. e r g What do you maan by TMI replacement energy? 6 A (Hafer) It means the increased cost experienced as a result of the unavailability of TMI. That 7 is, it had been anticipated prior to the accident that 3 p certain generation would be forthcoming from the TMI units, both Units No.1 and No. 2. As a result of the accident, of 10 g course, that generation will not be there. It is our gg determination of how much additional moneys must be spent 13 as a result of that unavailabh.11ty. h g Q So those are incremental costs abcne and beyond what would normally be experienced? 15 A (Hafer) Tnat is correct, 16 y Q New turning to Exhibits A-3 and A-5, if you w uld, A-5 being an update, I suppose, of A-3, to refleet 18 19 actual costs in October, is that $14 million a month reflectet anywhere on that exhibit or the numbers used to calculate the 20 . 37 average? j A (Hafer) No. 22 Q It is not? 33 b g A (Hafer) The A-3 and A-5 exhibits represent - g the forecast of net system requirements, energy costs and 25 f! CME!:A CI: & MAESHAL. !!la == 27 !!, LOC:* WILLOW AVC -IIARRISCURC, f*A. f 78 f a 1640 252
Hafer/braham-crocs 357 1 g enerEy sales by month from July 1979 through 1980 as we new s 3 anticipate them. ' Ibis reflects the fact that TMI Unit No.1 3 is anticipated to be unavailable unt2.1 September 1980. You see that after the TMI line for the fere-4 y cast months there is no generation shown until September 1980. f Q So the second line from the bottom of Exhibit 7 A-5, for exar,ple, where it says total energy costs, are they 8 total energy costs experienced by Met-Ed for all generaticn, 4 1 9 whether due to the absence of TMI-1 or otherwise? 10 A (Hafer) It is the actual total energy cotts 11 which Met-Ed expects to incur from generation, purelased power 12 l and interchange, yes, reflecting the fact that the TMI-2 1 13 unit will not be available during the period and that TMI-1 14 will not be available prior to September 1,1980. 15 4 One thing I don't understand is that the 16 average per month for just replacemnt energy to replace the 7
- unavaihbility' of THI-1 is $14 m m ion and, for example, in I
18 July of 1979 the total energy costs are $15.5 million. Is 19 the difference between those two numbers the amount of money 20 that would have been experienced or the amount of energy 21 cost that would beve been experienced by Met-Ed had the 2.2 , accident not cecurred? l 23 4 A (Enfer) Iio. First of all, we are talkins ; ' i~ 24 abcut a total cost to the systen for TMI-l's unavailability 25 i of $14 million. Met-Ed's replacement power on average has 1 , d IJCHRE/.Ci! & fulOPJ.L. t~i~ =* 07 M. LCcKY!!LLOV! AVO -17.RR!:2U30, Pf- 17112 1640 253 _ . _ .
Hafer/ Graham-cross wSI
~
1 increased from about $10 million per month to $14 million h 2 per month, yes, that is true. 3 Now there is a missing piece to this, however 4 and that is that that is en average factor and there were 5 periods of tine in the original forecast, which I dcn't 0 happen to have in front of me now, where the unit was 7 expected not to be available for purposes of refueling or B maintenance cnd the like. 9 'Ibere are some forecasts of forced outages. 10 So it is not necessarily incremental to every month. 13 Q For example, what were the TMI replacement 1 1 12 costs for October 1979? Didn't you testify on Monday that O U they were expected to be around $17 million but they actually e i 14 turned out to be $19.5 million? 15 A (Hafer) No, those were the total energy
-16 costs experienced by Met-Ed 'in the month. We had expected 17 total costs of abcut seventeen, the actual costs were more 18 like nineteen and a half or specifically 19,477 as you can 19 i see on A-5.
i 20 I Q So what were the TMI replacement costs for 41 the month of October, do you know? 23 A (Hafer) I don't know. I can get that I 255 information but it will require that I go back and get the ( I 34 { original budget and see what we would have otherwise expected h 25 ! f ron TMI Units 1 and 2 in the month of October and calculate us:mme: a w.cuu s:2.-n :e. 5,oc=ww.cw ave. - sw.msmuu, n. m 1640 254
Hafer/Grahnn-cross 359 I i 1 the difference. I 2 Q Would it be appropriate for no to assume that < 3 they would have to be around $14 million in order to be con- ,
.i sistent with the average you cite on page 8 cf Statenent A?
5 A (Hafer) Yes, I thinh that is -- 0 Q So that the nornal costs in October would 7 ' have been around $5 million if the TKI accident had not ! 8 occurred? l 9 A (Hafer) Yes, I think that is true. f 10 Q And for the other months, if we subtracted 11 $14 million on the average fron the line that says total 12 energy costs on Exhibits A-3 and A-5, we .would get the ! U approximate total energy costs for the Met-Ed systen had 14 ., the accident not occurred? A .Yes, that is true, with some caution that is 16 an average, but that would work cut, yes. 17 Q Mr. Hafer, in Appendix B of Exhibit A-2, I 76 ubich is a petition for modification of the net energy clause, 19 specifically Table 1, if you would r,efer to that, please -- 20 A (Hafer) Yes.
%I Q Eefore we do that, could I ask you a question, 22 did you use Er. Huff's data in developing Exhibit A-2?
23 ' A I am not sure I knor what you mean by Mr g M Huff's data. Certain cost records from Mat-Ed were used g by both Mr. Euff and me in putting together our various i umame n rm2:re m:.-a ::. r.:cr.w:2.ow m:. - numnuaa, n. nua .
- n.. - ,,
t6 4 0-2 - -
Hafer/Grahan-cross 360 - i c ..
^
information.-
- k. ;
3 The projections used for pro;]ecting deferred 3 energy costs, sales, et cetera, used by me -- and I am not certain at this point, I don't recall at this point whether 4 5 Mr. Haff used projections or not; -- but we would be using the g same ones, I think. 7 MR, RUSSELL: Can you identify Mr. Huff's a data you are referring to? MR. MALATESTA: Specifically Exhibit B-3. 9 yo It has not been identified for the purpose of the record but gg it has been provided to all the parties. I just have a 12 question because there is some inconsistency between the figure : 13 you used for the deferred energy cost balance as of October h 14 31, 1979 and I wouM Just like to clarify what the source of 15 that differerne migb+ be. 16 BY NR. MALATESTA: 17 Q Do ycu have a copy of Exhibit B-3? Actually, yg Exhibit B-3 is attached to Supplenent No.1 to Met-Ed/Penelec
?g Statement B so it is not a separate exhibit.
I 20 A (Hafer) Yes, I have it. ; l Q Deferred energy costs you have listed on 21
) Table 1, the second colump, e of October 1979,$62.4 million, 77, 23 is that correct? That is Table 1 of Appendix B of Exhibit b 24 A-2. g 25 A (Hafer) Yes.
14C H13AC:1 O f.!AftSPs".t., INC. = U N. LCCKWi". LOW t.VC. - !7ARRIC2URG, F'A.17181'. 1640 256
Hafer/ Graham-cross 361 Q And on Exhibit B-3 at the very bottom for s the four months ending October 1979 the balance of retail 3 energy cost deferred is identified as $50 9 minion? 3 z, A (Hafer) Yes. g Q Can you explain the difference? o A (Hafer) Yes, there are two differences. 7 One, the $50.9 million does not include the so-called old g clause balance which is about $14 million and also has been p updated to reflect October actual as compared to Table 1 10 which still included the October estimate, and that, as you indicated a little earlier, was about two and a half million 11 13 dollars difference. 13 Q So the major difference, though, is that 1,; all through Table 1 of your exhibit you have $ncluded the 13 old cicuse deferrals and Exhibit B-3 does not include then. I 16 A (Hafer) That is correct. That is the 17 difference between those two. And by the way, if you look ig at Met-Ed/Ponclec Exhibit A-7, which was an update of Table 19 7 from Appendix B, the starting number on that sheet is the 20 $50.9 million of deferred energy cost exclusive of the old 3; clause dcferrals as of C.:tober 1, which is consistent with 22 , Mr. Huff's schedule.
;3 4 How as we proceed down the deferred energy r t gj.t cost balance column on Table 1 of Appendix B of Exhibit A-2 3 25 as those numbers go up they still reflect a net of the MDMMDAC T A f *AP. fila 1 INC. = $llT IL !.OCKWILI.OW AVtl. = !!A!tRISCtfr.C, PA.17113
-- . - - - -k . _ . . _ .
Hafer/ Graham-cross 362
~
1 reduction in the old clause balance? h 3 A (Hafer) Yes, they do. 3 Q So, in other words, the numbers wculd have 4 gone up even greater if it were not for that anortization of 5 the old clause balance? 6 A (Hafer) Yes. 7 Q Mr. Hafer, I guces you can describe it in 0 words but hopefully present some kind of exhibit describing 9 what Met-Ed's net energy clause would have looked like in T , 1980 month by month if the TMI-2 incident had not occurred l 11 l that is reflecting the actual energy costs that Mat-Ed would 12 O O have incurred absent the incident. A (Hafer) Had the TMI accident not occurrei e N at all? l N Q Tnat is correct. 16 A (Hafer) In the earlier stage of this proceedi:ag, t 17 the proceeding in the same docket, you nay recall .that c,ttache i 18 to Mr. Graham's exhibits was an exhibit of what the clause 3 would have been, as I recall, under our budget, that is 20 assuming that TMI-1 was in operation, had been shut down 21 only for its normal refueling. 22 , Eo obviously things have changed since 23 then to the extent oil prices have gone up and coal prices 24 have varied and that type of thing. But that gives you s pretty good idea of what it looks like. Plo:iR3AC M A fdAF.Ch* *J , !! C.~ W ?!. LOOCVILLO'.7 Avli - P.ARRISUURC, PA.17112 1640 258
Hafer/ Graham-cross 362-lL i s y, t Q Taore is sone disagreement as to whether ( 2, anything that was entered into the record in these proceedings 3 is useful in this proceeding, and also you have cited changes f i
/, in oil and coal prices that vicre not anticipated at that time.'
j 5 l So wculd it be pocsible to present that kind of an exhibit i i 6 again in this preceeding? { 7 A (Hafer) Yes. Tae calculation of what tha l 8 normal Met-Ed clause, norraal being that found in I.D. 214, 9 would be, had there been no accident at TMI, and had they i 10 operated as we would expect them to operate. Yes, we can i 11 do that. 12 h D (Transcript continues on Page 363. ) r 15 16 17 16 19 1640 259 . 20 21 22 23 i ir ' y _ r s.. i.. ur : a MAC.C:M, MO,- 317 N. LCOK7E. LOW /.Vr = I'.A!:R!Ir.URG, FA.1718?.
. . _ . . . --- . - _ . - _ - . . . . -. .n-
narcr/ Gre.nemwroca ^ 6'. 1 l BY HL MIATESTA (Of Mr. Graham): (- 2 i i Q I guess this question is best directed to Mr. g 3 Graham. Again referring to Table 1 of Appendix B of E hibit 4 A-2, thore has been som explanation of how those figuros 5 change as they proceed through 1980, but uhat is represented -1 6 by the $28.8 rdllion figure that best.ns the period in 7 October 1979 for requires:ents other than deferred energy costs ? 8 A It's really the residun1. When you take the o short term debt that is outstanding at that tima, about 10 $19 million, and if you take the middle column that says that 11 of that $91 million it is financing about $26 million of 12 deferred energy costs, then what is left over that is the 13 rest of the capital requirements of Met-Ed being financed 14 i with short-torm debt is about $29 million, which is the first 15 colum. 16 It is the results of all of the operations of 17 Me t-Ed: Its construction progres, its internal sources and 18 generation of funds, tk cleanup of the results of the acei-19 dent at the Is: lend, the insurnnee recoveries =ssocinted wi th 20 lthat. It's everything oise that is happening or has happened i within ISt-Ed that has not yet been permanently finnneed. 21 22 Q Now, on Exhibit A-9, Mr. Graham, you identify 23 j three general entegories that account -- cr requirement i 24 ?. throughout the year. Ize those three general categories -- 25 nan:ely, conctruction, sinhing funds, and refinancing -- the i I JACHRDACH C: &.fAftsHAL. INC. - 27 N. LOCKWNLOW AVE.
- HARRtSBURG. PA. 17182 1640 260
untertGranam-cross 3 o4 1 ' components of the $28.8 million also? s 2 ' A Well, they're part of it. If you.look down at 3 the bottom of that cahibit, the first number that in there . 4 fs $28.8 million. Thnt is the first line in the column .hnt . 5 l you've been looking at. All of the various things thnt go 6 l into that are represented by the numbers above it.
- -2 '
r 7 It f.c the not -- in other words, the difference l 8 between the construction program, the dollars that are re-9 quired to meet sinking fund rcontrecrents or to finance 10 maturing obligations, and everything else that is in the 11 business -- paying n11 the bills, deprecietion accruals, i 12 . tar deferrals, everything else which are represented by 13 ' changes in working capital and the other items that are there.
.14 Q But only ones that are identified as cash need ,
15 ns opposed to cash sources in the column above the $28.8 ! 16 millien on Exhibit A-9 are the construction, sinking funis, ; 17 and the refinnneing, is that correct? 18 A Well, except that if you look down at the line l 19 that's en11ed " Changes in Working Capital and Investment Tar 20 Credits", you'll see that that's frequently a negative number . 21 Well, a negntivo ensh source is a need for 22 fundc, and cometimes that's quite e inrge number. For 23 , instance, if you look in April, it's abeat $15.6 Eiillier i
" hat's the point when Mat-Ed pays its Stnte tcres 2/,ll negntive.
l 25 I of about $16 million. MONRBACH & MARSHAL. SNC. - 27 N. LOCMWtLLOW AVE. - HARRISBURG. PA. 17312 - 1640 261
Hafor/Grahnm-Cross 365 l 1 So it's just the convention of putting thn: l h 2 f down as a secree of funds that skes it appear that way. 3 Q Are the generally positive figures in that 4 same column or the same horizontal column, " Changes in 5 Working Capital", for December, January -- well, December l I 6 ! and Innuary primarily? Are they duo to the insurance 3 l 7 i recoveries you spoke of on Monday? 8 A The biggest item in the December number is the 9 change in the tan nilocation agreement among the GPU l ccmpanies, chich produces a substantini avnilability of 10 11 cnsh to Met-Ed at thnt tim. You'll see the same thing 12 happens at the end of 1980. g 13 And I might say that the SEC has not yet 14 approved that change in the s11oen~ tion agreement. If it's 15 not approved before the end of the month, we mey not have 16 that positive number there for Mat-Ed. 17 Insurance recoveries would be another item 18 that could be in there and that may produce swings in the 19 working capital position. 20 Q But they are not now reflected on Exhibit A-97 21 A Yes, they are. ! l 22 Q They nre. Is the anticipated $25 million 25 ! recovery reficcted on Erhthic A-?? g; 24 l A No. I should say not the specific recovery v 25 that c:a hava now been able to ngree upon with the insurance g McHRCACM F4 htAltSHA1. INC. - 21 N. LOCSCWILLOW AVE. - HARRISBURG. PA. 1711E 1640 262
Ha ter-Grn hnm-Cros s 3he I 1 i company, but throughout 1980 that nre assumed insurance s I s 2 recovertos that in fnet total more than 25 millica, as I i 1 3 ' reen11, during the course of the year. ! 4 Q Mr. Graham, in Paragenph 15 of Het-Ed's Answer I i 5 l and Raw Matter to the Comission Order to Show cause why its -4 I 6 i certificate abould not be revoked, Met-Ed made the statecent l 7 that -- well, it alleges that the Comission Order of 8 June 19, 1979, at this same docket number, which resolved 9 the firct phase of these proceedings, recognized that the . 10 k current recovery of energy costs is required by law. Are i 11 ! you fnmilier uith that? t I i 12 i IG2 RUSSELL: Could you hold on a second? The; l
] 13 ! Answer to the Shou Cause Order? Do you have that, Mr. Grahnaj? -
I 14 EE) MAIATESTAE Way the Certificate should not ' 15 he revcised, yes. 16 IE) GPallidii Paragraph 15? I 17 _ r IG)IGIATESTAi That's carrect, sir. 1 18 ! NR) GRAMM: Perhaps I'm looking at the wrong 19 document. Mine hns the heading, "The icvel of Respondents' , 20 Pcst, Present, and Procpc::tivo Charges to Customrs". ! i 21 IG) MMATESTAi You might be looking at the ; l 22 ' wrong document. I i 2"., IG.) Gi?AEE: Oh, okay. I see it. That's the f '
- . j r 24 ! TIII-1 base /ratan. :
' l 25 ER2 ICIATESTA: This is the one in response tol MOWitBACH & MA tSHAL. INC. - 27 N. LOCKWILLOW AVE " H ARRISEURG. PA. 17112 1640 263
nercr-Granna-Uross .ib7
) . ,
i i f the Order to Shcw Cnusc uhy the Certitiente shculd not bs s 2 revoked, g i b t 3' 1a/ GRI.HtR: I have it. I had the book in the 4 trong pince, i' 5 f 3Y 10..' IGIEIESTA (Of Mr. Grsham): 6 Q And thic is on ?ng: 10 cf thet response. 3-5 7! A Yes, sir. S Q And it's the second sentonce. It says thst, 1 9 "A denini or delny by the Cor21ssion of current recevery of 10 . energy ecstr", and than in parentheses, "which the Cc:cticcion's 11 j Iune 19, 1979 Order found to be required by law".. 12 lir. Grahan -- 3 15 ! 12t/ RUSSELL: I'll give Mr. Grahne a copy of g 14 ; the Tune 19th Order, if he msy cake reference to it. 15 BY IF,/ FAIATESTA (Of Fr. Graham): 16 ! Q Mr. Graham, I'm not going to nsk yet whether i 17 ! the .iune 19th Order says that, because that's not ny interest. I 16 IR, RUSSEIL: I'm sorry. Then ycu can ferget i 19 it, Mr. Graham. 20 BY Et,I N!aMESTA (Of 10. Grahhm):~ Q I'm going to ask you this: Frca year rending 31 g; t . 22 of th1t, dcas th.et mm.n to ycn that Itt-Ed hr.3 interpreted 23; the Tune 19 Crdar, regsrdless of what it cr y;, to permit I; i
. ?..CI full nlbeit deferred, recovery of all energy costs
(_ w . w~ 25 , c::per!.cnced by Fat-Ed cc o result cf ti.c TMI-2 incident? ime I E noans4ca t runsum.. me. - nr ::. Loew:u.o.v avs. - unnis=une, n. 1640 264
nuar/ ura nam-t,ross .s t> s 1 A When you say "from my reading of that", you're ,
, 2 referring to the Answer rather than the Order?
u . 3 Q Exactly. 4 ! A That's how I read the Order. , 5 Q So that the only issue as far as that Answar 6 ; is concerned 9ppears to be when Met-Ed will recover these 7 costs, not whether Met-Ed will recover these costs? -6 8 A Thnt's my understanding of the decision on f Page 10 of the Commission order, where it says, quote, "The 9 20 Comission is of the opinion that the recovery of these
) . . i 11 l costs is required by inw", unquote.
i 12 l Q Now, you have been primarily responsible for 13 dealing with the agent banks in the agreement that has been i
! identified as Exhibit A-1, is that correct?
