ML19276F561
| ML19276F561 | |
| Person / Time | |
|---|---|
| Site: | Green County  |
| Issue date: | 03/13/1979 |
| From: | NRC OFFICE OF THE EXECUTIVE LEGAL DIRECTOR (OELD) |
| To: | |
| Shared Package | |
| ML19276F559 | List: |
| References | |
| NUDOCS 7904060082 | |
| Download: ML19276F561 (47) | |
Text
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March 13,1979 s
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UNITED STATES OF 1MERICA 4
NUCLEAR REGULATORY COMMISSION
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BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of
)
)
Docket No. 50-549 POWER AUTHORITY OF THE STATE OF
)
)
(Greene County Nuclear Power Plant)
XXXXX STATE OF NEW YORK DEPARTMENT OF PUBLIC SERVICE BOARD ON ELECTRIC GENERATION SITING AND THE ENVIRONMENT In the Matter of the Application of the )
)
Case 80006 POWER AUTHORITY OF THE STATE OF
)
)
)
(Greene County Nuclear Generating
)
Facility)
)
NRC Staff Response to PASNY's Third Set of Interrogatories The NRC Staff submits the following responses to PASNY's Third Set of Interrogatories:
178, 179, 182-184, 194, 195, 199-201, 207, 216, 221, 225, 228, 230.
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178. (PASNY):
Section 3.7.2, Paragraph 8 of the FES indicates that segment F-G (1-1 miles) of the preferred corridor would be in a parallel rather than a joint use configuration with Central Hudson Gas and Electric Reconcile that comment with Applicant's Company's right-of-way.
Article VII Application Exhibit E, Figure 2-1 and 2-2 (Row Section
- 3) which shows a joint use configuration utilizing 100 feet of existing right-of-way and 50 of additional right-of-way.
Answer:
The staff's analysis of transmission line corridors was based on the applicant's Article VII Application dated June, 1978, and containing Exihibits 1 through 16 (FES, Sect. 3.7.2, first sentence).
No further exhibits representing changes to the initial application have been received by the staff (e.g., Exhibit E).
In the June Application, the applicant states that the " North Alternate No. 2 was designated the Primary Cementon Route".
In describing North Alternative No. 2 (Exhibit 16, p. 16-4-16), the applicant states that "This alternative A 180 foot would require...and 180 foot right-of-way for 1.1 miles".
right-of-way is the one the applicant describes as being a new, independent right-of-way, parallel and adjacent to the existing Roseton-Leeds right-of-way (Exhibit 16, p.16-4-1).
Also in Exhibit 16 (p. 16-4-38), the applicant states that "An extension of the Joint Use concept to include that segment of the Cementon Alternates between Points "F" and "G" is a viable alternative". The staff has recomended that serious consideration be given to using a joint corridor along this 1.1 mile segment (FES, Sect. 4.1.2).
R. M. Reed 3/5/79
179.
(PASNY):
Provide the basis for the statement made in Section 3.7.3 of the FES that "[t]o reduce the impact of the pemanent access roads, none will be constructed in areas that are under active cultivation, seasonally wet, of rugged terrain, near major streams, or at scenic or heavily travelled highways".
Answer:
The response to NRC question 2.34A (ER, p. Q2.34A-1) states the following:
" Generally, access would be restricted at scenic or heavily traveled highways, areas under active cultivation, seasonally wet areas and areas of rugged terrain. Access would also be prohibited across major streams, sizeable wetland areas and areas where the terrain is so difficult that construction of an access road would cause excessive damage to the physical environment.
Since access to each structure site is required during line construction, effort will be made to minimize impact by locating access roads off the right-of-way, by making full use of existing public and private roads, trails, and by using paths of least resistance with respect to terrain, vegetation and land use."
This response served as the basis for the statement, which appeared in the DES in 1976 and elicited no consent.
Upon reconsideration of the DES' wording the staff reccgnizes that restrictions on permanent roads were not specifically addressed, and that the applicant's general commitment is to restrict access and to minimize impact of all access roads.
R. Reed 3/6/79
182. (PAS'iY):
With respect to FES Table 9.14 a.
For those alternative sites whose area is not classified as either adequate or inadequate, state whether or not the area of the site is adequate for construction of a nuclear power plant.
b.
For those alternative sites whose area is classified as adequate, state the basis for determining adequacy with respect to the 10 CFR 100 accident analyses.
Answer:
a.
Four sites in Table 9.14 of the FES are labeled neither adequate nor inadequate but have specific or approximate areas stated.
In addition to the proposed Cerenton site, these sites include Shawangunk, Athens, and Stuyvesant, all of which have significantly larger areas than the proposed site.
For the reconnaisance level alternative site environmental assessment included in Section 9.2 of the FES, the staff believes these sites are adequately large for the proposed unit.
b.
The staff has not performed an accident analysis based on requirements of 10 CFR 100 for the alternative site environmental assessment.
N. E. Hinkle 3/6/79
.=
183. (PASNY):
With respect to FES Table 9.14 - For each site classified as " preferable" or " superior" to Cementon, list the location and pathway for the maximum exposed individual to normal radioactive effluent releases.
If the "RC staff has concluded that the potential radiological exposure to t<
te individuals is in compliance with the design objectives of Appendix I
> 10 CFR 50, state the basis for such a conclusion.
Answer:
Neither the location of the maximum exposed individuals to normal radio-active effluents nor the analysis of potential radiological exposure for these individuals has been attemoted for the environmental assessment of alternative sites.
N. E. Hinkle 3/6/79
184. (PAStiY):
With iaspect to FES Table 9.14 - For each alternative site classified as " preferable" or " superior" to Cementon, please state whether the radioactive waste treatment systems proposed for GC!iPP would be in compliance with paragraph 20.
Answer:
Compliance with paragraph 20 of Appendix I to 10 CFR 50 has not been determined for any of the alternative sites in the reconnaisance level environmental assessment in Section 9.2 of the FES.
f4. E. ' inkle H
3/6/79
194. (PASNY ):
Refer to FES Section 8.5.1:
W1th respect to the 10% discount rate used by NRC Staff to represent " Opportunity cost":
Identify and provide copies of all documents used by NRC Staff in deternining a.
the basis for this parameter.
b.
Identify and provide copies of references including all authoritative statements of policy by NRC Staff which describe or explain the proper utilization of " opportunity cost" in performing environmental cost-benefit analyses.
c.
Indicate those Final Environmental Statements for other nuclear projects in which NRC Staff has utilized the " opportunity cost" concept in evaluating cost benefits.
d.
Indicate the discount rate used for the other projects identified in (c) above; and indicate whether different discount rates were used for investor-owned and public authority projects.
e.
Provide Reference 11 for FES Section 8.
f.
Identify and provide all NRC Staff writings discussing proper utilization of an " opportunity cost" discount rate for the 'ireene County plant and other projects.
g.
Identify and provide all NRC Staff correspondence or other writings evidencing NRC Staff disagreement with the selection of a 10% discount rate for the Greene County plant.
h.
Identify and provide the rationale and basis for utilizing a discount rate based upon the cost of capital to investor-owned utilities for a public authority project.
Answer:
a.l.
ORNL Intra-laboratory Correspondence " Estimation of the Social Discount Rate for Evaluation of Neu for Power for the Proposed Greene County Nuclear Plant,"
August 23, 1978, from R. S. Konkel to W. Fulkerson, T. H. Row, R. M. Rush, R. L. Spore, T. Takayama, and H. E. Zitel.
