ML19275A608

Comments on Intervenor Seacoast Anti-Pollution League 791002 Ltr to NRC Re License Amend & Request for Show Cause Order. No Conflict Between Rj Harrison 790806 Testimony & Util 790925 Prospectus.W/Supporting Documentation

ML19275A608
Person / Time
Site:	Seabrook
Issue date:	10/05/1979
From:	Ritsher J ROPES & GRAY
To:	Harold Denton Office of Nuclear Reactor Regulation
References
NUDOCS 7910100246
Download: ML19275A608 (12)

Text

e g 1 ROPES & GRAY 225 FRANKLIN STREET BOSTON O2110 CasLC *DoeE55 RCPGR ALCR anta coot 617 423-6 00 TC 6E n eevens t m 940 5:9 October 5, 1979 Harold R. Denton, Director Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D. C. 20555 Re: Public Service Company of New Hampshire, Seabrook Station, Docket Nos. 50 443 and 50-444

Dear Mr. Denton:

I am in receipt of the letter dated October 2, 1979 to you from Mr. Backus, counsel to the Seacoast Anti-Pollution League. I believe that the " assistance [thereby proffered] to you in evaluating the issues raised by the License Amendment and by the Request for a Show Cause Order" should be put in some perspective.

The letter essentially raises four points: (1) an alleged conflict between testimony delivered on August 6, 1979 by Mr. Harrison, Financial Vice President of Public Service Company of New Hampshire, and statements in the recent prospectus issued by the Company; (2) a suggestion that the lack of interest in purchasing the Company's owner-ship interest in Pilgrim No. 2 was material to the matters before the Commission staff; (3) an argument that the deferral of payment of certain liabilities creates a "significant hazards consideration"; and (4) an argument that a potential fuel financing arrangement creates both licensing and "signi-ficant hazards consideration" issues.

As to the first point, it is essential that the excerpts from the August 6 testimony and the September 25 prospectus supplement be put in proper context to demonstrate that the alleged conflict is more apparent than real. It is important te recognize that the August 6 hearing was held at a time when the uncertainties of the CWIP issue were still beclouding the /

revenue prospects of the Company which in turn affected its 3 e access to external financing and that the hearing was called s 7910100 E G

ropes & GRAY Harold R. Denton, Director October 5, 1979 because the New Hampshire Public Utilities Commission's July 27, 1979 order failed to approve in toto the Company's proposed disposition of 225 of the Seabrook project, a progasal which had been designed to resolve the cash flow problems threatened by the then imminent loss of CWIP. I enclose for your informa-tion a copy of the opening testimony by Mr. Harrison at that hearing which clearly explains the time and financial constraints which then prevailed and also a copy of a letter dated October 2, 1979 filed with the New Hampshire Public Utilities Commission by the Company's New Hampshire counsel which explains the con-text of the August testimony and the subsequent events which have altered the Company's position.

With respect to this point I would add only that the initial quotation from the Harrison testimony in Mr. Backus's letter is unfortunately out of context. The question posed was "If the Conpany delayed Seabrook Two could the Company retain a larger share of the plant?" (Tr., p. 89) The answer was "Yes.' The practical answer is that there is no time to decide and implement some other plan, involving deferral of Seabrook Two, even though such deferral could theoretically allow the Company to keep a greater per cent of ownership." (Tr., p. 90)

The time frame to which Mr. Harrison was referring was the pressure at that time from the financing bankers which he had referred to in his opening remarks. (See Tr,., p. 11, enclosed.)

As to the second point, Mr. Backus combines material from pages 15 and 83 of the August 6 hearing to imply that disposi-tion of interests in Pilgrim 2 and Millstone 3 are essential prerequisites to completing the 22% transaction in Seabrook.

The Seventh Amendment to the Seabrook Joint Ownership Agreement is absolutely clear that no such precondition exists.

As to the third point, since the Commission's Memorandum and Order, dated January 6, 1978, in this proceeding (7 NRC 1 (1978)) concluded that there was no demonstrated direct connec-tion between financial qualifications and safety, it should be absolutely clear that any temporary deferral of a construction obligation, particularly when the parties have concurred in such deferral, cannot constitute a "significant hazards con-sideration".