14 15 A Yes, sir. 16 Q Have you ever com2nicated to them this 17 i interpretation of the June 19 Order of the Comission? i 18 ' A Yes, sir, nnd the bankers have expressed to me 19 : that that is their view of the Conmission's Order, i 20 Q Would you say that the agreement identifiel ns 21 j Exhibit A-1 uns prepared with that express understanding by i 22 all parties to the agreement, to the best of your knowledge? 23 ; A Well, thero are 43 -- or 43 now -- banha in i 34 fthe5.greamsnt-- 25 l Q Ist ma make it easier. Do you think that that McHRBACH 8: MARSHAL. INC. - 27 N. LOCKW1Li.OW AVE. - MARRISBURG. PA. 17112 m n- - 1640 265
~ _ _
aster / Grnnam-cros s .i on l. 3 . 1 I was the understanding by.the two main agont bnnks and ( n 2 Metropolitan Edison Company and GPU? O 3 A Before you make it casier, perhaps I can answer 4.i your cuestion, 5 Q Oh. Fine. I -7 6 : A It was a very maior part of the nbility of the l 7 l banking group, the agents for the banking group, and the S Company to be able to put together the revolving credit 9 agreet:ent, the undersennding thnt we would reeover the 10 deferred energy costs. 11 My belief is that but for the understatxiing 12 that wo woul6 be able to recover the deferred energy costs 13 and the Comnission's language that ande it clear that we g could, we would have had great difficulty in having obtained
~
7.4 15 the credit through the revolving credit agreen:ent. 16 I think that the banks' expecention is that 17 ue elli be permitted to recover those costs and that it is 18 solely a quastion of time. 19 l Q Now, Exhibit A-1, the agreement with the brnks, 20 ' provides several conditions where there might be changes in 21 the agroe=ent or some of the availnbility of credit might be 22 changed pettding certifiention of this Comicsion or other 23 regulatory ngencies. !
! e 24 Would an unactivocal statement by this Com-b 25 sission that the Comission's June 19 Order did not in fact g
MOHitSACH 4: MARSHAL. INC. - 27 N. LOCKWILLOW AY:. - MARRPSBURC. P A. 17112 1640 266
rIn1e r-bra num-Uros 9 .$ / U l 1 , intend to permit -- or intend to resolve the issue of uhether 2 Mat-Ed would be allowed full recovery of. deferred energy 3 , costs -- in your opinion, would that be a significant chrnna 1 4 ! that could evoke a subsequent change in the terns of the I 5 ' agrectant? -8 6 A I think it would be a very, very significant 7 i ndverse, detrimental occurrence, very mich inconsistent with 8 ! the Order entered by this Cornission that led to the banks 9 extending credit to Metropolitan Edison Company and to the 10 other ccmpanies. l i 11 I suppose that the magnitude of any indicatica , 12 that we would not recover the deferred energy costs would i 13 have to be taken into account. But in my view, the Corn-a 14 mission's expresse decf.ston that it wouM nilow us to re-15 cover the deferred energy costs was and is a very,'very 16 important elorent of the f tnnneing package that we have out 17 together. I i 18 i Q Ens there any expectation, in addition to the 19 expectntion that n11 the deferred energy costs would be 20 recovered, as to the time over which those costs would ha 21 , recovered? 22 A Well, you may reen11, Mr. Malatesta, there was ' 23 . l n provision that was stated more generally in the revolving 4 24 l credit sgreemant about there being sufficient revenues to i 25 l unintain fincncini vinbility, and I don't have the exact MOHRSACH & MARSMAL. INC. - 27 H. LOCKWILLCW AVE. - HARRISBURG. PA. 17112 1640 267
En fcr/ Gr.e.tum-Cros s 371 1 !wordsf.nmymind. I .could find them in the agreement. C 2 ' They wanted to see that Matropolitan Edisca O l 3 j Co=pany and the other two operating companies would have i 4 ! enough cash flow to see them through the period when.THI-1 6-9 5 was not operating until Met-Ed's fuel costs drop -- and they l 4 f 6 ' do drop substantially, ns you can see from Exhibit A-2 -- l
? , I'm sorry, Eshibit A-3. !
8 So I can't really address exactly what the 9 5 minien was that they had in their mind as to the reetwery. I 10 Several tix:es they expressed to ne that they felt that there i 11 had to be n shoring or nn indiention by the Conaission thnt f 12 they core cilling to s11ou a sufficient loval of energy ! Q 13 billings to show that Mot-Ed tiould be seen through this a v W 14 period. I 15 MR.' M11NIESTAE Those are all the questions 16 I h*ve for Mr. Graham and Mr. Enfer right at this moment. 17 After the other parties have completed thstr cross-erami-18 nation, 1 mr.y have other questions. And additionally, I
- 19 suspect we'll have other questions at a subsequent time and 20 place.
21 TH3 ACTING CILERM!sN: At this moment we'll ! 22 take a vary brief recess. 23 (A recess cas taken from 2iOO p.m. to 2514 p.m.) ' 24 ) 25 l THZ ACTING CHiIRMini Right before the recess G I nom aca ,. unsuc. me. - n u. toexmu.ow Ave. - unms.une n. ima i 1640 268
nnrerturnnam-crocs s/z i l 1 l Mr. Malatest- indiented to us that he had completed his ( 2 questions and. reserved the right to cuestion ngnin, perhrps 3 l cfter the others had completed their interrogation. Mr. : 4 . Maintesta, ri.ght before we resume now, hns indicated he has 5 !oneortwomorehuestions,andIhaveagreedtopermithim 6 to resume and complete his interrogation of the witnesses, i 7 Mr. Malatesta?
- I S gg,i RUSSELT2 I've just mantioned to Mr. I
-10 9 ' Maintesta that there is a portion of Mr. Hafer's testimony 10 { on Monday that he had given in response to
- ouestion of Mr. ,
11 Maintesta that I would itke to have Mr. Enfer correct. So i 12 before he finishes it, may I have that matter brought before . 13 i the recordt
~
14 TIE ACTING CHAIRMAN: I can't see why not. 15 t 16 REDIRECT EXAMIR1 TION 17 BY MR.' EUSSELL (Of Mr. Enfer)5 18 Q All right, Mr. Hafer, in your cross-examinnetorj 19 by Mr. Malatesta on Monday you made reference to n figure of 20 18 mills, which I believe you said was the energy clause - 21 , increase that would be required if Met-Ed were to recover l 22 j its current energy costs nnd get rid of its deferral by the _ 23 cnd of 1980. Is that nn sporcrimtely accurate characteri-
,- 7A =ation?
25 A Yes. MOHRS AC1; & MARSHAL. INC. - 27 N. LOct: WILLOW AVL - 54ARRisDUMG. PA. 17112 -
- 16A0269-
Harer/ Grannm-Rectreet 3 73 1 Q Since your testimony on Mondny, hwe you had an 2 opportunity to check that number? 3 A Yes, I have. 4 ' Q Weuld you have any further statement to make 5 lwithrespecttothatnumber? I Basien11y, that number was 6 A Yes, I would. .1 7 arrived at because of a statemnt that if Met-Ed were to 8 fully recover the nnticipated deferred energy belance at the 9 l end of 1979 cvor the year 1980, it would require about 7 -- 10 between 71/2- and 8-mill increase and the statement that 11 Et-Ed's current energy costs are running nbout 26 mills, as l 12 compared to the current energy recovery of about 6 mills, or And that's how I g g 13 about a 10-mill deficiency to get current. 14 arrived matc11y nt the 18 mill figure. l 15 If we look nt Exhibit A-8, which was an upante ! 16 of Table 8 in Appendir B, and see here on Appendix -- on l l 17 Exhibit A-8 n derivntion of 10.6 allis per kilowntt-hour, j 18 that 10.6 mills would recover all of Met-Ed's energy costs, j 19 assuming it goes into effect January 1 through the end of ' I 20 1980, with the exception of the amount remaining in the old 21 deferred balance, which we're not dealing with in this p:'o-22 coeding, and $26 million, which is shown in nbout the middle ! 23 of that page. e 24 Thnt $26 million in this eniculation would be 25 necessnry in order to allou n smooth transition back into the MOHRBACH & MARSHAL. INC. - 27 H. LOCKWlLLOW AVE. - H ARRIESURO. PA. 17112
. 1640 270
Hafer/Grahnm-Redirect ' _.;7 ; . 1 , normal clause in 1981. That is the clause that looks back 2 and then develops an nvernge and npplies that to future 3 months. 4 If -- as the question was posed by Mr. 5 Malatasta,.if we were to be fully recovered at the end of '"12 6 1980 -- that is, there would be no deferred energy balance 7 at nil -- then what you do is add to the $81 million on , 8 Schedule A-8 tbc 26 million of deferral, or come up with - l 9 total of $107 million to be recovered -- excess costs to be 10 recovered, which, when divided by the gigawatt hours of 11 sales of 7,972 nnd then multiplied by the tax factor to cone ! 12 up with the " cost to customer" com s up with a total factor i 13 of 14 mills, which would have to be npplied for the year 1580l , 14 as opposed to the 18 which I had estimated earlier. l l 15 i 16 RECRO.SS-EKAMINATION 17 BY MRI MAIATESTA: (Of Mr. Enfer) 18 Q Well, let me ask you a couple questions about 19 that, Mr. Enfer. Whnt you're saying, then, is that a 10.6 20 mill incremant, in addition to recovering current costs ! 21 f.ncurred during 1980, would niso reduce the deferred energy 22 balance existing on December 31st, 1979. f 23 l A Yes, sir.
?
24 Q And it would reduce it by $26 million? 25 A It would reduce it to $26 million. MCMRSACH & M ARSHAL. INC. - 27 N. LOCKWILLOW AVE. - HARRISBURG, PA. 17112 1640 271
HGfor/Grahn-Rocross 375
. t 1 I Q So it would reduce it by approximately
(^ 2 '
$35 million'i G 2 A Yes.
4 Q Now, you say that the estimated cost in 1 5
- millage per kilontt-hour for power in 1980 f.s around 26-
-13 6 point-some mills, ic thnt correct? l 7 A Yes. It avernges about 26 mills while TMI ic ' 8 off and then drops down considerably once the unit carees 9 back. And that's on Exhibit -- it shows up on Exhibit A-3. ' 10 Just by looking across the total energy costs I 11 at the bottes of that pnge, se can sec that it runs 25, 26., i 12 ' 27, 24 -- thereaboces -- up until September of 1980, whe... i.c [ 13 ; drops to 12.7, 10.2, 12.4, because of the anticipated return O , of TMI-1, O 14 15 Q And whct line is that? , 16 A I'm inst reading neroes the bottom, the very 17 bottom line on Exhibit A-3, the far right-hand column under 18 cach month, uhich is, " Indicated Mills Per Kilowatt-Rour". 19 Q And the current recovery under the existing 20' base rates of ht-2d and the ~ c'urrent leveliced net energy 21 cinuse is 16.4 mills par kilowntt-hour? 22 ; A Thnt's correct. . 23 Q And if you add 10.6 mills, it makes that 27, ! i . 24 { is that correct? Or would it be more appropriate to ad6 25 something Icas thnn 10.6 mills bacnuse the 10.6 mills ! i h MOHRBACH e Matt *HAL. INC. - 27 H. LOCKWILLOW AVE. - H ARftfSBURG. PA. 17112 1640 272
Unfer/Grnhno-Recross 376
.s '
1 I includes ths tax roccvery niso? 1 l ( 2 A Well, either cay. You either have to hnvo -- ! 3 l it would be appropriate to add something less. You've.got 4 a; 1ittle mixture there. There's 8 milla included in base ' 5 ' rates, which is 8 mills of energy ecsts exclusive of t ees. 6 There to an 0.8 mill energy clnuse factor being employed -14 7 enrrently, which is 8.4 mills of energy, 4/10 of a mill fer i I Cl taxes. The 10.6 alli number niso includes taxes. ' 9 I don't hnve my eniculator with me, but tiu 10 prepar uny to do it is divide the 10.6 by 1.047, and you - 11 would find out what the energy component of that factor is. ' 12 To that then you sculd add tha 8 mills and the 8.4 allis. 13 , Q So nocauhere between 26 and 27 mills? 14 A Tes. , 15 l Q And the last page of Exhibit A-3, Page 6 of 6,l 16 you estimate that your average cost for 1980 will be arour;d , t 17 : 2'2.2 mills, i mI A Yes. I 19 Q And so I .nastme that the difference, then, i 20 ! between the 26 or 27 and the 22 is what would go to reduct i I 21 { the deferred energy balanco existing on December 31st, 1979.; l 22 j A Yes. l . 23 :
, 24 25 I
.a ,, ') ** MOHRGACH & MARSHAL. INO. - 27 Na LCCKWILLOW AVE. - HARRISBURG. PA. 17112 1640 273
un:or/Gran9m-rurtner Cross 'J/7
.] .
1 euinMR CROSS _EXMiINATION [ 2 . BY IC2 IET4ESTA (Of Mr. Grahnm) O i 3 Q Nou, Fr. Graham, just before our recess we were 4 disecssing the agreement with the agent banks nnd the Co2-5 mission's Order to June 19, 1979, and Mot-Ed's interpretation I -15 6 l of that Order, s/nich uns that it percitted a complete re-I
?
j covery of all deferred energy coste and that in fact that 0 interpretation had been provided to the banks and was n 9 isrge part of the bauts for the loan agreement, is that 10 correct? ! 11 A Well, they read the Order ~ themselves, and that 12 cas their understanding of the Order, as well as our undor - O-
I **"""t"5 "" *** ""*' '" "' *"- S ' ""'" *"7 **"* """ 9 14 provided to them. I don't think I led them astray by my 15 interprotatten er the Company's interpretntion of the Orde.:.
16 As you know, representatives of the agent bankr 17 participated in this proceeding and had copies of the Order 18 ; thanselves. 19 ' Q But did you maha known to them your otrn inter-20 pretation of this Order? 21 A Yes. 22 l Q Ncw, Mr. Grahr.m, I agroo eith you that on 23 ; Page 10 of the Creer there r.re certain statements that .
,. 24 indicate that the Co=riesten hns allcaed in this Order n ful!
V 25 l. l recovery of deferred energy costs. But if you could tm:n to g I hownssev a nansHAL. swe. - av n. Locxwstow Ave. - H ARRISBURG. PA. 17112 . 164.0 274
mfor/Grohnm-Further Cross 178
. . I 1 Page 16 of the Order, if you have n copy of.it before ysu,
( 2 - the very inst paragraph -- nnd I'll iust rend it. It's 3 within a slightly -- it's in a different contert than tha 4 prior provision of the Order referred to. 5 Aut just to read it for youi "As an incentive
-16 6 to pursue this climination of split savings during emergeneins, 7 the Com:nission util consider the efforts of Respondents in 8 this respect" -- nnd this is the langunge I want to 9 orphasize - "in determining whether to allow the amorti-10 ntion of cuch energy costs deferred during the 18-month l
11 Period in which their energy costs nre Icvelized." 12 Now, rending that innt paragraph, do you 13 think that lonves nny doubt at all as to whether the Order 14 of June 19, 1979, absolutely and finally resolved the 15 cuestion of whethar Met-Ed would recover all deferred 16 energy costs? l 17 : A I do not think there is a doubt. You have 4 18 i ter n one sentence out of a part of the Order that denle vitti 19 the PTM split savings feature in the Interconnection Agree-20 n:ent. 21 You will reen11 that Mr. Madden (phonetic) 22 testified that the way the billing fnetor ought to be set 23 initially ras te assume n higher level of anticipated 24 savings *3 ngninst the PJM pricing than va had been abic to ,' 25 necomplish at that time and that we did net disagree with i MOHRBACH E. t.fAR3HAL. INC. - 27 Ne LOCKWILt.OW AVE. - HARRLSDURG. PA. 17112 t 1640 275'
s tinrer/Urnnam-Furener GroSG : / 'f ~ Q 1 the fact ths t, either through other arrangements thsn we hsd { 2 nirendy entered into or through a change in the PIM. agree-3 ment nnd particularly with the nilowance of the dam 9nd 4 chargos for specini purchases, that we would be able to unio 5 further swings. We hwe been abic to do so. -17 6 I think thnt cinuce that is in thnt port of the 7 '
. Order donittg with the change in the PTd
- green:ent simply w=n 8 intended to be a monitoring of our efforts to minimize the 9 repinceent p.tmer cost.