(FES pg. K-6, ref.1).
a.2.
Memorandum for Bud Zittal (ORNL) from Wm. H. Regan, Jr. (NRC), " Discount and Fixed Charge Rates for Greene County Analysis", August 28, 1978.
=
194 (PASNY): cont, a.3.
ADEP Project Instruction #70, " Increase in Discount Rate", U. S. Atomic Energy Commission, August 13,1974 (copy included in ORNL Intra-Laboratory Correspondence cited above).
(FES pg. K-6, ref. 2).
a.4.
" Increase in Discount Rate in Environmental Statements", U. S. Atomic Energy Caanission, June 26,1974 (copy included in ORNL Intra-Laboratory Correspondence cited above).
(FES pg. K-6, ref. 3).
a.5.
" Appendix A: Generic Fixed Charge Rates", in Coal and Nuclear: A Comparison of the Cost of Generating Baseload Electricity by Region by Roberts, J. O., Davis, S. M.,
and Nash, D. A., NUREG-0480, December,1978.
(FES pg. K-6, ref. 4).
b.
See response to 194.a.
c.
Objection filed.
d.
Objection filed.
e.
See reference number 5. in response to 194.a above.
f.
See reference number 1. in response to 194.a above.
g.
- None, h.
See FES pg. 8-18.
The basis in part for this approach is from E. J. Mishan, Cost-benefit Analysis, Praeger Publisher, N.Y.,1971, Chapter 32.
R. Tepel 3/7/79
INTRA LABORATORY CORRESPONDENCE OAK RIDGE NATION AL L ABOR AToRY August 23, 1978 TO:
W. Fulkerson T. H. Row R. M. Rush R. L. Spore T. Takayama h
H. E. Zittel FROM:
S. Konkel (priority action requested)
SUBJECT:
Estimation of the Social Discount Rate for Evaluation of Need for Power for the Proposed Greene County Nuclear Power Plant On Thursday, August 3rd, I met with Bajwa and Regan of NRC to discuss their resolution of present inconsistencies in ADEP Project Instruction
- 70 (Aug. 13, 1974, attached).
R. M. Rush and I had previously spent two afternoons (May 18 and August 1) with Regan and the NRC Cost-Benefit Analysis Branch staff detailing the problem of using this instruction to evaluate the fuel savings argument for Greene County.
Regan informed me on August 3 that the CBAB had reconsidered its position that a 7% cost of borrowing for PASNY would be sufficient for evaluation of the fuel savings from society's point of view.
I was given a copy of " Appendix A: Generic Fixed Charge Rates".
Regan said that a revision of ADEP #70 would be forthcoming.
On Wednesday, August 9, I met with Darrell Nash (CBAB), Mel Ernst (A.D. Eavironmental Technology), Jack Roberts (CBAB), and Ron Callen (consultant to NRC) to discuss the use of a social discount rate for public and private utilities.
K. R. Corum and R. C. Tepel also attended this meeting at my request.
There was general agreement that:
(1) The cost of capital of the Greene County Nuclear Power Plant varies according to whether one is taking the point of view of PASNY or of society.
(2)
From PASNY's point of view, it is correct to estimate the recovery of capital costs by using 7*. as an estimate of PASNY's cost of borrowing.
(3) ADEP d70 was out of date with respect to the cost of capital to society [ opportunity cost of the resources, materials and productive services which would be utilized to construct the Greene County Nuclear Power Plant].
W. Fulkerson et al August 23, 1978 (4) Tha inconsistencies in ADEP d70 could be resolved by a change in NRC policy that is based on the concepts and figures detailed in " Appendix A: Generic Fixed Charge Rates".
(5) IIRC would send us a revised instruction informing ORNL of this change in policy. Also, NRC would highlight the social discount rate they are adopting that super-sedes those (6, 8, and 10%) in ADEP #70.
I need the information described in (5) AS SOON AS POSSIBLE.
In the present analysis, I am using 10% for the.7cial discount rate.
RSK/swp Enclosure
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UNITEf? STATES
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?N ATOMIC ENEV Y COMMISSION
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p (7,, k,s4;,/M, IllCREASE Iti DISCOUitT RATE 7".'
SBfAM in the cost / benefit analysis for all future environmental statements, i
use 10% as the discount rate for investor-owned utilities, 8% for TVA, and 6% for publicly-owned utilities (such as WPPSS).
This instruction supersedes General Instruction flo. 6 which was sent to the laboratories September 7,1972.
The basis for the discount rates was developed by Dr. Paul Fine, Cost-Benefit Branch, and is dis-l cussed in the enclosed memorandum to Joseph M. Hendrie f;cm Harold R.
i Denton, dated June 25, 1974. -
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$Y jy 6 Da r>1 e-R. Nu 1er, Assistant Director g
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Directorate of Licensing
Enclosure:
Ltr dtd 6/26/74 J. M. Hendrie fm H. R. Denton M
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,.,aeph. ti...Handrie, Deputy Director for Technical Review, L
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INCREASE IS DISCCUllI RATE.IN CIVIR021F.3IAL STATEE'lIS For several years, the AIC has used a discount rate of 8.75*: per
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p?f annum for investor-ovned electric utilities ia co=putinz the present F
This uas obtained by a weighted worth of future. benefits and costs.
.c averaging of 7% for bond interest and pref erred-stock divideads and
/
12.. for return on coc=on equity (co==ca stoc!c plus retained earnings).
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Average financing consists of about 65% bonds and pref erred stock and about 35% coc=on equity. The co=putation vas:
7%(0.65) + 12%(0.35) =
8.75%.
A Interest rates have been rising, especially durin;; the past year.
current fig.tra for bonds and pref erred stock is about 9.5% and for return on coc=en equity is about 117..
The weighted average is:
3 9.5%(0.63) + 11%(0.35) - 10.0%.
For the Tennessee Valley Authority, financing of electric power 1
The interest f acilities is entirely by bonds (and retained earnings). The current on these bonds is not exempt f rom Federal income taxes.
b interest rata is around 8% per annum.
For utilities owned by cunicipalities, public utility districts, or state authorities, financing is entirely by bonds (and retained earnings).
f roct Federal income In most cases, the interest on these bonds is exempt The current interest rate is about 6% per annus.
9 taxes.
is therefore proposed that the discount rate used in cocputing present Ji It and costs in AEC Environmental Statecents be set j
vorth of future benefit:
10% per annum f or investor-otmed utilities, 8% per annum for the
,t tl Tennessee Valley Authority, and 6% per annus for municipalities, public
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utility districts, and state authorities.
This should be regarded as an interim measure, since there are nu=erous that should be studied further.
For example, aspects of this subject not included in the above calculations for investor-mmed utilities is
.. jI the ef f ective reduction in cost of c:oney resulting f rom interest oa debt l
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oeing deductible as an expensa for purposes of Federal. ince::a tax-this =eans that the real cost to the utility of bond istarcst is cut al=ost in half.
Also, interest rates dapecd on the rate of inflation, which. shodd be, takca into account. in est ~, ting future benefits and costs.