Finally, the fourt point must be recognized a foundation-less, diversionary issue with respect to unrelated, and as yet still merely contemplated, potential nuclear fuel financing transactions. The Commission's Regulaticns (10 CFR $ 70.20) contain a general license to receive title to and own special nuclear material without regard to quantity. The acquisition of such material for ultimate use in the Seatrook units and

Ropts & GRAY Harold R. Denton, Director October 5, 1979 the financing thereof is unquestionably within the scope of such general license. It does not now, and will not if and when consummated, conceivably raise a "significant hasards consideration" as suggested by fir. Backus.

The Company expects to file in the near future a further supplement to its pending Amendment No. 40 to the License Application to update the stat.us of the proposed transfers described therein.

Very truly yours,

• [

Jo d A. Ritsher JAR:vnl Enclosures

)

cc: All Parties on Service List

Copies to:

E. Tupper Kinder, Esqu' ire Alan S. Rosenthal, Chairman Assistant Attorney General Atomic. Safety and Licensing Environmental Protection Division Office of the Atcorney General

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Appeal Board U.S. Nuclear Regulatory Commission 208 State House Annex Washington, D.C. 20555 Concord,. New Hampshire 03301 Karin F. Sheldon, Esquire Dr. John E. Buck Atemic Safety and Licensing Sheldon ,Harmen, Roisman & Weiss Appeal Board Suite 500 U.S. Nuclear Regulatory Commission 1725 I Street, N.W.

Washington, D.C. 20555 .

Washington, D.C. 20006 Michael C. Farrar, Esqulre Dr. Ernest O. Salo Atomic Safety and Licensing Professor of Fisheries Research Appeal Board Institute U.S. Nuclear Regulatory Commission College of Fisheries Washington, D.C. 20555 University of Washington Seattle, Washington 98195 Ivan W. Smith, Esquire Atomic Safety and Licensing Dr. Kenneth A. McCollum Scard Panel 1107 West Knapp Street U.S. Nuclear Regulatory Commission Stillwater, Oklahoma 74074 Washingten, D.C. 20555 Robert A. Backus, Esquire Joseph F. Tubridy, Esquire O'Neill Backus Spielman N.W.

U100 Cathedral Avenue,6 116 Lowell Street 03105 Washington, D.C. 2001 Manchester, New Hampshire Dr. Marvin M. Minn Laurie Burt, Esquire Atomic Safety and Licensing As.sist ant Attorney General Board Fanel One Ashburton Place U.S. Nuclear Regulatory Commission Ecston, Massachusetts 02108 Washington, D.C. 20555 Lawrence Brenner, Esquire Office of the Executive Legal Director U.S. Nuclear Regulatory Co==ission Washington, D.C. 20555

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Q Vincent J. Incopino , Secretary New Harpshire Public Utilities Coc=ission 6 Old Sune00k Road ,

Concord, New Hanpahire 03301 Re: DF 79-100-6205 - Seabrook Tranafer De.1r Mr. Incopinn:

The purpose of this letter is to provide further information to the Cc=nission within the context of the above docket, about materials contained in the supplement of september 25, 1979 co the Frospectus dated Septe=ber 20, 1979 issned by the C0=pany in connection with the nale of General and Refundinp. Mortgage Bonda.

The Supplesent i t self was delivered t.o the Comm!!,s f on on Septe=ber 26, 1979 in connection with Docket No. DF 79-181.

As noted in the Supplement, on September 24 1979, the rc=pany receired notice that the Massachusetts Municipal Wholeenle Electric Cc=pany (MFMEC) would take a maximum incroaco in f;eabrook cwne: ship interest of cppror.imatelv 8.877.. rather than the D . B M.

ori ;inally proposed in the Companys application in this Docket and approved by the Commission in Order No. 13,759 and Order No.

13,760.

A l c. o , on September 11, 1979, the Company received notice from Cent rol Vermont Public Snrvice Corporation that becauce of certain conditions imposed by the Vermont. l'ublic Service Ecard (VPSB),

Central Vermont Publ3 c Service Corporation would not take the 17.

additional o nership interest in Seabrook, pendtny, further clarification of the VPSB order, as originaily propor.ed in the Company's application in thic. docket and approved by the Cec =tission in Order Na. 13,7S9.

Cn t.hu heic of these new develop =cnts, the Gupplen:ent. noted:

"... [I]t appears thai, if all reg'.t1Cory opprovals are obtained, the maximum reduction interent in the in the Corpcuy's Seabrook Plant which o nerr.couin hip, he neccuplished under the preacnt proposal is approximately

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"The Corpany believen it can finance about a 357,o.:nership interest in the Seabrook Plant annuming that the cc=plction of Unit 42, currently scheduled for 1985, is deferred four ycurs."

