ML19308C000
| ML19308C000 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 06/18/1979 |
| From: | Barbour G, Hynes E, Mcglynn R NEW JERSEY, STATE OF |
| To: | |
| References | |
| TASK-TF, TASK-TMR 795-427, NUDOCS 8001170741 | |
| Download: ML19308C000 (9) | |
Text
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DEPARTMENT OF ENERGY BOARD OF PUBLIC UTILITIES 6/18/79 1
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1 IN TEE MATTER OF TEE PEJITION OF
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ph JIRSEY CC; TEAL PC'n*ER AND LIGHT
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COMPANY FOR APPROVAL OF AN AME::D-
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DECISION AND ORDER ME::T OF ITS TARIFF FOR ELECTRIC
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SERVICE AND FOR A:ENDME:f! TO THE
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DOCKET NO. 795-427 DERGT ADJUSTMENI CLAUSE AND FACTCR )
IN W D TARIFF FOR SUCH SER7 ICE
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C on May 4, 1979, Jersey Ce: tral Pever & Light Ce:pany, a public utili:7 of the State of New Jersey, subject to the jurisdicti = of the 3 card, pursuant to N.J.S.A. 48:2-13, sub=itted a revisic: cf rates pursuant to 3.J.S.A. 4S:2-21 to beccce effective June 1, 1979 This petitien arises cut of the eve::s which cecurred e-
arch 28, 1979. at the Sree rile Island Nue? " - Co-erati:2 Static: C:it No. 2 located in Middle:cvn. Pe::sylvania, o g i:5 the ec-na,.y.ls_a 2 H y er.,
The Ccupany's preposed revised tarif f, based upon the cor alized test paried cf twelve mentas e=c:=g sece= der 31, 1979, prevides fer se increase 1:
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o-C*Jase rates.3 The rrenosed rates provide fer an are:
r = r m u m e-r c huse (LIAC1 presently at. U3 mills per hh and establishne : cf a new energy adjus::ent facter of ".375 mills per W h, which will increase its gress a==ual revenues by 5113 millic=.
3ecause of the energen sature of :his applica:ics, the 2 card scheduled expedited hearings ccm.encing en May 21, 1979.
A nu=her of parties intervened to centest the propcsed increase g in the Lavalized E ergy Adjustment Clause. "hese parties were Depart =e::
of Public Advocate, Depart en: cf Energy, Ocea: Ccus:7 3 card cf Chese Freeholders New Jersey Chapter of the National Association of '*ater Cc:-
pasies, Air Products a:d Che=icals Cerpany, New Jersey Public !=:eres:
Research Grcup, United States Depar::e:: of Defense and the Staff of the Board of Public Ceilities. The peti:ioner presented direc: a:d rebuttal testimony.
Dr. Fred Grygiel, Chief Public Utili:7 Economis a:d A: ic:7 J.
Zarillo, Executive officer, testified en behalf of the S:st! of the 2 card,
-d the Departmas: of E argy prese::ed direct and rebuttal testi=c:y.
Additienally, at the 3 card's request Aare: Levy, Isq. of the United S:a:es Securities and Exchange Cetz:issien testified solely en the questien :f reorganizatics and bankruptcy.
888 2 270 7y/
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l four separate evening hearings in the company's service area for the 4
The Board conducted nine days of evidentiary hearings, and purpose of hearing public witnesses. Oral argument was held before the Board on June 14, 1979 at which time the active parties presented arguments regarding their positions.
After a full and complete review of the entire record in this matter, the Board has determined that the position of the Staff of the k
Board of Public Utilities is tne proper one to be tollowed in this matter and we will, therefore. adopt it in this decision.
'(I On May 23, 1979, the Board ruled (TR-384) that the issue of fault regarding the accident at Three Mile Island tl nit 2 would not be one that would be considered in its determination of this phase of the case. We affirm that ruling for the very practical reason that numerous agencies, cossaissions and cotsnittees are actively pursuing this issue and it is unlikely that a relatively certain determination on this complex issue will be arrived at in the near future.
The issue of reorganization or bankruptcy has arisen in this case due to the financial strain caused by the OtI incident. Although we have considered the testimony of Mr. Levy of the Securities and Exchange Cer:missien as well as the testimony of other witnesses, the Board at this time belie <es g
the question of bankruptcy is not a viable alternative fer this ccmpany.
A N that trustee in bankruptcy would have the same monumental financial problems to confront as current management. The costs of replacement energy would still be present and the trustee would still have to coes to this Board for relief.
