ML19261B922
| ML19261B922 | |
| Person / Time | |
|---|---|
| Site: | Skagit |
| Issue date: | 02/15/1979 |
| From: | Swanson D NRC OFFICE OF THE EXECUTIVE LEGAL DIRECTOR (OELD) |
| To: | Leed R LEED, R.M. |
| Shared Package | |
| ML19261B923 | List: |
| References | |
| NUDOCS 7903070545 | |
| Download: ML19261B922 (15) | |
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/pn atogb UNITED STATES
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7 Roger M. Leed, Esq.
m 1411 Fourth Avenue Seattle, Washington 98273 In the Matter of Puget Sound Power & Light Company, et al.
(Skagit Nuc1 car Power Project, Units 1 and 2)
Docket Nos. STN 50-522 and STN 50-523
Dear Mr. Leed:
Enclosed are the NRC Staff's responses to your Interrogatories to the Staff dated January 9, 1979.
Some of the material referenced in the responses is attached to them and some. material was already provided to you in previous correspondence.
Some material which is referenced in Response to Interrogatory No. 2 was submitted to the Staff as part of the Pebble Springs docket and was not sent to you.
It is too bulky to economically duplicate and send to you.
However, it is being made available for inspection and copying pursuant to 10 CFR a2.790(a) at the Commission's Public Document Room here in Washington, D.C. and will also be made available at the Local Public Document Room tor the Skagit proceeding at the Sedro Wooley Library located in Sedro Wooley, Washington.
In addition, I am seeking to determine whether a copy of this material is available at the law offices of Perkins, Cole, Stone, Olsen & Williams which would also be available for your use.
I will inform you if such an arrangement can be made.
Sinterely, f
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niel T.VSwanson f/
Counsel for NRC Staff
Enclosures:
As Stated ec w/Affidasits & Enclosures Mr. Lloyd K. Marbet F. Theodore Thomsen cc w/ Affidavits Remainder of Service List 79O3070Syf
UNITED STATES OF AMERICA NUCLEAR REGULATORY C0!EISSION BEFORE THE ATOMIC SAFETY AND LICENS! fig BOARD In the Matter of.
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PUGET SOUND POWER AND LIGHT
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Docket Nos. 50-522 COMPANY, ET AL.,
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and 50-523
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(Skagit Nuclear Power Project
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Units 1 and 2)
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AFFIDAVIT OF LOUIS GITTLEMAN Louis Gittleman deposes and says under oath as follows:
I am a Financial Analyst in the Division of Project Management, 1.
U. S. Nuclear Regulatory Comission.
I am responsible for conducting the financial analysis to determine the financial qualifications of Puget Sound Power and Light Company, et al., to construct and operate the Skagit Nuclear Power Project, Units 1 and 2.
The answers to interrogatories 1 and 2 were prepared by me or under my 2.
I hereby certify that the answers given are true and accurate supervision.
to the best of my knowledge, Y$f 4
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Louis Gittleman Subscribed and sworn to before me this tyTsday of feggunRy)g79 N(
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ANSWERS TO INTERROGATORIES 1 AND 2 SKAGIT NUCLEAR POWER PROJECT, UNITS 1 AND 2 The following is the staff's response to the intervenors' interrogatories and request for production.
Interrocatory No. 1 "Please describe all material referred to in the following sentence appearing on page 20-1, paragraph 20.1, of Supplement No.1, to the ' Safety Evaluation Report Related to Construction of Skagit Nuclear Power Project, Units 1 and 2' dated October, 1978:
' Applicants have submitted financial information in support of their Application.'"
The following material was submitted by the applicants in support of their application for permits in letters dated October 10, 1977, and May 4, 1978.
1.
The most recent cost estimate for each unit grouped as follows:
(a) total nuclear production plant costs; (b) transmission, distribution, and general plant costs; and (c) nuclear fuel inventory cost for the first core.
The cost estimates in dollars escalated through the year of con-struction completion. Also, the attached schedule entitled " Plant Capital Investment Surnary", for each unit using the most recent cost estimates.
The estimated site labor requirements expressed as " man-hours kWe."
The average site labor pay rate in dollars per hour (including fringe benefits) effective at month and year of NSSS purchase.
The estimated month and year of construction start for each unit and the earliest and latest estimated dates for completion of construction of each unit.
A brief description of the manner in which the applicant plans to finance the acquisition of nuclear fuel.
2.
Copies of any revisions to the preliminary agreement among the co-owners (dated January 23,1976) that was submitted with Amendment No. 2 to the license application. Copies of the " Project Ownership Agreement" that was referred to therein.
3.
The following information was required from ea-h applicant:
a.