At the time of t.hc hearings in this Docket in June and Augus t 1979, the Company's witncas stated that in the Company's view, it could finance only a maximum 287,ownerr. hip interest undr expcetable financial circumstances (F..p Volume 3, page 33). Thir.

was an accurate recitation 6.. , transcript. as they then existed, f circtstatances duc primarily to the position taken by the banks which furnich short term credit to the Company. Put bluntly, the banks' attitude was that they would not continue to lend to the Company if the Company were forced to keep more than a 287 ownership ' interest.

However, certain subsequent. events apparently ecmbined to change the attitude of the banks with regard to a maximun financeabic ownerchip interes t. In particular, the cocratesion's Report occcmpanying Order No.13,799 of August 29, 1979 in Docr.cc No.

DR 79-107 neemed to provide the banka with some assurance of the Cocaission's support for completion of the Scabrock Project, along wi t h the Co=minaion's refunal to stearily reduce the Company' c revenue:. , it.n recognition of increased riskiness of the Company's securitics in the absence of Ch*IP and its deterCnation to conduct a thorough investigation to determine what revenue levels the Company would need in connection with its cenatruction program, in acenrdance with the standard establ-ished by the New Hampshtre' Supreme Court.

Additionally, the Cc= mission's Supple = ental Report of Septecher 24, 1979 in this Docket reiterated the Commiecion's nupport for the ccepiction of Seabrook and recognized the interrelationship betwten the si::c of ownership interest the Cocpany could retain and

" projections as to needed revenue" in the forthecming rate case.

Thic is not to say that the banks had actually endorsed retention by the Company of a 35% Seabrook ownership interest, uf th deferral of completion of Scubrook Unit No. 2 t.u 1989. Tbc ba.Ms remain concerned (as does the Conany) cbout the offect that suen a deferr.a1 might have en the econonica of the 1>roject. Itowe er.

they have indicated a williny.neco to review the cirunt. ion once y in in light of chanp.ed circumst.ances , and it. is this vilii:tgnens th a t.

provided the factu.21 basis for the Cc=peny's expressia on the subject in the Prospectus Supplement of Septeniber 25.

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Vincent J. lacopino, Secretary October 3, 1979 D \

In the ' time since the supple =ent was icoued, there have '

been still further developments. Most. recent inforuction available to the Company indicat.cn t. hat N;r C will be in a position to take only 6% Secbrook ownership interest (rather than the 13.877, originally propoGed). Also, Green Mountain Power Cc=pany of Ver=cnt is subject to the same conditions that were imposed by the Vermont Public Service Eocrd on Central Vc- cont Public Service Corporation 's acquisition, in connection wi n G:@'s acquisition of an additional 17. ownernhip inLetest.. If C;tF ucre to decline to take the additional share under these conditions then, with IM EC acquiring only a 67, additional ownership interest, the maxiruutn ownerch n reduct, ton which could be accomplished under the present arrangccem. would be approximately 127,, leaving the Company with the requirement to finsuce a 367.

ownerchip share.

In order to nat.infactorily renolve the many emer;;ing uncertaintics regarding the ultimate o.nership level the Company will be. required to finance. the Co=pany is in the process of recirculating it.s initial offering of additional shares. Tne ultimate goal eould be to bring thin ul t.imate ownernhip level to 287. so that construction of the Scubreak plant can cont.inue on schedule. If the Company in not succccaful, the secondary goal is to bring the ultimate ownership level to a maximtra of 357, which the Company believes can be financed, assuming an udenuut.c 1cve.1 of ratea (an more fully described in our filing in Docket No. DR 79-137) and deferral of scheduled completion daten.

It 16 the Company's intention to continue to provide the Comission with fort.her information an it developa in this crucial and compicx eatter in advance of the hearing ucw scheduled for October 1S in this dochet.

Copier. of this letter and of the Frospect.us Supplement have been foniarded to LUCC. We ask that you bring this letter and the enclosure to the Cot =nission's attention. '

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THE STATE OF NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION Concord, New Hampchire August 6, 1979 - 11:00 a.m. (THIRD DAY)

(COPY)

Re: DF 79-100-6205 Public Service Company of New Hampshire. Request for authorization to adjust its ownership interest in Seabrook Station from a 50% ownership to a 28%

ownership interest.