Reorganization or bankruotev vould benefit no ene. either the ceccarv or the~
_ ratepayer, and would only serve to endanzer the ability of JCP&L to provice~
adequate and proper service.
Rate Base Treat?ent of SI-I and O!I-2 Jersey Centra' 5 er and tight Cemeanv (JCPit) has proposed to forego a return o(ene-haljhhe eeuitv inve=r-a-t in the nree Miae is.a:n!
Two plant. n e Ucmpany states that this proposal results in an equita ut*
1 haring tetween the ratesayers and shareholders of the firancial~ 1:cact caused bv the unavmi!=%114rv M ?him Slant (Exhibit JC-G O).
.he 3 card's N~ Staff and all other parties have joined in opposition to this positien.
Staff argues that the Bem-d ehnuld exclude free rate base 2:I-2 and
- the related operating expenses. which will reduce the revenue 1-oact ct...
in the eranting of anv rate re. lei.
.ne eu eet of this reccer.endatien is to
- 7. p. h.,,,.,M = av4=eine b E rates by S29 millien. C R-I!62, Ex. JC-213).
y win nn re fused anc usefg h
They contend that the reeerd a vv e the riant in oroviding elece-4e G *-atine service for a period of at least u*
c h years, if ever.
In pt oposing a recovery of purchase power costs, the Staf f testified that af the company were allowed to recoup O!!-2 canical and operating costs through base rates, in addition to recevering the 2:I N replacement energy costs, there would be a double burden on utility custeners.
In the Staff's view this would represent an unfair sharing of these cests.
All other active intervenors agreed with this staff positien. ::ceket So. 795-427
The Board adopts the Staff's position on this issue. There-fore, TMI-2 will be treated as a Iacility that is not used and j
useful in providing service to the utility's rate payers. This deter-se Eination by itsalt results in a reduction of base races by 29 million
\\s dollars.
l Inso f ar as yt t'n o w. t is. concerned, the Board finds that the outage of this facility is of a _ temocrary duration._ The record indicates that this unit any h nt= rad hack in ensmercial operation t_o provide service to its customers as early as August 1979. Further-more, all calculations in determining replacement enerav costs were based 'upon TMI-l returning to commeretal service as of January 1,1980.
LEAC FACTOR The major issue in this case is the replacerent energy costs resulting from the TMI incident.
The level of replacement energy cost's has been set out in JC-206(a), page 3 and JC-206, table D.
These exhibits indicate that for the 21-month period from April 1,1979 to December 31.198C, replace-N=ent energy costs are estimated by the coepany to be S138 =illion.
~he company, reduced them to give effect to savings from purchase pever agreenents with Allegheny P ver Systems, Philadelphia Electric and Pennsy-Ivania Pever and Light Cor.any of approxi=ately $16 millien, resulting La a revised level of esticated replacerent energy costs of $122 million.
It is Staff's pcsition that the company will realize additional savings of $17 million of estinated replacement energy cests through the incentives that Staff proposed and purchased power agreements under negotiati:ns. These savings could be accomplished through the ability of the Company to recever capa-city charges through the LEAC; by extension of the existing agreeeents noted above; and by additional capacity purchases that are being necotiated with Ontario hydro, Northern Indiana Pever and Public Service of Indiana.
Further, the staff notes that company witnesses have testified that IMI-1 could return to commercial service as early as August, 1979.
Staff used a service return date of January 1, 1990. Should TMI-1 return to service prior to this date, the cempany could realize additienal sav-Lags of approximately $5.5 millien per menth. While staff has net t; eluded this in its calculation, such an eventuality veuld put the ce= pray in an i
even better cash position. Therefore, the staff centends thr. the cc pany's esti=ated replace =ent energy costs could be reduced to approxinately
$105 mil'. ion based on the Staff's assunptions. Staff, through Messrs.
Grygiel and 24rillo concluded that the cempany's estimates did not give ef fect to the incentives and oppertunities identified and ree=== ended in the.r testimony. Decket So. 795-427 1
Staff also contends that $7.3 million should be used to further reduce the company's estimate of replacement energy costs. This amount represents an adjustment in recognition that the ratepayers, through the Staf f's proposed LEAC, will be paying replacement energy costs from the date of the accident to July 1,1979, the effective date of the proposed LEAC factor.
