ML19309D016
| ML19309D016 | |
| Person / Time | |
|---|---|
| Site: | Three Mile Island  |
| Issue date: | 04/03/1980 |
| From: | Russell S, Seltzer A, Shanaman S PENNSYLVANIA, COMMONWEALTH OF, RYAN, RUSSELL & MCCONAGHY |
| To: | |
| Shared Package | |
| ML16341C651 | List: |
| References | |
| NUDOCS 8004090478 | |
| Download: ML19309D016 (182) | |
Text
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1963 p
l Before '
s, 2 TIIE PENNSYLVANIA PUBLIC UTILITY COMMISSION 3
In re: -79040308 - Pennsylvania Public Utility 4' Concission versus Metropolitan Edison Company, at al.
5 Further .uaring 6
7 l 6
' Stenographic report o.f hearing held in Hearing Room No. 1, North Office Building, Harrisburg, Pennsylvania, !
9 ,
1 Wednesday, 10 February 13, 1980, !
at 10:10 o' clock a.m.
12
{ 1s, ..
BSE6RS e.
S $ S A I S E N i A M A'N ', C'EAIRNAN, Presiding
- 14. ; HICHAEL JOHNSON, Cormissioner.
LINDA C. TALIAFERRO, Commissioner 15 JAMES E. CAWLEY, Commissioner .
16 . ---
I '
17 APPEARANCES:
ig SAMUEL b. RUSSEL, ESQ., and ALAN M. SELTZER, ESQ.
19 Ryan, Russell & McConaghey '
i 530 Penn Square Center
- t0 ,. P.O. Box 599 Reading, Pennsylvania 19603 21 For - !*tropolitan Edison Company and Pennsylvania Electric Company 22 23 1
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1 ' APPEARANCES (Centinued):
l 2 DAVID M. BARASC2, ESQ. 1 l l 1425 Strawberry Square '
3 Harrisburg, Pennsylvania 17127 For - Office of Consumer Advocate 4
3 JOSEPH J. MALATESTA, JR. ., ESQ.
G-38 North Office Building 6 P.O. Box 3265 Harrisburg, Pennsylvania 17120 7
For - Comnission. Trial Staff 8
BERNARD A. RYAN, JR., ESQ.
9 Dechert, Price & Rhoads 10 800 North Third Street Harrisburg, Pennsylvania For - Bethlehem Steel Corporation 11 12 JOHN BOWERS, ESQ.
i R.D. 67, Box 388
\ 13 York, Pennsylvanic 17402 14 Tor - Holly Esch, Deep Run Farm, Inc.
15 LARRY SELKOWITZ, ESQ.
P.O. Bor 1597 16 Harrisburg, Pennsylvania 17105 For - TMIA, Inc. ;
17 18 RENNETE A. WISE, ESQ.
213A North Front Street 19 , Harrisburg, Pennsylvania 17101 For - Louise Riley, S.P.A.G. l 20 21 PATRICIA A. SMITH Box 52, R.D. il 22 Etters, Pennsylvanit 17319 i
For - Narberry Township TMI Steering I 23 Committee 25 .
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, . r 1E55 1 APPtARANCES' (Cont'inued): ,
2 LOUISE DUFOUR +
3 Route 401 Chester Springs, Pennsylvania 19425 4 .
5 STEVEN D. McCLAP.EN, ESQ. -
Deputy Chief Counsel 6 Rates Division - Law Bureau G-19 North Office Building 7 marrisburg, Pennsylvania Special Counsel to the Commission 8
9 ROBERT P. SEIVELY, ESQ.
P.O. Box 195 10 Stockertown, Pennsylvania 18083 Por - Lehigh Pocono Committee of' Concern 11 12 GERALD BORNISH, ESQ.
Wolf, Block, Schorr and Solis-Cohen
( D .12th Floor Packard Building Philadelphia, Pennsylvania ~19102 14 For - Citibank and Chemi, cal Ban,k, !
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1966 0
1 INDEX TO WITNESSES
(
2 RESPONDENTS Direct Cross ReDr ReCr 3 S evart E. Clifford -------- 1967 1983 2137 ----
4 Robert Gillham ------------- 1968 1983 2137 ----
5 (Note: Both of the above-ntmed witnesses were'on the stand sinultaneously.-)
6 7 INDEZ TC EKEIBITS IDENTIFIED S No. C3 Prepared direct testimony of Intervenors Citibank, N.A.,
9 Agent, and Chemical. Bank, Co-Agent, before the Pennsylvania 1C Public Utility Commission as of January 25, 1980 ---------- 1966 11 MET-ED/PENELEC 12 -
s-Ho. A Responce to Commission Trial. ,
13 Staff Interrogatories No. 8, 10, '
11, 12, 13 s. 14 -------------- 2139 14 No. A Response to Cross-examination 15 Request by David sarasch, Esq.,
of J. G. Graham at N. T. 1192 16 to 1194 ---------------------- 2139 17 No. A nespence to Consumer Advocate Interrogatory No. 25 --------- 2140 18 No. A Response to Three Mile Island 19 Alert Interrogatory No. 10 --- 2140 20 No. A Response to PUC Trial Staff . -
Interrogatory No. 38 --------- 2140
~l No. D Response to Office of Consumer 22 Advocate No. 27, Set IV ------ 2140 23 .No. H Letter dated February 6, 1980
(
cn letterhead ef Merrill Lynch 9*, White Ueld Ccpltal Markets k- ~
Group to Samuel E. Russell, 25 Esq. -------------------------- 2140
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1966 O
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2 3 THE CHAIRMAN: I believe, according to 4 our schedule, we have initially testimony from bankers.
5 we have a couple witnesses, Mr. Gornish?
0 2m. GORNISH: That is correct, Madam 7 Chairman. .
O THE CHAIRMAN: Would you proceed?
9 HR..GORNISH: Yes.
10 I have asked the stenographar to mark 11 a copy of the testimony of intervanors Citibank, N.A., -
12
~ Agent and Chemical Bank, co-agent, before the
( 13
(
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Pennsylvania Public Utility Commission.as of' January 14.
25, 1980, as exhibit--I suppose for shorthand we can -
15 call it CB-1. I think the stenographer has already 16 marked it. That testimony has been made available 17 by mail or personally to the customers and all the 18 parties.
i 19 If anyone has not received it, I have .
20 some additional copies.
21 we have here today Mr. Clifford and Mr.
22 Gillham who are the persons mentioned in the testimony
/
23 l and I'll r.s; them some quections, and then they can i
L .
24 { be subject :o cross-eramination.
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... sTnwART 3. cLIFronn, having been 2 I' duly sworn as a witness, was examined and i 3 testified as follows ...
4 DIRnCT EXAMINATION 3 BY MR. GORRISE:
6 D. By whom are you employed and in 7 'what capacity?
0 ";.
i A I'm employed by Citibank, N.A. .
I'm 9 I Senior Vice President in charge of the domestic 10 . energy business. '
11 0, can you tell us something about
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12 , your experience with the bank?
b, - -.
A Since December of 1975 I've been in M charge of public utilities and gas tr'ansmission com-15
' panies; that is, lending to those companies and i
16 ' handling bankiilg relationships. -
- 17 In addition, most recently I've also 18 been given the responsibility for domestic coal 19i i, comp [anies, domestic oil and gas and drilling companies,
~
20 l . and related supply companies to the oil business.
t 21 sefore 1975 I was in London, England, i
22 l for three years in charge of the multinational business 23 of citibank in that country and in scandanavia, f f 24 Prior to that, I was in a staff position 25 in New York, and prior.to that in the early sixties I-TJ7.Est!:ACM & af/.M*(A* TNC. -:::" N. Lot.:In".IL*.014* t.T7 - 1*.!JtRICE*JRG PA. t7)15
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Clifford - direct IMD l I was in Canada ."..'.nning the Mercantile Bank of Canadc.
1 2 g The Citibank has intervened in 3 these procaadings as one of the intervenors as an 4 .
agent; is that correct?
5 L That's correct.
6 0 lir. Clifford, I show you the 7 statement that's been mar)ied as Exhibit CB-1. Did S
you prepare or supervise the preparation or help in the 9 preparation of this statement?
10 L Yes, Mr. Gillham and I both 11 participated in its preparation.
12 E. And are you sponsoring this state-C 13 ment,7 O 14 L Yes.
3 .-
16 ... ROBERT GILLHAM, having been duly 77 sworn as a witness, was examined and gg testified as follows ...
gg DIRECT EXAMINATION p BY MR. GORNISH:
31 O By whom are you employed and in g
_ what capacity?
3 L 'I'm employed by Chemical Bank, and b .
'4
- I an a Vice President in charge of Chemical Bank's ,
t 3 Public Utility Group.
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4 Gillham - direct 1969 i
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O Can you tell us something briefly l
2 :
about your crperience as a banker? I 3
- t Isve been associated with our Public 4 Utility Group since July 1874, and have beendn charge 1 5 of it since August of 1977.
6 Prior to my becoming associated with 7
the Public utility Group, I was responsible for a 0
variety of large corporate relationships geographically E
located in Lower 21anhattan. 1 10 Prior to that, I was in the Metropolitan 11 Division of our bcnk dealing with middle market ( ,
13 business.
13 G If you'll look at the same statement j
14 I showed to lir. Clifford, are you sponsoring that 15 statement? .
16 A .Yes.
17 c Did you help prepare the statement 10 or supervise its preparation? !
l 10 L tir. Clifford and I worked and 20 supervised the preparation of the statement.-
I 21 G In preparing the statement, dic you ,
22 communicate in any way with Metropolitan Edison or 23 Penelec?
l 24 L After we had prepared our testimony, 1
25, we did in fact submit it for review and comment by l
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Gillham.- direct 1970 i
i 1 Hetropolit?n Edison Company and GPU.
2 Q. For what purpose?
3 L Essentially to establish that our 4 statements and facts were substantially accurate..
5 c. And did they make any suggestions 6 to change it?
7 i i They made a suggestion which we in j 8 fact adoptef which related to the way in which the n
9 $55 million asking was derived, and in fact in that 10 point our facts were not accurate and theirs were.
( H g I note that the testimony states i
12 that,it is as of January 25, 1980. Can you tell the 13 Co nmission why the testimony was so endorsed?.
l 14 L By that I take it you mean why was 15 it submitted as of that date?
16 C. Right.
17 L We anticipated that there was a gg- chance that we were going to testify the following 19 week, and in striving to adhere to the Commissi~on's 1
20 rules, we wanted to have the testimony submitted a 21 week in adv.snce of the hearing.
3 G And the reason that you had a d' ate 33 put on to show ths date thct the testimony was stated I as, 34 was thera a specific reason, because of possible 25 changes in the future?
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Gillham - direct 1971 {
1l; L I think that is substantially 2I correct. We wanted to essentially estahl,'.sh the 3 j date at which we had reviewed the situation.
'l 4I O Is there anything in the testimony
,1 f j as of January 25, 1980, that either of you wish to >
0 correct at this time?
7 A I don't think there is anything in !
l S
the testimony that we wish to corre=t at this time.
1 9 1 0 Since we are now on February 13, 10 1980, after January 25, 1980 are there any additions 11 you wish to mahe'to your testimony based on things
- 12 that have happened since that time?
L 13 A Yes, we do. I think I will ask .
1 14 Mr. Clifford to speak to that initially, and then I '
l 15 will'have a comment as well.
16 G Fine.
17 (REPonTER's note: At this point, there !
18 vere twc witnesses en the stand, and their !
. l 19
. cnswars will be identified from this point
'20 forward with the appropriate names.)
21 i(clifford) There are several matters i 22' that have occurred since we schmitted cur testimony i
23 and that ne would like to review tith the commission l 24 now and'hcVe become-a part of our direct testimony.
25 The subjects we wish to discuss are ueur.s.cn :: us.neau, me. - =r n. s.eennu.ew x2 - x.umiss:ma. ,v. in:= l l *
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Clifford & Gillham - direct 1972 e 1 the following. There are three of them.
h 1 Pirstly, we want to discuss the events L
3 of last week. In particular, we want to discuss the -
4, GPU decision to eliminate dividends, and we wanted to 5 talk about your order of last Priday, Pebruary 8.
6 The sacond matter we wish to review with 7 you is our deep concern at the growth of the deferred 8
energy account for Metropolitan Edison which has, does, 9 and will represent almost the entire amount of the 10 revolving credit locns'from the banks to Metropolitan 11 Edison.
El
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13 The third area we want to review with you which Mr. Gillham will discucs is the delay in the 14 hearing schadule to a nay 23rd decision versus April 4,.
15 as it pertains to obtaining funds from the banks over 16 and above the $292 million level..
17 neferring bach to Point No. 1, and first-18 ly danling with dividends--
19 MR. BP.RASCH : Objection,.if I could "
20 just interrupt for a second.
21 It appears tir. Clifford is reading 22 frcm something. Perhaps cince we haven't seen the
,13 testimony, do you have ertra copies?
2 MR. GORNISE:
These are handwritten 25 notes. Much of this relates to things uhat happened emer. Acw a exarni.: me.-e n. s.e=n ._ww Avr. -umarsmme. n.
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1 Clifford & Gillham - direct 1973 Il e l
' t 1F very recently so there has not been opportunity to 2j put it in u.:iting.
.a c.R . EARASCH: As I unferstand the l
41 proposed scope of this further direct, two areas ' appear l 5 te be beyond the scope of the 25th testimony for 6 events thet have happened since then, the dividends, 7 the Friday order, and the delay in the hearing 8 schedule.