The schedule entitled, " Sources of Funds for System-Wide Construction Expenditures During Period of Construction of Subject Nuclear Power Plant", through the year of earliest estimated completion of the second unit, including the assumptions upon which the " Sources of Funds" statement is based.
These assumptions include, but are not necessarily limited to:
(a) rate of return on average common stock equity, (b) preferred stock dividend rate, (c) Icng-term and short-term interest rates, (d) market / book ratio with respect to the pro-jected common stock offerings, (e) common stock dividend payout ratio,
. (f) target capital structure, (g) resultant SEC and indenture interest coverages over the period of construction, and (h) annual growth rate in kWh sales and price per kWh.
b.
Copies of the 1978 first quarter (and second quarter, when available) income and retained earnings statements and balance sheet.
The same statements for the most recent 12-month period. Also, copies of similar statements for the corresponding periods ended in the previous year.
c.
Copies of the prospectus for the Company's most recent security issue and copies of the preliminary prospectus for any pending security issue. Copies of the 1977 Annual Report to Stockholders and the 1977 SEC Form 10-K.
d.
Copies of the most recent Officer's Certificate or Net Earnings Certificate prepared in conjunction with the issuance of mortgage bonds or debentures and showing interest coverage calculations using the tests set forth in the applicable indenture. An explanation of bondable property addition provisions as they relate to restrictions on the issuance of new long-term debt.
Copies of the portions of the indenture relating to interest coverage tests or alternative earnings tests and bondable property additions.
Calculations of net earnings and interest coverage, as defined in the mortgage bond in-denture, on debt presently outstanding for the most recent 12-month period using the most restrictive bond indenture test. Assuming a range of interest rates considered realistic by the utility, a state-ment of the additional amount of first mortgage bonds which could be issued under the most restrictive test based on net earnings, as de-fined by the indenture, for the most recent 12-month period.
e.
Copies of the portion of the charter containing a preferred stock coverage requirement. Assuming a range of dividend yields considered realistic by the utility, a statement indicating additional amount of preferred stock that could be issued by applying the most restrictive test for preferred dividend coverage for the most recent 12-month period.
f.
A detailed explanation of all other restrictions or constraints on the issuance of short-and long-term debt, preferred stock, preference stcck and common stock. Also short-term debt, including bank lines of credit and commercial paper, if any, and compensating balance requirements for bank loans.
g.
A description of the nature and amount of the Company's most recent rate relief action and the anticipated effect on revenues.
Copies of the rate order and opinion. Also the nature and amount of any pending rate relief action (s).
. A description of the aspects of the company's regulatory environment including, but not necessarily limited to, the following:
prescribed treatment of allowance for funds used during construction and of con-struction work in progress (indicate percentage and amount included in rate base); form of rate base (original cost, fair value, other);
accounting for deferred inccme. taxes and investment tax credits; and fuel adjustment clauses in effect or proposed.
h.
A list of generating units, transmission and distribution facilities and general plant projects to be constructed during the period of construction of the subject nuclear power plant, showing the type of facility, net capacity of each generating unit, the dollar amounts to be expended for each facility during each of the years involved, and in-service date of each facility.
- i. The completed form entitled, " Financial Statistics", for the most recent 12-month period and for the years ended December 31, 1977 and December 31, 1976.
Additionally, a copy of a rate order of the Idaho Public Utilities Commission dealing with Washington Water Power Company was requested and submitted by the applicants. This order was requested to assure the NRC Staff that it was reviewing the most recent financial developments in conducting our review of the applicants' financial qualifications.
Interrogatory No. 2 "Please describe specificall, _.' computations, analyses, work sheets, and other documents prepared or u.ilized by staff in conr.ection with preparing the information reflected in Section 20.1, ' Financial Qualifi-cations', in the ' Safety Evaluation Report Related to Construction of Skagit Nuclear Power Project, Units 1 and 2', Supplement No.1, October, 1978, other than documents described in your answer to Interrogatory No. 1."
The information submitted by the applicants is reviewed against criteria set forth below.
Staff utilitizes the Seabrook decision [Public Service Company of New Hampshire, et al., (Seabrook Station, Units 1 and 2),
CLI-78-1 (1978)] for guidance.
Computations are basically performed by the applicants and are embodied in the information submittal.
Our analysis focuses on the Sources and Uses of Funds schedule and the reason-ableness of the projections and their underlying assumptions. An independent revicw of the underlying assunptions measures the applicants' financial qual-ifications in relation to similar utilities. We do not consider these pro-jections as a forecast of what will actually occur. Rather, these projections should demonstrate one possible way by which future construction projects, including the subject facility, might reasonably be financed.