Finally, interest rates and stock di,vi:icada i
vary censiderably f rom one investor-owned uti.lity to another, so that the question arises as to whether a nationa.1. average should
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Appendix A s
GENERIC FIXED CHARGE RAIES Annual fixed charges cever all costs that are 1) in direct proportion to tt e investment initially made in the plant or in the working capital neces ary for its cperation, and 2) independent of the extent to which th< iacilities, equipment, services, etc., represented by this invcstr.ent are used.
Sume components of the fixed charge rate, such as deprecia-
' inn, are bookieeping espenses which do not represent cash outflow during the operating period.
Other fixed charge components, such as property insurance and property taxes, represent annual outlays which are in
['
direct proportion to part or all of the initial investment.
The required return on the investment and the income taxes associated with this return are a major part of the annual fixed charges.
Also included is an interim replacement allowance, which provides for any intermittent replace-ment of equiprent required before the end of the scheduled plant lif e.
Not included in annual fixed charges are relatively constant fixed costs, such as nuclear liability insurance, and decommissioning cost or plant staffing expense, which bears no pirect relation to the plant investment.
4
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g"i fixed charge rat.es will vary f rom utility to utility.
A major variable that affects the fixed charge rate is the capitalization structure of the utility.
Accordingly, ut.ility systems may be separated into two general groups depending upon their method of financing, i.e., publicly-owned utilities (municipals) and investor-owned utilities.
Within these groups. differences due to such things as capital structure, credit rating of the utility, rate of return permitted by state regula-tory agencies, state and local tax laws, and utility management. will
?
affect the. fixed charge rate.
Where the capital cost of the two alter-natives if of the same order of magnitude such as'"C'o'al and nuclear p
generating units, a generic fixed charge rate f or the two types of utility
[
systems may be used without introducing a significant bias into the comrarison.
For example, if the capital cost of a coal generating unit is 70". less than the nuclear generating unit and the part.icular utility system's fixed charge rate is 10% higher than the generic fixed charge rate develnped in following paragraphs, only a 2". (0.10 X 0.20) bias in fixed charges would he introduced into the cost-benefit analysis.
Since fi<cd charqcs are about 60". of the total levelized cost of generating electricity, this bias af f ects the tot al generation cost only al'out 1.2%
(0.6 X 0.02).
This bias is in favor of the icwer cost alternative if the utility's fixed charge rate is less than the generic fixed charge rate, and in favor nf the higher cost alt.ernative if the utility's fixed charge r a t.e is greater than the generic fixed charge rate.
%'2 It is proposed that for general studios and environmental statements,a gnneric fixed charge rate f or publicly-o.ned utilities and for invest.or-
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owned utilities be used The following paragraphs discuss each component of the fixed charge rate and present the basis for the values selected.
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v TABLE 1 FIXE 0 CHARGE RMES FOR ELECTRIC UTILTIES, PERCENT Inve s tor-Gs;ned Public G.aned
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U t i l_i ty_
j Util_ity_,
37 Depre-Hendepre--
Depre-Nondepre -
ciating ciating ciating ciating Assets Assets Assets Assets i,.
-Component 9.44 /
9.442/
2 6.07 6.07 interest or return on investment 0.68 1.25 Depreciation (30 year SF)
.664/
.60 /
4 Interim Replacements 0.05 0.05 Property Insurance Federal Income Taxes 1.453/
4.78 p
1.34 /
4.32 /
4 4
State and Local Taxes 9.37 6.07 16.54 14.22 O
1/ Fixed charge rate for such things as land, working capital for operation and maintenance, fuel, etc.
2/53% bonds @ 8.78%, 12.2% preferred stock @ 8.95%, 34.8% common stock
@ 10.6*
3/Pased upon straight line oepreciation for tax purposes and Federal tax P-
@ 50% of taxable income.
4/ihe fi.ned charge rate for interim replacements and state and local inflation and levelized taxes has t>een adjusted for a 5% generalto the cost of money for each type of using a discount rate equal utility (i.e., 6.07% or 9.44%).
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. C Re c mpesiticn of the r,y ner ic f ix ed cn u ge rates f or p ub l i c l y-c.s ne d E
utilities and investor-o. nod utilities is given in Table 1.
Interest cr return on I nve s trae n t The cost of money for a ncw generating unit on a publicly-r+ned utility system is equal to the interest which must be paid on new tiend i sues, and this rate varies with financial market conditions and with the credit rating of the borrower.
For investor-owned systems, the allowable rate of return is generally set by regulatory agencies, in consideration of l
the utility's capital structure and the prevailing cost of money for each ccmponent of the capitalization.
The nationwide composite capital struc-
~~-
ture for major investor-owned electric utilities as reported by the DOE /fERC (formerly FPC) for 1974 was 53.0% funded debt, 12.2% preferred s tock, and 34.8% common s tock equity (Re f erence 1).
The debt and preferred stock returns are, as for municipal bonds, functions of market conditions.
The rate of return for municipal bonds was obtained from Reference 2, a table entitled " Moody's Municipal, Bond Yield Averages - Long-Term Bonds."
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gr9 The average yield for municipal bonds for the past five years is summarized in the table below.
The average value is used in Table 1.
The rate of return for investor-owned utility bonds and pref erred stocks was obtained from Reference 3, a table entitled "The Market for New Utility Capital - Moody's Weighted Average of Yields on Newly Issued Domestic Bonds and Preferred Stocks."
The average yield for the past five years for bonds and preferred stock is summarized in the table below.
The rate of return on common stock equity was obtained from Reference 3, a table entitled " Selected Statistics on floody's 24 Electric Utili ties."
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The return on equity for the past five years is summarized in the table (k'
below.
The return on equity consists of carnings per share divided by
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year end book value per share, excluding deferred inccme tax.
b=-
Cepreciation for studies and for cost-benefit analysis of fossil-fueled and nuclear-fueled electric generating stations for baseload operation, a service life of 30 years is assumed.
Technical oNi.'o'IAW,"rather t han phys ical break-down, is expected to be responsible for plant retirement, at least from baseload operation, at the expiration of this period.
The sinting fund method is used to compute depreciation.
The sinking fond earns interest at a rate equal to the cost of money prevailing for each type of utility.
(See preceding section for discussinn of cost of money.) The sinking fund payments plus the earned interest over the lifa of the generating unit is designed to generate funds equal to the original investment excluding nondepreciating investments such as land and working capital.
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O SE! ECIFD ST AIISTICS ON RME OF FF f URN ICR UiltliY IN/L5!Mi.NIS g.
'!ondy's Weighted Average of Yields Moody's on flewly issued Moody's Municipal Cond Utility Return on Yield' Averages Fonds Preferred Equity gar
.(%)
(%))
Stock (%)
_f()
1971 10.8 1972 5.30 7.50 7.53 11.0 1973 5.22 7.91 7.50 10.5 1974 6.18 9.59 9.95 10.4 1975 7.04 9.97 10.63 10.3 1976 6.61 8.92 9.12 y
.a_r ll. O Average 6.07 8.78 8.95 W
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preliminary na - 1976 data not yet available.
The weighted return on capital for investor-owned utilities is summarized in the following table.
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Return on Weighted Cost Class of Capitalization Investment of Capital r,
Investment Ratio (%)
(%)
(1)
'l. ' 'o Uti1ity Bonds 53.0 8.78 3 65 Preferred Stock 12.2 8.95 1.09 Commnn Stock Equity 34.8 10.6 3.69 100.
9 44 The returns on investaient shown in Table 1 for public and invnstor-owned utilities are int ended to represent current and foreseeable f uture cost of money.