9 But there was another area mentioned whict 10 I don't see in any way is something which is a subse-11 quent event which is the whole issue of the growth of
,e 12 the deferren energy account. I don 8 t understand why
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13 we couldn't have that in advance.
14 WITNESS CLIFFORD: The reason is--
15 MR. EARASCH: I think that is a question 16 for counsel.
17 IIR. GORNISE: I think the testimony 13 will show mort of what is going to be said about that
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19 will relate to things that have happened after January 20, 25th, and relate in some way to the orders of the .
1 21' Commission.
3, HR. EARASCH: I'll wait to hear if that 1
33 is the case.
( .
)
v 24 THE CHAIRMAN: Proceed.
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Clifford & Gillhp - direct 1974 1 WITESS CLIFFORD: m t
Referring.back to our g)
.J first point for discussion. dividends, the elimination 2
3 of dividends for the current quarter represents, if 4 it carries forward on an annual basic, a potential 5' $60 million savings. so in the short term, one would I
6 have to say it is helpful to cash flow.
7 However, I would like--we would like 8 to make two observations about this. Firstly, the 9: company in our cpinion has dealt its only remaining 10 card. They have in our opinion just about e::hausted i
11 their ability to save cash.
12 S,econdly, to contemplats financial c 13 viability for thq future., ubich is,c subject the 'O Ir;. banks are continuously reviewing, as is the company ,
15 and the commission, the dividend must begin again at -
16 ,
the earliest moment.
17 Y u ask uhy. We would say that new gg equity is clearly due and in due course will have to be g
- obtained.
20- I think, parenthetically, we're looking 1
9 a at a very large public in connection with a future equity, we're looking at I think something like
~.i. 175,000 shareholdars, which through their various z.a {
g,l accounts and pension funds and so on--this is my own 9
3: estime.te--probably represents several millions of cur.=4:n wasar me. - e x. .w.ev.r.:.ew m. - nnrassuna. n..:me
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Clifford & Gillham - direct 1975 h
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people that have to be looked to in the future to help g i
2 , this company get back o.i its zee . 1 i
3 You may well ash did the company discuss
.g. ! the dividend matter with the agent banks. They did.
5 They reviewed with us the three options before them, 6 which basically were to-heep the dividend as it was, 7 to cut it to some ertent, which still retained some
't S
I dividend, and to eliminate the dividend entirely. -
p l They reviewed with us all the pluses 10: and minuses as they saw it and invited us to add to i
11 the list if we sau anything they had neglected to 12 mention. .
13 I want to emphasize that they did not 14 ask us for our recommendation, and I can assure this ~
13 Commission that neither Mr. Gillham or I or anybody 16 j else involved gave any recommendation. It was our 17 view that this was solely a' company decision for the 7g company and its Board, and we felt the banking group 19 w uid e ntinue their support irrespective of the 20 decision at this particular moment in time.
~1 Note, if I may go to the second point, a,, which is your order of February D, your granting of 3 ! interim relief lends further tangible help to the k./ .,
Ah
' cri tical near tern cash squee=e. We realice that this 25 rder, howefer, is not final. It is, quote, subject
- NORP.3ACIC 2 *.3A.M I:ic. "l7 N. LCckWLLC".7 AVill. == MAltatstung. PA. 57111
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Clifford & bi5.1 ham - direct 1976 i
t 13 to further investigation, and quote, and we must
(
2 confess we are unsure as to just what this means or
.f 3 portends for the future.
[
4 Perhaps even more helpful, however, is 5 the language in your order as it related to your -
6 obvious understanding of our major credit concerns.
7 Your corment and disinterest on brinks- l 8 manship, your statement that, quote, the public 9 interest requires this Commission provides Meted to banks' creditors with the requisite insurance that l 11 they can ultimately be repaid, and qt;ote, you of 12 -
course hit at the heart of our concern when you 13 acknowledge that great concern by the banks needs y no evidence, uhen indeed the very ipsue, of Metsopolitan. ,
3 Edison to continue as a public utility is at risk.
16 The end result of this is that we do 17 believe that you understand our concerns, and you have
- g. indeed helped the cash flow modestly between now and 39 your decision date by your action.
Eowever, I want to enphasize, we want g to emphasi=e, the fate o'f Metropolitan Edison itself as far as the bcnks are concerned as an ongoing utility l
sa is still at stake.
/
our sscond area of major concern relates to tile absolute buildup in deferred energy. As a j
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Clifford c Gillham - direct 1977 I
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, lj. reference point tee refer you to Jchn Graham's direct a, , I 1 ' ;
tec-imony, .tnhibit A-23 Page 4 out o# e "6-is schedulq*
l S l is a source and an application of funds for Metro- l I
4 politan Edison Company.
o- ! If yen look down at the last two lines, I 6 l this is a month-by-month fore =ast of short-term debt 7! and deferref energy ccst balance.
i I think you can 8
l see that there is a very close correlation in the I 9 {absoluteamountseachmonth, and the changes'from i
10 i month to month botween short-term debt and deferred 1 l
11 energy cost.
r- 12 V There can be no doubt whatsoever at the t D
! obvious conclusion; namely, that it is bank money that
' l i
.tf i; is being used to finance and expand the deferred l i i -
.L:
- energy account.
t '
16 l 1
The actions of this Commission last June 17 i regarding deferred energy did appear reasonable to the l
10 , banks at the time. Pu che.se power was 'the principal i
l in fissueforurtodealwith. The matter was dealt with 20 } to our satisfaction at the tir.e, and the evidence is 21
(: that we did in fact get 43 banks to sign the revolving 2; !creditagreement. The reason they signed was that i
,j ; they believed that the com any would continue as a
^
i v 2.; l viable entity, and that they would not be asked over
.5 time to pay, the banks wculd not be asked to fund I
n mer.ex t. :.utm:r.:., r::c. -: : 2:. t.c=uw :.ow Avs.- r.e.n:szuno, n. 271t=
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Clifford s Gillham - direct 1973 I!
1 deferred anergy. )
'i I 3 The ferecaccc then were for deferred l
i l 3 i onergy of 44 million at June 30, going up so=sehat by 4 the end of the year, substantially, I should say,. and 5 then back to 44 million on December 31 1980. That 6 astimate is now 120 million. The reasons are fairly
? obvious. THI-1 is out of action, and exploding S
oil prices used principally by the suppliers who 9 purchase pouer so Metropolitan Edison are the culprits.
10 I would like you to know wha.t we have 11 told the coupany. We have told the company that the 12 55 million contingently rec.eived in your order of
)
13
?cbr.texy 28 is-in our-view grossly inadecuate in 14 t view of reality. our real =ancern is that the deEarred 15 energy account being financed is relying on the only 16 source of funds availabic to the company, which is 17 from the banks, and is very close to the total amount 18 available by the banks to lietropolitan Edison. ~
UL This strihes us as a very poor use for .
20 ' all of Metropolitan Edison's credit availability.
21 Ws should also point out that Metro-
- 3 politan Edicen bears the principal financial.
23 responsibil ty for the cleanup of TMI-2 over and above
( ;4 the proceeds from insurance.
)s 25 We also find it d'fficult i to conceive ucmen::: a u,ws:ur ::::.-e n. .acmm .ev. cer - t:Aa:us:ru: 3.x. m::
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Clifford - Gillham - direct 1979 0 .
e H I k 1h that the h::. lance of the deferred energy acccunt e.t
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il ,i 2l 12/31/80, if not changed, wculd be repayable o~er I 3 4 ten years ac we calculate it, a heavy and we thinh 4 perhaps very unfair burden for future users of 5 anergy in this user area to bear. ~
0 It would be our feeling a two-to-three-7 year cmorti::ction is much more appropriate.
i clearly E ! I we cannot initiate thic action other than to mention I I.
9'i and repeat to ycu our concern about the deferred l
10 j energy account, and also to the company.
11 The third issue is the timing of your 12 order r and I uctid like to ask nr. Gillhe.m to speak
' M to this. .
14 IG . BA RASCE : Madam Chairman, if I 15 could', since we're about to switch to another witness, 16 I would like to note fer the record having heard that 17 testimony I don't see any reason why that couldn't 18 have. been rumolied to the parties in advance. It's 1
19
! still independent of the events that happened March 20 25th, and to the e:: tent which he refers to the S55 21 million petition the petition was filed on November 1, I
- n. tnd certr. inly the barJcs could have noted they thought n
23' it was inadaquate at that time.
sf 24 Appt.rently, I presums the Commission 25 wishes to haar the testimony, but I would like to just i=:..w..-x :u.v::A: :::c. - er :. :.c =m:::.:.ow a - wAwemme, rr. m::
- 7. _ _.--..r.. . - - - - . . -
i
u,_8 _ _ . . *
- - .. ~
r .
Clifford F. Gillham - direct 1980 h;
u
- g. 1 ;,! state r." chjection to the fact we weren:t supplied A,
k ,
li! with this stuff in advance, and in this particular g 1 .
t 3 i aran there is absolutely no reason why vs couldn't.
t l 1
- 4. i! MR. GORNISE: !! adam Chairman, I think '
~li . I 5 t:j,i the problem was, and I think it came out in the 1 l'
6 ]i testimony, this was before the February 8 order post-l 7 , pening the acts of determination to toward the end of S! May rather than April 4th. That is the reason the
'l 4
9
-1
! issue I think becomes critical at this point, and the t
10 ' reason Fir. Clifford felt it was necessary to say some-11 thing to the Con. .m.issi.o.n ab,out it which prior ts the il i t i. m e. e n. J a.n.u. a r,_v.
/, 25..t_h wh.- en t.h. .i.s. t.estimo. nv wa. s. pre.mared, 13 when contemplating an April 4th decision date, it was 14, not as neces.aary to state..
15<
Fir . Sarasch will have the right to cross-15 l e= amine on that issue; we're not trying to take that l
17 away from him. But tir, clifford obviously felt it 1g was important that the Commission note the bank's 19 views on this issue.
90 <
.IiR . B.ARASCH: I h, ave. no doubt I'll b.e
~
- 1 given the opportunity for cross-exnmination; the point 22 is I can go line for line uith everything that has
- 3 been caid, uf svery piece of this testimony could have
- v been anticipatof, discussions of amortizations of the .
23 deferred anargy balance, reference to Graham's
,- uen::2.wr a ran. u.
me. -:: :r. r.ec:m: :.cw.m. -ruanieruns. .-a. ime e e - e em .e .
- =
_.-..Mga N" =v W* ~
Clifford & Gillham - direct l?81 9
1[ testimony 1..11ch has been in the hands of everf- pcrty 2 ;!? for weeks cad months.
3l I just don't see the need why we have
- f. j te have this sort of stuff sprung on us at the last 5 ! minute.
6 The other areas I see in view of the 7 strance nature of these proceedings, it's unavoidable, 8 but in this crea I really don't see why we couldn't 9 have been provided this as this Commission stated 1 -
10 rspectedly, the parties were going to have at least a t
11 j weel". to review things before they had to cross on it.
4
,' 12 I'm nct stying I'm going to need a week, but I just 13
- wcnt to note for the record it is this Commission's 1
14! l!
policy to give the parties an opportunity to supply I
15 the testimony in advance.
16 I don't think this really rises or 17 falls with ycur order last week' at all. Every single 18 , fact and inference scde there could have been made
}
19 ~ regcrdless. I would just like to note an exception 20 on the record.
i .
v
-s liR . GORNISE: I suggest !!r. Barasch can n ash 11 . Cli:* ford t.*hy ha didn't have the testimony e
1 23 [beforehr.ndifhethinksthatissoimportant.
i i
24 {
i THE CHAIRiaN: Thank you. Exception
-: I u !, noted.
n:m:n.e: e :u.nmue :ce. - = ::. s.c=::w::.:.ow v.T. -::v.n:c:::no. w nr 22
-- - - r ; v,
._ g; _ _ ., :
,,g _ .
_ m. ._
i . . . _ . _ . _ ... . . . . . _ ,
f '
ulifferd & Gillham - direct 1552 i
T
- .- Ocntinuc. 1 i
O.
2 ;1.M. . GO.'2:SH : I think IIr. Gillham was j
i 3 about to testify. I i i 8,
4 WITNESS GILLHAM: We feel we must make 5 !
the Commission aware of our deep concern over moving j I
6 the date for the final orders from April 4 to May 23. t i
i o 7 : we have made it clear that we sincerely doubt that the
- 8 l
banks will be willing to increase the $292 nillion sub 9 ]limituntilfinc1ordershcvsbeenissuedbythis J l
10 i commission.
11 .
The February 8 crder. While encouraging 12 in some respects, simply does not give us grounds to
- i O
134d alte r. th.i.c. vis..e. .
Althounh. . - i.t wo.uld. . a.ppea. r t.ha.t. the.
I 14 sub limit nar no,w not.b.e. a o.r.. o b. l.e m. u n..t. i. l e f t.e r. Ma._v 23 i g
J3 it should be noted that this was accomplished in part 16 i
by the comp'.ny's action last week by emitting the 17 I
dividend, wh.'ch is certainly censidered a drastic
.I
.:.o-. action.
19 ,
i ';cnetheless, the company's borrowing 20 requiremento built substantially during April and May ,
y
. .i. ; and an unanticipated evenl: or combination of events J
22l1i such as the unsehsduled cutage of a eccl-fired plant, ,
I
.m ! a delay in ths return in service of Cister Cree.k or !