. PRESENT: Chairman J. Michael Love (Presiding)

Commissioner Francis J. Riordan Commissioner Malcolm J. Stevenson APPEARANCES: Martin L. Gross, Esquire (Sulloway, Hollis, Godfrey & Soden & Philip Ayers, Esquire (Public Service Co. of N.H.) reptg. the Petitioner.

Harold Judd, Esquire, reptg. LUCC Kirk Stone, reptg. New Hampshire Energy Coalition (Limited Appearance)

John Harrison. pro se.

Court Reporter:

Robert E. P.tncudo, CSR

3-8 Mr. Earrison, if you will take the stand, please.

ROBERT J. HARRISON, Suorn DIRECT EXAMINATION Ev fir. Gross:

0 Mr. Harrison, would you state your full name for the

- record.

A My name is Robert J. Harrision. ,

O You have presented previ6us. testimony in this docket, did you not?

A Yes, I have.

O And took the oath this morning again?

I A That is correct.

part of the O Mr. Harrison, I would like first to make

" record the Company's reasons for requesting an expedited r Will you resumption of hearing in this proceeding.

tei the Commicsicn why the Company requested that the Commission reconvene these hearings sooner taan original-

ly scheduled by the Cetmission in its order of July 27th?

Yes. The Company, as the Commission is aware, is now

- A

' responsible for building fifty per cent of Seabrook.

And at the same time the ability to continue to collect C*r:IP based rates has been precluded by passage of the As a result of this impossible so-called anti-CWIP bill.

- 3-9 situation the Company currently does not have access ,

to capital markets. Specifically I am referring to the ability of the Company to sell in these markets long-term debt securities.

This inability is as a resu: t of the uncertainties surrounding the Ccmpany's situation, ac it relates to the (1) requirement to finance fifty per cent ownership of Seabrook; and (2) being denied the inclusion of Construction Work in Progress in the rate base. Until the Company reestablishes i f

such access our revolving credit banks, those seven I

banks which have extended to the s'ompany $115,000,000

.$ of revolving credit have indicatec that they will d '

5 lend reluctantly, if at all, and then on a day to day I

basis. In order to reestablish our access to the capital market then we will require the following:

fj A rtpplemental decision by this Commission approving the transfer of the entire 22 per cent as proposed, and an allowance by the Commission of higher rates.

This of course will be a separate matter. Absent >

s such action, the Company has scheduled a meeting of all Scabrook participants to determine the extent of any construction suspension. I would now, with that over view, I would liho to turn to the particulars of the

- 3-10 The banks recog-immediate crisis facing the Company.

nising what all knowledgeable experts have said, namely, that without CUIP the Company cannot finance ,

fifty per cent of Seabrook, have insisted that the Cc pany reduce its ouncrship level to 28 per cent.

Nou, unfortunately the banks have the money and the Company and the State for that .

matter needs it We may not like the fact that the hanks are in this position, but nevertheless tha t is true.

It is their coney and they will only dicpense it or lend it if they are satisfied eith the

) particular situation to which they are lending. -

5 From the time uc received the Commission's ,

order on July 27th, there have been enumerable telephone conversations and conferences with the agent banks.

These have tchen place on Saturday the 28th, Sunday the 29th, in the erenings both at here and from the office. All culminacing uith the President of the Company, W. C. Tallman and myself being summonsed to a hastily convencf =ceting of all the revolving credit b:nks in Locten on August the 3rd. In that frantic and alacct desperate wech we have been trying to get act.uranccc frcm the banks that they will continue to

3-11 lend up to the limit of the existing revolving credit.

Cn the contrary, however, the banks have indicated that that assurance will be forthcoming enly after the cunership interest of the Company has been reduced ,

and the entire matter regarding the Company's ability r to finance that reduced ownership interest has been clarified.

The situation in which the Company

now finds itself is the result, as I have indicated, of recent actions in the State of New Hampshire.

The Company's financial plan to

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build Seabrook with fifty per cent ownership in essence has been destroyed by the inability to include CWIP, '

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]s just as the Company said it would.

C The problem nou facing the Company,

. and the Statcof ::cu Hampshire, is to get from that 3 point of fifty per cent ownership down to a level 3

which can be supported without CWIP. That very quickly is the extent of the very severe pressure under which e

i the Company now finds itself with specific reference b

to the banks willingness to lend and more generally uith regard to access to capital markets. That '.s the ability to sell long-term debt.

Q .r. Harrison, did I understand your answer to suggest

.