10 I think that's fully consistent with Mr. 11 Madden's (phonetic) testimony. I think it's fully consistent 12 , with my testinony in that proceeding, and that's the resson 13 i why in this proceeding we presented witnesses who have shown 3 O 4 9 14 our efforts and car accon:plishments in minimizing replaceant; 15 power. 16 - 17 (Transcript continues on next page.) 16 j 19 , i 20 t . 21 l 22 i 23 -
~25 2
- MOHRE ACH & MA tSHAL. tHC. - 27 N. LC KWILLOW AVE. - M ARRf 59URG. PA. 17112 1640 276
Hafer/ Graham-cross 380 g Q, I- don't want to get into a debate on what s that clause means. I will Just ask you one or two more 3 i 3 questions, and if they are unco::fortable questions, we can j,. just forget it. What do you think the words, such energy 3 costs, mean in that paragraph? TEE ACTING CHAIRMAN: Where do you find that? 6
- 13. IRLATESTA: On page 16, the last para 6rapn 7
8 of the June 19th order. 9 THE WI'INESS: (Graham) I believe that is~ 10 intended to refer to the portion of the replacement energy 11 costs that tms not put in the initial billing factor. You l 12 will recall how the Commission arrived at the present billing j
'S factor. It took our initial original costs of replacement i
14 poker, initial estimates, and it reduced them by 25 percent, t 15 saying they h::,ve already entered into contracts with APS that 16 will save about half of that 25 percent and we thirik that i i 17 they can enter into other contracts for the remainder. , f ig I believe that the adjective, such, in that 19 sentence refers to the portion that Tcs not reflect.ed in the 20 initial billing factor for the difference betieen 25 percent 21 and the APS contract that ue had already entered into, and 22 I believe the t is why it is in the part of the order referring 23 to the change in the PJM agracment.
- 18. IMLATESTA: These are all the questiens 29 ,
25 I have for Mr. Graham at this time and for Mr. Hafer. ;
' h* ppm 3At*I Cs T.fA::f: TAI It!C. == fl7 N. CCiWRI. LOW AVE - Hf.:tR!CTURG, FA.17312.
Enfer/ Graham <ross 381 * { 1 E .AC M G CHAIRMAR he Consumr Admate? h 2 IR. EP.RASCH: Dumh you. 3 BT 2G1. BARASCH: 4 Q Mr. Graham, if I could have your attention y for a mirmte, I would like to refer you to some exhibits 6 that wera just submitted a little earlier today, Met-Ed/ 7 Penelec Exhibit A-9, specifically regarding cash needs other 8 than deferred energy, that is your construction program. 9 As I read across that table I get to September of 1980 and 10 I see a rather sharp jump.in your construction expenditures, 11 September of 1980. I wonder if you can tell me why it goes 12 from Aus2st, 3.6 million to September of 6.2 million. O 13 A (Grahnm) I don't hncw. I would not describe 9 14 that as a large jump. I think it is not unusual for that 15 kind of a change to occur. 16 I can look into those details, if you give me 17 a minute. We do have that . 18 Q And Jr.st while you are looking, what I am 19 specifically referring to is I see an array over those 15 20 months of construction expenditures generally between three 21 and a half and four and a half million and in September it 7,2 suddenly goes up to six and then goes back down ~egain to i 23 three, four. I just ras wondering tthat happened in September D 7A that is so special. be h 25 A (Graht.m) It may/ delivery of a nuclear fuel IJCtf8tBAC5.* & F.!A12CILtL. I (c. -1*/ N. LC*.ML:.CW AVC - 14A33:DWRS. P/ 17812 1640 278
Hafer/Grcham-cross 332 contract or something lihe that er a payment that is due or I 3 something, but I think if you just G ive c:e a minute I can 3 find it. Q Fine. 4 3 A (Graham) We don't have that with us. We 6 vill have to supply it to you. 7 Q Fine. Also, if you would look again at A-9, 8 as I look at the not income after preferred, cash sources 9 other than short-term borrowings 3 you show net income from 10 October through Ihrch of 1980 and then we go into a series 11 of negative readings starting in Ihrch, going across to the 12 right-hand side. - d 13 Would you tell me why net income declinea 14 after April of 1980 or after Ihrch of 1980? Is there sem2 15 single new cost or something that takes place between March 16 and April? 17 A (Graham) I don't know of any specific item. 18 . Inflation has a ocnstant eroding impact upon net income. 19 Whether there is some specific change in the level of costs 20 such as a change in the labor contract in that month, I don't 21 know. I can take a look at that. 22 Q Again, I don't need the answer necessarily I 25 at the moment, but if you cculd provide an explanation fcr 24 that. 23 A -(Graham) Fine. nonnou n a umsnas me.-a n. n.oca.,:.:.cw ava - numuur.o. n. sms - _ . . _ _ _ _ _ - L6_4_0_273
Hafer/ Graham-cross 383 . 7 MR. BARASCH: Also, to the best of my g knowledge as of this moment -- Mr. Russell, perhaps you 2 could correct no -- I don't believe the cor:pany has provided 3 an answer to OCA Interrogatory No. 5, have you? I was about 4 g to ask samthin6 that would refer to the answer. MR. RUSSELL: I don't recall if that is 6 . finished as yet. To tell you the truth, I can't say I can 7 g speak to your interrogatories by rmmher. , MR. BARASCH: Specifically in the course of 9 10 responding to that Interrogatory No. 5 we would like it if you could provide some detail for the changes in working 77 capital and ITC that appear on A-9 Would that be possible? 12 13 THE WITITESS: (Graham) I have not seen A-5 h 14 I don't knoir what is on it. 15 BY MR. BARASCH: Q I an referring to A-9 and as I look at your 16 Exhibit A-9 under the line, changes in working capital and 77 yg ITC, I would just like to know if we could get more detail on that in the ecurse of your responding to Interrogatory 19 20 l N.5 A (Graham) .Yec. I might say that for purposec 21 33 of this presentation the e:-:penditures for the clee.mtp at 23 Three Mile Irland are on that line as are the insurance b 24 recoveries. l g 25 In the response that I am preparing on the ! fdOmtcAr;H & 90nSRAt.. INC. - 27 FL LOCXWILLCW AVIl'. = HARRICDURG, PA.17192 - 1.640 280
Hafer/Grahnm-cross 3% four year sources and application of funds, in my testimony that accompanies that I am putting those separately, and it may be that in the next several days I will have that complete 3 and out, and that would give you an explanation of those iteur. Q Thank you. I would like to follow up a litt1d bit on an area that Mr. Malatesta was exploring with you, Mr. Graham, specifically regarding page 10. 7 g THE ACTING CHAIRMAN: Will you please speak into the microphone? 9 Ma. sanASca: 1 am sorry. 1, ;
,, ST MR. EARASCH: 2, m ;
12 Q I would like to follow up on Mr. Malatesta's j
\ l J g line of questioning regarding the June 19th order and your l g interpretation of that order., specifically the language that s
you Were discussing about page 10 of that order. As I understood your testimony a little
.t6 earlier, you are saying that you interpret that order to say that the Commission has stated the company's right to full
.t8 g
. recovery of the deferred energy cost, is that correct?
g A (Graham) Yes, sir. Well, I should say full ; recovery of E.11 prudently incurred deferred energy expene% 21 _ There was the Commission's intention to look at the question 2/. of what we did to minimhe the replacement energy cost and inposed a challenge there, and we have pursued that. So I 7[ g think I should add that modifier.
', , mo>=4p a umirt me.-n n. :.ceranu.ow wr.- mamsaune, ca. trisa
. _ _. i .. -. - 1610_281
385 Hafer/ Graham-cross t Q I would like to be just slightly repetitive g just to tie things together. At the time of the June 19th 2 order -- this kind of gets back to some of our cross on 3 Monday -- that order was assuming a TMI-1 return of January 5 1, 1980, is that correct? A (Graham) Yes, sir. 6 Q And it was also assmhg a set of oil prices 7 3 substantially below that which the company in fact has incurred g both in direct oil purchases and in purchased power expense, is that correct? 10 gy A (Graham) Yes, sir. That is a relatively l t smaller part of it. 12 13 Q And it also assumed, in coming up with the 14 8.8 millage rate an approximate 25 percent savings as opposed 4g to purchases frcm PJM at the split savings that were due to bult power purchases, is that correct? 16 A (Graham) It did not assume that for purpcees
- 77 gg of recovery. It assumed that for purposes of the way in which the initial billing factor wculd be established.
79 Q But in no way did that order anticipate a 20 delay in TMI .1's return to service or the present set of j 31 il prices that are now facing the company, is that correct? 22 A (Graham) With respect to oil prices I think 33 (- V 34 the Comissicn end everyone else knew that we were in a g 25 period of rapidly increasing oil prices. We used an estimate MONREAC12 & MAMSHAL. INC. - M N. LOC 2GV1LLOW ATJ. - HARRISBURG, PA.171IS -- 1640 282
' ~
386 Hafer/Draham-cross g of, I think it was, $20 a barrel at that time, which is what t 2 others were using within PJM. I don't think anyone anticipat d 3 what has happened since the sumer in that regard. As to TMI-1 return to service, in the answer 4 5 to the order to.show cause addressed to THI-1 we do set 6 forth what Mr. Dieckaup's testimony was as to when TMI-1 7 might return to service. We were using January 1. That was 8 accepted by Mr. Madan as a valid basis for pinnning. We 9 were hopeful at that time that it weald be able to be back 10 in service by then. 11 I don't know that te Comission could not 12 have anticipa.ted some further delay in the return to service :f 13 that. 14 Q Eut specifically when ne are looking at the i 15 phrase on pa6e lo of the order where it refers to recovery 16 of these costs, I presume it is your understanding the 17 commission was talking about costs as they then understood 18 them to be. 70 g A (Graham) Well, you know, what they said is 20 IIet-Ed and Penelee are presently providing reasonable adequatla 21 reliable electric service. I think these costs, if anything,, 22 referred to 1: hat was happening in April, May and June of
?S -
1979. Q As well as what was anticipated at that time, 24, 25 vould that be correct? MCfCC3AC!i ti MAREttAL !MC.= Jt? N. LC KWILLOW /NE.- HAKR152URS, PA.17112 _ _. _ _ . ._. 1640 283
Hafer/Draham-cross 387 C ,^, A (Graham) At which time Unit 1 and Unit 2 h 3 were both out of service. For purposes of setting the recovery factor, the time of recovery, we all used January 1, 1980 4i g Q Fine. That order also had something to say 6 about TMI-1 for base rate purposes, didn't it, sir? A (Grnhnm) It did. 7 g Q Is it fair to say the Commission put you on g notice if TMI-1 was not returned to service by January 1, 10 1980 that they might begin proceedings to remove that frou , gg rate base? 12 A (Graham) They said they would investigate O 13 that questica in the order. 9 14 Q A little earlier when youwere tnmnc to Mr. 15 Malatesta you indicated you believe the banka have been 16 assuming a full cost recovery of fuel, the deferred energy 17 balances, correct? 18 A (Graham) Yes, sir. 1p Q In your conversations with the banks what is 2(i i your understanding of the assumptions they made about TMI-1 21 remaining in base rates into the indefinite future? 22 A (Graham) They have expressed substantial j y;!! concern about what happens to Mat-Ed if its current base raten 24 are reduced. One of the things that the banks have seen in h 25 their discussions with us is that Met-Ed is not today, and l 3201t3BI.CM & MARC *dAL. IMC. -17 N. LOOXWILLOW AVE. - HAnats5URG. FA.171!2 --. . _ _ _ _ . . _ --- r _ .. - - . _ - , - - . - - . -
Hafer/ Graham-cross 388 I y . will not be in 1980, earning at a level that would reflect } ( ' 2 the allowed rate of return from its last order, which I think! 3 wasabout13.8ontheplantotherthanTMI-1andTMI-2,that! 4 l there has been a substantial attrition, erosion, inflation i 5 effect there. l 6 What they have said is that they would be j very concerned if TMI-1 were simply taken out of base rates 8 without looking at the entire level of the base rates of p Met-Ed, which is exactly what the Commission did in the spring. 10 In the spring they did a current rate of 11 return study and found that there should be an adjustment of, 12 I believe, $49 million. This tim 3 if a current rate of s return study is done, cnd if TMI-1 were not taken into 13 14 consideraticn in doing that, you would not make any adjustment I 15 to base rates. I I 16 I think the banks would be very subs'tantially m~ concerned if the Commission did not take that into con-l 19 sideration. ! 19 Q Let me try my question another way, i 20 A (Graham) I take it'that means you are j 21 unhappy with my answer. l-i 22 Q I think that is correct. In the course of ! 25 your conversation with IIr. Ihlatesta you were temng about ! 24 some cf the assumptions that went into the agreenent of the ! 25 banks to enter into the revolving credit agreement. I guess
~
MCMP.rtAC ! O MARSHAL. INC. - 07 Eri. LocKW:LLOW AVE = ITARr.teEURG, PA.17112
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Hafer/ Graham-cross 389 . g what I am really trying to find out is at the time they were g 2 entering that revolving credit agrecuent with you, what is 3 I your understanding of the assumptions that they were making at that time about what might happen to TMI-1 if not returned ; 4 3 to service on January 1, 198o? 6 A (Graham) I don't believe they were explicitly 7 focusing on TMI-1. They were fccusing on financial viability. 8 They wanted to see adequate cash flow through the energy gl charges and want to see that 42tropolitan Edison Company can 10 service its capital in a minirm17y adequate way. y Q You offered your interpretatica and what 12 you suggested to the banks to be your interpretation of the OU 13 treatment of deferred energy at that time, correct? I think g 14 that is what you told Mr. Malatesta. 15 A (Graham) I had extensive discussions with 16 the banks, 17 Q Did you offer any interpretation of the 18 portion of the order that puts you on notice of the possibilit - 19 of a show cause against TMI-1 as of January 1, 1980? 20 , A (Grahan) Yes. I said that we believed that 31 there was a very substantial difference between a plant tM' 7.2 had generated power in an effective way for some four or five , . l 33 ~ years, that bed one of the highest capacity factors in the
) pg nation, that had produced very, very substantial energy scvingIs g 25 to the customers. i '
acuucu a w.r.e:ua., =. - zr n. i.e=nmu.ow Ave. - uAu,ntmo, PA. Im2 -- 1640 -286
3N Hafer/ Graham-cross One of the things I pointed out to the banks 7 was that the cost of oil this year representing the energy 2 output of TMI-1 had inflated more than the base rates that 3 are paid for TMI-1 and that when the Commission looked at 4 g the benefits that have accrued to the customers, and that 6 will accrue to the customers from TMI-1, we believed that 7 the cemmission would find that those rates should remain in 3- our charges to customers. I 9 Q So, in other words, just to be precise, g 19 was asking your interpreation of what the order said. Yoa 11 have given me what amounts to a prediction that you gave to l 12 the banks abcut how such a shott cause order proceeding might 13 come out. 14 A (Graham) That was not what you asked me and 5 that tras not what I said. You asked me what I said to the ' 16 bankers, and I told you. l, l 17 Q okay, no matter. The purpose of the question 3 16 was how did you interpret the show cause order, and I think Lo your answer basically has been a prediction that you gave to : ' 20 the banks at that time about what the upshot of such a show - 21 cause order procceding might be. 22 A (Graham) No, I don't think I gave them e. 23 l prediction. I think I gave then a statement of our posicien 34 and why we believed that it was proper to continue to have 25 TMI-1 reflected in our charges to customers. ; COMtUtC{ & B.:AECI!AL. '.NC. = 2"" U. LCCKWI' LCW AY:* = HAftRfC3URG, f*A. 371 f t. ! " - * * - - - - . . . _ - , , _ ._ (3 Q ,2 L _
Hafer/ Graham-cross 391 i { 1 HR BARASCH: Thank you. May I have a minuted i 9 3 please? I have no further questions of Mr. Graham at this ! 3 time but maybe I will have some later. I 4 THE ACTING CHAIRMAN: Thank you. Mrs. Smith? 5 BY MS. SMITH: l 0 Q First of all, I am very grateful to be an ; I intervenor. A while ago I asked what my limitations are. O They said there are none. May I relate the frustrations of E sitting here, hearing Met-Ed saying I need money, money, N I am a ratepayer so I am very, very concerned. 11 I guess this hearing depends on the future of Met-Ed but this i 12 ' 13 hearing also depends on my future. ,
+
g Two times in' one year we are supposed to
%~ reach in our pockets and help out Met-Ed. I don't think you 15 will find your ratepayers would minr1 paying for an adjustment !
i 16 of fuel, but after what has happened with the nuclear accident 17 we don't want to pay for the purchase. of power and to save 10 your neck. We have just reached to the bottoms of our po::ket
'D book. ,'
?,0 Every commission we go to, I can only help !
21 you so far, re have our framework, we have our framework. N] I would wish the pUC vould encourage them to do a study of 23 TMI-1 to ecmrert it, not just Ho. 2. 2' I have petitions here, I don't know if they 25 are relevant or not, wit' over 5,500 nnws and it states they { McH!tCAcid 514A1:3HAL, INC. 27 N. LccicWI:.:.ow A11C. - EARKIS3L*RG, PA.17112 I _ . . .; _ . __ _ . . . . _ .. . _ _ _ __.1640.2.88 _.