{
- g. - an intsrrupnica in the availability of purchasa power, )
25 leu-ecst purchase pcwer, could result in the issue l
- r e: .=4-- : re . a.. n.:=. .
.7 ::. :.ec:. vr_:.=w xv::. ::e., .:=wn , p.s n:n -
Clifferd & Gil1Lan - direct 1983
- 5. . , r.avine. to b.a afdressed .nrior to the date von: criers i -
6 P, ,.
- 7. ;i are dus.
'll 5
d I
, 3 ;t We urge ycu to consider the dangers 1 l 1
t.
- i inherent in such an event.
l 5 1
'l' I might add. we originally were told 6
t that decisiens en all items would be forthcoming in ,
7 ' January. That date has now slipped three times. Tc D ' ash us te consider increasing the sub limits prior to e
t I
0 f
4 the order issued would be in your words to engage in i
10 l' an act of brinhstanship.
t l
11 l We urge you not to put us in this 12 , position ar.d consider the dangers we have detailed O i 13 ; abovs in adhering to the May 23rd date.
I 14 t tm. GoPRISE: Cross-examination.
i 15 l' CHE CIIAIRMAu: Mr. Malatesta.
I.
16 CROSS-EXAMINATICU 17 13 , SY MR. III.LATCSTA:
i 1 )
19 ,
G My name is Joseph Malatesta and I'm ,
l 39 representing the Commission Trial Staff in these I I
,e
. ; proceedings. l 4
22 ; Mr. Clifford, looking at the second d'fullparagraphen?cge 2 cf Exhibit CD-1 an I cerrect
. I
(, ;,{' in assuming that after the accident at THI-2, that
- i your bank, Citibank was already willing to enter into I
i u=rs.:::.c:: u i.m:n me. - :: n. u:=xvnu.ow exr. -mn:: ..ac. pr. tra:
?
. . . _ . . . . . . . . . . _ . . . . . - . . - . . ~ . . - . . - -
' h
. g ,, _ _ , _ _ , .- ~- ~-
j
-w-
.e . . . . . ~.- - ---
i . . . _ . . _ .
. . . . . . . . . . . ~ a Clifford 0 Gillhan - cross 1984 t
4 I a revolving cr edit agresnant with GPU?
i I[)
2 .i(Gillhan) ?is =ty be uncles: on whct i 3
3 ; you are talking about. J.re you discussing the testi-t
{t 4 :, =eny we filed ac of January 25?
i
(
5 t 4 YS3r that is nzhibit'cD-1. ,
That is 6 ,
how it's been identified,.and specifically the sentence 7 at the bottom of Page 2r "We reviewed the problemr. we S )arehcvingasco-agents in arranging a formalized
? -
o credit agreement."
10 It centinues on Page 3. Does that i ,
l il indicate that your bcnk, citibank, had already made a, commitment :o anter into this revolving credit 12 17 agreem.e,n.t,?
14 1.(C.l.i.,f_f_o._r..d. ). f. e h..a.d.. ind..i. .cate.d. I. thin.h 15 our willingness to enter into a commitment subject to 16 getting tha other banks involved with us. We were
.;7 not able to get the ether banks to agree.
73 G That is before the Commission J
19 - made a decision in June of 19797 go L(Clifford) That's correct. I thinh 21" that statement should be directed to both Mr. Gillham
%l
! and myselfr because we both were engaged in the
? '
33 i effort.
I 3 Mr. Gillham, do you have a different 24 :
)
- answer
- th sa cuesti ns?
'5 1
i
.:arrr.:w: = .:c:mu me. -::r ::. .e::n.r :.ew .wr. - w.r_a.rsttma x .:rt:= -
- w . ="v
Olifford & Gillham - cross 1935 n
!i a) 2. (Gillhan) We had indicated a willing- i
..+.! l
' .: ness to entar into a rsvolving credit agreenant,as I 1 5y Mr. Clifford said, su bjse: o our chility to nego-
'N
.-{tiatewithuhecorpe.nyandwiththeotherbanks, an SF agreement that we could nll live with.
- ..i'.
u 01early our ability te do so was to some 7 ' degrec affectef during certainly the months of April 8 and May and the early part of June by the press of 8 ,
9 j events, not tha least of which were the fact the 1 i
10 ; dependency of rate orders from both commissions, and l J.
[' L ar. you are aware we ultimately felt it was necessary
( 12
! to review the orders issued from both Commissions 1[ --
As
- before we could in fact close the revolving credit i
,4
.. l agreement. <
. l t
15 2 1
j nr. clifford, was the primary
' l 16 :
purpose of the revolving credit agreement to provide l i
17 protection to 0-pU and its subsidiaries? !
is -
i 1(Clifford) It was indeed to provide I
19 protection, because es we stated in our direct 20 tastimony, while the companien had obtained basically 21 , a doubling of lines of credit immediately after the i
.m-l ceci5ent, cs events began to unfold and uncertainties 6
23 ' becaue heightenad, we felt it absolutely ecssntial i
29; to try and get the banhs together in a committed i
I 15 credit facility. We were afraid that if we were wer=2en t ram::.: :ac. .v n. :.c=m:: .: w ar. - uaanssuns. n m e -
8 e
f Q ?~ 7~L ,i' '
- ~ " ~ ~ ~
- W- ~~ ~
, W ..
__ _ _. .. . . . - . . . . . - - - u _.m - - . - -
~~ -
]
Clifford & Gillhem - cross ,
1986 t
F l 1, unabis
< o ao enat, tent the lines c: crer :. , which cre i h
2[ not contracunni obligaticne te lend, a numbe- " " =' i g
I' 3l; would fall by the t:cyside, and in fact some of them g
4 did.
5 4 The revolving credit agreement 6 increased the already-existing lines of credit 7 .
I, available to the company? '
8 L(Clifford) ,
No, I do not believe that 9 is correct. I think the lines of credit were about 10f $225 millica fro = 90 banks, and at the time of the 11 t: accident, the company ashed their banks to. basically 11 i dens,le the lines of cre,dit, and, I. t.h,i,nk t.h.e.y en.d.e..d. u.p.
13 with li.ne.s. o.f. c.r.e.d.i.t. o. f s_o.m..et.hing in, the renge of O
e
'Is lt 5.4 7 5. m i. l..l.i..o. n . .
15 At the time we signed the credit agree-16 , ment, I think we had lines of credit--I mean we had' 1
17 43 banks in the revolving c: edit for a total outstand-
-e A o. ina of--
l 19 i L(Gillham) $409 million.
J.
20 L(Olifford) $409 million.
v a CL If the primarv purpose of the-w-
asNhs' P
.' renciving credit agreentent was to protect GPJ, wh a.t oI
.r.e ,I. wte the cuid tro que recoivad bv tha banks in er at,l; racurn?
I gt s t
.53 F-(01'if ferd) The quid pro que from the
=:.r.=r.=x a m=r cr.: :::c. - r. n. :. =.r_ cw r.v=. - u.uimaru:ts, n. tme
.se.an= *.e e .
w - -
m
r Clifford & C-illham - cross l?B7
?.t
- i. banhc uns ta first of e.11 be se.
- isfied as a res:1: e .! ;
g
.e l' the ordere of both Conr.iction- e Lc:h r.:.mni..sions ;
H e
- e. felt thr.t the companies chould continue as ongoing, i I 1
4 viable entitie:, number one. ~
I 3[ Hur.5er two, we were satisfied that 6 i both comniccions were acutely aware of the concerns f I
? cf the banks and their disinterest in financing the ,
S ]pn:chasepcuerwithoutcnywayofbeingrepaidevident. l l '
p j so I think those were the conditions i
10 , which he.d to be satisfied first before the banks '
11 ,
, went ahead and fintlized the revelving credit agree-
.I r q j ment. .
I thinh it is apparent that the banks were i s i 13 satisfied on that score.
14 The interest of all concerned was that -
15 i if the Commissions ' felt that the company shotald ,
16 continue as ongoing, viable entities, and that they 1
77 were willing to have parties other than the banks '
'g . ultimately pr.y for the deferred energy, that we t
.o absolutely required something more sxplicit and I
- p l g contractual than lines of credit which can disappear 1 j
4.k
- very, very quickly, believe me, with the event, I
.u, 1 : material adverse eventr*e so we needed a banking ,
I e
~. group together to previde credit and aneble tne
,,v { company, slowly, to rebuild its financial health.
g, That wa.s the guid pro quo.
r.:c az. : n, w=w :=. -::r ::. :.oc:sr. t.ow mr.- r.Aa:ue:uns, re. tr::2 .
t t
. :v ---', - - ' "
. . . - ,1., -- , . . . .
x.. .. .w.
. . .__....=
..l Clifford & Gillham - cross 1980
.. t 48 f i
. think the cther quid pro quo nas ne j g 4' . . had felt the :anks espacially in I?ew 'Jorh, felt the: l, 3 d we had a high responsibility providing that the l h
l 4$1 commissions did act responsibly, to try and keep this j
51 company scing Scr the benefit of other utilities in I i
5.
6y the state and fer the benefit of the utility 7 i industry across the country.
i ;
Sd Q. 1?cw, prior to C.ns, citibank had 0'F i
already =ada a conmitment te enter inte a revolving i
10 ; credit agraecent, isn't that correct?
t p { i. (Clif ford) We and many others had i
12 i indicated that we were willing to contemplate an amount f
13 predicated upon certain conditions.
14 1, 0 So your commitment was conditional, 15 as well?
i 16 l 1.(Clifford) Was conditional as well, i
17 li and mest particularly conditional ultimately on the gd outcome of the hearings in the form of what the crders
'.)
1p ', ware with particular reference to the purchase p0 war l
ng i issue.
l l
1 21 j, D"t also they were very contingent and
- reliant en the requisite ntnber of banks coming into
" E. .
\ i 3 1 the credit f:r an amour.t which wculd in our view !
.n. . q anabla ths cenpany to continue to cperate. I
. }
ah uculdn't ds us any good to get an segreacte credit
--t y'
us:=i.m a : .t. . :. r.: m -: ::. s.e ::r. ..:w .vs. - wn.::2cr.c. >A. :r: a
~ - -
_ _. e _
_..c._._.
Olifferd & Gillham - cross 1 39 1.
1
'.[! : ge her for 5200 millien. Ws really needed bcsed s
- !. fI Z i ll on ths cash flow, somenhing over 400 million. ,
I i
l 3 i nr. Gillham do you care to add anything I 4 l to that?
5 ! L(Gillham) Nothing.
I i
6 } g nr. Clifford, in describing the
%r '
7 conssteration flowing to the benhs as e result of 4
1 E ; the revciving credit agreement, you noted that it would 9 protect oths: utilities, and the utility industry in I
10 ?
l generc1; is that your testimony?
11 L(clifford) It wcz our feeling as l
(7.
Il both banks, and the New York banking community in y .'
13 general as stjer lenders to the industry, that if we 16 were dealing with a situation which appeared to be 15 one uhich could ultimerely be resolved, that we 16 I had a very high responsibility to try and put together i
i 17 : the revolvi:rg credit, and to gain the other banks' Is , acceptance te the terms tnd conditions, and to keep !
I lo : o GPU gc3ng as c viable financial entity.
f l
20 ; O But am I correct when I suggest i I i
n; you did it act for GPU. but for the industry in
.v
- senert17 23 A. ( Gi11htm) Chat uculd net be correct, I
4 p,jisnyjufymant. It uns done primarily, I am sure, t
25 ! for GPU. And as nr. clifford has very clearly made i I i i Mc%t.a.t-! ,> :."?"ML f 9 .= 7 ::.
- 00 *.W.* "
cT1 A*.T. - W . .tr.3t::ts, PA. *7!12 -
{ (
1
. e
> .__ . -- *'r,
- ?
Clifford & Gillham - cross 1990 ti i I l 1N ..
the point, ths prchlem 5:e ware confronted with in ! -
43 3.pril e.nd !iny US.s that the linas of credit that tha i
i l' !
3hc0mps.nyhe.daskeditsbanksossentiallytodouble t; are an extromcly tenuous t<ay of financine .;.n a dis- j 5['turbedsituationwhichthisclearlywas, and wa in
[
i 6l' f act as I recall had situations where banks told us 7., that they didn't know if netrd were te ash to borrow n !-
today that we would be able to fund it.
o Against that background and against the a
10 1 substantial requirement for funds the companies needed, 11,i the revolvine. credit. which is an orderi.v way of h, i f.
proceeding uhich benefi.ts I thinh. both the company U i and of course. the banks to the degree we have a 4 -
14 structured environment in which to lend,was the n.ost
! t:; sensible way to proceed.
t.
16 But indirectly there is no doubt in li 17 ' my mind had the banks not proceeded to put the credit 10.' (t' together, that there would have cartainly been an 1
1 19 4
.'. indirect impact en the utility industry, and certain1v - -
46
.70 y 0 cc your utilities i.n t..h,,e. C o.= m o n.w e a l t h , s -
L 21[, () Apart fromyour consideration for
- I the revelvi?.? credit agreement was there any V
'3 {: uencidsration flowing directly from GPU or its 4
-- t
.h. e. i sub.zidiariar?
0
'!5 ,
7.
(Gillham) could yota possibly rephra'se !