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The formula for the sinking fund is as '0110-5:
? pd r L(h
-EMI <-fV-
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where:
the annual payment to the sinking fund.
PMI =
t.he future value of the sinking fund which is set equal to FV
=
the capital cost of the generating unit.
n.,
the interest rate which is set equal to the weighted cost i
=
of money for each type of electric utility.
the operating life of the generating unit which is assumed n
=
to be 30 years.
The fixed charge rate (FCR) for depreciation is:
FC R= PMT/F V=i.f( (Id-- 1]
FC R - =--P M T /F V-=
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For publicly-owned utilities where the cost of money is 6.07% (see above),
the FCR for depreciation is 1.25%.
For investor-owned utilities where the weighted cost of money is 9.44% (see above), the FCR for deprecia-tion is 0.68%..These fixed charge rates for depreciation are incorporated in Table 1.
Interim Replacements Depreciation charges do not provide for replacement of those items of equipment which have a service life shorter than the assumed plant li fe.
{*
Certain items (e.g., control rods) which are repaired or replaced during scheduled and forced outages by the onsite maintenance forces are provided I
for in O&M costs.
An interim replacement allowance is provided for other equipment which may need to be replaced at relatively unprodictable i.
intervals.
Long-term experience upon which to base the value of this allnwance is lacking for nuclear plants.
Based upon fcssil-fueled power station experience, interim replacement is estimated to be 0.35%.
This is believed tn be a conservative value for nuclear generating units because the manufacture and installation of safety-related nuclear com-ponents nust meet certain design specifications and are subjected to quality control inspections; hence, these components should be more reli-able and have a longer service life than normal power station equipment.
The remaining components and systems (e.g., turbine generat.or units, pumps and mnters, condensers, cooling system) are the same for nuclear and fossil power stations.
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%h Sirice t.he cust of interim replace.ments weuld be subject. to W a al infla-tion, the 0 ?5% alue has been adjusted to a levelized !) asis at,sur.ing a l
Si escalation and discoun. rate equal to the cost of money for cach type of utility.
The fixed charge rate for interim replacements is estin ated to be 0.66% for publicly-awned utilities and 0.60% for privately-cr ed utilities.
The difference in the two values is due to the difference in cost of money used in the levelizing calculations.
Property Insurance Two types of insurance coverage are provided for nuclear power plants:
property dan age and thir:1 party liability.
The liability coverage is not directly related to plart investment and is therefore included in O&M costs.
The fi<ed charge rate for property insurance in Table 1 is based upon the amount paid by electric utilities for property insurance and the total investments in piant and equipment.
The following table stmaarizes the property insurance paid by privately-owned utilities, the total investments in plant and equipment and the ratio of these two expressed in percent for the last five years of published C-data.
The data were obtained from Tables 15 and 17 of Reference 1.
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D Prcperty Insurance Total Investment Property Insurance Paid by Utilities in Plant & Equip.
as Percent of Invest.
Year (millicn 5)
(million 5)
(%)
1970 41.87 93,303 0.045 1971 55.39 104,300 0.053 1972 68.38 116,644 0.059 1973 72.13 130,840 0.055 1974 76.85 146,006 0.053 Average
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- The cost of property insurance for publicly-owned utilities is assumed to be the same as for privately-owned utilities.
Federal Income laxes Federal income taxes are part of the inves tor-owned utility's cost of doing business.
From an accnunting viewpoint and in accordance with the FPC " Uniform fystem of Accounts," taxes in general are treated as an expense, and income taxes are related to taxable income, not t.o the investment in property and plant.
Taxable inccme, hcwever, is in turn related to the investment as well as to the percentage of common and pre f erred stock equity in the capit alization, t.he deprociation method,
.,1, and the tax structure.
The Federal income tax compcnent of the fixed charge rate in Table I is calculated f rom the percentage of stock equity in the return on investment.
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O Ihe Ft:.eral i n c o.w tax (T) is equal to U.c product of t e Tederal i ncc n e tax rate (r) tir.cs the dif ference between net income bercre tax (tJIP,T) and depreciation (D) as-T = r (tilBI - 0)
The t;lBf is equal to the net income (tJI) plus the Federal tax.
Sub-stituting til + T = tilBT in the above equation and rearranging, w9 obtain:
-T-4'.:
_, _ ( C M' )
T=
I N ~~
If we assume a Federal income tax rate of 50%, then T equals (til - D).
til expressed as a percent of investment is equal to the return on equity
[i.e., the fraction of capital financed by preferred stock (P) times the rate of return for preferred stock (R ) plus the fraction of capital P
financed by common stock and retained earnings (C) times the rate of straight line over 30 years ignorin)g].
return for common stnck equity (R Cepreciation (D) is assumed to be land and salvage values, tax credits and rapid depreciation methods.
This is summarized as follows:
T = (til - D)
= [(P)(R ) + (C)(R ) ~ 03 c
The values for P, RP, C and R are obtained from the above section on Invest?ient."
The fixed charge rate for Federal
" Interest or Return on income tax for investor-owned utilities is thus:
T = [(0.122)(0.0895) + (0.348)(0.106)
.0333] = 0.0145 for depreciating assets and I = (0.122)(0.0895) + (0.348)(0.106) =.0478 for nondepreciating a s s e t.s.
~ Generally, publicly-owned utilities are not subject to Federal in: cme I
tax; hence, the blank in Table 1 for this category.
State and local Taxes State and local taxes, like Federal income taxes, are part of the utility's cost of doing business.
These taxes can vary strnngly with locality.
Included in this category are property (ad valnrem), income, franchise, capital stock, gross receipts, occupation or license, energy or generation, unemployment, and miscellaneous excise taxes.
The fixed charge rate for state and local taxes shown in Table 1 was derived from FPC-compiled composite statistics, References 1 and 5.
The amount of state and local
'" 7 taxes paid, the amount invested in plant and equipment and the ratio of these two expressed as a percent are summarized in the following table for both types of utilities for the last five. years of available data.
D 9 mog c3 3
y I 2.S m
_ow
...... _. $.. * %_.,~v.=.+-
.*'=
~,.s,'
-g-C E#
l Private Caned
'J Fublic 0-ned Investment Ratio of State I nv e s tr.en t Ratio of State and in lant &
ax and cal in Plant & Ta>: to Local Taxes 3/ Equipment Invest-Taxes Equipment Invest-
'e.ar (million 5)
(million 5) nient (%)
(mill' ion 5) (million 5) ment (7..)
f 19/0 81.6 12,939 0.63 2,403 93,303 2.58 1971 93.2 14,457 0.64 2,680 104,300 2.57 1972 102.7 15,688 0.65 2,986 116,644 2.56 g.
1973 130.0 16,457 0.79 3,252 130,840 2.19 r!/ '
1974 146.4 17,865 0.82 3,686 146,007 2.52 1975 Average 0.71 2.54_ _.. _
1/- Data obtained from Tables 8 and 10 of Reference 5.
E ata obtained from Tables 11 and 17 of Reference 1.
D 3/
- The state and local tax component for publicly-owned utilities includes all payments in lieu of such ta,xes.
b increase State and local taxes, like interim replacements, are expec along with general inflation.
Thus, state and local taxes ha.. been adjusted to a levelized basis assuming a 5% escalation and a discount rate equal to the cost of money for each type of utility.