Hafer/ Graham-cross 392
; want No.1 and Ho. 2 converted, they don't uant nuclear pover/
q - \ 3 yet we are sitting here talking about it. 3 Someone has got to take the bull by the horns., Notr yesterday I tahd about your accounting 4 5 . going to a rural electric corporation. I would hope that 6 would hurt Met -Ed's pocketbook. Nobody answered me how n:any y customers that would entail. We are desperate. We are going 0 to do somthing about it. But we are just on the ground flool.. 9 It is going to take time. 10 In the meantime, if you approve everything 11 for Met-Ed, then I think our hemework will be useless. 12 Correct me if I am wrong, Mr. Graham. As a 13 ratepayer I sit here and I knar I am paying for the censumer 1/r Advocate's salary, we are paying the PUC's salary as a taxpayer. 15 Am I paying your salary as you sit there? 16 A (Graham) A portion of it is charged to 17 Metropolitan Ediscn Company,'yes. ig Q But I help as a ratepayer paying Metropolitan 19 Edison, so I am paying for it. I am paying for everybody 20 else sitting here for Met-Ed. I am losing money as I sit 21 here but I c paying for everybody else's salary. It seems 22 funny to be paying you to fight. It is just a frustraticn
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25f I have to get off my chest, and I know I speak for many , ( ; 24 ; people. 25 One more question. We are deducting 10 percer.t MohTrACM Q h! ACEL % IMO. - 27 N. Loc'0 3 LLow AV :. - MIJ:R:SCURG, PA.17112 1640 289 -
Hafer/ Graham-cross 393 I g where I live, lawful or unlawful, it is a principle at G is 2 point and we are willing to take the conscquences. Have you j 3 noticed a c' .it in the budget because of this? 4 A (Graham) Not that I am aware of, no ma'am. 5 Q M ny are deducting 25 percent and that has j f not made a dent, either? y A (Graham) Not that I am aware of, alth =gh I g I don't see the receipts within the various operating dis':r'.at,3 l 9 of the company. , i 10 Q Because that is about our only way to protest,l 11 is to deduct w 2at we believe. We don't sinr1 paying our fair ! 12 share. Faybe we should advocate 25 percent in my territory. 13 I guess part of my frustration is I am a total 1/r electric hoca and I feel I was conned 15 years ago because 15 my rates were supposed to go dottn. They went down for two 16 years. For 13 years they kept going up, up, up, and I just 17 , feel I have been conned by the industry. 16 I asked Mr. Cherry yesterday something and he j 19 could not answer it. Is the nuclear industry or the utility 20 industry in any fashion financing 16t-Ed during this year? l,
'21 A (Graham) I think you asked Mr. Arnold that l
1 22 question earlier. No, ma'am, not in any way that I am aware 23 of. 24 Q That you are aware of. Seventy-five percent 25 of the people are worried, it is not just me. I just think I uc wac r c. unen.u rue. - av n. i.ocrxu.s.m me. - ru.arassimo, n. sys sa _ 1640 290
Hafer/Grnham-cross ~ 4 you got to take a different avenue. That is all I have for 2 n v. 'Phnnk you very nuch. THE ACTING CHAIR!/AN: Ms. Dufour? a BY MS. DUFOUR: i 4 { q I just have two questions. Do you have a l 5 t 6 general idea what construction cost money is going towards? I t A (Graham) For next year the figures I have ! 7 i g are construction expenditures of about $50 million for i g Metropolitan Edison Company. A very small portion of that, about half a million, is for new generation construction. As 10 gg I recall that is for the land and the licensing in connection 12 with a coal-fired station in western Pennsylvania. 2' About $8.8 minion, $9 mimon is for f g construction at existing generating stations. Most of those 15 dollars tend to be associated with environmental improvements.: y We just completed a cooling tower at Titus ; 17 Station for about $12 millicn. That kind of item would be { included in that category. 16 19 Nuclear fuel is about $15 mi.111cn. Nuclear 20 fuel expenditures are made well in advance of the time when 21 fuel is needed in the plant, and many of those were contractu 1 i 22 . obligations that were incurred sometime ago. I 25 i Transmission expenditures are $11. million: ( 24 that is the high voltage lines. > 25 Distribution expenditures $20 mmion, which , I" Not!TIDACM a M/AGI!A! INC. =I":" FL LOCKWII.LO'.Y AVEL = IIARRIGI"URO. FA. I?!IC _ _ _ . _ _ . _ _ . . _ ._ __._L6A 0,19_1
Hafer/ Graham-cross is about 40 percent of the construction budget. 'Ihat is [ g C booking up new customers, building new substations, repairingi 2 : substations, that kind of thing. 3 General expenditures would be office buildings and shgs IN that, and that is M $2 mmon. 5 6 e Thank y u. can you just eghin, so that I understand a little better, what you mean by the unreliability 7 3 of short-term powhr supplies you are presently getting and . I i why PJM would be more reliable? 9 ,
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A (Graham) I don t think I am the person to 10 11 answer that. I dcn't know that that would be in tay testimony.- 12 MR. RUSSELL: I would say Mr. Sims and Mr. . O 13 1rewton were the witnesses here yeeterde ,who testified with & respect to it. If I may, Just to try to be responsive, I will 14 15 give you my recollection of what they said. , I think Mr. Sims said that the outside power 16 purchases are on an as, if and when available basis. They 77 I g frequently are sources of power at a lesser cost than one g ' wculd get through PJM even at the cost plus 10 percent, but - g they are not firm and they are not available constantly, j therefore they are nice when you get them but you can't 21 always get them. 3 On the other hand, PJM is a power pool that 73 C; y is in being. All of the generaths facilities of member l g. 25 companies are devoted to the PJM system and one can rely
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McHnBACH th MARSMAL. INC.- 27 H. Locxvt11.ov/ AVE- HATUtf3DUAG, PA.17112
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Hafer/braham-cross 396 upon the availability of power from PJM, -and within the limits indies.ted by the PJM modification power would be 2 available from PJM at cost plus 10 percent, and then enything 3 above the limits of that agreement would be on the regular 4 , 8plit saving basis. 5 MS, DUFOUR: I will reserve my questions any 6 further till later en then. 'Ihat is all I have. ' 7 BY MR. FRATER: ! g Q Mr. Hafer, referring to Exhibit A-7, energy ! 9 10 charges accounted for there, do they include any capacity 11 charges? i A I g (Hafer) Yes, they do. They include the l 13 capacity charges for the outside purchased power agreements 14 that we have entered into in order to secure lower cost power, i 15 Q Is there any separate accounting of those 16 energy charges in this record at the present time? A (Hafer) There is a portion of Mr. Newton's : 3.7 ; g testimony which addresses that. I don't know whether that l i 19 meets your standard of separate accounting, but I can look. ; i 20 Q Well, let me proceed and maybe we don't need to do all that follow through. Has there been an establishmer.'!; 21 in this record that you are aware of that those energy charget 33 23 with those ca.pacity charges which are included in these i energy costs did in fact produce a lower net cost of energy 24 25 as a result of including those capacity charges? NcHREACH O MARSHAL, INC. - 27 N. LecKYnLLOYr AVIL - HARRISEtJRC, PA.171IR
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Hafer/ Graham-cross 397 i ( y A (Hafer) It was an issue of whether inclusion! h 2 of those capacity charges produced a lowerrat cost of energy. } 1 3 'lhere are exhibits in this record in this proceeding which se 4 out the cost components of all of the outside purchases as , 5 well as the cost characteristics of our own generating statiers 6 and of the purchases andalles to and from PJM. 7 The reason that that was included was because 8 it was only fair'to recognize that in order to keep total . 9 costs down, the company was going outside and seeking out 10 these purchases. . 11 The purchases in total entered into by the 12 company, including demand costs, were less than relying upon O 13 its normal mode of securing replacement energy, that is, the 9 14 PJM system, In fact, I tMnk it was first at the suggestion 1.5 and/or reconm:endation of the Consumer Advocate's witness that 16 this inclusioIi was made. But it was done more on an equity ' 17 basis, that is on a fairness basis, than anything else. gg NR. RUSSELL: I think if you look at Exhibits 19 G-3 and G-4 they may perhaps give you the data you are looking, t t 20 for. 's . ..... gy MR. FRATER: Thank you, Mr. Russell. 'Iha t 22 is all I have. 23 THE ACTIEG CHAIRMMT: Mr. Linder. 24 MR. LINDER: Thank you, Mr. Chairman, Just h i 25 a couple questions. i McNR22ACH & StARCHAL. INC. - F.7 !L LOC 1GY1LLOW AVE.= HARRISBtJR@ PA. 571 f A _- - - _ - - - - . ~ . - . - - . - - - . - . ,
Hafer/ Graham-cross 390 1
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N 2 4 Mr. Graham, following up Ms. Dufour's questior 3 regarding construction, you may not be the proper witness for ; this, but nonetheless. Can you identify what new constru::tior.' 4 5 is? You indicate there was a small portion. 6 A (Graham) New generation construction? ( 7 Q Yes. 8 A (Graham) I don't have the specific mmhers
; , before me but I believe that would be the very prelimhry 10 expenditures that have to be made in connection with Seward-
{ 11 7 Station and Coho Station. ! 12 In order to build a generating station you v 13 do have to acquire the land end you dobave to get the licensesk i 14 particularly the environmental licenses. To get those , 15 licenses you often have to do air quality studies over a ! 16 fairly long period of time to demonstrate- what effect the 17 new plant would have upon that air qualitsf. I 18 My understanding is that the dollars that are ! i 19 in here are dollars for those kinds of studies associated witt 20 those two plants in western Pennsylvania. 21 I could get a specific breakdown of those 22 don nrs if you would like. 23 Q Eo, that is okay. What kind of power would m 24 be generated at those two plants? 25 A (Graham) They would be coal-fired stations, 14CHf1 ear:H Es MAR 3HAL. INC.= 1:7 TL LOCKW1' LOW AVE l. == JtA!UtlSEltsit& PA.17112 -
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Enter /Grans -Furtbar Cross '
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1 BY NR.' LINDER (Of Mr. Grnhsm): {. 2 i Q And with respect to the money in the con-3 ! structica budget for the purchases of nuc1 car fusi, enn you 4 cinrify, is there presently money set aside in the con-5 , struction budget for future purchases of nucient fuel, or is I 6 ; this money already comitted? Can you clarify, piense? t 7 ! A I think there's both, Mr. Linder. The money 1-1 l 8 for next year is money that is already committed. Mr. 9 lCherryisthepersonwhowouldhavethedetailsofthat. i 10 I thinic you'll find, however, that for nert 11 i year there nre fsirly substantini dollars associated with tho 12 secuisition of uranium. We have some contracts that we will 13 acquire the uranium at $10 or $11 a pound, and it has n O O 14 current maritet value in the vicinity of the low 40s -- 15 $40, $41 a pound. And I believe that n 19rge part of the 16 dollars that are in there to taixe advantnge of those 17 sequisitions. . I 18 Q Would it be possible to defer any of those l 19 funds toesrds the present purchase of replacement power? 20 A I think they've already been deferred as far 21" as they could. I do know that this year and next yanr ce 22 have deferred substantini payments to the United States 23 i Dep9rtment of Energy fo enrichment service th-t I thin 1;
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24 i for the system tot:1 about $33 or $3S million. 25 I don' t knce that tm could defer either h 4 _ _ _ . . _ _ . , _ . , - - _ . . ,, . 4
Hater / Graham-Furthar Cress 4C3
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i further acquisitions or further psyzesnts. Again, Mr. Cherry (, 2 would be the person to, address the specifics of th9t. The 3 ' instructions that he has received from the fin?ncisi aide of 4 l the organizettion is that he uns to have taken ns many s':eps 5 { in that regard as he could, and I know that he's taken s lot i 6 lofsteps. I don't know that there could be any further that 8-2 7 { he could do. 8 ! Q Those enrich:aent services that you refer to -- l 9 l they would take place -- they would occur assusing Unf.t No.1 i 10 lwasbackinoperation?
)
11 l . A No. These are enrichment services that he:ve 12 already been performd. Thay m2re bilic that ca:me due, and
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13 we were able to work nn agreement with the United States 14 Department of Ensrgy to defer paymant and to pay them the 15 cost of monay instead, and that has worked out to be both 16 beneficini in terms of the interest rate that we were nelo 17 to work out with the govern: cent and in terms of the fact 1G i that we didn't have to pay some $33 million. 3 i Q Are there any funds that have been set asM . 20 , for enrichnent services which hnve not yet been incurred? i 21 j A I don't know. Mr. Cherry uculd have to addrets i 22 j that. 23 Mt.I LINDER: Ohny. Thnnh you very mach. c., 24 ll Thank you, re. Chr.irman.
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25 TE ACTING CHAIR 2nN: Do you hsyc any questiote? d McHREACit & M Alt EHt.L. INC. - 27 N. t.CCKWILLOW AVE. - N AHRISSURG. PA. 17112 1640 297
Hafer-Graham-Further Cross 'w. 7 1 l NR.;GORNISHi No, sir, (
/ 2 l THE ACTING CHAIR?iW [ Mr. Bowers? h-3 l MR.I BOTERS: Con:missioner Tohnson, before I i
I 4 broke for lunch, I indicated that I p19nned to identify 5 certain doeuents referred to in my cross-examin, tion of Mr. 8-3 6 i Arnold. Would this be nn npproprinte tim to do so? 7 ' TH2 ACTING CHAIRMAN: You mcy do so. S IG. B0iERSi Consistent with the identifientior. 9 l mthod that we e::aployed in the first phase of these pro-10 ceedings, I would prefnee these docuants cith the initinit 11 i HSR, whleh are the first letters of the nace of one of r:y i 12 clients. 13 And specifically, the first document I'll refes O 14 to is the internal Nucient Regulatory Commission memorandum - e 15 THE ACTING CHAIRefAld Would you please speak i 16 into the microphone? l l 17 HR.I BOWERSI I'm sorry. I thought I was, l 18 The first doeurr.ent that I wt11 inbel for 19 , identification purposes is the internal Nucienr Regu1*tery 20 Cathmission camarandum dated July 9th,1979, from Howard R. I 31 Shapy, tha Erecutive Legal Director of the Nucient Regt:.- l
~22 intory Cc:::c:ission, and thic docus:ent will be labeled for 23 identification H3K Exhibit No.1.
i 2+ , j (~n : 25 L i 3 (HSK Enhibit No.1, a nine-pngr: 14CHRSACH O MAR $HAL. INC. - 27 N. LOCKWILLOW AVE.
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Hafer/Grcham-Further Cross 40. 1 internal reirnrandant of the Nuclear Regulatory Comnission from Howard N 2 l K. Shapar, dated July 9, 1979, was predneed and acrhed for identifi-l 3 cation.) 1 4 5 12. 30iERS: Tbo second docusant referred to in 6 1 ny cross-examination of Yz. Arnold which is not already an M 7 exhibit in these proceedings is the remorandum and Order of 6 the Nuclear Regulatory Coamission authorizing the use of the 9 EPICOR II decont:imination system, dated October 16, 1979, and to 'thic document will be labaled for identification ESK Exhibit 11 No. 2. . 12 . 13 (BSK Exhibit 2, a two-page document concisting of a somsrandum and Order 14 of the Nuclear Pegulatory Commission, dated October 16, 1979, was produced is and marked for identification.) Ad 17 FR.' BOWERS: The third document is e latter 18 dated October 23, 1979, from Mr. R. C. Arnold, Senior Vice , 19 President of Matropolitan Edison Company, to Mr. Richard 20 vollmar of the Nuclear Regulatory Commission, and this i 21 documant we uill label for identifiention as ESK Erhibit No. ! 22 3. Inassach as pursuant to this Cour.ission's re:mest I ham 23 distriheted copics of thic particuler 1stter to all the i
. 24 l parties and to the Coamission, I usuld n:ove at this time F.
25 that this particular dccument be admitted into evidence. MOHet3ACH C MARSH AL. THC. - 1, N. LOCKWILLOW AVE. - M AFmtSSURS, PA. 17112 i' 1640 299
nater/ t.,ranam-r ur tnor t ros s av.; l 1 , IE. RUSSELL: I would object to any admisslen ( 2 in evidence at this point. 3 THE ACTING C MIRP6N: Mr. Bowers, I thought 1' 4 that you understood, as I'm sure all other parties do, the 5 procedure to be followed in these proceedings, that you're 6' ! to identify otherwise unidentified material and that at the t-5 ! 7 conclusion of the hearing, before thet record is closed, the 8 i Caa: mission uill order what is admissible and what will not i 9 j be parmitted to becom part of the record. 10 at that time all the parties were asked whethen 11 they find this an agreeable mathed of handling such material. 12 and, if my samory serves me correctly, it was without dissen~: . i 13 1 Does that taka care of your objection, Mr. g 14 Russell? 15 MR. RUSSELL: Yes, it does. 16 17 (HSR Exhibit 3, a one-page letter from R. C. Arnold, Senior Vice 18 President, to R. Vollm?.r, Director, U. S. Nuclear Regulatory Commission, 19 dated October 23, 1979, was produced [ and marked for identification.) 20 l l , 21 BY IR.* BOERS (Of Mr. HaforN 22 Q Mr. Hafer, I'd like to return to a matter 23 ! that mis very briefly touched upcn at the conclusion of 24 Fonday's preceedings, and I would like for yca to explain 25 to to, if ycu would, tin bacis for the ascuzption in the McHREACH & M AR EHAL. INC. - 27 N. LOCKWLLLOW AVE. - M ARftl$GURG. PA. 17112 1640 300
r Ha rer/ GranCTs-YurcDG. CROSS d. UL: I 1 l Petition fcr Medification and in your testimony and in the 2 l accompanying exhibits to your testimony for the assu:aptima 3 1 that the Tiree Mile Island Unit i recetor teill in fact re-4 turn to service in September of 1980. , 5 ; A The basis for the assumption and tha~ conclcsist. 6 in the Petition was the input that I got from tha individua1r 7 within CPU who ec directly responsibic for those activicha 8-6 8 and uho have the expsrtine in those areas, individuals, 9 specifically, lika Mr. Arnold, Er. Diecisamp, who is President 10 of GPU. 11 Q Did these people cor:municate to you their i 12 ; confidence that Matropolitan Edison would succeed in 13 accomplishing tha masures specified in the Nuclear Rege- ,
.14 Intory Cmaission's August 9th order as conditions far a ;
15 TIE-1 restart? i 16, A Tiell, I'm not sure what you man by "ca:mami- , 17 cating their confidence". The indication that I got frca l 18 those gentleren une that under the procedure as laid out by f 19 the NRC and to date as rigidly adi2ered to, there is a possi , 20 bility thatMet 146 could be allowed to commence operation nf 31 THI Unit No.1 in mid-August, as early as tsid-August 1980 ' 22 I think technically the date is scanthing like August 16 -- 23 4 and that th:rofece they thetght that thsre was a chance that i i t-24 : tilis plant -- a scod chcace that this plant could be becug :e E 25 g back into service by Septerher 1,- 1980, albeit that that ; n wonas,.ca a mRsm. me. - 27 N. LCCICWH.L.OW AVE. - H ARRISBURG. PA. 17181 1640 301
tiarer/uratam-rurtner cross
7 oppertunity to keep the requests that we have to make in this 8 proceeding down to the minirnmi amount necessary to stay nithin 9 our borrowins limitations.
m Q In other words, the information provided to yn2 11 assumed a favorable outcom to the bearings that are pre-12 sently being conducted before the Ecclear Regulatory Com-13 l mission?