- r: x. .r: . : .:. : . - e :r : . :.c=- :.-r .m. - mre t.u. re. tv::: -
. - . ~ - --. ~ _ .. _. _ . _
L Clifford & Gillham - cross 1991 1
q 18: 6.
that? I'm not sure I uncers:cnc wnat you are trying i
't
<. y to :. rive nt. .
I ,
2.- Q. Uell, every contract has considera-0"1 tioni prasumably going both ways.
O s
J Lii, - .Su've described consideration 6
! fro:: the banks being their willingness to give GPU l
? ,
i e more stchie line of credit thr.n the uncontracted S
line of crolit, and you've also describef considera-Fk> tion sort of .trom a third party in terms of a utility 10 industry being better served by a revolving credit 11 agreement.
5
- g. 12 ] Uas there cny direct consideration Y '
13 i
provided by GPU to encourage you to enter into the 14 { revolving credit agreement? -
15 A.(Gillham)
Do y:: scan monetary?
16 0 Or otherwi;c.
If j ,
L(011fford) I think the agreement as N, it finally transpired permitted the bcnks to take what t
1.0 security there was in the form of the revolving
- c,I credit.
There were certain available first mortgage s".,. ;
loans which the banks collectivel.v. t ook.s the.v. also e/- .. tock colleanivelv the various urani'rn with Kerr-I~ngee
.I
.:. ! r.nd cir.ewh re cnd they also took the chcres of the e
./ 0
~h subsidit.rio.r, as collcterr.1, if that is what you are h
m
.n ,
rafarring. to.
i tm :.ne: a t:r .v:7.: m::. - = x. i.oecer::..we.vn. -::e.:uss: a. re me :
.__...._.7._...... . . . . . . . _ . . . . . . .
,_,_ _ _ . _ , m _ . -
Clifford 5 Gillhan - crocs 1992 l1 1 1'
(- 4 }
i I l'j i!
That is what I'm referring to.
l 9 -
3p L(Clifford) But that was part and !'
3 l S't parcel of getting 40 be.nks to get together in a .
i !
4 i structured environment.
I We tock, since us were !
5gl being ached to provide up to 3407 million increnantal ee 6I funds, wa tock whatever security there ves which was 7 j unencumbered--which I might add was not equal to $407 1
6 ' nillion.
I S
C. After the June 19 order of the 10 commission, was it the opinion of the banks thct GPU 11 was ne greater c risk then any other utility?
12 L (Cli.f ford) That is de.fi.ni.telv not
('
13; tha. c.a,s.e. .
Ue. co..nsi.d.e.r.e.d. GP.. U t.o. ha.v.e. a. s.t.or.m.sv future 14 a_hea.d of i.t, a n..d..
- o..n e. t.. hat. w.o.uld at_ lees.t be cble.to 15 survive for t.he necr future based on what this 16 I l Commission and the New Jersey Con =iesion did and what
.v; !
we did.
Ig . ,
i L(Gillham) I would only add to that h I think we felt by putting the revolving credit 20,; agreement together, although we reccgnized the 11- problem was very severe and significant ahead, that
~;l} at least we provided a structure in which the company 1
23 4 could be restered to fincncial health in an ordarly i
d
- pjI; ar.1 reasonable fashion. given a variety cf things !
l 25(u taking place, including obviously favorable l p! ,
- rn.:n :. w . .s.:u.: a:c. -::r ru.ormves:.:.ow .wr - m.w. w::2. .n sm:
1
-- . . ~ . . _- __ _ _
p --
Clifford & Gillham - cross 1F93 n l g-l consideranica cf their rcto a: kings.
- l. ,
i t 2 .;i. 0 If GPU hedn*: been GPU, it had been i
?
3 a utility compani in a norncl financini condition, and <
b h
4 came to you for a similar revolving credit type of l 3I agreement--if that is feasible--would you have demanded I
6 ' security for your loan? t 75 L(Clifferd) In the first place, GPU r
E l
was not a normel type of company after the accident. I ll P
i Before the accident G?U was an A-rated compc=y, held i
[
10 le
! in high repute in the fincncini community, and I'm i j
l' lli sure if they had come to seah a revolving credit from i
I 12 us, it would have been givan on an unsecured bacis.
t.- ,
l,a G So you normally loan money to en A- \
14q rated utility on an unnecured basis?
15 ;l E(Clifford) Yes.
1 16 G Is that trua also of the Chemical .
I
, Bank?
1":
I l 1
IG A(Oillham) Yes. There tre some -
l IP )typesoffinancingswherethat in not necessarily the s
i 20 case, such as nuclear fuel financings, et cetera.
211 Sut that is the ererption rather than the rule.
li (
23l: ..
.L(0lifford) Yes. There are other 23[ exceptions, too, if you tre lending to a utility chich
(_) 24 in devsicping cil and : Jar for their gas distribution I 15
- comptny and it's a nonrecourse gas production loan, I
i !;;i*f.3 W*! L ts A f*r** *.* MC. - J f;. LO ":W: .* C7/ J.'.*3. = 1* ,*JtfdO "J !O, F." i 17; *T.
. I l
(
i
--- - 4 -2
! , ~+-
L
y u.,,... . _
m .. -
-= - - -
r Oliffcrd G. Gillha: - cross 1994 I;
P r
1.. !l ther that vould be secured also. AJ 2(i;
, Eut. by nnd large, I eccid say sub-
.: f.
2j stc= ially ay and large, our loans to utilities, i d
/r alectric utilities in good financial standing for t
> revolving credits are unsecured.
W 6 g :s it true, then, the only reason f
7 i you de=anded security of GPU in thic revolving credit S,
agreenent was because even after the June 19 order
?
- of this Comnission and the actions of the Jersey '
10 4 4 Commission last spring, you still perceived GPU ar, i 11 ,
u being a grea"- "'sk than they had been prior to the It r 12>l accident?
' s 13 A. (Clifford) GPU was. patently a 14 very distinct risk, and I would say our efforts to 15 gain security preceded the hune order by several 16 jmonths.
I r. san, we had centsnplated sactrity alrost 17 f from the very beginning af ter the accident.
Ig; O Prier to Meted s filing of a motion
(
}(
1pg l in late January for an immediate increase in their~
gj; level at energy Ediustment charge, did Meted or GPU l'
.i consult with citibank?
a-u 1
y,; g!!. EP. . GOFl!.T SH : Do you nern for any
,:,s t:':)
- urpoes?
3p MP. . IG.L.393STA : With r3 gard to that --
.c~ motion.
0 - --
. =- rs. r.:. :: .rc: : we. -= ::. : ce:mr.:.cti;xr - ru. mrcuns, Pr m t:
- __ : . _ . -. -- - . -- -- - -- =
-v
. Clifford s Gillham - crosc 1995
' I r '
i i l'i.. " Mat was directed to Mr. Clifford first. l c 3 r, I,. (Olif f ord) I
.' We were suzre that they 1 3 ]weref.oingit.
i I didn't see, mycelf--I don't think I j I
t 4 , caw thst .earticular appliention. l 3' .
5; - 'Gillham) I was rer.lly going to ask i
t 6 l you to repect the question. I'm afraid I didn't I
- 7. { catch it.
a.
8 I 4 You've referred in your direct P testimony to the commission's action on Priday 1
10 i grcntine a 5.9 mill increase in Meted's leveli=ed i
l -
11 -
energy cdjustment =harge, isn't that correct?
I r
( ~..
12 L(Gillham) Yes.
Y
- b. 0 Are you twe.re that what precipitated 14 i that increase was a motion by Meted in late January of 15 19807 16- L(Gillhan) yes.
I 17 0 Now, prior to Meted's filing that
- c.' necion, did they consult with you with regard to 4,
1; filing that notion?
20 L(Gillham) I don't specifically recall
-a '
n i
them consultiner with us as to the seccifics of whether nq or not to file the expedited rotion.
, i p,3 I nm aware I believe the company had
- en onc or two previous. occasions sought expedited '
r 25 j relief fiom ths Commissien.. I gather the first was
'I
- . cn .:w: ::..1:n:. :no.-:r::.:.:c: v:~. er r.:: - nrx:ss1: 1:, n. s s ta l
_ . . _ . ~ _ . . . . _ . - . . . _ . - . . ... . . _ _ _ . . . . . . ?
.g,ee g a W" ..
. --- _ u ._ _
m .- -_. _
. 1, .
Clifford & Gillhan - crocs 1955 V
d r I
,e ljl'l the original asking t- ich they asked to be implemented I 1 I -
i 2 ' on Canuary 1. '
. (
3 G Ic that alco true for Citibank, t
4 thct there wac no prior consultation?
5 .
L (Clif ford) It may have been to 6 someone other than myself, but not to me.
7 G Is it true that under the revolving 8
credit agreement, that any materici adverse change
? I can be considered a default by Mettd or GPU?
10 L(Clifford) The banks may caucus and l 11 datermine that a.nate, rial cdverse change has , ,
, 12 o,ccurre,d for gha,t.ever event, it might be Meted,.it 13 might be.GPU, it night bs Jersey Central for that 14 netter.
15 ? But it vould be c defcult or could
- 16. be considersi a default?
17 E(Clifford) There is a clause in the y,F ' revolving crsdit agreenent which allows the banks to 19 -
contemplate that a materic1 adverse change has 10 occurred.
2; Q You still haven't ansuered my
- 3 question, nr. Clifford. Uould thct be concidersi c i
I
- 23 ; dsfault undar the revciving credit agreenent?
r.
m 34]1 E(Gillhan) It could be considered a _,
9 23 i
, default under the revolving credit agreenent.
- .rc m.:,- . : ., nr.: =r_. :nc. - r.: n. w:- u .. r. e - rar_ .:=wrec. -i. m m l
1
. _ _= _. + . = . .- - - ~
.c- -- -~- - ' ~ ^ ' - ~ - ' ^ '
Clifferd E Gillh:r.u - cross ~.?97 r .' : I
'; ;! I And under the circumstances of !
- P' a i dafcult, isn't it cleo true the banks hcve the )
.. 6 1
S cption to accelerate repaymant of any notas under .t j
i, -
/ ! the revolvine. credit agreement?
1 5 l f
1.(G111 ham) That is my understanding.
6 i 0 Is that yours clso?
7 l L (Clifford) Tes.
0 l
1 1
C. He.s Citibank had cn opportunity to 9 !
review full.v the corr.ission's action en Fehrnar.v Sth 10 ;l i
granting the increase in the levelized energy adjust-i 11 ment clause charge?
g, J.1 I(011dford) I'm not quite sure what t.
13 you mean has the bank reviewed it fully.
14 l i
iie have certz. inly read it and reflected I
15 ' on it and hr.ve commented or. it as part of our 16- additional direct tastimony.
17 c. Is that also true for chemical 10l Bank, lir. Gf.11han?
19 I (G111har.:) Yes.
20 ;
I might cdd, although I was aware of the 2,1 I
specific dollars involved in the order as of Friday ;
7;, aftorneen . did net receive a ecpy of the order e
i l
- .3) until yectorday avening.
l
-l '
i s 24); (.t In your direct tastimony did ycu l 0 ai j
l 7,53i describe thet order es not being fully responsive to 1
t: nr.:=: r ::..=mu r::::.~.c ::.-:.een :.:.ew: -- t.:r.r.tcm: n.:. =1:n
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4
, Clifford & Gillhen - crcse 1299 N
H l t i. vctr concerns?
-u -
U -
- e. g i
&_(clifford) We said think that the ;
3 ' Order was contingent, a.nd that it was snbject to i
.6 p suhtaquant investigation and that clearly the h
i 5
issue of whether or not ths lice re e should be revoked 6 ' remainsi, and that that was, of course, had to be a (
s 7 ' material facter in what the banks might do or not do.
t l.
6 ! 4
? Have the banks made a 7.etermination
?
9 j as to whether the Cc==ission's acti on on February 8th t
t 10 ; is or is net a material adverse change?
1 it
- L E(Clifford) I think we wonid find it il L1l hard to thish that was a material adverse change.
( -
l 13 Quite the contrary, in terns of ths.,f.act. that the r
14q issue of tho 55 nillion was, dealt with,al.*ge_it 9.on-15(; tingently, I think the language of the order has got 16 . to be help in our dealings with the other banks as welll i
l
~;. '. as our own understanding as to why the Commission i
g j did whan they did.
t 19 0 Prior to February 3, were the banks lOf'awarethatthemotionforanimmediateincreasswas j
O
- c. c .. pending before the Cowaicsion?
-au n
-n D
.z - a. (Clifford) Yes.
h * ,
i
.e
~..
[
- E Ir that true also for Cheraical i j
3,, . Eanh?
l s t i ~*..
I j
2p, L(Gillham) Yes.
[
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.e . _.. _
Clifford E Gillham - cross 1999
- a
( !:
i 1i 1;R ,. GORNISEs I believe the record will ;
S 1 7.;iot: tney :2. led a rssponse.
i
't lin. IGIATESCA: Thct is true.
t, 4, E'l MR. I.~7
. 1ATESTA:
5 ; g now, ware the banks clso aware the i
60 Comission intended to make some response to that t ,
Ti, motion en February 8th?
il Skle 7-(Gillham) l'e s .
1 3 D If, rather than do what the 10 : Commission did, the Ccomission had deferred response 1
7 I T 1 C on the motion on February 8th, would the banks havs g
12 1
considered that a material adverse change?
'C i 13 j AIClifford) I would like to say that i
14 the Commission didn't do that, and we dealt with what i
15 l the Commission in f act- did. I don't know how else te i
16 ,i respond to your question.