The fixed charge rate for state and local taxes is estimated to be 1.34% for publicly-owned utilities and 4.32% for investor owned utilities.
- s. s,.,..*
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.e
f.'
-9 RLiEr,iNC!.5_
g.-
1.
Faderal Power Cemn.ission, " Statistics of Frivistely-N.ed Electric Utilities in the United States - 1974."
2.
Moody's " Municipal and Government Manual - 1976."
3.
Moody's "Public Utility Manual - 1976."
4.
Federal Register, Vol. 41, lio. 206, Friday, Octeber 22, 1976, page 46618, "Just and Reasonable late of Return on Equity for fiatural Gas
- a. :
Pipeline Companies and Public Utilities."
5.
Federal Power Commission, " Statistics of Publicly-Owned Electric Utilities in the United States - 1973."
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UNITED STA fs,.
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Docket lio. 50-549 14EMORAhDUi4 FOR:
Bud Zittel i
Oak Ridge National Laboratory c
FROM:
Wm. H. Regan, Jr., Chief c: c f8 Environmental Projects Branch 2 7
SUBJECT:
DISC 0Utti At4D FIXED CHARGE RATES FOR GREEi4E COUtiTY ANALYSIS For Lab's analysis on Greene County discount and fixed charge rate, the basic guidance will be ADEP - 70, dated August 13, 1977; The analysis will be done using the discount rate which'the applicant faces, as well as that which is typical of an investor cwned utility, i.e.,10 percent.
h-For your further guidance'in the analysis you will use the NRC staff V
paper entitled " Generic Fixed Charge Rates." This explains how the discount rates were derived. Also from this paper you will use the
{
fixed charge rate of 16;5 percent shown in Table 1 for an investor-j o.vned utility. This more fully places the analysis in the same basis as a private utility.
Wm. H. Regan, Jr., Chief
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Environmental Projects Branch 2 Division of Site Safety and Environmental Analysis
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Appendix A GENERIC FIXE 0 CHARGE RATES Annual fixed charges cover all costs that are 1) in direct proportion to the investment initially made in the plant or in the working capital necessary for its operation, and 2) independent of the extent to which the facilities, equipment, services, etc., represented by this investment are used.
Some components of the fixed charge rate, such a depreciation, are set up as a sinking fund and are bookkeeping expenses which do not represent cash outflow during the operating period.
Other fixed charge components, such as property insurance and property taxes, represent annual outlays which are in direct proportion to part or all of the initial investment.
The required return on the investment and the income taxes associated with this return are a major part of the annual fixed charges.
Also included is an interim replacement allowance, which pro-vides for any intermi'. tent replacement of equipment required before the end of the scheduled plant life.
Not included in annual fixed charges are relatively constant fixed costs, such as nuclear liability insurance, and decommissioning cost or plant staffing expense, which bears no direct relation to the plant investment.
Fixed charge rates will vary from utility to utility.
A major variable g
that af fects the fixed charge rate is the capitalization structure of the utility.
Accordingly, utility systems may be separated into two general groups depending upon their method of financing, i.e., publicly-owned utilities (municipals) and investor-owned utilities.
Within these groups, differences due to such things as capital structure, credit rating of the utility, rate of return permitted by state regula-tory agencies, state and local tax laws, and utility management will affect the fixed charge rate.
Where the capital costs of the two alter-natives are of the same ordet of magnitude as with coal and nuclear generating units, a generic fixed charge rate for the two types of utility systems may be used without introducing a significant bias into the ultimate comparison of total generating cost.
For example, if the capital cost of a coal generating unit is 20% less than the nuclear generating unit and the particular utility system's fixed charge rate is 10% higher than the generic fixed charge rate developed in following paragraphs, only a 2*.' (0.10 X 0.20) bias in the dif ferences between coal and nuclear fixed charges would be introduced into the cost-benefit analysis.
Since fixed charges are about 60% of the total cost of generating electricity, this bias affects the difference in total generation cost only about 1.2%
(0.6 X 0.02).
This bias is in favor of the lower cost alternative if the utility's fixed charge rate is less than the generic fixed charge rate, and in favor of the higher cost alternative if the utility's fixed charge rate is greater than the generic fixed charge rate.
A-2 It is prooosed that for general studies and environmental statements, a generic fixed charge rate be used.
The following paragraphs discuss each component of the fixed charge rate and present the basis for the values selected.
The composition of the generic fixed charge rates for publicly-owned utilities and investor-owned utilities is given in Table 1.
Interest or Return on Investment The cost of money for a new generating unit on a publicly-owned utility system is equal to the interest which must be paid on new bond issues, and this rate varies with financial market conditions and with the credit rating of the borrower.
For investor-owned systems, the allowable rate of return is generally set by regulatory agencies, in consideration of the utility's capital structure and the prevailing cost of money for each component of the capitalization.
Tne nationwide composite capital struc-ture for major investor-owned electric utilities as reported by the 00E/FERC (formerly FPC) for 1976 was 51.4% funded debt, 12.4% preferred stock, and 36.2% common stock eqeity (Reference 1).
The debt and pre-ferred stock returns are, as for municipal bonds, functions of market conditions.
The rate of return for municipal bonds was obtained from Reference 2, a table entitled " Moody's Municipal Bond Yield Averages - Long-Term Bonds."
The average yield for municipal bonds for the past five years is summa-rized in the 'able below.
The average value is used in Table 1.
The rate of return for investor-owned utility bonds and preferred stocks was obtained f rom Reference 3, a table entitled "The Market for New Utility Capital - Moody's Weighted Average of Yields on Newly Issued Demestic Bonds and Preferred Stocks." The average yield for the past five years for bonds and preferred stock is summarized in the table below.
The rate of return on common stock equity was obtained from Reference 3, a table entitled " Selected Statistics on Moody's 24 Electric Utilities."
The return en equity for the past five years is summarized in the table below.
The return on equity consists of earnings per share to common shareholders divided by year-end book value per share, excluding deferred income tax.
Depreciation For studies and for cost-benefit analysis of fossil-fueled and nuclear-fueled electric generating stations for baseload operation, a service life of 30 years is assumed.
Technical obsolescence, rather than physical breakdown, is expected to be responsible for plant retirement, at least from baseload operation, at the expiration of this period.
l B
A-3 TABLE 1 FIXE 0 CHARGE RATES FOR ELECTRIC UTILTIES, PERCENT Public Owned Investor-Owned Utility Utility Depre-Nondepre jf Depre-Noncepre 7j ciating ciating ciating ciating Component Assets Assets Assets Assets Interest or return on 6.14 6.14 9.57S#
9.57S#
investment I
i Depreciation (30 year SF) 1.23 0.66 l
Interin Replacements
.665
.593#
Property Insurance 0.06 0.06 Income Taxes
- 1. 6d 4.97 S#
4.32$
State and Local Taxes 1.33 Y 42 6 T4 1rT4 14T4 1/ Fixed charge rate for such things as land, working capital for operation and maintenance, fuel, etc.
-2/51.4% bonds @ 8.96%, 12.4% preferred stock @ 9.13%, 36.2% common stock
@ 10.6%.
3/ Based upon straight line depreciation for tax purposes and income tax
@ 50% of taxable income.