The Federal Energy Regulatory Commission Annual Reports, Public Utilities Fortnightly,
Moody's Investors Service, Standard and Poors Outlook, Moody's Public Utilities Reports, Valueline Investment Service, The Wall Street Journal, and the Utility Industry Survey - Dean Witter Reynolds, Inc. are utilized as sources of information in making the independent review.
In assessing the financial qualifications of an applicant to design and con-struct a nuclear facility, we consider the size of the applicant's construction program, including the subject facility, and the expected sources of funds to Our analysis assumes that.
meet these anticipated construction expenditures.
there will be a rational regulatory climate with respect to the setting of The former assumption rates and that viable capital markets will exist.
implies that rates will be set to at least cover the cost of service, in-cluding the cost of capital; the latter assumption implies that capital will be available at some price.
Basically, the ability of an applicant to finance a construction program over a future period is a function of a number of variables, the most important of Profitability (return on common equity) which is the level of profitability.
can be assessed by referring to the return a company earns on the capital it employs in its business and comparing it to the return a company earns else-All other things being equal, the return on common where in the economy.
The return on equity is the best indication of a company's profitability.
common equity will also have an effe. on the level of interest and dividend We normally judge the level of interest coverages in relationship coverages.
These coverages, in turn, will significantly affect to industry coverages.
the ratings assigned to a company's senior securities by the principal rating agencies and consequently the price demanded by the marketplace to buy these Finally, the return on common equity affects the level of inter-securities.
nally generated funds through its impact on retained earnings, although one should keep in mind that the primary source of internally generated funds is depreciation and to a lesser extent, deferred taxes.
Although a reasonable rate of return might be characterized as the most sig-nificant variable, it needs to be coupled with a reasonably balanced capital structure or there can be no reasonable assurance that the senior securities For this reason we judge the applicant's capital struc-will be marketable.
ture in relationship to the range of the industry average for debt (50% - 60%),
preferred stock (10% - 15%) and common stock (30% - 40%).
It was primarily the approach set forth above that led us to conclude that the That is, the applicants' projections were within the " zone of reasonableness".
projections were within certain ranges of industry performance and are in accord with industry practices, and asstaptions being used, although not susceptible to precise measurement against absolute criteria, are not out In short,
of line with what one might expect under postulated conditions.
the financing projections constitute reasonable financing plans which, in turn, will satisfy the reasonable assurance standard.
. Request for Production "Please produce for inspection and copying answers to the foregoing interrogatories Nosat the o
. I and 2."ments described in your Copies of the materials referenced in respon are not being prayided as requested.
All material referenced in response to interrogatory No. I was attached to letter Commission; copies of which were sent to you197 s dated October 10, 1977 o the Nuclear Regulatoryand May 4, mitted by a letter dated May 5,1978 from Portl Additional information was sub-to the Nu' lear Regulatory Commission in the P bbland General Elec (Docket Nos. 50-514 and 50-515).
e The Portland General Electric Companye S for Portland General Electric Ccmpanysubmittal incorp Puget Sound Power and Light Company on for the year 1977
, Pacific Power and Light Company and Interrogatory No. 2 was attached to the corr Material referenced in respanse to Room located at 1717 H Street, N. W. copies of which were espondence which was noted above, will be made available at the Local Public Docum, D. C.n the Public Do
, Washington located at the Sedro Wooley Library, Sedro Wooleent Room for t In addition material copy of the rate order by the Idaho Public Utiliti y, Washington. Finally, a Washington Water Power Compc1y Rate Case N es Commission in the No worksheets or additional data were utilio. U-1008-l zed in performing this analysis.
UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSICil Before The Atomic Safety and Licensina Board In the matter of
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Puget Sound Power and Light Company )
Docket Nos. STN 50-522
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50-523 (Skagit Nuclear Power Plant,
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Units Nos. 1 and 2).
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AFFIDAVIT OF R: CHARD P. DENISE Richard P. Denise deposes and says under oath as follows:
1.
I am the Assistant Director for Site Technology, Divison of Site Safety and Environmental Analysis of the Nuclear Regulatory Commission.
2.
By memorandum dated February 2,1979, I requested the USGS to rrTLnd to Interrogatories 3, 4, and 5, and Request for Production in11uded in "INTERVEN0R'S INTERROGATORIES AND REQUEST FOR
'.] DUCTION TO NRC STAFF DATED JANUAPY 9, 1979". A copy of this request is enclosed.
3.
By memorandum dated February 7,1979, Robert H. Morris to Richard P. Denise, the USQ, responded to this request. A copy of the response is enclosed.
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Richard P. De'aise Subscrit ad and sworn to and before me this Q
day of February,1979
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1-i Notary Public
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Mv Comm'ssion E i e,
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