17 @ Prior to February 8th, lir. Clif ford, 16 did yesu even concidar what the Commission's responses 19 might ba?
20 L(Clifford) We knew it was a subject ,
i 21
' that they would be decling with, and we frnnkly were '
u s. ve.iting to see i.htt they did.
I ed. il
_ B In other worde, you never considered whe.t the banh's respense might be, depending on what e, j.
l
+5d the C mmissi n's response might be?
j s -
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.}. - .-
. _ . _ _ _ ~ : -- : -
- Clifford & Gillham - cross 2000 f
r t 1
1(Gillham) I suspecc that 5:e would p-)
4 51! V have 6.iscussed the actions of the Ccamisalon,- or lach !
1 e
3f1i cf action of the Ocamission, with the other banks in I 8
1 4 l l
5 the waho of the order, and determined what the sense i 5 fofthebankinggroupwas. !
I i
6I We have had a frequent schedule of
{
7' meetings of the banking group to diceuss these B .
natters.
9L G 3at prior to February 9th, neither L.
10
. Citibank nor Chemical Bcnk even considered what its t
1 11 } own responsa nicht he?
11 j' L(Clifford)
- I thinh, just my own <' %
D 'd f reaction was I wacn't sure whether there would be I t
14 anything forthecming out of it on not. So I don't 15, think vs would have tried to anticipate before a l i
16; reaction to it. e I
17 G Did you anticipate that-- !
ist L(Clifford) I doubt very much if l p
)
nothing had happened, if we had kept to the April 3rd l 20lldate, I would have thotght that we perhaps wecid not le gy !lj have considered that a material adverse changa, if
". ; that is your question.
+
y h
33 3
r.
G lir . Clifford, it's my understanding l U.t l Citibank is one of the two or three 1crgect banks
- a. .
s I
- 3 in the country, isn't that true?
h cur wi c e.unw :ne. -: :. :.c.=w::.:.er: nc. - v.mme== - x. inir. l
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~
7 Clifford & Gillham - cross 2001
.- i 1
1 .
L (Olif f e rd) That in correct.
E' .i t
2 4 Prior co February Oth in a revolving l i
5, credit agreement invol"ing 200 or 300 million dollars a
l' 4 1 at this point, you never even considered what the 3 I
5 Commist.icn's reaction might be to that motion? ,
ol t L(Gillham) I really think that we 7 ' consider lets of things til the time, actions that S
might take place from the Commission's viewpoint.
F actions crtarnal to the Ccmmission, and we consider 10 all the timo what our responses might be.
11 l It's very difficult, I thinh, however, 12 te plan a course of action with respect to something
~
I 13 such as the Commission's acticn en February 8th when 14 i
one considers,as*Mr. Clifferd pointed out, the fact 15 I it re' ally has to be interrelated with a number of l
16 ' other events that may er may not take place, and I 17 1
g think also the suggestione and advice and considera-18 j tions of sens of the other partners in the credit i
i 19 agreement.
20 n P.ut chemical Sank and Citibank are '
-gu the lead banks in the revolving credit agreement, isn't
., e h.. that correct?
33{j L(Clifford) That'z correct.
1 24 1
i G And wouldn't you neesssarily tahs ,
33 the lead in cny major changes in the revolving credit :
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! particult: rea.it conctituted s. meterial cdverse Y
!;. l 5 ] change? I l '
6 L (Clifford) i That is a judgment fer the
?ni; ba hs to mthe as a group. 13 percent of the bcnks 0 ;l! .
4:
si ccn ccuse a caucus to take place on a material cdverse n l y el' Il chcngE quasu.e en.
't 10 j. c. But is that a question thct the two I
11_ 1 na.ior bcnks
- i. citibank cnd chemical senk would be
$}*
12 i enpacted tc, take the 1:ad on?
I e 13 l V 1
T. (Calf ford) I think that we wonid 10k h p&.:-hp.ps t,ake a ler.4 cn it after hcving reviewed it
't 15, 1 uith others before.we took an action.
ffi Sut I would like to say we were consider-17 j ing c numbe.r of issues that were bafore this
...: j Ocmmis sion, cnd this was cr.ly one of the issues.
'l d a We were cententiatine that c decicion would be ferth-I 20 i coming en April dth, cnd we've leched at the cash f. low .
- of the company and cen'ter.plc.ted that we reclly wculdn't
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g falt we uc:.L.i b comfortchle living to thtt date to (t J
.-P
&J. find cut uhr.t the deterninttien of the Cenmission was.
us::ae. : . :.c.: s : .: :::=. -:-::. :.c=m:, u.c e,. . - >: .ntnuao. m. :ma m.
clifford &'G'1~'e~ --^*s 2003
- r. .!
r
. fact it - e.cr.: t until af ter I.pril 4th that the '
t 2{ deferred energy account retil.c Scran te nnplode }
S' frc= ths prssent level. !
b*
i 4 'l se I thich the Ensver to your questien 5 " as Scr cs I'm concerned in our bcnh was did not ' -
6 consider that no action as of last Friday would have h
l 7 ' constituted grounds for seeking other hcchs to j 1
6 determine thtt there hcd been a materici adverse E cicnge. !
10 j C. But you nade that decision that ac I i
11 l cction would be grounde for seeking 't determination n
(_
\ .
u- , prior to February 8th?
I 13 .'
t L(Gillham) We did not make a determina-14 j tien cf thtt.
I I think there were a number of things 15 j cnd considerations, one of the critical ones, the 16 .t I
pro ^ections the company has furnished us from time ,
( t
~
[
17 h ~ to tine indicated that there could be a situation li 1G l_ prior to April 4th where the company could retch its 19 *b ,. sub limit on credit availabilit.v, snd verv. clearly 20 1
. if that was the esse, ue might have encountered some
- 1 rsal tronble in living to that date.
! .S.e Thct is errentially wh." I sav when vou .
l 51., havs two ccaions the like of which you had last l
(,
l 3p. Thursday and Fridty ar.d in essence having bean 1 .;
1 25 ; consulted en the issue of the dividend, we cra aware
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Clifford & Gillha: - cross 2004 8
f: * ~~l '
t-
{ i { certainly the company vac considaring tching action, l ,
i 2 "1 and at the scme time we uore aware the Commissien i I
L 9'l *ics going to issue an ordar on February 8th, the !
! a e,".
I '
content of uhich we did non .inow, that it's really 5g. quite difficult to plan out very precise atrategies i l 6 j and I think unfair to n11 parties without analyzing
,i 7 jwhct those as:act ordero are er actions are, and then j i
6 j determining your course of action on the basis of 4
lt fli analycis. '
S.I 10 Essentially, this is what we did last lij June when us decided to put_the revolving credit agras- '
. 12 mant together.
{
O L(Clifford) To.take a not unrelated 14 question, if the prics of oil had doubled on Wadnesday, 15 which is not inconceivable these days, you know, 16 what impact would that have had on the order of rridey? I 17 That is e.n outside event which can 13 I
occur which clearly affects the deferred snergy i i
19] account and the availability of credit for Metropolitrni i
.! I 20] Edi3.en. . Thara are a whole lot of things that can
- 1 occur.
y t
e.u, D. Is it your testineny, then, regard-
, 1, er!
-1 lasc of what he.ppened on Fchruary 9, you wers looking I
l s
! L
.ce u'i beyond that data to April 4th? I l -
J ggi A(Clifferdi April 4th was the date lt j 1
l acaw e: 4. r.ww.ve c:e. -::r : . :.cm. mr.m ur_. -umamma. n.. :mm -
l
., " G = :- -mm .-u .. m .e- m u - L - -- - -
Clifford & Gillham - cross "905 i-( 1 l
whien we were planning cround, that'c correct.
1 2 i G so you don't consider the 4 i
j i
1 l Commission': interin grant of relief very significant, i !
I
,; then, do you?
o .
u(Clifford) I've already stated what l
6 my vieu is. I think their language was very positive 7 in terms of reassurance to the bcnking group.- I.
E recognice as you do that the 55 million of deferred P
a energy is contingent upon further investigation, and 10 i I clso realiza as you do that the issue of the 11 franchise has not been dealt with, nor has the issue 12 , of THI-l been dealt with.
13 G If on February 8th the Commission 14 denied outright HetEd's request for immediate relief 15 e and it used language you don't consider very 16 positive, would you then have considered it a material i
- adverse chance? -
33 1(Clifford) They didn't do that.
ip G Is there a possibility you would 20, have considered it a materici adverse change?
21 A (Clif ford) I doubt it, at that I
~
m0 ment in time with the April 4th deadline approaching.
1 25 g Is that cico true for Chenical ss ..,- 4,
- Scnh7 23 L(Gillham) I would have been much more r.
- :sm.t.c ; e, zu.e:7. it:e. - r: r:. t.ee::w:u.cw cr.- u.wusocr,o,.n tr : I l
=.-c~ -
l y__ Clifford a Gillha - crees TA06 e
( t II cencerned, I thinh, and I think the actica of a #
f?
1.;
r e r deferral of the actual date for the crders,to be ;
i 0rJ issued cenbined with ths rejection of a request for 1 -
0 4!!. expedited relief i culd have' caused serious concern I I
5 as I think we've indicated we are concerned as it is 6
about the deferral.
t l L(Clifford) I would agres with that, i
Ed but my testimony was with respect to the April 4th i
9 l date, and the reason is the cash flows basically were l
AC 4 in a standstill kind of pattern, especially with the 11 dividend up.to that date.
11 'I g
,. Would yet at least ad-It once Meted N.
13 {}
!i filed a notien for an immediate incraase in its energy 14ladjustmentclaucecharge,thatthepotentialfora 15 catorial adverse change then existed, j ust with regard.
16 to that particular matter?
17 L(clifford) You are saying just the 1G.
fact that it was up for consideration, that that by 19 itself, solely by itself with the April 4th date, 20
~
would constitute grounda for us thinking that we 21 potentially had a case, the banks had a case for 2;jcaucusing to datsrmine materia 7 adverse changs? I i.3 0 Let me phrass it slightly l
- :l' i 2<. J i differently. l r s 25j Khen that notion was filed, did there ;
u=::r.=r ex s =c:r.21 :=. .n. ::. :.c=w: :.x ver.- e. .:mm=uro.pr rm: t
Clifford ti Gillham - cross 2.107
- f I
1 Ifexistacaresultofthatmotionapotentialfora 1
l 2 fmaterialadversechangaoccurping? 1 i
S A(3111 ham) I would have to say yes, a 4 l potential for materici adverse change occurring exist-5 ed then, it exists really now, given the gravity of 6 the situation.
7 ; Uas there an increased potential S
for material adverse change as a result of the filing 9 cf that motion?
10 MR. GORNISE: Madam chairman, this 11 questiening has gotten to it seams to me the specula-l 12 ltiveandhypotheticalrealmwhichIdon'tthinkit's 13 1 leading anywhere. I haven't objected prior to this 14 time, but I'm just not sure where it's taking us as to
~
15 uhat might'have happened had something else happened. I 16 I .rould just like to object to the lft speculative nature and really the relevance.
ig MF. . HALATESOA: Madam Chairman, if 19 ever a case was based on hypothesis and speculation, 30 this is it. There are very few certain things that 21 have been placed on tha record cf this proceeding; 33 mest of it is projection.
I 23 I'm nerely attempting to find out what I
(-. in the minds of these bankers since they control i
94 is '
25 ce much of these proceedings, and because their ;
- l rm.-
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'- Clifford & Gillham - cross y,i',0,,8 to i
a r
- I !-ti willingnsst to tche ona courss c" setion or another ; e
'n 1' ~,.;
2ld-I controln so much of th:ss proceedings. 3 1
.t. N WITHESS OLI? FORD: May I anawar that?
l<
4 MR. MALATESTA: I would object to Mr.
t
.i 5 clifferd responding to my statement.
6 MR. GORMISE: All I'm saying, most of 7 these questions are what wculd you do. The questions e,
have been ancwered. I don't unnt to delay the 9 :
matter, I'm juct saying I don't think it's leading us 10 anywhere.
11 MR. MALATESTA: I also add I find it 12 inconceivable two of the largest banks in the country
. a c .,
B sit bacl: and wait,for cc.peth_ing.to happen before they 14 . make any,1;in,ds o" dscisions as. to how they'll react, 15 and if that is the way they're operating, then I'm 16 extremely surprised.
17 TH2 CHAInnAn: Your objection is over-g ruled. Continue.
19 MR. MALATESTA: Could you read the
- 20. question again, please?
21 (The court Reporter then read back the A, j: record as follows:
23 -
"Cuestion: Uas there an increased i l' k
24[. ?otential for caterial adverse change as a .
'\
23h result of the filing of that motion?")
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. 9
._._. .t4 ---g..r. --
.=c -
011fferd & Gillham - cross 2009
)
('. 1 t
3Y MR. I*ALATESTA:
i 2jj C. Would you please cnewer the o j
quaction? I 5 }I s r
(. y A(C111 ham) The filing of the motion L
1 5 ' for expedited rate relief?
6 g That's correct.
7 L(G111 ham) Increased potential der 6 }i material afverse change because of it?
9 ? Yes.
10 L (Gillham) I think it's very hard to 11 say. It doesn't strike me the mo' tion in and of 12 itself increaces the potential.
v I would have to cay 13 clearly the potential for it is going to depend upo 14 the outcome of their filing ultimately, and other 15 factSrs.
16 o Doe =n't the mere filing of the 17 motion necessarily trigger a response from this 13 3 Commission?