-4/The fixed charge rate for interim replacements and state and local taxes has been adjusted for a 5% general inflation and levelized using a discount rate equal to the cost of money for each type of utility (i.e., 6.14% or 9.57%).
l I
A-4 SELECTED STATISTICS ON RATE OF RETURN FOR UTILITY INVESTMENTS Moody's Weighted Average of Yields Moody's on Newly Issued Moody's Municipal Bond Utility Return on Yield Averages Bonds Preferred Equity Year
(%)
(%))
Stock (%)
(%)
1973 5.22 7.91 7.50 10.5 1974 6.18 9.59 9.95 10.4 1975 7.04 9.97 10.63 10.3 1976 6.61 8.92 9.12 10.6 1977 5.64 8.43 8.43 11.0 Average 6.14 8.96 9.13 10.6 The weighted return on capital for investor-owned utilities is summarized in the following table.
Return on Weighted Cost Class of Capitalization Investment of Capital Investment Ratio (%)
(%)
(%)
litility Bonds 51.4 8.96 4.61 Preferred Stock 12.4 9.13 1.13 Common Stock Equity 36.2 10.6 3.84 9.57 103.
The returns on invest _nt shown in Table 1 for public and investor-owned intended to represent current and foreseeable future cost utilities aro of money.
b i
i
A-5 The sinking fund method is used to compute depreciation.
The sinking f und earns interest at a rate equal to the cost of money prevailing for each type of utility.
(See preceding section for discussion of cost of money.)
The sinking fund payments plus the earned interest over the life of the generating unit is designed to generate funds equal to the original investment excluding nondepreciating investments such as land and working capital.
The formula for the sinking fund is as follows:
Pf1T = (FV) i/[(1 + i)" - 1]
where:
PfU =
the annual payment to tt.a sinking fund.
=
the future value of the sinking fund which is set equal to the capital cost of the generating unit.
i
=
the interest rate which is set equal to the weighted cost of money for each type of electric utility.
l the operating life of the generating unit which is ussumed n
=
to be 30 years.
The fixed charge rate (FCR) for depreciation is:
FCR = P"T/FV = i/[(1 + i)" - 1]
For publicly owned utilities where the cost of money is 6.14% (see above),
the FCR for depreciation is 1.23%.
For investor owned utilities where the weighted cost of money is 9.57% (see above), the FCR for depreciation is 0.66%.
These fixed charge rates for depreciation are incorporated in Table 1.
Interim Replacements Dept eciation charges do not provide for replacement of those items of eqt inment which have a service life shorter than the assumed plant life.
Certain items (e.g., control rods) which are repaired or replaced during scheduled and forced outages by the onsite maintenance forces ar a D rT/ i de r t fnr in O&fl costs.
An interim replacement allowance is provided for other equipmont which may need to be replaced at relatively unpredictable intw vals.
Long-term experience upon which to base the value of this allewance is lacking for nuclear plants.
Based upon fossil-fueled powar station experience, interim replacement is estimated to be 0.?5% annually nf plant.apital cost.
This is believed to be a conservative value for I
nuclear generating units because the manufacture and installation of i
safety rolated nuclear components must meet certain design specifications
A-6 subjected to quality control inspections; hence, these corponents and ara should be more reliable and have a longer service life than normal power The remaining components and systems (e.g., turbine-station equipment.
generator units, pumps and motors, condensers, cooling system) are the same for nuclear and fossil power stations.
The annual charges for interim replacements is not sufficient to cover the cost of backfitting to comply with new regulatory requirements such as emergency core cooling systems, radioactive waste systems, condenser cooling systems, electrostatic precipitators, and flue gas desulfuriza-Although backfitting expenses are primarily of a c3Dital tion systems.
In this report, cost nature, they often show up as charges to annual C&M.
it is assumed that the plant meets all regulatory guidelines and that it will be free from future major backfitting requirements.
Since the cost of interim replacements would be subject to general infla-the 0.35% value has been adjusted to a levelized basis assuming a
- tion, 5% escalation and discount rate equal to the cost of money for each type The fixed charge rate for interim replacements is estimated of utility.
to be 0.66% for publicly-owned utilities and 0.59% for privately-owned The dif ference in'the two values is due to the dif ference in utilities.
c.st of money used in the levelizing calculations.
Property Insurance Two types of insurance coverage are provided for nuclear power plants:
The liability coverage is not property damage and third party liability.
directly related to plant investment and is therefore included in 0&M is based The fixed charge rate for property insurance in Table 1 costs.
upon the amount paid by electric utilities for property insurance and the total investments in plant and equipment.
The following table summarizes the property insurance paid by privately-owned utilitit.2, the total investments in plant and equipment and the ratio of these two expressed in percent for the last five years of published The data were obtained from Tables 15 and 17 of Reference 1.
data.
Property Insurance Total Investment Property Insurance Paid by Utilities in Plant & Equip.
as Percent of Invest.
Year (million $)
(million $)
(%)
1972 68.38 118,603 0.058 0.056 1973 72.13 128,881 1974 76.85 146.007 0.053 1975 93.47 160,711 0.058 0.060 1976 106.91 177,566 0.057 Average D
A-7 The cost of property insurance for publicly-owned utilities is assumed to oe the same as for privately-owned utilities.
Income Taxes Federal and State income taxes are part of the investor-owned utility's cost of doing business.
From an accounting viewpoint and in accordance with the FPC " Uniform System of Accounts," taxes in general are treated as an expense, and income taxes are related to taxable income, not to the investment in property and plant.
Taxable income, however, is in turn related to the investment as well as to the percentage of common and preferred stock equity in the capitalization, the depreciation method, and the tax structure.
The income tax component of the fixed charge rate in Table 1 is calculated from the percentage of stock equity in the return nn investment.
The income tax (T) is equal to the product of the income tax rate (r) times the difference between net income before tax (NI8T) and depreciation (D) as:
T = r (NIBT - 0) i The NIBT is equal to the net income (NI) plus the income tax.
Substituting NI + T = NIBT in the above equation and rearranging, we obtain:
T = [r/(1 - r)](NI - 0)
If we assume a combined Federal and State income tax rate of 50%, then T I
onvals (N1 - 0).
NI expressed as a percent of investment is equal to the return on equity, [i.e., the fraction of capital financed by preferred stock (P) times the rate of return for preferred stock (R ) plus the fraction of capital financed by common stock and retained earnings (C)
P times the rata of return for common stock equity (R )].
Gepreciation (C) is assurr.ad tn be straight line over 30 years.
(Corfections te depreciation for land wd salvage values, tax credits and rapid depreciation methods would lower the fixed charge rate for income tax but this correction would be wall and has been neglected here.) This is summarized as follow--
' = (Ni - 0)
- [(Pir R ) * (C)(R ) - 0]
7, c
I he
'e for P. R, C and R are obtained from the above section on D
Returrs on Investbent." The fixed charge rate for incor.e tax "Intm e,i ror in --' r owned utilities is thus:
[(0. IN)(0. 0913) + (0. 362)(0.106)
.0333] = 0. 0164 for
=
d Traciatino assets D *
- ii *W T g
oof} old_1 k}h u
A-8 and I = (0.124)(0.0913) + (0.362)(0.106) =.0497 for nondeoreciat-ing assets.
Generally, publicly-owned utilities are not subject to income tax; hence, the blank in Table 1 for this category.
Since return on investment is based on the capital invested in the plant and is a constant in this analysis, the income tax is constant and is not Note that the above subject to inflation as state and local taxes are.
mentioned sinking fund for depreciation generates the funds over the life of the plant to pay off the investors.