O 14 l
4 A Certainly, in my opinion, it would be a -
i e
15 favorab12 catcom. I'm not sure that that's shared by every !
16 one else in the room. But --
17 Q By " favorable" I mant favorable to Metropoli-18 i tan Edison.
I i
19 , A It wonid be favorable to the custou rs of #
40 : Metropolitan Edison as well, cnd that's really who we're i 21 tall;ing about; favorable to tho extent that it sssumes t'est 4
22 Thrce Mile Island Unit No. I would be allcreed to return to {
21 , service offective 1 September 1980.
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- p. , Q But that favorable outecz was assumd in tlw I 25 documents that you prepared cnd presented to this Commissien, $
MOMftBACH Q I4e.REHA* NC. " 27 N. LCCKWiki.OW AVE. - H ARR:SBURG. PA. 17112 1640 302
nuern,ranam-rurtner cross (06 I 4 1 is that correct? 1 2 l A Again, I'm not sure what " favorable" has to cc 3 with the whole question. It's quite clear that the estimates 4 used in propering the requests for modification of the energy S clause factor do include a resus:ption of service by Threc 6 Mile Island Unit No.1 effective Septeniner 1,1980 7 That assumption is inherent in all of the 8 calculations made in the Petition, yet, sir. 9)o Q And you would agree that such resumption will
;o ! not be permitted to take place unless it is so authorize 6 by 1
11 the Noelour Reguictory Cc:n: mission? Is that your understandinj? I 12 A That is my understanding, yes, sir. 13 Q And such an authorization will not take place 14 , unless there is an outcome to the bearings presently taking 15 place before the Nucicar Reguintory Comission that is 16 favorable to Metropolitan Edison's position? Is that your 17 understanding also? 18 MR) RUSSELL: Well, I really don't think this 19 is the proper witness to ask the question, and I think it's ! 20 l a question that asks for a conclusion. I think on both i 21 j grounds the question is neither tirsely to this witness or, 2 l i 22 thinh, appropriate with respect to any witness that we've I 23 offered. I L,, El/ SOTRS: Cc m issioner Johnson, I speci L .1(r 25
- asked prior to tha lunch becair whether Mr. Arnold wculd ba ekl MOHRSACM G MARSHAL. INC. - 27 N. LOCMWILLOW AVL - HARRISOURG PA. 17112 -
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Hafer/ Grc'nam-Further Cross 40' s 1 - 3, . I ! 1 appropricte person to address this line of questioning to in 2 I ILght of the fact that his testit:ony dealt creensively with h 3 the proceedings presently taking pince before the Nuclear 4 Regulatory Com4sion, ss that question ir.pacted upon the 5 Petition for Modification. 6 i Mr. Russell advised tha Co:mnission and s:yself -g 7 that Mr. Arno14 was not the appropriate party to have this 8 line of questioning addresced to; that Mr. Hafer would be the 9 appropriate v. arty. So I'm so:sewhat at a loss at this point ' 10 to know how this metter should be dealt with. 11 . m) RUSSELT2 Fell, I think, if my mernory ser re:I i 12 rm correctly, I indicated that questions with respect to the l 13 Petition are directed most appropriately to Messrs. Enfer ! O 14 and Graham. I didn't say anything with respect to requests l@ 15 for conclusicus that have to do with outcomes of proceedings ' 16 before the Nacicar Regulatory Consission, ,
;7 E. BOERS: Ona of the principal assnaptims i
18 in the Petition, howevor, is in fact that 'IMI-1 will return 19 to service in Septertoer of 1980 I think that that qu2stion 20 is insoperable from the Petition cud the bases that it's been I 21 laid cut for, j 22 MR)RUSSELLi Er. Hafor has affirmad that yes, j 23 that tras an cscwption underlying the Petition.
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24 i E. BOIER3i And ny lins of quostioning was to l f '. . l 25 inquire as to the basco for that assumption. MOHRD ACH & MARSHAL. INC. - 27 f4. LOCKWILLOW AVE. - HARR!SSURG. PA. 17111 L640 304-
narerturanna-rurtnar cross e.UL
. . : 1 1 l HR RUSSELL: He's indicated that he's gotten , 3 that input from Messrs. ArnoM, in charge of Three Mile 3 , Island, cad Mr. Dieckartp, President of the Co:npany, to use 4 3 that assumption.
5 . 1R. BOERS: Cozaniscioner Johnson, I don't 6 i particaisely see the point of Mr. Russell advising an as to i -10 7 the manner in t/nich I shonid proceed with this line of 8 questioning. Either the line of questioning is an appre-9 priate one for this witness, or it isn't. 10 TEE ACTING CHAIPJiid:' Mr. Bowers, inay I ash 11 you to state directly, succinetly, what it is you are seaking 12 to accomplish in this interrogation?
, 13 HR) BOERS: My putese is to determine what 14 ,
considerations, what factors, were taken into account in t 15 umking the nssuuntion that Ynree Mile Island Unit i reactor 16 will in fact return to cervice in Septerioer of 1980; secondlyl, 17 to deram% what the offects wenM be upon the evidence 18 that's been presented so far if that in fact did not take 19 place.
'^
It seems to s:2 these are both demonstrably 21 , reIcvent crcus of inquiry. t - 22 l TE ACTING CHAIFlM: Mr. Bowers, I think I 23 undarstcod the thrust of your proposed interrogation, You
, 24 are getting at the hxzt of one of tha phases of this entire 25 ,
proceeding, naraly the Show cause Order decling with Three
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Harer-tiranam-vurtner cresc wr 1 ' Mile Island Unit Ho,1 and whether or not it shonid be kyt q 2 in the rate base if in fact by January 1st,1980, it is not 4 3 l in operation. 4 l At this moment we're dealing with the alliage I 5 jquestion. The Respondents vill undoubtedly deal with tin i 6 l second phase, and at that time ha and his witnesses have the -11 7 l burden to precent evidence that Three Mile Island Unit No.1 6 1 will in fact be operative before January 1st, 1980. At that 9 tina your questions, I'm sure, will be relevant. 10 T2ut, Mr. Bowers, with my overy desire to be na 11 permissive with all of the citnesses and attorneys for all 12 ' the parties, I cannot see that this is relevant to the 13 matter beforo us at this mosant, which is the Campany's re-O 14 quest for rcte relief in terms of the energy cost rate in
'e 15 the amount of a cum in creens of $50 million.
16 I'm going to ask you to address a matter that j 17 we are supposed to be discussing at this tirte. You'll have ! 18 every opportunity to get into thic present metter that you rct 19 socking to discuss when it trill be relevant to the topie -- 20 to tbc matte.r that we alll be discussing, nat:nly chat happw' 21 g with Three Mile Icland 1 and what shall its treatcont b by 22 this Co nitas, ion if it is not in operation by Jatramry 1. 25 E.2 E0iElRS: Cc missioner Johncon, this IL.u l l 24 l of questioning is nce directed to that , issue. I'm addreasinj
@- i a 25 I
j this iscus in the contert of the Respendent's motion for a W MOHREACH & M AR9HAL. INC. - 27 N. LOCKW LLOW AVE. - HARR!SEURC. PA. 17112 1640 306
MSIer/Granam-Furtt10r gross 4 10 _ I l modification of its energy adjustmant clause. 2 i One of the principal assumptions in the docu-3 ments he has supplied and subraitted to this Commission in 4 support of that Motion for Modification is that this reacte-- 5 will be in operation September of 1980. It is an issue thr.t 5 h the Respondent himself has raised, and it seems to me it'c a i
- ,,g 7 ! demonstrably appropriate crea of inquiry because of that.
8 THE ACTING CHAIRMa.N: Will you relate to ma ths 9 relationship betnoen your questions dealing with the basis 10 for the cone'c sicu by the Company that the Three Mile Island .
. 11 Unit No.1 would be bach in operation by January 1st, what 12 bearing it has on the request for an incre'us,e in ailinge?
13 If you can do that, we, of course, will permit this interro-i, 14 gation to proceed along these lines. 15 MR/ BOERS: In Figure No. 2 of, I believe it's f 16 Appendir B to Exhibit A-2, which was -- which is the Motion ' 17 for Modificatien itself, there is an indication of what the j i 18 Company's short-tsrm debt will be over approximately a fcur i 19 toen-month parlod, and the last four months of that perica - .' I 20 TE ACTING CHAIP511N: Ifnat page are you re- t 21 1 ferring to non? , 22 MiU EGERS: I don't believe there's a page j 23 ; nutber. It's, as I said. Figure No. 2 of Appendir 3, I 24 f believe, tc Exhibit A-2, which is the Company's Motien far i o [ j 25 [ Modificction. l i- MOMSACH & MAREHAL. lHC. - L7 N. LOCKWILLOW AVE. - MARRICEURG. P A. 17812 1640 307
narer/ urannm-r urcner t. rosa yt l 1 l TE ACTIIU CHAIRinN: This is Figure 27 ( 2 NR.'BOE RS; Yes, sir. h 3 TE ACTING CHAIRMMh Of Appendis: 37 f ~ 4 19..' BOERS: Yes, sir. 5l TE ACTING CHAIRI&N: Very well. I'm with you. l' ' 6 IE.' BOERS: If you'll notice -- if you follow 3-u ! 7 l the lica of the short-term -- the taarimum short-term debt, 8 f.t begins to take a sharp drop in September of 1980, and my o . understanding of the reason for that decline is the Compmy'r
- 10 e=pactation that the Three Mile Island Unit i reactar will 11 return to servico at apprazimately that tims. And Mr. Enfor 12 has so testified that that assumption was in fact in existenca .
13 h t I'm trying to get at is whather or not g 14 that's an assumption that was wraranted at this tinur; and, 15 number t:co, what thsce figures and what this graph would 16 look like if in fact TMI-1 doesn't go back into service at 17 the cine ass ead in those papers. 18 TEE ACTHIG CHAIRIEN: We'll he at ease, plance. 19 1 (Off the record from 3i29 p.m. to 20 3:33 p.ta.) 21 l THE ACTII?G CHAIRMLNi May we restmse, Me Ecworrh 22 continuing cur disenscion? You are inquiring of the witness l 23 the basis for the conclucions, the Company's conclusions, i i 24 that TMI-l esa he recetrad to service on or by September 1, I O 25 1980, is that cot ect? e MOMRS ACH 8e MAR PH AL. It4C. """ 27 N. LOCKWit.l.QW AVE. - MARRISSURG. PA. 17112 1640 308-
M5tf er/ L:In11h11 -r11rtiler brUh:M M 1. 4 r e- - 1l M1.* BOERS: Yes, air, h 2 TE AkfEG CEIlumN: May I ask you what it: is 3 ; ycu trant te acccuplish with such a line of interrogation'? i 4 ' %at will ya: be prwing? Will you be proving that tha 5 ' Company shou'ui requiro more money? 6 ER.' B0iERS: That could be a very possible 14 7 , showing cf this line of questioning, yes. 8 I would like to see -- in fact, this was one 9 l of the thingc I tics going to ask. I would like to see 10 versions of the tabics and the figures in this Petition that n reflect preciocly the opposite assumption, that THI-1 venid 12 not in fact return to service in Sopteriocr of 1980 to see i 13 what the financial impact of such a development would be. l' kl 14 And in order to substantiate the appropriato- ' 15 ness of such additional submissions, I was attempting to - 16 inquire into the basic for tha casumption that was made in 27 the first place. 18 ' TE ACTIN 3 CW_1TJAN: You have n:e at a loss, 19 Mr. Bonors. If you cent to plead the Company's case, it's 20 all right with us., h 21j it. Russell, in view of this framo of re: feron o 99 nc we've drmm it nets, dc ycu withdraw your opposition of t -ir 23 llinecfinterrogntion? i 24 ! E .I BUSSELL: iTall, I would have no objecticas
') l 25 j to withdrawing my objact".on and have Mr. Ecfer answer it to I
MOHRSACH & MARSMAL. INC. ** 27 N. LCCKWRLCW AVE. - HARRISBURG. PA. 17112
- 1 1640 309
mci 3r/ Gra n:I!i-Furentr gross 41J I, 1 ! the extent that he can, but I think I would like to just say (' l 3 ! this to put it in content: $ 3 Uhother it'c putting a Petition together 4 l giving the chole picture from the Company point of viec, er 5 whether it, for orample, coaM be putting a whole picturc 3 6 together for a buco rato case for Ifot-Ed er Ban 21ec, as the 7 ; ence may be, there has to be a t:frucos cho sort of givas the i G l overviou of the whole picture, but he certainly is not c i 9 i specialist in occh and every avenue or cree of cperations i 10 l of the cczpany. 11 Ho hcs to got input from the varicus speciclist s l 12 in the varicas creas of respencibility no he can testify in l 13 en overall senso with respect to the picture, whiebever g 14 j picturo it may be. But he obviously, when you get dc:m to 15 the details and specifics in a spociclized area, has to g 16 l defer to the t.-itnacs uho supplied him the informationin 17l that area. 18 . Ucu, returning to the Petition, Mr. Hafer has I 19 said that the datermincticas with respect to the September 1 20 passihlo in-service date of 'EII-1 cama from Mr. Arnold And 21l Mr. Diechamp. 22 l And to the extent he can give you any more 1 23h depth tir.n that, fine. If act, rc'll be glad to trake tin h 24 ij gentlemen cvailabic cino gaw him the input and have them [ w. V 3 25, cross-e nnited ca to the uhys cud tracrefcres of the quality MOHitSACH *,: M Af! 5 H AL. INC. - 27 N. LOC KWNE.OW AVE. ** HAFtRISBURG. PA. 17112 1640 310
rister/ tir3 nam-YurCrE2r grogs ' ,1<- 1 1 of the input that they geva Mr. Enfor. . s 2 f TE ACTING CliEIMRN: Thank you. F2. Borarc, 3 one other question to you so we understand where we're going. 4 l At thic mannt tshst is it that you seek to establish with 3 your questioning? 3-16 6 i H 1 .' B O W 2 R S : What I would coek -- 7 TE ACTING CHAIRMAN: Take it a step at a tinz,
).
8 5 please. 9; MR.* B0iERS: Sure. What I am interested in 10 laarning and what I think this Commission should have bef7n
.I 11 / it is infernatica that is based upon an assumption thst is 12 different from cae of the assemptions that was ande in the i
m 13 preparation of the docurtants that have been submitted to the J 14 l Commission, and that particular assumption that I'm addrees-I t 15 ! ing myself to et this point is the assumption that TMI-1 l l 16 will in fact return to service in September of 1980 17 My line of questioning was intended to lay a 18 basis for that opinion and also to get into the nature of de r j information ths.t oculd be required to fill out the recc..? r 20 I have outlined it. I 21 'd~ IE ACTING CIGIRIBN: And what relationship 22 l uould this have to the race relief request of the Company? 4 . 23 [ Kl.' BOICES:_ It would give so:m indiention ns 24 to t;hether this in thr: kind of rate relief tinich util be es sufficient to Itaet the financial needs of this company, 25 MCMMBACH 614AXmeAL. INC. - 27 N. LOCKWILLOW AVE. - MAR RISBURG. PA. 17112 - - - r
- c. .
1640 311
mum utanamcuuum ut ua 6. q
} . .
I whether the Company, na I have understood their presentatt.ca, ( 2 has attempted to present the picture that this is the kind 3 l of reliof that will bo sufficient en a relatively long-term 4 basis, at least threugh the end of 1980. 5 And if that is not an accurate picture or if 6 there are assa:sptions that that concision is based upen r_g 7 , which are quastionablo, it esems to na that this Comunission 8 should know about that in order to address the maries of thei? 9 Motion. 10 T"E ACTIUG CIBIIDER: Mr. Bowers, with the 11 knowledge that you are perhaps seeking to support the l 12 W Company's position, I will ask Mr. Russell to withdraw bis i 13 opposition. Or in the event he does not, I will deny it, g 14 deny his requast, and permit you to continus on this limited 15 basis. Prococd. ! 16- BY 1R.' E0iERS (Of Mr. Hafor):'
! i 17 Q Mr. Hafar, did the officials of your company -
16 uho comunicated their assessment as to the likelihood of 19 the restart of TMI-1 at the time assumed in your presents-20 t tion indicate to you the bases for their opinion? 21 la Yes. As a matter of fact, that's been dis-a cusced a nutber of tions publicly before this Conission, j 23 It's inclu<ied in Exhibit F-1, which is sponsored by Mr. 1; 24 ! D2.ccamp. O 25 j There's n apscific restart schedulo, hearing I I MONMDACH & f.1AftSHAL. f H1 - 27 N. L OCKWILLOW AVC. - HAMftlS D'JRG. PA. 17132 -
, 1640 312
nom, o.mmm , uuum w.v.. u 1 1 ; schedule, if you will, that tha lac has establiched that ec11: 2 for boarings to begin on abcut the 10th of February nczt yc ar, t 3 l c variety of things to ta*Ka place which I won't detail at thia 4 [ point, and for a decision by the NRC on August 13, 1980. 5 I have been advised that if a decision is OS 6 rendered Augunt 13, 1930 by the HRC allcuing Met-Ed to Ishu 7 l TMI Unit No,1 to service, that that return couM be I 8 j accomplished in a very short parted of time, perhapa days or 9 , even less. 10 ' We have therefore, for this basis -- for ther.e 11 , purposse and after discussions with Mr. Diechamp and Mr. i 12 ' ArnoM, tiho han pristnry responsibility for the TMI project, ! i 13 ! as be testified thic morning, assumed in our projections of i k l 14 l l cost that tha unit wenld be available for service 1 15 September 1,1980. ' 16 Q I would gather frca your remarks that thera ; 17 has been vircun11y no consideration given within your ecmpan 18 l l' to the possibility of a decision by the Nuclear Regulary i 19 l Cosainsten in August or thereabouts next year that is un-l 20 ' fcvorable to the Caspany. In other words, a decision that { 31 i would continuo the suspencica of cperation in effect. s li . 22i A That is not only crong, but unfair. Yno best , 23 judgant of the peeplc within GEU rerpensible for the secr':-
, 24 up of Ten. Unit Wo.1 ie thct that plant will irdcod be ')
25 h returned to service. I uex=.4cw ut.nosat. inc. - 27 s. tocawatew ave. - winarsevac. ex. iriin - 1
,. m.