19 A(Gillham) I suppose it does.
20 G Might it as easily trigger a 3; negative responce as a positive response?
23 1(Clifford) They have to respond.
e 23 } O In concidering they have to respond, i
q, ;4 li and they can rerpend negatively, did you consider ths l
33 i possibility.as increasing the potential for a material I
ETCC"M'.CY; a MAftS*#.t INC = "J 2 . LOCKVf!!.* OW A5% == HARRISD*JES. D.4 f **112 l
. I
_ _ _ i. _ _ _ _
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i i
Olifford & Gillham - cross 2310 i'
e l t
t' 1 1.- adverse chcnga?
l l C l- ?
?. g
.s (01120ced) i
. Me're dealing with an d I 1 3[ everall question of ongoing financici viability. The i g
i t
item you referred to is only ene pnet ef c giganti=
t i pu:-' -A' ch is being played fron. ths oil dicids of
.E I
6 j Saudi Arabia to thic Commission. It importantly n
7I l incluries the nac cnd a whole host of attitudes and 1 ;
0 8 j other factors i cnd we cannot deal with one fact in 9 } isolation.
i 10 f of and by 'tself, this one particular
,.I 11 , action as I:ve stated I think several tinas before, 12 uith the April 4th pending order, would not of cnd by 13 I'
, itse.lf constituto, if it had been decit with nege-l 14}' tively, a materini adverse change. It would obvicu,s,1y 15 . hava'been negative but it would have to have been 1..u' i
' takan in content with the overall decision of the 0
17 Commission on the three metters before it on April (th.
gg i If I could possibly refer you to our i.
19 ; concluding comments in our direct testimony, uhich is I
gg,j cn page 16, 15 and 16, we cannot in a matter like this 6
E.
v
~A J.
deal uith absolutes that are strictly on a cuantitative -
.e9.p p sense; we have to deal with qualitative judg=ents, l
r l .m.
r
. nr.d we have to dsal with e level of ccnfidence, and if
, 0, 2,;.
ce believe in cur heart of haarts thct this com-issi:n ,j i
<< 3 *
'. intends ths.t this comeany continue as a viable
- uw.es.= :. :.:e.: tw.: mc. - c r :. =.r.r.:.w w - imis:u,.3, re. sm:
l
, I a
w,
~r, F%vm- --
l i
Clifford & Gillhem - cross 2.11
- 1
^ 4 !,
s .
' i <: i financial entity, cupplying an esssntial product anc t !
?,ij y sarvice which isn't going to go away as far as need ir {
5 : concerned, I think we tend to try and obviously ke.ep i
.{. '! going. i i
5 If a collection of events tuhes piece :
6 uhich causes us in our minds, hearts and *)udgment and
?
l that of the other banhc, to hcvs material questien es C' to whether or net the compcny ca.n survive as c 9 l fincncic1, viabic financial entity, or uhether it even i
10 desires that it survives cc a viable entity, then I 11 think we have to der.1 with another matter.
12 : I think you ace asking us to deal in k U absolutes when va're daaling with a tremendous number H i of factors r.s they affect supply of oil, cost of cil, !
15 energy policy, need for power in the stato, et cetsra.
16 p. Mr. Clifford, could you give me. an 17 s:: ample of r.n event thz.t this co= mission 'or en act thf.s
- I 13 l Coma.issioncon'.6takeths.tyouwouldconsidera 19 material adverse change?
O L(Clifford) If the franchise were
.M revoked.
- e 4 Any:hin~ shcrt of that?
g 7.(Clifford) iis're getting close, I d
(',
h think the iccue cf THI-1 it. a critical issue, and I i
on' think there could well be determination that that t.
I we:m:n.::: . ::: ..-w.: e:=.-: ::. :ee :w.e r e.ve - mamerx:2. cr :::
.,-_-.- - 8' L
Olifford & Gillham - cross 2012
. I.: ;
? vould be--I can't tell you what the outcome would be.
I
.3 I but that would ba an advarse dsvelopment which woulti ;
v e 5 i!i. have to be caucused bv the banks. -
4 e I' j
4{ .
C. By uhe issue of THI-1, you mean l
D .t the issue of T211-1 going back into operation?
t l
6!g 1 L(Clifford) No, I think we contsmp'. ate 7 t that TMI-l will yo back into operation.
i.
S
- c. The timing of that?
9 j I
.t(Clifford) You are as good as I am.
101 The company has estimated a startup date the 1st of 1
I 11.! 1, na=t year, and as far as I'm concerned, I have no 11 4 rsason to., you know, cast material doubt about that.
.,I
- s. I s,c ,
13 -
l I've seen the KF.C schedule; I hopa that they meet it.
M ' I hope they dec1 with it earlier.
i 15 i sut I think ve really do believe that E
16 TMI-l will be allowed to operate.
17 0 Mr. Clifford, perhaps you misunder-t 1
1G - stood.
1 19 During the answer to my last question you 20 said you were concerned about the issue of 'IliI-1, and 21 1
I'm just trying to find out what you mean by that issue)
.e,s .. Is that the issue of whether $@l remains in the P
1
- -J ' c=upany's rato baue?
I Ml L. ( Clif f ore. t uo .
J w
23 0 If ths CorW ssion removed TMI-l
- =c:: r,:w s ::ms.: :::c.-:::- r. :.e:::: .~._:.:.r/ t.vr. - t:ncescu.-s. n. t :::
M w- W' m
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1
~
Clifford E Gillht= - cross 2013 !
F < l m P i :
s >1 frc: E..tEC:
.. l rate base, would that be a n terial !
i
- i. '
<, cdversa change?
l 5 i L.(Clifford) This is a cause--certair.ly h
. I '
4 4I! a cause for a caucus by the bcnks. I.
i.
5 I uhink I can state with some certainty i
i m I 0! that whatever amount might have been available above 7 " the 29 2 level would be matericily adversely affected O j as a result c: suen a cetermination.
- 1 9 j C. And would there e.lso be a potentiti 10 l for the banks to decle.re a default of the revolving 4
11 ,l; credit agreenent if that were to occur'?
t u ?(Gillham) Yes.
J O '
O. Mr. Clifford, if the Commission
'A44.
were to esmove CHI-l from Meted's rate base, if the 15 cffect of that were ne net change in the company's 16 revenues, would that still be a disturbing circum-17 stance?
1 18 l A.(Clifford) Yes, it would be -
l 19 g O. Jiust the mere fcct thcu it was 20 i t removed?
1 21 ! L(Cliffordi That is correct, and I l,
.v. , would be glad to elaborate on thct if v.ou would like. .
23 -
t O. I wf.sh you would.
24 L (Olifford) As we unfsrctand it, the 25 reason it would be taken out is c, determination had
.te!.7.31.C-t O *: *.:'S'.L., f ic. - c: ;*. LecxwT.Lc? Av=,- E.ut.Terpr:0, M 171in
., . i
~~~ a+c--
J l
Clifford & Gillham - cross 2G14 U. ,
l.i 1
b3Cn made that it Va5 not uSet and useful or uZed or b(
e (,
.~. n use:ul.
b.
6 N
30 As we see the situation, T!!I-1 is t l'-' I*
4d. perfecti*v capable of operating. I gather there are t i t s ! some minor retrofitting that has to be dene, there t 1
6 are other Eabcock & Wilcon reactors--all the others 7 i I guess havs been retrofitted and thev are in fact 4 -
1 S I now back in oparation.
9 It is undamaged it's separcte frc=
o 10 ! TMI-2, so I cannot see why it should be considered 11 as anything other tha.9 used or usefu,1.
h U l
~
The. f a.ct of the m.atter is. that it is. in .e3 n ; (;/
la i rate bas.e, and if you tako it out of rate base, that 24 . means at some point in time it has to.be put back B in. 'Ciu: view is you take it out for a reason,'and '
1 16 I'm not aura what the reason would be considering that 17 :nI-l is able to operate, the NRC has scheduled 18 hearings te detcrmine uhen it might operate and undsr 19; what conditions.
l 20 once something is out, it becomes 21 I,
questionable whether or not it's as easy to get it in ni
-a as it was to est it out.
- .?erhaps the state will
- l. l Cf. ;d oppcse it going back in; perhaps some int:ervencrs will 1
4 34.f come in and raisa legal questions as to u.*1sther it t' _,
2-!i can be put back into rate base, 6
T4CW.:A3R 314;I.O.4AI D;C. - 2" 2*. I.:?.: 't.*I:.,* 0%* A*eT - f* k":M:3EU*E. Ns.177 f t 1
Clifferd L Giliht=
cross I013 li i e
x i !} . I think our attitude is that it is I
?
2 '.,: important from the banking point of vieu for THI-1 ani !
b s S j; the rates associated with it tt thisjuncture to rescin l F
d I'
~ . ' . in rate base.
t And I thish at the very minimum as I 5 3:stof before, the fact that it would be taken out of j s
6 j rate base would ccuse the cbsolute amount of credit !
I i i
7-: over and above if cny cf 292 million crailable to I a
i 8] the compcnye to be reduced by virtue of the fact it t,
9 l war nahen out.
10 ,
Perhcps nr. G111 ham would care to give 11 ,i his views en that which tren't necessarily the same.
t 12 L (G111 ham) I would only say we have v.-
\- 13 had strong cypressions from several'other banks on 14 the issue, and thev in fcct feel as strong.1.v as I
- I if gather we do about the subject. i 16 L nr. clifferd,.I'll ask your counsel 17 to bec: with me, because I'm geing to repeat the
- g j cuesti
- n be:cuse I'm not sure you understood the ! I n
i I 9 1 question.
20 Chat is, if this' Commission took TMI-1
- s. out of rate base. but did not reduce Meted's rates 1
"" : in any ucy as a result of thct action, n~culd that '
l 35 still be a potential mtterial adversa change?
g,y L (Clifford) I understood your question 25 to be the way you've just stated it again, and the r.:ca.ei,e.: : :.: .ner.ee me. - n ::. :.e=w::.s.ow s.v . -: macxr. n. er.::
+ _ - - ..-e-
I- w
- . . __ _ =,. - .n.,_w-.,
t Clifford & Gillhc= - :ctss Fels "1
8 1
,. ".(anzu2: is ras, in has that potential.
4:
e i
i T: ,,
0 Uculd that be true if the ;
r! a 3!. i Commission'c rer.ovc1 of TM -l from rate base specifi- !
'l t
. p!
t cally said it would <jo back into rete base cs soon as '
5'! the plant were operational? I i i 6 2.(Clifferd) It would, and the reason 1 l
7, is the scme as the one I gave. There is alwcys a t-n 8i.scuestion once you've taken it away as to whether or I'
S!! !!
not it's as easy to put it back, especially since I
10] there doesn't appear to be a reason fer used or useful 11 to take it,out.
12{ F.R . BARASCE: Madam Chairman- I would a A t
u Q like to have that ctricken because hn is offering a 14I! legal cpinion et this point. I don't believs.he is I
15' competent to testify as to used or useful status of 16lf O this plant.
f 17' As far as I know, he is not a lawyer, is co we don't have the situation we were faced with with 19 Mr. Hiller.
l 20 , TES CEAInNAM: Would you read back that v
.1 last answer?
1 I
m
- (The Court Eeporter then reef back Mr.
.esd, Clifford's it.st answer cs reaussted.)
- 4. ;. THE CHAIRMAN:
s.
g It sec=s to no this witnsss,I -
- g] has nade comments as to used and useful throus_hcut his li
!.:CXR121.CM h **A!LO'A IN" - ::" !L " OOT.7" *.OW /*.*L - !* L"t.it 2 ::':3, F/ 1 *182
01: f ford & Gillham - cross 2ul?
~
. t
( ,
- ii answers l'* Mr. Strasch, r.nd this Cc miscion will put l
i T
whatsver weicht, recognizing he is not c legal j
- l. f 5, en=crt, i
a e
f 'f t MF. . EARASCE: To ths extent which hs's i
- b. i.
os mace comments on used and useful, my cSjection stands !
l"- '
I 6 : to all the testimony.
a !
a f 4
7 COMMISSIONEL JOHNSON: Wotid it hcre !
8 j helped if hs made them more tinely? ,
0 !
MI. , BARASCE: Mu problem
- is the tiero- l I
10 phone was taken away from me and I didn't want to i
7.1 interrupt the testimony.
t, 11 t COIU<i2SSICE2R JOEUSON: Just chcut out.
i i n'
- s
.r v. .s.n . .nws.m_gg.nA L
t I
i 14 '
f G Mr. Clifford, on Page 7 of your 15 ,
statsnstt, CD-1, the ne=t-to-the-last sentence at the .
I 16 bottom of that page, it reads, "This msans Mete 6 17.
I needs a mininum of 355 million~1n additional revenues f
l gg ' to cover additional purchar.e power costs which have 19 ; also been eggravated by the unprecedented increase in t -
I f
30 ; cil prices and other expenses."
r i
21 l i
What did you mean by the werd "unprece- ,
i 23 dented increases in oil prices," actually the phrase,
- I
.c e. ' but the vord I c focusing en is ' unprecedented."
, 9e
-v i A (Cla. , _rrorc) . ..
I caink my use of it no .- was fairiv innocent, that after havine been stable l
r=c::u.ar a ex: := ::ec. - = rc. :.cm ::.2.w 4v=. - m. amena .s. n. :m .
~
t,,__. . _ _
.g n*
-t 6d
, o Clidderd & 0-illham - crocs 2018 i f.