State and Local Taxes State and local taxes, like Federal income taxes, are part of the utility's These taxes can vary strongly with locality.
cost of doing business.
Included in this category are prope*ty (ad valorem), income, franchise, capital stock, gross receipts, occupation or license, energy or generation, unemployment, and miscellaneous excise taxes.
The fixed charge rate for state and local taxes showp in Table I was derived from FPC-compiled composite statistics, References 1, 5 and 6.
The amount of state and local taxes paid, the amount invested in plant and equipment and the ratio of these two expressed as a percent are summarized in the following table for both types of utilities for the last five years of available data.
State and local taxes, like interim replacements, are expected to increase along with general inflation.
Thus, state and local taxes have been adjusted to a levelized basis assuming a 5% escalation and a discount rate equal to the cost of money for each type of utility.
The fixed charge rate for state and local taxes is estimated to be 1.33% for publicly-owned utilities and 4.32% for investor-owned utilities.
A-9 Y
M Private Owned Public Owned Investment Ratio of State Investment Ratio of State and in ant &
Tax to and Local in Nnt & Tax to Local Taxes 3',
Equipment Invest-Taxes Equipment Invast-Year (million $)
(million $)
ment (%)
(million $) (million $) ment (%)
1971 93.2 14,457 0.64 1972 102.7 15,688 t.65 2,986 118,603 2.52 1973 130.0 16,457 0.79 3,252 128,881 2.52 1974 139.6 18,652 0.75 3,686 146,007 2.52 1975 157.4 21,445 0.73 4,164 160,711 2.59 1976 4,653 177,566 2.62 Average 0.71 2.55 E ata through 1973 obtained from Tables 8 and 10 of Reference 5, 1974-5 data, D
is a composite from Tables 1W, 2W, 1R and 2R of Reference 6.
E ata obtained from Tables 11 and 17 of Reference 1.
0 E e state and local tax component for publicly-owned utilities includes Th all payments in lieu of such taxes.
P
,l A-10 l'1' REFERENCE 5 1.
00E/EI A-0044 (formerly Federal Power Commission), " Statistics of Privately-Owned Electric Utilities in the United States - 1976."
f 2.
Moody's " Municipal and Government Manual - 1977."
~
k 3.
floody's "Public Utility Manual - 1977."
?
I 4.
Federal Register, Vol. 41, No. 206, Friday, October 22, 1976, page 46618, "Just and Reasonable Rate of Return on Equity for Natural Gas
(
g g
Pipeline Ccmpanies and Public Utilities."
~
5.
Federal Power Commission, " Statistics of Publicly-Owned Electric
[
Utilities in the United States - 1973."
6.
Federal Power Ccmmission, " Statistics of Publicly-Owned Electric Utilities in the United States - 1975."
1 J
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- t NUCLEAR REGULATORY COMMISSION a's
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WASHING TON, D. C. 20555
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,y JUL 2 0 56 Environmental Projects Personnel ADEP Project Instruction # 76-5
.>J PROJECTIO'l 0F FUEL PRICES FOR EllVIR0l#1EtlTAL STATEMENTS In order to gain consistency in the economic comparison between nuclear and coal-fired power plants in our envircr. mental statements, the following short-term interim procedures should be adhered to in estimating the fuel y
Q price of coal and nuclear fuel.
w 1.
Nuclear fuel The price of nuclear fuel should be estimated to be 7.4 mills per kilowatt-hour in 1982.
For nuclear plants con.ing on-line at a date that is later than 1982, the above nuclear fuel price shnuld be escalated at 5 percent per year up to the propcsed year of co:r.mercial operation.
This estimate of the nuclear fuel price is based on testimony presented by Darrell iyV
!! ash at the Wolf Creek Generating Station hearing (Docket No. 50-482) on January 28, 1976. The pertinent sections of
'r,.j this testimony are attached.
2.
Coal
==
The price of coal should be calculated by taking the average of 4
the average contract and spot price paid by the applicant during 1975 for coal delivered to the applicant's system and escalated at 5 percent per year to th2 year of connercial operation of the the 1975 average contract and spot price of coal can be plant.
obtained from the Federal Po';er Conmission (Form fio. 423).
This s *,E calculation should be performed for both high-sulfur coal (coal with a sulfur coni.ent of greater than one percent) and' for low-sulfur cnal (coal with a sulfur content of one percent or less).
An econcmic comparison can then be perfonned for a coal-fired plant. both with and without a desulfurization system.
Several steps were taken to arrive at the above procedures for projecting fuel prices.
These steps included:
7W A review of the current literature on the subject matter.
This
'r A.
includod an examination of (a) the fiational Enerny Outiook - 1976 r
prepared by the Federal Energy Adminisi. ration, (UTEStudyof l
ns;g.
. J v. -.., M y.a m, 3 v.,;:.x.
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5 Environmental Projects Personnel JUL 2 01976
- l Coal Prices prepared by the Executive Office of the President, Council on Wage and Price Stability and (c) several other re-ports on fuel price projections prepared by, among others, Arthur D. Little, the Federal Power Comission, and the Environmental Protection Agency.
B.
Collecting computerized pricing data on recent coal deliveries to every electric utility in the U. S.
This data was obtained on a computer tape from the FPC. A request for technical assistance has been sent to William G. ficDonald, Director, Of fice of Panagement Information and Program Control, in order that we might develop this raw data into a more useful form for our needs.
C.
Discussions with knowledgeable individuals in the field of fuel prices.
This included discussions with representatives of FEA,
-~
FPC, Arthur D. Little, and Sobotka & Company.
w
'";?
As a result of this review, we have found that the above procedures are a reasonable interim method for determining future fuel prices in our environmental statemen ts.
In making this recommendation on projected coal prices, it is recognized that by simply escalating the 1975 price of coal, one ignor?s, to a V
degree, many of the factors which might influence coal prices in the future.
For example, there are several forcing factors which would My tend to lower the future price of coal.
These factors include, among others, the availability of vast supplies of western coal and the relative ease of strip mining operations in the west.
On the other hand,;
there are forces at work t.hich could substantially increase the price of coal.
lhese include the continuing labor difficulties and rising coal miner wages coupled with declining productivity.
In addition, strip mine reclamation programs could add.significant costs to the price of cnal.
gp Our approach tn projecting future coal prices would be based on the assumption that these factors would tend to cancel one another out and that the net effect would be that coal prices will increase at the nominal inflation rate of 5 percent per year.
Based on our discussions with the parties ideatified in Item C above, our apprnach to projecting coal prices may be conservative.
FEA repre-sentatives stated that in their opinion, future prices of low-sulfur coal will escalate substantially over existing prices in real terms
,,y g%
and that high-sulfur coal will probably escalate at the nonnal inflation rate.
An FPC representative indicated that in real terms, coal prices 5 00@ $fN
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JUL 2 019M Environmental Projects 1
Personnel
'l can be expected to increase by 50 percent by the early to mid-1980's.
When this 50 percent real increase is added to the 5 percent inflation rate assumed in the proposed treatment, this yields price increases ranging from 9.6 to 12.0 percent per year.
j Questions regarding the technical analysis should be referred to Dr.
Darrel Hash, Cost-Benefit Analysis Branch, 492-7906.
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ty Voss A. Moore, Assistant Director for Environmental Projects
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Division of Site Safety and Environmental Analysis d.3 1
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195.