The company has proposed a 14-month period of replacement energy costs to be recovered over 12 months. The Staff, on the other hand, used the company's estimate of replacement energy costs for the 21-month period (April,1979 to December,1980) to be recovered over 18 months.
g Due to the magnitude of the incident and its extraordinary nature, the 18-month time frame must be considered reasonable. The Board is per-suaded by Staff's argument on this issue. We view the conte = plated reduction of $17 million as a reasonable possibility. Therefore, we adopt Staff's recommendation that 98.3 million dollars of replacement energy costs be recovered by JCP&L over a period of 18 months. This is consistent with prior Board practices in allowing extraordinary expenses to be recovered over an extended period of time. While the Advocate and other intervenors have suggested a period of anywhere from 36 to 60 months, the Board considers the 18 month proposal most reasonable.
The Board also adopts the staff recommendations on the inclusion of the capacity charges related to the TMI incident in the calculation of the LEAC. This treatment is being permitted, in this limited instance, to provide an incentive to JC7&L to actively pursue all possible cost reducing purchased power agreements. Any capacity purchase successfully negotiated, that has associated with it a capacity charge should be treated as part of the net fuel cost savings and flowed through the LEAC.
With the allevance of the Staff's propcsed LEAC factor of 6.275 mills per kwh and a removal of IMI-2 from base rates, the company will realize approximately $45 millien in additional annual revenues.
l 1 3ceket No. 703-427 l
Dividende The issue of suspending the Jersey Central Power and Light dividend is vexing. The company through its witnesses, has testified that to pass a dividend will be viewed by the financial connunity as a negative sign and could seriously jeopardize its ability to obtain lines of short-term credit through the proposed Revolving Credit Agreement and limit its access to long-term capital markets.
r'"
The staff has recommended to the Board that it order Jersey 1 Central not to pay to General Public Utilities Corp; ration (CPU) seme y,$35 millica in dividend distributions during the balance of 1979. This action would, in the Staff's opinion, conserve Jersey Central's vital cash resources, and assist the petitioner in its efforts to secura long-term financing. (Exhibit BPU Staff 100).
Under ordinary circuestances, the general authority to regulate the rates and service of a public utility cenpany does not ecmprehend the pcwer to interfere in the internal affairs of the corporation, N.J. Bell Tel. Co. v. Bd. of Pub. Utiliev Cemmrs. 12 N.J. 568, 590 (1958);
Passaic Consolidated Water Co. v. Board of Public Utility Comm.,
5 N.J.
Misc.1078,1081-1082 (Sup. Ct. 1927) aff'd 104 N.J.L. 666 (E. & A. 1928);
State of, Missouri er rel Southwestern Bell Telephene Co. v. Public Service Commissien of Missouri, 262 U.S. 276, 289, 43 S. Ct. 544, 547, 67 L.ed 981, 985 (1923). The management of a utility is charged with the responsibility of operating the assets of the corporatica for the benefit of its share-holders; the regulatory ccanission supervises such operaticu to assure the premotien of the public interest.Because utility property remains private property, a regulatory commission is of ten precluded frca exercising its authcrity in a way which would interfere with those inportant rights and
- l. tecidents of private ossership vested in sanagenent. Nevertheless, where the policy of a utility company's nanagement collides with the public interest, such rights and incidents of privcce evnership nust yield to the L,paramcunt concerns of the State. Accordingly, even managenent's prerogative to declare and pay dividends to shareholders is not sacrosance, when to do so would affect the utility's ability to reader safe, adequate and proper service, see Public Service Commissien v. Jamaica Water Supolv Ccrpany, 42 N.Y. 2d 880, 397 N.Y.S. 2d 784, 366 N.E. 2d 874, Ct. App. 1977 aff'd o.b.
54 A.D. 2d 10, 386 N.Y.S. 2d 230 (3rd Dept. 1976); See also State ex rel Kacsas City Transit. Inc. v. Public Service Ccamission,405 S.W. 24 5, 11-12 (Mc. Sup. Ct. 1966) (en banc). In his decision for the internediate appel-late tribunal in Janaica Vater Supoly, Justice Herlihy cernented:
"In our opinien, tha general mandate of the Public Service Law to assure safe med adacua*e service at *ust and reasonable rates (Public Service Law, 589-b, subd. 1; 189-c, subd. 4; scy-s; necessarily immlies the evar te centrol the disbursaea** cf funds as dividends. The fact that dividends are solely a matter of corporate affairs does not insulate them frca having an impact on rates and service. The solvency of a public utility is clearly related to its status as an organizatien capable cf providing the public service for which it was franchised."