1640 313
- , _ _. _ . _ - - - ~ . , . --,..r--,r- ,e,-m*.r--m----- - -
m.erturauam-r urumr vruas <u
-- y .
l 1 l The best judgment which could be offered te nr. ( 2 by those individuals for purposes of preparing cost estinator h 5 < in ccansetion with this Petition is that there is a 4 ' reasencble basis to assucs that that return will occur on 5 Septernber 1,1980. That does not indicato in any way, shape, 6 or form that these people did not considor any number of i 3.19 7 alternatives, such as denial, such as unfor modifications, 8 splippage of schsdules, whatever, 9 But it does indicate that, having taken in all 10 of those possibilities, their consensus was that the best 11 estimate is that this plant can be returned to useful service 12 on September 1,1980. 13 Q Thank you. My question to you, eben, is, Coa 16 g 14 you describe to e the reasonable basis for that judgn:ent 15 as it was comunicated to you? 16' A I don't think I can describe to you any better ; 17 than that. I know Mr. Arnold personally and have for qtita 18 a while. I'm acare of his backgroand. I'm aware of his 19 responsibilities within the organization. I have no ques- l 20 tion whatsoever in his competence in the field, in his al czpertise. And therefore, when Mr. Arnold tells ica that in 22 I his opinica theac thingc nra reasonable to expect, I have no e 23 reason to take exception to it. I I 24 i Lihanise, the same can ba said for Mr. Dicek:a;j. N.s only is La my superior, but ha has a great deal of 1 25 Plo:9B ACH & M AR '1H AL. It!C. - 27 N. LOCifWit. LOW AVE. - HARRIS 9URG. PA. 17112 1640 314
Enter /Granac-Further Cross o1E 1 ! knceledge and expertise in these matters which I perscasily
- 2 I
! do not.
3 l Q I understand. Then your answer is that they 4 ? did not crplain to you to any appreciablo degree of detz:.1 l 5 the bases for their opinions as they expressed them to yes'i 1-20 6 THE ACTING CHAIIUMN: Mr. Bowers, we're 7 going to rule that be has answered the question -- your l 8 question as cell as he can. Mr. Diechamp and Mr. -- 9 m ' HAFER: Arnold. 10 TBE ACTING CHAIR %N: -- Arnold will be hare, 11 and you will have a right to put this question to them, 12 find out frora them. But at the moment -- 13 1R. B0iERS: $q : 1 I regret the time that this ic
.14 taking as well, but I would rem *nd the Comnission that I 15 offered to interrogate Mr. Arnold this morning on this 16 very subject, and I was told that Mr. Arnold was not tim 17 appropriato person.
18 m.' RUSSELL: Well, the question or the 19 proposed question was not put on the basis, t 20 The question was, Whom would be interrogate 21 with respect to the Petition, and we said Mr. Hafer is tle 22 one sino sponcered the Petition. If we had kncsn that thf.s 2.3 - was the line of questioning, ce wculd have been mere theti i 24 hnppy to tava it piccued with Mr. Arnold. 1 25 THE ACS:ING CHAIRMANI We can repair thct, B .
;. ' 7. ,. i g
, _ _ uoi4,. 4cs a u,nssic. inc. - 27 n. toc::wi: tow ave. - san.aiseuaa. ex. iviin 1640 315
narer/urance-rurtner cro::s 2 2.o-:
,i I
1 l Russell, l
' 2 Hl/ItHCSELL: Mr. Arnold will bo here. h 3 ; TE ACTING CFAIR)2R: And you, Mr. Bouers, 4 l will have an opportunity to put the question directly to him.
i 5 l ER.i BCi?ERS: Thank yco. 6 ' TE ACTnX; CF).IRMe.N: Am! to Mr. Diechamp. 7 Do yes have any further questions? 8 HR)E02ERS: 700, cir, I do. 9 i 10 (Transcript contitraen on next page.) i 11 l I 12
I '
CJ ! I 4> 14 i, 15 16 yn l 16 19 t 20 ' i l 21 ; I* 22 23 24 D 25i{ . noenuca c. uwmai.. eric. - n u. t.ecuwn.s.ow Ave. - mainuna ex. ima - 1640 316
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Hafer/Grahan-cross 419 t g y BY:MR. BORERS: l 1 2 4 Mr. Hafer, you testified on Monday that the 3 resumption of operation of TZE-1 would enable 1btropolitan l Edison to realize savings in its fuel costs of approximately 4 5 $5 million per month, am I correct in ny recollection? , 6 A (Hafer) I think it came up in a different context and it is somewhat time dependent. It would be about 7 8 $5 Milion a month differential over the first eight months p of 1980, the difference between a cne-month slippage, one-10 month acceleration as you get to the end of 1980 it is closer 11 to about $6 million, but if you want to talk in that range of - 12 five to six millten dollars for resumption of service versus 'h 13 unavailability, yas. , i T.{ . Q Su that that would be an accuratc estimate l 15 as of September 19807 16 A (Hafer) Yes. Keep in mind, Mr Bowers, that 17 this is a comparison. When we talk about the value of TMI or i gg the savings of having TMI come back, you always have to ask 19 the question, compared to what? ! 20 When we make those calculations we look at ; i 21 , a schedule that would have had TIE in service as normally l l 22 expected, as budgeted, if you will, vis-a-vis a schedule ; t ! 23 lthatdidnothaveitinservice, 24 Therefore, if in a particular nonth of tl.a ; 25 year we had budgeted that plant to cperate 100 percent at the MOM!tHACH O MARSHAL. INC. = 27 N. LOCKWILLOY/ AVE. = HAstRisDUttC, PA.17t IS
, a i, ,. .i-
- , , , , .m , - -
. - . . . .-.--w.,,#- m . . . - = , - ~
Hafer/Grnhameross 1;20 * ' time and now it is unavailable, the savings, if you will, g the differential of not having that plant versus having the 2 , t plant, is a very large rnmher. 3 If it happened to be a particular month where 4 the plant was scheduled for refueling, then the savings is 5 6 comething else. Now in the context of these discussions I 7 3 don't know that it is necessary to get into the detail of a p specific month and the number of hilowatt hours. 10 S what we have done is said that on averaFe s 11 taking into account that the plant will be out for maintenance g or out for refueling and so en and so forth, the fact that it . 13 runs greater immediately after refueling than late in the fue3 y cycle, on average the plant is worth about five or six million y dollars a month in savings, that is, the differential of 16 e sts when it is there versus when it is not there. 17 Q And those calculations are reflected in g Figure Ho, 2 for the last four months of 1980 and also in g hble No. 2 for the same period of time? 20 A (Hafer) Yes, savings of those magnitudes are 37 inherent in those determinations. The numbers would go up by y about that amount if the plant were not operatiing. 23 4 Would those amounts be cunnlative? ; b 24
, A (Hafer) Yes, they would.
g 25 Q So if I were talking about the additional l SJO!!RDACH O M.trtSMAL. IPfC. - st? N. LocKWILLow AVO= HA'tRISBURG, PA.17132 1640 318
M-- mi w - N,e m4-+mwee emula,m -e a-w =m e.-w---- --maen.e,mm. e, Hafer/ Graham-cross 421 energy cests that would be incurred if TMI-1 were not to be x available in October of 1980, I would add approximately ten 2 , to twelve mil' lion dollars to the amount you have listed in , 3 your Table 2. 4 A (Hafer) You said not available in October? Q Yes, in other wordu, two months beyond the , time your figures assumed it to be available. A (Hafer) Yes, two months slippage would be ; approximately $12 million great 3r. Q The incremental amount per month would be approximately five to six million dollars as time went along? 4.1 A (Hafer) That is right, It .is just about the . 12 ; s j g same. You know, it is one of the variableu 3 the equation. i You are absolutely right. Just as the timing of the granting [ 14 , of the increase in the clause is a variable. It so happens 3 15 t that the clippage of one month TMI is about equal to the : 16 i slippage of one month M granting of the clause.
- 17
, Q I understand. What I would like to request 18 cf you is for you to supply me and the Commission with a revised $'igure 2 on Table 2 reflecting the unavailability of 4
,0j, TMI-1 for the last four months of 1980,Would that be _.
21 i possible for you to do9 22 , 1 A (Hafer) It would be possible for me to do. f A I can tell you that in anticipation of this question, based i 24 on my reading of some cross-exanhtion yesterday, I have
-McHREACM & MARSHAL. IffC. = 27 IL LOCKWILLOW AVL = Halt 1HSBURG, PA.17112
/ c~ : -.. 1640 319
_x
_. 1. . _ ._ _ _ _ . _ _ _ _ _ ._ _ _ _ _ _ . . _ Hafer/ Graham-cross
!:22]
F 1 talmn a icok at what adjustments would be made to the last , e g four months in this year. I can toll you what to add to each! n ' of the months and put it in yourself. I 3 Q You can tell me that in testimony. I wor 16 i 4 - still like to have it in writing if I could. 5 A (Hafer) Fine. Q Do you wish to -- 7 A (Hafer) Would you like it both? Fy estimate I is that the energy costs for the month of September would be
$6 minion greater, October approximately $6.2 million 10 greater, cumulative therefore $12.2 million; November approxi-11 mately $6 million greater, cumlntive $18.2; and December O y aggreamate1r $6.4 mini = sreater than eh-n, cu=1ative e:
- the end of the period, $24.6 mil 11on.
Those numbers would then just be added tc. tne colum an Table 2 and a new line drawn on the figures. Q So that would result in a total short-term ' 17 debt of December of approximately $103 million? l IS ! A (Hafer) Which period are you looking at? I Q I was looking at the end of calendar 1980. 20 . A (Hafer) To the 78.4 mil 11on you would add ; 24.6, 22 I Q Which renu 1ts in a total of approximately
/N i 24 l $103 million?
A (Hafer) That is correct. Of all the variabib 25
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NONRDAC11 & MA'tSMAL. INC. = 5l7 N. LOCKWILLOW AVIL = HARR199URG, PA.171IS
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1640 320
Hafer/ Graham-cross 423 M y identified, which Mr. Grahrtm spoke about on Monday morning, j 2 considerable lag, if you adjus+. for only that one, that will 1 3 be the result, yes, sir. 4 Q rnat would be the change if all of the 5 additional relevant variables that you are aware of at this i 6 time were taken into account such as other fuel costs and j l 7 inflation? 8 A (Hafer) It would produce an almost infinite j p array of possibilities, Mr. Graham listad a variety of 10 variables such as insurance recoveries, both amounts and 11 timing, continued inflation, regulatory action, interest 12 costs, and it goes on and on. f 13 You know, we just have to use our best Judgmed: 14 about what the most likely course is. 15 Tais chart and the numbers I have just given 16 you, however, indicate that with the granting of the 7 mills, , 17 and the slippage in the return to service, the short-tert 18 debt tends to stabilize at about that line that we have 19 identified as the margin of safety line or the maximum level 20 , that we think is apprcpriate, would tend to flatten out rather 21 than tail dorm. 22 , Q Do you expect that line to continue on a l 23 relatively horizontal level into 1981 or is it impossible for l'
- you to --
24 25 A (Hafer) If this is the only adjustment that MOHR!IAcH O MAI1SHAL. INC. - T.7 N.1.CCKWII.: .# /.Y!*. - EARRIS3URG. PA.171(A l 610_32L -
- - . .- . . . . .-. ___. .~ . Hafer/ Graham-cross 4 21: 1 we make, it would indicate that that December mark, rather $' { 2 than uhere it is, will be up $25 million or two and a half 3 of the index marks, which produces a fairly flat result into 4 1981. 5 I have not examined what happens to 1t. , _if j 6 one keeps postulating that the plant is never returned to , f 7 service, but that there are no other adjustments made to the a other assumptions or variables, that energy costs continue to i 9 go up, energy sales to customers keep rising. 10 Q Mr. Hafer, on October 17th you submitted a i 11 response to a request for information as to Metropolitan l 12 Edison's financial capability given to you by the Nuclear j C' 13 Regulatory Commission. Are you generally familiar with the
! h j
14 contents of your response to their inquiry? ! 15 A (Hafer) Yes, I am, but let me say this to ! 16 you in all candor. I have to date supplied the NRC with just reams and reams of information, t 17 ig Q I understand. Let me try and refresh your 19 ' memory with respect to the specific rer ,onse that I am 20 interested in. 21
!E. RUSSELL: Are you referring to a specific:
22 written response? 23 11R. BCERS: Yes, sir, I am. , 24 IE. RUSSELL: Can you show the witness the i h 25 document and identify it, if you would. 310HREACH & MARSHAL. INC. ==.^7 N. LOCXWILLOW AviL - HARRfE3URG, PA 1711A
'640 322
Hafer/Grnhnm-cross 425 __
?
( 7 MR. BOWERS: Let me read to you the portions l 2 I am concerned about and I will provide you with a copy of it. 3 This is in response to the NRO staff's financial infor=ation 4 Request Ho 3 dated September 21, 1979 and it requests , 5 comp 3ation of an attached form entitled Pro Fort:a Sources of 6 Funds en a Monthly Basis Through the Month of Estimated , 7 Completion'of Long-Term P'odification -- to the reactor, I 8 assume -- and it says further, asks you to indicate the 9 assumptions upon which the sources of funds statement is f 10 based, and it is with regard to one of these assumptions 11 that I have a question. i 12 It goes on to request a brief explanation of I h- 13 the basis for each assumption. 14 On the next page under the heading Energy 1.5 Addustment Clause, you indicate 1dhat I understand to be an i 16 assumptico that Metropolitan Edison will realize as of Januar2l 17 1980 a $38 million increase in the amount recoverable under i i gg its energy adjustment clause. ' 19 Now would you like to see these? 20 MR. RUSSELL: Yes. Would you mark it for 21 identification in accordance with, I think, the procedure ; 22 described this morning? 23 i MR. BOWERS: Yes, this is HSK E::hibit No.14. 24 (HSK Exhibit No. 4 was produced and i , marked for identification.) 25
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BtOH121BACM & f,1AMSHAL. INC. - C' SL LCCK1Pf!Lt.CW AW.,- NARRISBU!tG, PA. 273 iA 1640 323
_ . -r__...... . - - - _ . - . . _ - . - - - _ _ _ _ - - - . _ - . . - - . - __ Ha^cr/ Graham-cross 426 * - g THE ACTING CHAIRMAN: Mr. Bowers, you are { g g going to provide us with copies? l 3 E . B C W E R S.: Yes, Your Honor. 4 THE WITETESS: Yes. BY MR. BOWERS: i 5 6 4 In my statement have I accurately reficcted i 7 the portions of the contents that I read te you? 8 A (Hafer) Well, I think you have, but that p will speak for itself when this is introduced in the record. i 10 There ic an assumption in this reroo me in f 11 prepardng the sources of funds statement for the NRC, we had ! I 12 included an assumption that there would be a $38 million O 13 increase effective January 1980 for Metropolitan. Edison if CompaD6r. That was included based on only three-quarters of l 15 the estimated increase in replacement energy costs as a . i 16 result of the slippage of TMI, and that that three-quarters
- 17 would be recovercble over an 18-month period.
ig It was put in for purposes of conservatisn 19 in order to demonstrate to the NRC what we thought would be 20 the most stringent financial restraints placed upon us during 21 the time that we would be attempting to modify and restart 22 the plant. That was the whole purpose for putting it togetherg 23 in that fashion. l b 24 I think it says that fairly clearly here. 25 It is by no way to indicate that that is the full cost of MOHRDACH O f.tARUHAt INC.= U N. LOCKWILLOW AVI:l ~ HARRICRURG, Pt.171la 1640 T24 7y %- e _ _ . _ _ - ,. --..-~..,.m,.~c m. - .. - - . . . . - -
Hafer/ Graham-cross 427
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energy nor is it to indicate that that was the current f re very f su h costs. In fact it explicitly says current l 2 . cost recovery of TMI replacement energy is not assumed. 3 {t Q I understand, but that 'infort::ation was suppliid 4 g to the Nuclear Regulatory Comminsion in the context of an endeavor to demonstrate to them that your comp my had the 6 { i financial capability of operating the TMI-1 nuclear power , 7 8 plant which was the basis for that inquiry, is that not I g correct? ! 10 MR. RUSSELL: Could we have the question U- again? 12 Bf MR. BOWERS: i 13 Q The information tnat you supplied them was ; 14 supplied by your company as part of an effort to demnnntrate ; i 15 to the NRC that your company had the financial capability ! i 16 to operate the TMI-1 nuclear power plant, would that be a ; I g7 correct statement? - gg A (Hafer) Well, it was supplied to the NRC i i gg in response to a specific request. I think if you look [ t 20 behind why the NRC bothers to ask these questions: certainly i 21 because they are cancerned on knowing that the company de an 22 have the financial capability under a given set of circunstandec 23 , which they hopefully will find reesonable to own, operate and maintain a nuclear power plant. That was the purpose for the 24 25 submission, yes, sir. l StOHR13ACH or MARSHAL. INC.= 27 PL LOCKWTLLOW AVIT.- HARRISBURG, PA.17512. i
- o. ,
1640 325
Hafer/ Graham-cross 428* i y That was prepared, also, based on cost data h g which is, I think, one step removed from what we now have, ! 3 so there have been some modifications. t Oil prices, while each time we prepare a 4 5 f re ast it is our best estimate, we think we have a reas:nc31ja 6 estimate of those, but things like the Iranian situation and I of other factors have so far made them almost impossible to get 8 ahold of, p Q Are you suggesting that the difference between.' 10 the $38 mf115cn indicated in that report and the $55 mt111on 4 11 increase in revenue requested in the petition for modification l 12 is attributable to the factor you Just mentioned, increase in O 13 oil cost? 14 A (Hafer) I am suggesting to you that there are 15 a whole variety of things which take place. What I indicated 16 was that the estimate that was used at the time we prepared 17 this response, I believe is an earlier estimate, in fact I am 18 almost certain is an earlier estimate than the most recent 19 one that was just completed by the company and which was used 20 in preparing this petition and the supporting documentation. 21 Tnerefore, there would be a variety of changes 22 which would have taken pis.cc between the two. 23 Q Would it be possible for you to supply us with 24 a copy of the computations and the assumptions made in arriving 25 at the figure that is in your submission to the NRC? MONREACH & MARSHAL. INC.= 27 N. LOCKW:1. LOW AVE l. - HARRIDEURG. PA.17113 1640 326
Hafer/ Graham-cross 429 1 8 g A (Hafer) I am having trouble with that becaust( 2 I don't know what you maan by it. The assunptions made vere 3 that the company would receivu 75 percent of the repincement , 4 power costs for TMI-2 amortized cnrer an 18-month. period cnd 5 that would translate into $38 million rmmmily, and that that l 6 would be effective January 1,1980. That was an assumption 7 made and it was an explicit assumption made and put into this i 8 response. . 9 Q Are those replacement power costs those 10 associated only with TMI-27 l 11 A (Hafer) No, those are replacement power ; l 12 costs associated with TMI-1 and 2 with the assumption that i G 13 TMI-1 would return to service 9/1/1980, which is als.o f 14 another explicit assumption in the response. 15 Q 1.ts it not your intention in mnkig that . 16 assuuption to demonst; rate to the HRC that that level of i 17 replace:ent poner cost reccmery would in fact provide you ! 1p l rith the finz.ncini capability to operate TMI-1?