, l 0 i 1 ;'. :or e number of years, we saw a ov-parcenn. .ncreare , t -.
.i
?
.9 in c matter of a var.v shcr c.ariod of time., and the g;
i
?
6
' ?"!. 3 0ssibility of that happening in the future is t
(
Il .
a 4
undiminished, end I consider an increase of that s
- 1 l
- : amount an une., ear precedent.
i .t A was nothing ce..ner 6; than what I:ve just said--
h i
? i, c At the time that these incrsases G I were imposed on Met 2d and ether entities i and indi-('
9 vidue.ls., you felt that the oil pricse wers fairly '
10 stabin?
11 l
L(clifford) I have never felt t.he 3 11 '.
I u
cil mcrkers were stable.because we need to inc.ert tO' c
a
,- around 3 nillion barreir a day, and alme=t virtually alli i
P t
14 ' those who supply it can charge what they want.
15 I'm quite aware of the estimates ~,
16 g acecmptions which 11r. Graham has made continuously,
-1, g
17; r.ni I think under the circumstances that is about as i
ig] goed as you could possibly have done.
1 But we really s
t haven't got that much control over the price.
l 101 20 G Do you know uhat OPIC price netiens g
21, may have bean anticipated last spring when this
_~,,,Ii l) ccmmission conducted ins first inquiry into Meted's r
33C financial operations?
I',
i s s~ ;f i
~ ,. 5;
.i 2.(Clifford) Did I know what OPEC's i
.s s
n
- P, e ricing .nolie.v was c.oing to be?
t r:c;c.E;.r.M 3. *.43.m4A*, ::;0. - 1.7 E T- .v;1!.0Vf A'!C. - IC.;tM*CitmC, % '7f *: -
_,.,..._-..__1--- - --
.+ -
7 Clifford & Gillham - cross 1019 i' .
F I t
9 i.
E Did */ou know what CPEC price actions!.
- 2!l were anticipatad by Meted in its financial prcjections l Sl Et that tine? i
{!
I 4 'l L (Clif ford) My. recollection is that
} l i
3 j Kr. Grahan allowed for some quite reasonable substan- I b
tial increase in the future price of oil at that time 7
based on tinat he knew, and I think it probably was as 6]goodanestimataasonecouldcomeupwithatthat i
i 9
I I time. It was hard to challenge it.
10 ! G Che other expenses that you 1
11 j referred to in the sentence I read--first of all, what g- 12 are these other expenses?
s I w
1.
i(Clifford) Well, the price of money 14 is one.
I think the forecasts for short-term interest 15 rates back last June were for declining rates, which 16 ,i I certainly think ue would have agreed with, but 17 l! events for a whole lot of reasons have caused tha 10 i not to happen. That certainly is one area.
l 19 I think the general inflation rate 20 ' runn.*ng at the rate of 12 percent on the Consumer 1
21 Price Inde.: has caused every product a'nd service 32 that anybody uses, including electric utilities and i
3; ; Metropclitan Edison to increase the pace. I think
) 2.g b it ondad up being higher than had been expected.
25 g Mr. Clifford, on page 10 of your *
- ennz::.:n n.us. .: nc. -::, r. :.ee:.- .:.ue : = - r.xxc:rae, n. true.
i m m.u=
- m I _ _ -
Clifferd G Gillham - :: ens .
2020 e !.
r.
, '. I' g e. g _ _c a
. ~=. c.m . , A.DS I A 9. ". *** .>
- g . . ...~.A..".."' * .' # "D
--- "C.".*.u**.*.
-a ,
' ' ' s~ '*
. I.: #
e i centinucc from Pass 9, in that sentenc do ycu net l
- . e, i.
e _. ~ e_ e. .s um-2__ , ..._4 _1 .- b e n . _' _- .. =- = s a. .i .. ~w'.l e m= ,~,_4 e u _4 _-.. '
4 l$292 million ersdit limit unless the banks are assuref E j that the principles that you feel were esuablished in !
?
6
', the Commission's order of June 19, 1979, are re-96 i .. .
- a::. rmec? .
s.
6 i e
L(Clifford) Is that a questicn or a 9p> statemsnt? I mean, that is what I said--we said.
10 li G Yes, thank you. ,
11 How, was the. Commission's action of a 1- '
Friday,. February Q, in any W.ay a reaffirmation of -
l la
' h o s *.
. , _ _* . ~
. _'_n_'
- s ?.
s4 2
L(Clifford) It is a hopaful sign. I 15 i
would not say it's a reaffirmation because it's i
16 : subject to further investigation.
1 4
17 q G At the bottom of Page 11 and the i
1S. top of Page 12 of your statement, you described i
19 ] certain long-range ob.4ectives that Meted nust attain s
I l
l 20 .
to be considered fir.Encially viable; is that correct?
1
~
41 L(Clifford) j .Tre you talking with regard'
- 7,l,' .. to the partgraph '.2eaded up "Second," underlined? '
l-13!f G Yes. I b s '
li I
- 24. ."
L (Clif f ord) Ic your qusstien do I hE'in i .
2fI anything further to add?
I t
em= . .c-: a rr..m:= :::c _ ::: ::. :.c .:= .r cri reez. - r.eu.rc :c c. .-e. :m '
yw-_
b- --
_ _ w- .. .. ___ ... = - - _- .
l l
l l
l Clafford a Gillhan - cr:32 --1021 P
- 1. ante . to con:. . rn No, I yns:
3 ..
t.'.e.t .
i.
you an accurate recitatiCn of What is E [i i Ve CiVC f t.
i i
. Ju n..nere. r f
4
' I 4- 1(Gillhan) Uculd you mind repeating I ia 5 the recitation? !
O. ;
O Chat you described three long- ,
? " range objectivas that MetDd must attain to be con-8 sidered financially viable.
l
' t 9 1(01ifford) I believe that is what 10 i ne've said. That is one facter, the other of ocurse I
, j I
11 ! being other things such as the recovery of purchase i.
l
, 12 power and the franchise to operate.
- s. 13 a without the latter, there is not i
14 l going to be the former.
15 3y lenc. rance, do .vou mean by the end 16 of 1980, perhaps?
17 1(Clifford) No, I don't think I had 1s
. ,! that in mind. I think that you have been urivv. to -
I l 10 li . Grahan'c forecasts for out into 1981 and '82, and 20 I think that ecurse is predicated on a number of events
.o..f , ;
occurring.
l Tut I think to recover full-r financial 9-e
- {'
s c . .
- o3., vianza...:cv t e n _, n a r.e v wal, tsan t.nat une connany can 1
I l tehi go to the eccity narket and issue stock.
e, P
When do you think the company 1
25 G corr.ci.::: s te-x tes.- e v :.= =:ce :- .er. wr. - ui.r.mc=ur.c, .=r : :=
l
. . . , , -; - n .x . - - >_.nn ---
s
- r. - 3 .: .h , ,n e.4-9 * ..
-..- --- a.
. . .. .~ g g 2, ,". *
. ..? .
P. ;
I '.
, .u
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. .a . , ; a ,..
- s. - ,. m o u. -. . c. s .. !
I., .. ,T '
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. _--c.-. .-2 aro. . s. ..
..- c,g... y32n 0]uhayregoing.;cbeabletedot'lat.
I know when l, i I d.' thev hece to be .ble te do it. I can't rc.e.lly io E!, n lt tnswer that, becntse the real anstrer to the question =
i l.
6iI rests somew2.at in our hands. sc:nerhat in yom: hands, t
70 and this ce==issien
.i coms; at with the unc i.T '-
a
'-a!. U n s n.ngton . z.nd a wn.o .:. e
..t.c t o ::. p.:. aces. .
'l 9I O r intent is to work in a constructive 10 vsy te see that that can come about.
i.
t 11fd (L Mr. Clifford, is the words "long 12 4
- rance. obs ective.s" at the t.oo cf Pac.e 12, are the.v, . .
t s. '
13 your wcrds, are they Mr. Gillham's words cr are thsy
~ / .l':
-4 . e-u ,1., Em
- c. ..
t
.2 Woa C.e. .;
l.
is 15 tt. L(Clifford) I would say they're Mr. I 1
16 Gillham s v:rds, r.nd ours, mine.
1? , D. What precisely did you have in mind i
.m.l ', when ."On used the werd " lone. range"?
I ic !
t L (Cliff erd) Several years. !
l 9.0 i
\I Turning back to the bottom of Ps.s.e i'
.~. . i . 11, the last line, you refer to a market rate of retur1 l
I
. e ,,
i
.,,.u. w .
- s. . "4 . ..r . y n-.,....
mc +--,..._w.,.~,.,., - n -c ,I e
.s -- - . - -- * . .- ,.. ,o ,,
,, i . ". .
s
.,..i. . .i ..m
,,;g
, - , . . ,....,.. . 2 ..
~
..s i . 4 ,.
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, .,2 o. -- ...i .: .. y, .eu, s. , n'i a il
,.4.<.,.4...2.. s. 3.:.. 7 i
.6
.. I l
".5 '. L(Clifford) - think what - e msan here l i
1' \
- c.: ::::. v , : ::.e.: ::::. -: r ::. .c... .. :.:v., w=. - ::<. , a..2xu. :v.. : :: . -
mm '
-* m '~b 1
l 9 9 I\ m
~ . . -
l\ S-. k ,.
- s
- = _- .. :- . = w . _. . -- . . . = _ . - - - , . . - -
4 Clifforf !: Gillham - cross 2022
- s. .
p .
4 t
_ 1,; is the risk cle:nentin terms of issuing additional '
2, equity has been cuf ficiently minimi=ed if the compan-j '
f
?I... can go to the marhetplace and effectively compete to '
I -
4 offer equity. a
.i !
. i o : Oritical cf course, is the restcration !
6 l of the dividend, and hopefully some buildup bach of the
_- i Y
dividend. That is all pr.rt of thz equation. i I
6 I C Eut the rates you refer to in the.t <
i i
0l pa.ragraph beginning with the word "Second," they are i,
.' O ! rates that would provide a rate of return that is i
i' 11 competitive with other invc.stments of simils.r rish?
I p.s 12 j L(Gillham) I think the answer is t- ,
u ever time we anticipate ths.t the risk element will be 14 l reduced by varicus actions, not the least of which 15 ! are Commission actions I
EiC actions, et cetera. So I
16 that in time Kstropolitan Edison will be able to 17 , compete in the marketplace to othar utilities which t
10 , comptre with thtropolitan Edison at the time that
.t.o
. , the.v. tre loching tr> sell securities, and with GPU at 6
i 20 the time it is contemplating it.
it
- MP. . IG. LACES TA: Madam Chr.irman, this
~
~. ,i is a naturr.1 breah in av cross-eramination. - I have j 1 r
~
etite e bit nere to dc.
If the Ccamissien would
(
9,. 4 like te recass for any raa.=cn at this tine, this is l l
9- 3 a good time to do it. l
!!e:fa. SAC. o tr.n.v:t# me.-:7 T:. :.ccr.vm w Av:r. - ru.::r.;;ctmo, n t711m I i
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'I
- u. m i' .t" uv 1
. . - m* = t i ,. _ .r. ,7o._, :...3 2 y =.c_a- .J.n g l
. t. .s e3 "0:he.ps lunch? .
i t .
3j: IC . MA .ATESTI.: lic: ev.2n lun=h. I was l
{ 1 1
1 i
s., "
. inst suggerting if people nee.E a five-n.inuta.. base.h... l k e
- TEC CHAIRh1AlI: 6
- thick, cc: side. ring l
1 6 the hour that it is now, un'll broah now for lunch
,n l
7"t cad return et 1:00 c'cloch.
I 6
l (Luncheen ascess taken at 11:45 a.n.)
.c i - . .
4 l
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4 11
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j TI!3 C~IAIRIG.N : Ehc11 we proceed? ,{
l
- ir . Malatesti.
j D i t
- 12. K G.TZSTA: The.nk you, Madam 0I
' chttrus=.
? 1 f
8 I
... STEWART 3. CLISTonD cnd RosERT E I i
GILL.2I.M . having been previously sworn as i
10 i witnesse.c. were resumed and testified further 11 ts follous ...
t 11 $
1, l CROSS-ZZAICNATION
- *J l OONTINUED 14, 15 EY Ms. IG.LATnsTA:
16 c. Mr. Clifford under the revolving
.t.e t credit agreement, if the banks do chocse to recognize
.tar . a certcin event as constitutine a default, ccn the -
- g. , bcnks choose not to then e::ercise their rights to i
gg acce.:.erate pcyment?
9-
~1. A(Clifford) Your question is can the v i.
.:.4 ;
bcnhs caure c =cucus to come about t.nd come to a
.e p c e c . :.o n wh:..cn ..s ..
unt.c there :..s not a natsrial adverst I
24I ' CA**I"7 i
23 O. Ccn you cetually recognize s.n event i
- c.:m:i.en .v.r.:7.re ::::. - = ::. :.e:m.r :.ev. A. . -:x.r.::::mc. n 7::n .
t
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, Cf the revolvine. credit f.C. r s e D e n t and th2n choose OCu -;
g Si 6
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j accelerate rept.ynent of your nctes? '
d 0 .
i
, HR. GORMISE: We would just like to nets
.l
(
.k. . me.y
-_ w. e a ..aa..n e., c o..
a _,3 --c..?. e o ... ., u .~. .'. o . . . - ' n' _4 . >. . " .