(PASNY):
Provide NRC Staff's definition of " depreciation" in the second a.
paragraph of FES page 8-18.
Describe applicability of " depreciation" in light of the Applicant's b.
tax exempt status.
Answer:
"It is equally correct to say that the total of depreciation a.
charges is supposed to reflect the total decline in the value of the physical asset."* The decline in the value is due to obsol escence and wear and tear on the plant.
- Alfred E. Kahn, The Economics of Reaulation, John Wiley and Sons, Inc.,
- p. 177.
b.
Obsolescence and wear and tear on the plant occur regardless of the ownership of the plant.
R. Tepel 3/6/79
199.
(PA5NY):
Confirm that yearly oil cc;t savings shown in FES Table K.2 were developed by escalating oil costs for each year by 6.5*, and then discounting back to 1987 at 10", (Cost opportunity cost).
Answer:
Yes.
R. Tepel 3/6/79
200.
(PASNY):
If the answer to Interrogatory No. 199 is "yes", provide a basis for using a cost opportunity cost of 10~, which exceeds the assumed escalation rate for petroleum of 6.51.
Answer:
Since the escalation rate of any particular good has little effect on the discount rate, it was not censidered in the discount rate.
R. Tepel 3/7/79
201.
(PASNY):
Provide the basis for using a generic uranium fuel cost of 9.44 mills /KWH in 1987.
Answer:
See " Projection of Fuel Prices For Environmental Statements", U. S. Nuclear Regulatory Comission ADEP Project Instruction *76-5, July 20,1976.
4 R. Tepel 8
3/6/79 I
4
.a 205.
(PASNY):
Refer to FES Table K.5 (page K-5):
a.
Describe the mathematical derivation of the numbers indicated on this table.
Explain all assumptions used and their bases.
206.
(PASNY):
Provide the basis for using a discounted market value concept when determining differential power generation costs for a public benefit corporation such as the Applicant.
Answer:
Straight line depreciation means that the plant depreciates the same amount every year.
If the plant life is 30 years, each year the plant will lose 1/ 30 of its valte. At the beginning of the plants 26th year it would have 4/30 of a new plants' value left.
licweva, due to escalation 4/30 of a new plant in 2017 costs more than 4/30 of a new plant in 1987.
In 2017, 4/30 of a new plant would cost
$1259.4M.
This assumes a 5% escalation rate on a new plant.
This figure is less than the 7% escalation rate used from 1987 to 1991 in order to account for lower capital cost inflation and accelerated depreciation due to technical change or accelerated wear and tear of the plant.
Since $1 in 2017 is not worth $1 in 1987 the value of the plant remaining in 2017 is worth the discounted value of the plant ir. 2017 or $72.2M.
The concept of discounting does not change for a publically owned corporation.
(4/30 X S2656.7M) X (1 +.05)26 72.2M
=
(1 +.10)26 R. Tepel 3/6/79
207.
(PASNY):
Provide rationale for using different escalation rates for FES Tables K.1 through K.6 of Appendix K.
Answer:
Price increases in some commodities are different from others.
R. Tepel 3/6/79
216. (PASNY):
Discuss the consideration of total actual construction costs in determining alternative site superiority.
Answer:
Construction costs were not considered in the determination of alternative site superiority in the environnental assessment in Section 9.2 of the FEE.
N. E. Hinkle 3/16/79
a 221. (PASilY):
Explain if, and if so how, the time of delay in shifting to the Athens site was considered equivalent to the time of delay in shifting to the other sites identified in FES Section 9.2.6 as preferable or obviously superior.
Answer:
The time of delay in moving the proposed generatina unit to the Athens site was not specifically considered equivalent to the time of delay in shifting to the other preferable or superior sites designated in Table 9.14 of the FES fl. E. Hinkle 3/6/79
225. (PASNY):
Indicate what weight, if any, was given to the costs shown in FES Table 10.9 when performing a cost-benefit analysis of moving to an alternative site.
Answer:
All costs given in Table 10.9 were given equal weight in the cost-benefit analysis.
R. ?. Rush 3/6/79
228. (PASin'):
To what extent, if any, were the " contractual obligations" costs shown in FES Table 10.9 accorded determinative weight?
Answer:
Contractural obligations were considered to be part of the sunk costs. They were not civen determinative weight.
S. Lewis 3/6/79 s
230. (PASNY):
Did NRC staff perform similar cost analysis for the other sites that it believes are preferable or superior to the Cementon sites?
If so, identify and provide such analyses, including all back-up calculations.
If not, provide rationale for not performing such calculations.
Answer:
No.
Table 10.9 indicates that the savings and costs associated with moving to an alternative site were based on the costs of moving to the Athens site. Although specific economic analyses were not prepared for each of the preferable or superior alternative sites designated in Table 9.14 of the FES, the staff does not expect that the savings or costs would be significantly altered.
N. E. Hinkle 3/6/79
March 13,1979 -
..[
k,*., \\. G -
UNITED STATES OF AMERICA
\\r NUCLEAR REGULATORY CCMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD
/
In the Matter of
)
)
Docket No. 50-549 POWER AUTHORITY OF THE STATE OF
)
)
)
(Greene County Nuclear Power Plant)
)
XXXXX STATE OF NEW YORK DEPARTMENT OF PUBLIC SERVICE BOARD ON ELECTRIC GENERATION SITING AND THE ENVIRONMENT In the Matter of the Application of the )
)
Case 80006 POWER AUTHORITY OF THE STATE OF
)
)
)
(Greene County Nuclear Generating
)
Facility)
)
NRC Staff Response to PASNY's Fourth Set of Interrogatories The NRC Staff submits the following responses to PASNY's Fourth Set of Interrogatories:
262, 263.
262. (PASNY):
Has an analysis been done of lost opportunities at the proposed alternate sites which NRC staff finds perferable or superior?
If so, detail the analysis.
If not, why?
Answer:
A detailed analysis of lost opportunities was not performed for the site considered in the environmental assessment of alternative sites.
- However, the staff did consider that the Denning Point and Terry Brickyard sites along with the Cementon site were more advantageously located for industrial activities than were the other sites. To that extent, the staff recognized that use of these three sites for the Applicant's proposed power station would involve the loss of potential industrial development with associated employment, income, and tax opportunities.
The potential for lost tax opportunities is reflected in Table 9.14 in the tax sub-category of social inpacts.
N. E. Hinkle 3/6/79
263.
(PASNY):
Provide and justify the lost opportunity value of prime farm land.
Define " prime farm land". Distinguish " prime" from " unique farm land".
Identify whether public policy opposes destruction of prime or unique farmland.
If so, identify the source of such public policy.
Answer:
The staff did not consider the lost opportunity value of prime farm land.
The Soil Conservation Service (SCS) has established a policy to make and keep current an inventory of prime and unique farmland, with the objective of identifying the extent and location of important rural lands needed to produce food, feed, fiber, forage and oil seed crops (Fed. Reg. 43(21): 4030-4033). This policy does not state legal protection of such lands, but it has been developed in response to a national concern for the loss of the nation's best farmlands.
Prime farmlands are defined by the SCS as " land which has the best combination of physical and chemical characteristics for producing food, feed, forage, fiber, and oilseed crops", and which is also available for these uses.
Unique farmlands are defined by the SCS as " lands other than prime farmland that is used for the production of specific high value food and fiber crops".
R. Reed 3/7/79