~
i 19 A /(Hafer) I think all other things being equal, that i 20 is a fair statemnnt, yes, but it was done albeit at a bare 21 bones ninimm kind of estimte.. Q -I understand, idhat I am asking you for is 22 f 23 docunentatica as to the chargen in the underlying assuuptio7s - t' $ 24 or in the co.@utations which underlie the difference 'in that 25 amount and the enount that you are requestin.g in this motion NCPULDAC!i i!s f5A:titHAL. INC. - 27 N. LCCKWILLOW AVL = IIARRISEURC, PA.17111 -- t o .' 1640 327
.. ._w ..... . - . - - - - -.._ ---.._.- .-.. - . _ _ . - - . - _ . . . _ - . . - - - - - - Hafer/ Graham-c2Vss 430 l ( 1 for modification, h 2 A (Hafer) Well, Mr. Bowers; I will take a look J i 3 at what papers I have. You know, this amount, the estimates l
/, which were used to n:ake it up, has not been introduced into [
t 5 this case. Our best estimates of the cost of energy, ! 6 Metropolitan Edison Company, our best estimates of our j 7 capital requirements and our best estimates of the return 8 to service of TMI-1 are as they are filed in the petition and 9 as they are included. 10 Ever since March 28, 1979 we have been wora$ng 11 developing estimates and trying to recognize changing con-12 ditions, changing events, cost of money, cost of fuel, all 13 other kinds of things, and there have been a variety of such 14 estimates made, each time based on the best available inf ormat Lon. 15 4 I understand. I still think that would be 16 helpful to us. 17 A (Hafer) You see, there is no tie between the 18 two. 'lhe $38 m41uon has no relationship to the $55 million. 19 There is no way to reconcile the two. You merely produce a 20 whole array of Inimbers and say here it is. 21 Q I am not asking you to reconcile it. I tm 22 asking you to provide some indication why the two amountt are g.. 23 not -- t- m 24 A (Hafer) They are different. They were not F , 25 meant to be the same. That is my problem I cm having. There MOUftt2ACH 3 FEAMSMAL. FNC.= 27 N. LOCKVULLOW AE= HARR1InfURG. PA.17112 1640 328
Hafer/ Graham-cross 431 I g 1 is no reason why they should be the same. They were done for , completely different purposes. They were done before differer,i 2 ! commiscions. They were done at different points in time. ! 3 i; One does not purport to be the counterpart of another or the 4 . I logical following of another. 6 usht I had ye agmement, and W I did not you can correct me, that that assumption was made in the Context of an effort to demonstrate to the Nuclear Regulatory Commissicn that your con:pany had the financial 9 capability to operate the Three Mile Ishnd Unit 1 reactor without any undue sacrifices. l A (Hafer) I did not add that last part, but , d h 13 You were d ing fine up until then. , 6 Q Well, strike the last phrase. Am I correct l g in a understandbg? 15 A (Hafer) Sure, and I think, by the way, had f I chosen the assumption, that the increase would be 6.9 mills-17 ! and would have been $55 nmion per annum, consistent with i 18 i updated energy estimates, that it would have been just as l D ' f reasonable to assume that, albeit not quite as conservative, ) 20 i but I could have chosen that assumption as being within tim l; 21 band of reasonableness, and that is the problem I am having. One is not necestarily tied to the other or identified with : 2a,, . t f g the other as being an update. Q I understand. I don't see any point in
- McHMD ACH & MARSHAL. INC. - f.7 IL LCCKWELOW AVC - JEARRISBUMC. PA.178la 1640 329
Hafer/ Graham-cross l'32 1 pursuing this line of questioning any further, h
- 2. MR. BWERS: I have two questions of Mr. j 3 Graham.
)
i 4 THE WITNESS: (Graham) I was trying to find j i 5 something. I thought I could be of some help on the question l 6 Mr. Bowers was putting to Mr. Hafer. 7 I believe that the study that was done and l 8 submitted to the NRC in September was prior to the receipt ' 9 of the order to show cause, and I believe that it assumed I the ' 10 that Met-Ed's short-term debt could exceed /$125 minion ( t 11 supplement under the revolving credit agreement by some enounti. 12 I think that we did a study that had that O 13 short-term debt go up to about $135 minion, as I recan. 14 You will recall that the way we arrived at 15 the 6.9 nimms by looking at what we viewed as the top 16 level of short-term debt that was acceptable in order to 17 finance the system, finnnce Met-Ed, and that produces a somcwh Lt 18 different number. -' 19 I think in addition to the different assumptic is 20 l that are in there, that is a very significant difference in ! 21 the tuo studies that were done. 22 Bf IE!. BWERS: 23 Q Are you saying that this submiscion which is C' W 24 dated October 17th was the result of an earner investigation? h A (Graham) It was a study that was being done MOHf1Bf.CH a MAMSHAL. IFJC. *= R7 FL LOCKWn. LOW AVC - HARRISBURG. PA. T7188 -- 1640 330
_. t_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ -__ _. Hafer/ Graham-cross 433 i during September and it is the best information that we had-available at that time. I think the difference in the permittbd
?
,, top level of let-Ed's short-term debt between the two studies i is a significant factor that leads to the difference in the 1 4 3 5 assumption as to the energy clause b511hg that was set forth [
there and what is being requested here. 6 I 7 4 Your submission to the NRC did in fact ! 8 assume favorable rate treatment of some sort from this l i Commission, is that correct? l 9 10 A (Graham) Well, on your exhibit it explicitly l t gg says, one, that TMI-1 stays in base rates, which is very p, significant to the level of revenues of Metropolitan Edison , 6 13 Company, and two, that an annual wrease of $38 million ' e g would be permitted as of the 1st of Janna.7,1980. 15 You can either assume a different level of i i yg annual increasO or a different date to look at the effect 17 during the year 1980. A slippage of two months or three j m nths in the energy request here would produce a result. t 18 very similar to what is in that submission to the NRC. 19 20 Then there trere other differences as we 21 1 ked at it, changing oil prices, changing interest rates, , and a whole bunch of different changes that have occurred 3 23 during the fall. .. p 34 4 In your response to a question from Mr. 25 Barasch you modified the statement in this Co= mission's June j r McMRDACH & MARSHAL, INC. = ::7 N. LOCKW:LLcW Avr., = NARm3DU:tG, PA.17112 ! 1640 331
- -a - . . . . . . . -... -. .- Hafer/ Graham-cross g34 l
; l19th order by adding the words, prudently incurred to the i
2 fatatet:: ant, the Cchtsion is of the opinica that the recovery $ cf thre ecsts is required by 'Inv. 3 ]4 3 A (Graham) I did not do that, Mr. Bowers, I
. nr. Barasch asked r4 if I agreed trith his characterization of i
4 6 lthe Co:cnicsion's order and I added the word, prudently incurrep
- oa 5to his characterizaticn. I did not intend to change the I
g llangu::Lge in the Ccic.iscion's order. p ,
'IEE ACTIEG CHAIRMAN: Let ce reassure everybody i
10 }that the June 19th order trill not be tangered with but will 11 lrocain in the record an it was ordezed, so I want to put every '-
i 12 jbody's apprehensions at ease.
I 13 .BY h3. EC7ERS:
O g 1
4 Whnther or not we are tMking about a valid 4
i 13 modification to thic crder or not, let ne ask you this. You i 16 lused the phrcse, prudently incurred, in the context of an l 17 evaluation of your company's efforts to minir,4ze its energy 3e ccate over the relevant period of time, is that not correct?
l i
19 A (Grchan) Tnat is how I interpret the 1
20 jconission's orde'r of Jrna of this year. ,
i 21 j Q Is there, in your opinionj a basis in ~regulatc]l.'y i
22 cuthority for including within the notion of prudently incurreh t
23l circ 1; stances which initially caused the costs under question L
2.unants at this dockot utiliced are other than l i
g those ccntainsd in the partici listing herein above. ,
- 19) M AC M C M E We han a W.h cautions:
careful, concerned Corminnion trith concern for all of your ; 20[ ! 21 gr'y; hts, and ra have added this caveat. Pleece peruse th$n. on Tuccday monling when tre reemene the first order of i 22.s 5 23 fbusiness trill be the sdoption of this motion by the Co:FTdOEioL i e t 2e, lIfr. Barcsch? . i 25 E. BARASCH: Lir. Chsirnan, could I ask flie
. ... i \
MOMRR ACH G E1ADSNAL IMO. ~ 27 N. LOCKW1LLOW AVL - HARRISBURG. PA. 17812 I 1640 337
Va I court reporter to read back the additional caveat put-in shcre t 7, lby Cc:xtdssionar Shananan? I could not catch it that quic%1.y O 3 ; THE ACTIRG CHAIRliG: Yan cou1dn't catch it 4 lor warant t paying attention, which was it? t I S 18. EARASCH: Cculdn't catch it. I 6 THE ACTING CHAIREN: On that basis -- l
; i 7
l MR. RUSSELL: Is this on page 2 or page 3? 8 {i COIMSSIOUER SEANAMAN: Page 3 i 9 ! THE ACTIHG CIIAIRMAIn - we will ask the i i 10 jreporter to road back CmMncioner Shanaman's added mater!.al : 1 l 11 lto the last paragraph on pago 3 . I 12 i i (Tce follo:71rg was read by the reporter: O l 1 wou16 suggest that after the word, record, 4 14 l t there be inserted the fo11ctring phrase: subject 'ra 15
; providing the parties with proper notice if docuter.;r 16 ;
, at this document utilized are other than those 17 ,
cantained in the partial listing herein abwe. ) ; 18 , ' l i 19 (Discusttien cff the record,) 20 1 E. ITOSSELL: The word, record, appears at 21 tuo placea cn page 3. Is it et the very end of the paragrarn? 22 l CO?MSSIOliER SHAliAMAih At the very end of the i
.'G l paragraph, record a.nd period.
24 i TEE.1CTIEG CF. AIR EH: Change the period ta o b 25
}
lt-l cons. und than add. f tOHftOACH S SAARSHAL. SMC. ~ 27 M. f.CCXWEUDY/ AVE. - HAftstlSEURG. PA. 17112 -- - 1640 338
Mi A t (Discuscion off the record.) ! 1 2l 1 THE ACTIKG CHAIRIIAU: The reporter has 3 offered very genercusly to type it cat end have copies i 4 Ifor you, if you trm be at case, and there will be no 1cagar i 5 ' any need for further speculation as to what actun11y th$ 3 :es . 6 { There being no other business, Mr. Russcli -- 7 IG. RUSSELL: I would lihe to just identify 8 la . couple things for the Cc:riaissicn that are items of concern 9 ! to us from a hcusekeeping point of view and from the poist o' ' 10 ; view of meeting as best we can scn:e of the hearing schec h s l 1 5 11 !that are ahead. I 12 as you knew,., thic is a very accelerated I g 13 ! hearing schedule that is prsbably without precedent. We aro 14 t hcppy to cooperate in every way that we can. - 15 On Novenfber 10 at the first prehearing l i 16 conference we ina;.Adred as to whether base rate case preten;s- ! t 17 tions may be required and the answer was p s, they may. . 18 depending cn the first decision on the narrow issue of the I t 19 ' first order to show cause. I 4 I
. 20 i We suggested at that time a 1980 test year. i 21 We are still not in e position to go ahead with the base rnca 22 . case preparation. We Gen't know, of course, whether we arc 23 going to get to .thatz but ra can tr afford not to do it 'r?.cau;e 24i Tfnere we stand right now, unless we have a tsst year ide,Mf' E h 25 l that is going to be acceptable er.d agreeable, the likelibo~d l
eunu.cn a unsw me. - a r., tocm:u.ow m. - i4annissunc. wi. sviin I 1640 339
2H? 5 e
- 1 lof our having that base rate cc.se presentation, two of ti.m,
( 2 l fe both corpulies avai? dolo by tha middle of January is not T 3 !very great. l 4 i 1 So we ask that the Comission at the earlict t y {possible date rate a decision uith respoet to the test yow sc. , 6 fif nothing else, en a contingency basis we can proceed wi;h 7 the prenaration of these two base re.te case presentations. 8 ! Secondly, with respeet to the ruliogs that 9 j the Coninsion is going to be nmMng next week with respect 10 ito the prielty of treatment of the three proceedings that i
\
11 lueareinvolvedwithinthiscoacclidatedproceeding,weesi: ' 12 23:X1t the Ccscaission give como consideration, if it would, to 13 the order of proof., 14 We dcn't say that in tbs sense that we wil.1 15 not be prepared to proceed, if thb Cotatission wcnts us tc 16 prcceed first, but if we do 00, I think it would he without 17 prejudice to any views that we have as to who may have tha ' l 16 11rzrden of proof in these proceedings. 19 So we ask that the Comaission give som { 20'. consideration to the order of proof. . i
;;1 Tairdly, uith respect to the schedulinE cf {
22 ritnesses for next treek, E.t this point we have no idea who 23 lccunnel wot>2.d like to erer.c. - Inmine next week. If it is i i m 5$ (Egreeable with the Conniarion: tre vill consult with connec1. O ' 4) 33 ;1f possibic, rad work cut an crder of uitnecses that woule M I I uouRae.cw a tCAMDHA1 MC. - 27 T;.1.CCKW1U.OW AYC.
- MARMSBURG. PA. 17112 --- -
. 1640 340
A!;3 i i 1 ! agreeable to their preparation to crosseeim, and to i ry i
% 3 l to fill the next two days en that basic, if that'in satis fhett p?.
I 3 l THE ACTIH3 CHAIRME: Mr. Russell and lat.ies 4 f and gentlemen, with respect to your concern about sone of l 5 lthese questions, we have a prehearing order which this 6 iCemtncion wi?1 issue on Friday, which addresses itself to I 7 'some of the questions that you raise, partieninvly the test i 6 { year and sone of the other things, I hope all of them. 'Ihat 9 will issua on Friday at our regular public session. 10 l If ycu can get together with the other parties - I 11 land arrive at a oatisfactory sutcally agreeable conclusicn as . i 12 , to who shen 1d appear ne=t 'Ihesday and Wednesday, I want 3-:u 13 i all to know that ycu have the thanka and gratitude of the 14- Credr.sion for having done so, and we will accept your doitti l 15 > decision. 16 Are there any other questions? 17 l (No response.) l 18 l THE ACTING CHAIRMAN: Can we go off the 19 record for a a:or:ent? 20 (Discussion off the record.) 21 THE ACTIUG CHaIREH: We will a4journ this ' 22 session to be resumed Tuesday morning at 10:00 a.m. in this i I 2s lrooa. i
. 24 - - ~ ~ - -
8
..s <
(*a hearing was adjourned at 4:37 o' clock p.m.) 23 !
- MotGCACH c, 24AH3HAL. I:4C. - M IL LOCKWILt.OW AVE. - >:ARRISBURG. PA. 17112 --
1640 341 _
,. s i
(' Ih --c0o-- M E 2 t 3 I hereby certify that the proceedings and 4 gf evidence are contained fully and accurately in the notes O taken by me during the hearing of the within cauce, and t.v.i 0 ! this is a true end correct transcript of the same. i 7
)!
0 MOHRBACH & MARSHAL, INC. l I 9 : AO By h $/77/ l (/ JhlCS P. TW i ' ly 7', By DEBORAH K. HICKEY, @PR Ib - _ Li u{ l'A -l?r3R 14 :;
; (The foregoing certification of this transcript l
16": does not apply to any reproduction of the same by any meens .
.in
-' .' unienc under the direct control and/or supervision of the i
10 certifying reporter. ) i U i 1 All , 9 '
#1 ,I Nate es .
<*.* 1640 342 i.
15 4 fd3LCitAch & MA.' !*.AL,
- I'IC.-:.*III.1.CCXW11* SW AVL = !1%!iPJG11URG, PA.17182 -- -
e_ .
~~.,.--y -
s.