(386 N.Y.S. 2d, at 232).
l l
t Docket No. !?!-.27
Utility solvency and its ability to provide service, the critical issues in Jammica Water Supply, are addressed in this pro-caeding. The recent experience of this Board, in the emergent trea tment of Jersey Central's application for approval of the "yelloveake" financing (Docket Fo. 795-487), is illustrative of not only the company's extreme sh-flow difficulties, but the potential for service disruption. A ubstantial portion of the proceeds of that $30 million secured loan was used to pay the April bill for service rendered hv the PJM pool to Jersey Central. If Boara.ppsuvaa or tne agreement had not been forth-
~
coming and if the,PJM pool had insisted upon payment, the petitioner would have f aced potentially grave financial ccusequences (i.e., event of default). Therefore, the importance of maintaining adequate cast resources rather than expending the money to pay dividends, cannot be under-stated.
The Board adopts staff's position on the issue of dividends and directs at this time that JCP&L not pay to GPU any dividend for the renainder
'of 1979. By this ordar-the Board is not precluding GPU from issuing
'"ETvTdends te um m-atockholders. We arc cerely stating that the present
' evidence as to the financial condition of Jersey Central Power and Light Company is in our view such that for it to issue dividends to its parent GPU, might so exacerbate its cash position as to jeopardize its ability to keep its crocerty in a condition to provide safe, adequate and prcper service, N.J.S.A. 48:2-29.2.
r other Issues The Board has had discussions with the Gcvernor's Office and expressed its concern over the applications of the gross receipts and franchise taxes applicable to the replacement energy during this a=ergency.
We feel that to collect these taxes at this time, due to the ex:racrdinary nature of this incident places an unfair burden en the ratepayer. We have recencended that the State ferego the collection of gress receipts and franchise tax revenues which can be attributable to the cost of the replace-zent energy.
To further aid the petitioner in its efforts to provide the icwest cost energy to rat-- a'--*
d" '-* this period, the Board has discussed the probles with our;tasutilities.[Thesediscussiensmayleadtocertain ecoceny sales to.tzso,.. w.i was eccnomic benefits to fiev to ratepayers.
The Ecard has also had discussiens vi:h the Federal Energy Regula-tory Cecnission and the PJM interchange en :he possibility of supplying JC?&L with replacement energy at cest, rather than through the curren: spli:
savings pricing techanism. We direct JCFSL te continue these discussi:ns and veuld hcpe that Atlantic City Electric and PSEiG f cin in their effort.
Further, the Board has discussed with the New Jersey Cengressi:nal delegation and Federal officials the pessibility of the Federal Govern =en:
lending assistance during this time cf dire financial crisis.
3ased upon the foregoing, the Beard EERE3Y FINOS that:
1.
JCP&L Company is a public utili:7 of the State of New Jersey subject to the jurisdictien of the Scard.
2.
IMI-I nuclear generating station is experiencing i
l a temporary outage and is ecpected te return to ce==ercial l
l l
service en er about January 1,198C. Ocche: ro. 79f-4 7
3.
I-2. nuclear generating station is out of commercial service is not used or useful due to substantial physical damage, and will not return to service, for two to four years, if ever.
4.
On the basis of two and three above, TMI-l should continue to be reflected in base rates until January 1,1980; and.TMI-2.should be removed from base rates until that unit is returned to comercial service.
5.
The revised I.EAC proposed by the Company designed to recover $113 million of additional revenues for replacement energy costs relating to the TMI nuclear accident be denied.
6.
The petitioner's estimate of replacement energy cost over the 21 month period (April 1979 to December 1980) of $138 million is reasonable.
7.
The petitioner's estimated savings of approxi ately
$16 millica associated with anticipated purchase pever agreements are reasonable.
S.
The staff's additional estimated savings of $17 million associated with petitioner's purchase power agreenents new being negotiated, as well as to reflect the staff's incentive of passing capacity charges through, the LEAC, are reasenable.
9.
The staff's proposed S7.3 millien adjustment in recognitien cf the allowance of replacement energy cost for April, May and June, is reasonable.
10.
Based en the above findings in 6, 7 and 8, the Beard finds that JCP&L should be given an opportunity to recover approxi=ately $98 nillion in replacement i
energy costs through the IS month LEAC factor.
- 11. Petitiener's apparent financial position is such that the payment of dividends to GPU night impair JC7&L's ability to provide safe, adequate and proper service.