'. COMMONWEALTH OF PENNSYLVANIA PENNSYLVANIA PUBLIC UTILITY COMMISSION P. O. BOX 3265. H ARRISBURG. Pa.17120 December 7, 1979 IN REPLY PLEASE REFER TO OUR FILE I-79040308 William P. Thierfelder, Secretary Pennsylvania Public Utility Commission North Office Building
. Harrisburg, Pennsylvania 17120
_, Re: Pennsylvania Public Utility Commission v. Metropolitan Edison Company and Pennsylvania Electrie Company
Dear Secretary Thierfelder:
Enclosed please find the original and fourteen (14) copies of the Commission Trial Staff's " Comment on Companies' Proposed use of Calendar Year 1980 as the ' Test Year' for These Proceedings" and an original and fourteen (14) copies of" Answer of Commission Trial Staff to Companies' Motion For Severance or Special Treatment of Certain Parts of These Proceedings." Very truly yours,
$ g Joseph J., Malatesta, Jr.
Deputy Chief Counsel Enclosure JJM: pas cc: All Parties of Record 1640 343 y
/2lC 17
l BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PENNSYLVANIA PUBLIC UTILITY : COMMISSION :
- v. :
- Docket No. I-79040308 METROPOLITAN EDISON COMPANY :
3 and , PENNSYLVANIA ELECTRIC COMPANY : COMMISSION TRIAL STAFF'S COMMENT ON COMPANIES' PROPOSED USE OF CALENDAR YEAR 1980 AS THE " TEST YEAR" FOR THESE PROCEEDINGS In the proceedings that have transpired thus far, Metropolitan Edison Company (Meted) and Pennsylvania Electric Company (Penelec) have stated their intent to use calendar year 1980 as a " test year" for all data submitted relative to the treatment of the Companies' base rates. The Commission, in its Prehearing Order of November 29, 1979, directed all other parties, including the Commission Trial Staff (Staff), to file comments in response to the Companies' proposed use of Calendar Year 1980 for that purpose. The Staff has no objections to the Companies' pro ased use of calendar year 1980 as a Test Year in these proceedings. We believe that all of the Commission's decisions in these proceedings will have prospective 1640 344 1
-me. - - - - ,
implications, and that the use of prospective data to assist in those decisions is most compatible with the nature of these proceedings. Respectfully cubmitted, Q& Josdph J. Malatesta, Jf. Deputy Chief Counsel Albert W. Johnson, IIII Assistant Counsel For the PENNSYLVANIA PUBLIC UTILITY COMMISSION TRIAL STAFF Dated this 7th day of December, 1979 at Harrisburg, Pennsylvania 1640 345 5
-2 -
BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PENNSYLVANIA PUBLIC UTILITY : COMMISSION :
- Docket No.
- v. : I-79040308 METROPOLITAN EDISON COMPANY :
and : PENNSYLVANIA ELECTRIC COMPANY : m ANSWER OF COMMISSION TRIAL STAFF TO COMPANIES' MOTION FOR SEVERANCE OR SPECIAL TREATMENT OF CERTAIN PARTS OF THESE PROCEEDINGS NOW, this seventh day of December, 1979, the Commission Trial Staff (Staff) by its counsel answers the Motion of Metropolitan Edison Company (Met Ed) and Pennsylvania Electric Company (Penelec), described above, as follows: A. Request For A Severance, Or, In the Alternative, For Expedited Hearirg and Decision, Within the Present Consolidated Proceeding, on Met-Ed's Petition for Modification of Its Energy Clause Charge At Public Meeting of November 8, 1979, the Commission ordered the consolidation of three proceedings, including Met Ed's Petition for Modification of its "levelized" net energy clause. That consolidation was memorialized in the Commission's " Pre-hearing Order" of November 16, 1979. Met Ed's instant request for a severance or special treatment of its Petition for Modification,, therefore, is, in effect, a petition for
.. g
~
1640 346
reconsideration of the Commission's prior decision to consolidate Met Ed's Petition for Modification with the other two pheses of the Commission's instant proceedings. The Commission's decision to consolidate was a recognition that the future vitality of Met Ed as an electricity generating and distributing utility could not be adjudicated reasonably by a piecemeal process. That is, the Commission recognized that the development and implementation of methods to continue the financial vitality of Met Ed's
-operations must await a resolution of the threshold question of whether the continued financial vitality of Met Ed is a desirable and justifiable goal. The Staff respectfully submits that no ihtervening events have occurred which require a reconsideration of that initial recognition.
On the contrary, the Staff submits that any attempt to sever or to afford special treatment to any ratemaking aspect of the instant proceedings could place the Commission in an untenable position as the ultimate arbiters of the threshold question. If the Commission elects to allow Met Ed any form of rate relief prior to the Commission's resolution of the threshold question, the Commission no longer may be able t'o resolve objectively the threshold question, and actually may be estopped from resolving the threshold question in a manner adverse to Met Ed's interests. This would be true because the Commission already would have indicated its intent that Met Ed's ratepayers contribute additional money to the Company. Such an initial signal to Met Ed's ratepayers, and to +.he public in general, hardly could be followed by a Commission decision to revoke Met Ed's certificate of public convenience. On the other hand, g 1640 347
unless the Commission is willing to grant rate relief to Met Ed before the' Commission resolves the threshold question, there is no reason to sever Het Ed's Petition for Modification from the other two phases of these proceedings, and in particular, from the Commission's Rule to Show Cause why Met Ed's certificate of public convenience should not be revoked. The Staff submits, therefore, that the Commission's grant of Met Ed's Motion for Severance or Special Treatment of Met Ed's Petition for Modification would be a pre-determination of the threshold issue of chether Met Ed's certificate of public convenience should be revoked, and may be an irreversible pre-determination of that issue. B. Request That An Initial Decision Be Made As To Whether Three Mile Island Unit No. 1 ("TMI-1") Should Be Considered Used and Useful In the Public Service The Staff recognizes that the resolution of the financial implications of the removal of TMI-l from the rate bases of Met Ed and Penelee may require the development of a sophisticated evidentiary record. The Staff also recognizes that these proceedings would be simplified greatly by the preliminary rejection of the burden. The Staff submits, however, that the treatment of TMI-l cannot be resolved in a vacuum, or can it be resolved prior to the Commission's resolution of the threshold question in these procaadings, namely, whether Met Ed's certificate of public convenience sheuld be revoked. The reasons set forth in Part "A" of this Answer are equally applicable here and need not be repeated. 1640 348 , b In addition, however, the Staff submits that, regardless of the inconvenience, the develonment of a complete picture of Met Ed's financial condition is a necessary element of the resolution of the threshold question because both Met Ed's financial and operational abilities are the fulcrums upon which the threshold question rests. Without a complete picture of Met Ed's financial condition, the resolution of the threshold question might be reduced to a speculative process. And a question of such great and unprecedented magnitude should not be treated
, haphazardly.
WHEREFORE, the Commission Trial Staff prays that the Pennsylvania Public Utility Commission deny the Motion of Metropolitan Edison Company and Pennsylvania Electric Company for. Severance or Special Treatment of Certain Parts of These Proceedings. Respectfully submitted, t p tIThlBiR ?- Joseph J. Malatesta, Jr. ' Deputy Chief Counsel b M ~ Albert W. Johnson, III Assistant Counsel PENNSYLVANIA PUBLIC UTILITY COMMISSION Dated this 7th day of December, 1979 1640 349 Harrisburg, Pennsylvania c s' ' Person Responsible for Preparation: F. D. Hafern Vice President-Rate Case Management, GPU Service Co_rg. Telephone: (201) 263-6013 Date: December 2_0, 1979 Page 1 of 2 GENERAL PUBLIC UTILITIES CORPORATION Metropolitan Edison Company, Pennsylvania Electric Company and Jersey Central Power & Light Company NRC Docket No. 50-289 Three Mile Island Unit No. 1 Restart P roc ee_d in g Response to NRC Staff's Supplemental Financial Information Request No. 10, telecopied 11/9/79 (item numbers refer to initial requests dated 9/21/79):
"(10.b and 10.c) Subsequent to our September 21, 1979 request, it was reported (Newark Star-Ledger, November 3,1979, p. 6) that the New Jersey Board of Public Utilities (NJBPU) is studying alternatives to JCP&L's franchise, including a poss-ible transfer of the franchise to another authority. Provide any information available to JCP&L regarding the scope of the study alternatives to be considered and target date for the report. Provide copies of any related NJBPU orders and direc-tives and any JCP&L responses thereto."
Response
As noted in our initial response to this request dated 11/26/79, the NJBPU scheduled an informal conference to provide consultants interested in perform-ing the "GPU/JCP&L policy options study" with background information on Jersey Central and GPU (see the NJBPU's letter to prospective consultants dated 11/21/79 that was enclosed with our initial response dated 11/26/79). The conference was held on 12/13/79 at the NJBPU's offices in Newark. At that conference, Jersey Central and GPU officials made several oral presentations and distributed two booklets containing material employed in the presentations (Book 1), and background material providing financial information on Jersey Central and GPU,and information on the status of the TMI units (Book 2). Copies of this material, as well as a list of conference attendees, are accordingly attached. Once again, it should be noted that the NJBPU has not at this time in-stituted a formal proceeding to study alternative means of supplying Jersey Central's service territory (i.e., it has issued no orders instituting such a proceeding), but the Board did indicate at the 12/13/79 conference that it believed the policy options study would ultimately be incorporated in a formal proceeding, most probably Docket Ka. 795-427, Jersey Central's rate proceeding begun on 5/20/79. I640 350 m
e Page 2 of 2 Although inactive at the moment, this proceeding has been held open to deal with various matters relating to the TMI-2 accident (see responses to Financial Information Request No. 10-(c) dated 10/15/79 and 10/19/79). In conclusion, the scope and schedule for completion of the policy options study remain essentially unchanged from the scope and schedule outlined in the Board's 11/21/79 letter. 1640 351
JERSEY CENTRAL POWER & LIGHT COMPANY PRESENTATION BEFORE THE NJBPU DECEMBER 13, 1979 NAME REPRESENTING ADDRESS Linda Killian Resource Planning Associates Washington, D. C. Dr. Roy Shanker Dudley Andersen SRI International Menlo Park, CA Victor L. Andrews EBA Associates Atlanta, Ga. Alan Schoor Gordian Associates New York, NY Thomas Wind A. T. Kearney C. Gitzendanner Philadelphia, Pa. Robert M. Spann ICF Incorporated Washington, D.C. Priscilla Hayes NJPIRC Trenton Edward Lloyd " " Menasha J. Tausner NJ Public Advocate Newark Alfred L. Nardelli Edward A. Payne Woodside Assoc. Stamford, Conn. Thomas G. Knudsen David Waters Attorney - NJDOE Jersey City, NJ Dolores M. Delabar Attorney - Kirsten, Friedman & Newark Cherin M. A. Crew Rutgers University Newark Jan Acton Rand Corp. Santa Monica, CA Douglas N. Jones National Regulatory Research Inst. Ohio State Univ. 2130 Neil Ave. Columbus, Ohio Richard L. Stoddard State Treasurer State House, Trenton Ben Fogel Cresap, McCornick & Paget New York, NY Robert Wayland Temple, Barker & Sloane Lexington, Mass. Earl Hunt GPU Service Corp. Parsippany, NJ Dave Roberts Philip Doherty Theodore Barry & Assoc. . New York, NY Perry Wheaton James M. Hogan Samuel b. Laird Jersey Central P&L Morristown, NJ William W. L. Lee Univ. of Pennsylvania Philadelphia, Pa. Steve Feldman Lou Carter . Roger Ibbotson Univ, of Chicago Chicago, Ill. Larry Siegel Bruce Pittenger Cresap, McCormick & Paget New York, NY Alvin Kaufman NRRI - OSU Columbus, Ohio Steve Ross MRR, Inc. New Haven, Conn. Edwin M. Kinderman SRI International Menlo Park, CA Michael A. Viren Criterion Dallas, Texas 1640 352
Jersey Central Power & Light Company Presentation before the New Jersey Board of Public Utilities Book 1 Presentations before the Board December 13,1979
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JERSEY CENTRAL POWER & LIGHT COMPANY Presentation Before the New Jersey Board of Public Utilities December 13, 1979 Opening Statement by President Bartnoff My name is Shepard Bartnoff. I am President of Jersey Central Power & Light Company, a position I have held since September 1972. Prior to that, I was Director of Environmental Af fairs for the GPU Service Corporation. My purpose today is to present a brief overview of Jersey Central Power & Light Company including a short history, a description of our service area, our growth patterns both past and projected, a review of. some of our accomplishments, and a brief update on the TMI situation. My presentation will be followed by presentations by Marvin Raber, Manager of Forecasting and Supply Planning, of the GPU Service Corporation, who will address our ability to serve the electricity needs of our customers and our service area; by Dennis Baldassari, JCP&L's Secretary-Treasurer, who will address our overall financial situation; and, finally, by Fred D. Hafer, Vice President of Rate Case Management for the GPU Service Corporation, who will discuss the cost of service to our custo-mers, particularly as those costs have been influenced by the accident at Three Mile Island Unit 2 on March 28 of this year. The present Jersey Central Power & Light Company was in-corporated in 1925 and, as is the case with many electric utili-ties, was an amalgam of many smaller companies which dated back to before the turn of the century. Ten years earlier, in 1915, 1640 355
New Jersey Power & Light Company was incorporated. In the late 1930's, these two companies became part of what is now the GPU System, and in 1973, New Jersey Power & Light Company was for-mally merged into JCP&L to form the Company as it exists today. From 1956 until the merger in 1973, these two companies, while corporately separate, operated as a single company. Our general of fice is located on Madison Avenue at Punch Bowl Road in Morristown. We have 22 operating districts and 14 business offices strategically located throughout our service area. Our principal base load generating station is our Oyster Creek Nuclear Station located in Lacey Township. In addition, we own a 25 percent share in the Three Mile Island Station, which I will get to a little later, and a 16 percent share in the Keystone Minemouth coal-fired Generating Station in Western Pennsylvania. We also own and operate three oil-fired stations in Sayreville, South Amboy, and Holland Township; half of the Yards Creek Pumped Storage Station in Blairstown; and 25 combustion turbine units, which we use primarily for peaking purposes. Of the electricity generated by JCP&L in 1978, 56 percent came from nuclear: 26 percent from oil; 16 percent from coal; and 2 percent from gas and hydro. Of our total net system requirements in 1978, 37 percent was generated with nuclear energy; 11 percent with coal; 18 percent with oil; and 3 4 percent was received from purchased 1640 356
power, primarily economy interchange from the Pennsylvania-New Jersey-Maryland Interconnection (PJM). At present, JCP&L serves 693,000 customers--an increase of 63,000 since lf74. Our present customer mix is as follows: residential, 621,000; commercial, 68,000; industrial, 3,000; and other, 1,000. JCP&L serves 43 percent of the land area of the state. Our territory comprises the northwestern portion of the state as well as the seashore area from the Raritan River south to Barnegat and inland to the Jamesburg-Hightstown areas. JCP&L serves all or part of 13 counties which includes 231 communities, 5 municipal-owned electric utilities, and 1 rural electric cooperative. Our service territory is largely suburban and rural. By contrast, Public Service Electric and Gas Company, the largest electric utility in the state, serves 1,700,000 c ustomers located in the heavily industrialized sections of New Jersey. The other major electric company serving New Jersey, Atlantic Electric Company, serves the southern portion of New Jersey and its territory is somewhat similar in demographics to our own. Atlantic Electric's recent significant growth is partly a result of casino gambling which has been legalized in Atlantic City. In terms of customers, JCP&L is the fastest growing utility in New Jersey and the Ocean County area is among the fastest growing areas in the entire United States. 1640 357
4-As I mentioned earlier, JCP&L is a member of the General Public Utilities System, the 14th largest electric utility system in the United States serving 1.5 million customers in New Jersey and Pennsylvania. Other operating member companies of the GPU System are Metropolitan Edison Company with headquarters in Read ing, Pennsylvania, and Pennsylvania Electric Company with headquarters in Johnstown. Of the three GPU companies, JCP&L with its 693,000 customers is the largest. Pennsylvania Electric follows with just over 500,000 customers. Metropolitan Edison Company serves about 360,000 customers. JCP&L has about 3,600 employees; Pennsylvania Electric, about 4,300; and Metropolitan Edison Company, about 2 800 employees. Over the years, Jersey Central Power & Light Company has earned a reputation as a pioneer in the electric utility industry going back to the 1940's when we installed the first cyclone boilers east of the Mississippi River. We also pioneered in the development of nuclear energy as a participant first in the Saxton Nuclear Experimental Reactor in Pennsylvania and later with the construction of the Oyster Creek Station. The Oyster Creek Station and the economic analysis which led to its construction are significant events in the nuclear industry in this country. It was the economic analysis for Oyster Creek which indicated that electricity generated with nuclear energy would be economically competitive with electricity generated from fossil fuels, an indication that has been borne out after ten years of operation of the station. 1640 358
From the time it entered commercial operation in December 1969, the Oyster Creek Station has produced more than 36 billion kilowatt-ho-;s of electricity at a fuel cost savings to our cus-tomers, over what the cost would have been had that electricity been produced at an oil-fired station, of over $500 million and a savings of more than 2.6 billion gallons of oil. Last year, Oyster Creek alone produced about 40 percent of the electricity generated by JCP&L. We also participated with the other GPU companies in the development of extra high voltage transmission and the construc-tion of minemouth coal generating units. With Public Service - Electric and Gas Company, we built the first reversible punped storage unit in the eastern United States. It was that station, incidentally, that has contributed to our reliability of service. For example, when New Jersey was struck with a major blackout in 1966, it was the Yards Creek Station which enabled us to restore service to our customers quickly by providing cranking power to cet our oil-fired stations back in service. Another major contribution to the electric utility industry made by JCP&L was the demonstration in 1961 of the feasibility of burning coal slurry, a mixture of coal and water which could be shipped by pipeline from the mine to a generating station. That demonstration, which was conducted at our E. H. Werner Station, was made in the face of rising coal transportation costs and was largely instrumental in the initiation of the unit train concept by the nation's railroads. The unit train 1640 359
concept since that time has been expanded and has played a major role in keeping coal transportation costs down. In describing JCP&L and its record of service to its custo-mers, I would like to refer to remarks made by John Feehan}}