Therefore the Board EERE3Y CROERS
- EAT
- 1.
Petitioner file for the Board's censideration revised tariff to produce an annual reductica of $29 millien in base races.
2.
Petitiener fils a revised LEAC tariff to reflect a new LEAC factor of 6.275 n111s/kwh.
3.
The treatment of capacity charges asseciated with purchased pcwer agreements related to replacenent energy costs associated with the TMI incident be recognized directly through the LEAC factor.
i Jecket :o. 795-427 g
4.
Petitioner file monthly statements reflecting the status of mI-1 and mI-2 together with any reports filed with or from the Nuclear Regulatory Commissien or any other governmental agency or institution involved in the investigation of this incident.
5.
Petitioner file monthly reports covering the cost of rehabilitating MI-2 as well as the scheduling of these rehabilitation activities.
6.
Petitioner file monthly reports on the results of the LEAC factor herein authorized, indicating the actual vs. budgeted energy replacement cost and the revenues derived therefrom.
7.
Petitioner file with the Board reports on the status of all purchased power agreements.
8.
Petitioner file monthly reports indicating the level of short-ters borrowing outstanding under the RCA, and the cou:pany's legal 11=it of short-term borrowings.
9.
ased on present cash projectiens, petitioner is not o pay any dividend to its parent, GPU, during the remainder of 1979.
- 10. JCP&L eliminate the appropriate gross receipts and franchise taxes from all sales made to other New Jersey public utilities.
11.
The parties to this proceeding shall within the next several weeks identify the remaining issues in controversy and develop a schedule of hearings to deal with those issues. In particular, the narties then14 mAA-ame the need for a
{_ mana gemen t
- A" n' ?C?g and determine a conservation strategy consistent with this crisis situation.
D ATED: June 13, 1979 BOAP3 CT Pr3LIC UTII,ITIES (SEAL)
BY: (SIG'i!D)
GIORGE H. SA13 CUR PRESIDENT RICFJ.RD 3. McGLU.!
CCS ISSIONIR AITEST:
EDWARD H. hT;IS (SIG';ID)
CC m !SSIOUIR CI:UC A. CAIMP.!SE SECRETARY I
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Decket No. 795-4 7 l
l i
JI2 SET CEIC2AL PCVER AND LIGTJ COMPANT Docket No.
795-427 Jersey Central Power & Light Jack 3. Kirsten Esq.
Madison Avenue at Punch Bowl Road 17 Acade=y Stree Morristevn. New Jersey 07960 Navark, New Jersey 07102 Alfred L. Nardelli, Esq.
John J. Degnan, Esq.
Depart:nent of Public Advocate Attor:ey C'e eral Division of Rate Counsel State House 10 Ccamerce Court Trenten, New Jersey 08625 Neve:k, New Jersey 07102 Dr. yred S. G:731 1 New Jersey Departzen: of Z:ergy Chief Ecccc:ist 1100 lay =ced Boulevard 3 card of Public Cc111:1es Novark, New Jersey 07102 1100 Ray =c:d Eculavard Newark, New Jersey 07102
. A. Grey Sla;'
.y..
2: of Z:argy Gerald N. Tchia Ecc:cti: 2egulatory Ad=inistra:1c I. Paul Slav 1 2CCO M S::eet N.W.
Di risic: ef P.a:es 538 Va: guard 3uild1=g Beard of Puh',1: :ili:iss Divisi: of legulatory Precee g 1100 Ray ced 3culavard isashi:g :T,
.w.
.va61 Nevark, New Jersey 07102 34rthelesev !. :anelli, Esq.
Wal::
M. Jeffress, Jr., Isq.
Stryker, Tass & 0111 Cffice of Judge Adveca:e 33 Washi:ste S::eet Ge:eral Navari, New Jersey ~07:02 Regula: ry lav Cffica Vashi:g:::, D.C.
10310
!dvard *.J.:yd, Isq.
New Jersey Public I::erest Oavid A. Va:ers, Esq.
Research G::up Waters, Me?herse:, Eud:in & McNail' 33 Wes: *afaye::s S::ee:
3 Jeur:41 Square Tras:::, Xev Jersey C8608 Jersey Ci:7 New Jersey 07;;c Charles A. 11: % -
Assista:: 04 =1ssicce:
Depar es: ef Ise:gy ll:C lay:ctd 2cu'avard Neva:1, New Jersey 0710:
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