"i Clifford can state his understc.nding. but there =sy be t
G i a legal concinvion there ss well.
i.
f 10 t
- p. .r T E S S G".sLEAF. -. Subo.. s . * '.a * ' b.. a'. . .1. .? .'.". .
M.
l l Gornish's comment, counsel s.hculd prehably be consultc5.J,
. i i
I think we could haJo scse flexibility as to whether wrs 4--'-
did or we didn t.
).
s 15 c, !1r . clifford, have you examined 16 ;' the financial dset that has been identified and i1 17'! entered into the recori in these proceedi gs by
.i.
ZS.; Metropolitan Edison?
h
!J l
19 !
L(Clifford) Eave I?
20 C, Yes.
21 i L(Clifford) Yes.
f
.m : MR. GORN'SE: Can you clarif.v uhat .
- e. ;* - .
- u ls-
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25 ! 0 Specifically, the financial data l
r :.xw.m r.:e.e::ee =: . - = r.:. :.-- n ~ :.e .
. - ru twsnrn n. :m:
l t
_ =__ r a, _.
f Iliff:ri & Gillham - cross 2:27
- t. .
1:
( e ontoref cnd iicntified by Mr. Graham or K- . Ecder. !
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..n.-a . m r .,o m.r. ..
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1 ifICESS CI,IFFORD:
4 Yes. I i
5 :, IfIT1;ESS GILLEAM: I would have to reviet* !
1
)
6 y: specifically what they have entered to be able to '
l-7' : ell you whether I've r.een all of it or not. i t
U i
] BY I!R. 11hLATESTA: .
i 5' i G lir. Clif f ord, do you feel thtt you !
1 10 , cre familiar with netEd's fincncini condition at this 11 ,
time?
12 I(Clifford) I I I r.n familiar with the l s .
13 i range of problems that they face,. the impact of TEI-1, 14 TMI-2 on their activities, and I'm familiar with their ( ,
I 15 requirement and need for banh debt, largely for ths 4
}
6 deisrred enere.m.r.
I 17 ; .
Yes, I am generally familiar with it.
i gg; 9 Are you also 5amiliar with their g
t uo cash flow position at this time?
1 I
go 7 (Clifford) I am familiar with the i.
.e..t. estimates of cash flow uhich have been produced by
.~.s I
l the comoanv ever z. period cf ti e and adjnsted as
> l
.u svenus nave enangsc, yes. i I.
, [. And are you familiar with the cash '
2.4 i 1 1
[
'g~l flow projections for the nort several months that they I
f.*CW.::1.C*: .*. i".t. C**C.,
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..,. h ve r.rasanted?
~ .
r 7,
'. .i(Clifford) I art. fcmiliar trith what 3 P. is baint pracsnted in 2nhibit A-22, I believe it 10.
s
^
i-, l hy end I think tharS have bacn certain changen, diviisndu !
1
.6 s.
a i is one. .
6 yes ,. I c= generally familier with that.
- 7 C.
Given your f amilicrity t.-ith the ctsh {
". .l (
i flow nesition cf Meted at this tina and their Orc.iec- I; 9
tions, if the bcnks did choose to accelsrate repayman: f 10 of the notes under the revolving crsdit ce;reement, 11 4
, would that likely lead to c. situction where Metti 12
.! would be unabla to meet othar current lia'ailities when ..
u a cue? t .
,l it i I
A. (Clifford) Ic your qt:.estion if the i l e l 15 -l. ?
i banks accelerahed the debt and called in the event of 16i, def ault if the company would have trouble meeting 17 other onligations?
r w,11
-- G Yes.
1:
19 . 3(Clifferd) The ar. ewer cotid be yes. .
20! 0 Uould that liksly then lead to the i
1 31;I pcssibility that chs campany uculd have to proceed a
22 '
vclunttrily or involuntarily .n bankrupter proceeding:?
.ug. a3l.
t n.( m. .a.n. =.v.-
. . . . -.,~ _-. u y _am., ,. m2c.. .a. o a ,-os- .
i a,
- j s ~f.1j eibility.
3 '
l 25!I Q. Hen. if Meted were to enter into il r::nxus.nt a .v..um n: -:-::. :.:wyn:.:.:n e . - >:e.n:crume. n m:.-
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0 d I_ (Clif f ord) I have not talked at lengthy l e '
e
! vith lawyers c.s to what our position would be at that i
.E time.
t Cne cf the rea. sons we ettempted to take what .
l ;
.i.
' " , security vs cculd wts to be in a position of being .
'i l 9 c cccure t c r e c t. t c r , cht-icusly . Eut what rould htppsn i p:
1C E at thr.t particult.r moment in time t
I have not hypc-i 11 J ,
thesised on that ct thic juncturC e other than the
- , . : l 1.-
banhc tried to protect! themselvec by taking the
[
M i
cecurity that they could in connection with the j .
- /17 execution of the revel;-ing credit Egreenent.
15 10 . Gillham do v.ou havs tn.ything further .
i 10 ) to say?
17 L(Gillham) only that obviously we 1
l'j ttould have to earnino cur pecition with respect to e
e "9i.our status as secured creditors cni review the GPU 20 } guartntee which is supported by the common stoch of t
(
15 l the operating cubsidiarics and determina our position
.i i
e
%., ao ._ a- .n pg. .33 s l
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.;. 4.1 '.i LC .. GORUCSE:
I would also no s, liacEn .
4 t
...rh.. Chairman r to the crtent thet cLlls for a lea.al
-l 1
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l WC. O _r d _ .[L --"?
+ , - m --r -c~~'a~~~- s~ ~
cliffcrf & Gillham - cross . 233 r -
1 1 :
/ li'n conclusi:n, they'ra n_: qualified to naka it. i fi s O ';
- , u a
- v. w.. 1 .,u. y ,.,. w .. .e ..
' 1' i
Eih* S. Ears sither or both of you had an f
4 h, opportunity to review the testi= cay of HE: vey Hiller I i
- t c j in these proceedings?
I t
6-
! ;. (Gillhan) Yes.
I i
7j i 1.(Clifford) Yes, I have read it 0 quichly.
S
., G Do *ou recall that Kr. Miller IC l testified primarily as to uhat probably uo.uld occur I l'
11 if MotI:d wtre tc procesf. in bankruptcy proceedings !
17,!
under Chapter XI, the or.cani::ati.o.n cha.pter of the .
A3 bankruptcy codo?
14 3.(Gillhan) I. generally reue=ber Mr.
- 15 Miller's testim:ny. 5 do remenber his conclusion 16 .carticularl.v. on that sub 4, ec t . .
17 o no you recall that the subject
- L =atts
- vas as I deceribed it in my question?
19 fu(Gillham) Would you repeat your 9.0 ,. a.uestion?
.m.. 9 Is it vour recollection that Mr.
1 l
.~ ,.1 it.
Zillar testified primarily as to what probab1v wculd -
occur if MstEd vers te proceed. under Chapter 7.I cf the .
, 3 1 1
- t;. -
Iankruptcy Cod 27 '
~
. i; c (G1., Anas) 23 ;
Yes. -
1
- m:ce.=: a =.s. r,:r.: ::.-:..,::. :.= rwru.ew m - wx::saa . n. ena -
- (
Clifford & Gillham - cross 2G31-.
i
'l 1 ;
G Do you also recall that in !
g i
2[ making his prc$ections Mr. Miller first identified j 1
j
? i '
the rights of various parties, including secured i l 4 ,1 crec;;crs, anc then theorized how those rights might be
'ii. ,
5.~ er.ercised in Chcpter XI proceedings?
l 1
6 L (Gillham) Tes, I remember that. I l
1 7] ,
Q. t?ill you cceept, subject to check, I !
6 j that ene of the primary purposes of Chapter II of the 0 -
Bankruptcy Code ir to allow a fincnciallv troubled 10 ! company some breathing space'in which to strengthen l
11] ' "= #4 ncnciti position?
'i
{- 12 L (Gillham) I think that is a question C- 13 that really almost comes to a legal point rather than vr ., a bcn .42ng point. ,
l 15 i I'u generally familiar with what Mr.
l' 16 ; Miller said. I think .ery specifically the thrust l l 17 of his comments at the outset were since I think it's 1 Ig , the Hopc Act was passed in 1938, there has not been l
l 1c lt major operating utility bcnkruptcy in this country. I i .
20 !
1 I think he cited Green Mountain Power's 1 i
l 31 . reorgenication in 1946 or 1947. Green Mountain Power. l
)
.en - rear in mant,. ss n much smaller companv. -
, i 33 : c.cca:1onci-y, I tn. ink the one area ne m; 10r. Eills: didn:t diccuss that I uould also submit is i
a one of considerable unknowns is the fact that this is l
- m===: s s.: .ns w :::c. .
.r :c :.omin.:.ove . . - w.n a:runo. v. m ss -.
g' ,%
- m
. - > a re >
- 1. -
-=wa--a-
- lilford a Gillhan - cro s
- 23 2
.t i
n
.'. !: : c::npany that is reculataf under the .nuhlic Util:t; 1
- . .. I
. .w.i. :: _, ng r,organy e..:c of . 3a.
e i
3 !,
! S I guess c . ::: cs.- f ing is cusstient !
4' I 4 j in the crec of utility bankruptcy. we ha re proSchly 5 ffortunatelv not had the laberatorv e::periance to i
g 6 cecurately forecast, particularly bankers, as to f 1,i the probchls results.
ti 8- From our backgrounf, whtt we d know 0f I 9 i it, we feel ver.v stron~a1" it's not likel.e.as we've I
l' 10 i steted in our testinon.v., to benefit anybofy but the 11 legal profession.
12 ; (Clif ford.) I think--and.I stand to q 13 be : rrected en thic--but I think F. . liiller draw a
'4 dictinction between a regulcted utility and a 15 company in the manufacturing business which had the 16 cption in case of fintacial distress to deal with ;
i.
I l'7 ' prices, and I thought his cemments with regard to
.m. - that Jerva carsfully m.de a differentiation between 19- the concerns cf a utility for the. various classes of 20 debt and equity as distinct from a manufacturing v:
-o companv. a I
- g I think th3re is a substantial diffarance!
4 1
,i betusen the two ehich he dealt wiuh, I th o uc. h t ,
.g I g
n l
t
- 4;l raths
- c f f z e ci'isly . 3 l _,
s Well, both of ycu scunf intimately l .c.
i -- i :
A 1 1
it' e:: c:.:n u.:~.w: :nc. - c.r : . :.e c:: c. w . c. .v.r.mxs ..n. n :n::
e clid2cri & G-liham - cross
~ ~. ' O
- i. .' '
(-
~.
.c f =iliar cith ?~r. Uillar:s tastimony, so : feel i 3 b, comicrtable ashing these questions. I'll repeat I.
- i Tr!' ,
' the question I czhed inmediatelv ers cedin~'J . e -
l d
1 4 l De vou accent, subject to chech
- ens cf I J' ;- the primary ptrposes of Chcpter II of the Reorganice- !
i 6 l tion Division ic tc allow a financially troubled 7' company some breathing space in which to strengthen ,
e i I v its position? .
t 9 2. (Gillham) I will accept it, subject I 10 , to check. But I think I must also scy.as I understan6 e
11 lit, from =y nonlegti perspective, that a reorganication i
.I il ; proceeding under the Bankruptcy Code is also a pro-e3 l
- ceeding which also bears in mind the protection of I,
14 !
the creditors cf the company.
15 G Will you also accept, subject to I,
16 check, that the provision of the Bankruptcy Code that 17 , providec this breathing space is Section 362 (a), which I
- f ' j in pcrt produces un auto =atic stay cf all debt i
Lc interest and p:incipal obligations on the part of the 20 debtor?
- 21. L(Clifford) You tre getting beyond our
.. .. car abilitv.
.. . o - -
- i 22 !! d?. . GCHNIS3: I think the first qusstien o 5
(. 2.] was a itgEl qusstien, uhich I let them answer. but I PI
? -l i think he recily is starting to ask legal conclusions i,
F l
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m.* ;
t 5 .; statam2nt cf what the Bai.hruptcy Code cayc.
These i i
6 are not the _orinc.r.v. _ cur _ocses of m.v gnestion. to confi.m ;.
.n t
i
?. ,
l.
n ._ .4. . ,, ,., .,r.e ._ e . ., .d. .". ..e.,. a~ _#
'.he Coda. -
1 6 ,c.n.4 e <s.ays . a-. <. - c.+<
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' a' e s o. e.' a .' .".4 '-
10 , provisions of the Cede. I:s merely r.shing them to 1
- i s
- s. . .
I
.e. ney.s D.;. .e. . a<,.Cr av-. s on u %.e i. C C ,A,. , , ,3a- u h a.,. I ,4.33 I
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a =.$. _4 .. 3 'a.s..g. e c.
. s.o u.4. . _,
j .
z.t .;. que.s.tions?
I 15 M?. . 1G.LATESTA: Thsy will be somewhat 1.O ,. hvpothetical ultinately, ves.
4
.i
- 1 l
TZE CII.91RM.hM: Continue. If the
.G A
5:?itnGSS c n an5W9r th3 question.
c 112 . MALATESTA: I'll reces.t the c_uestic .
A> f o a.s . GC r,.a,. .L_ o--,n : .
44 s L understanc., wnon i.
y;. tney're being ashod, snbject to check, they're really
.~9 ji not Sain; crked anything, thor:ra recily being told t'
.; . . e ..
_4 ., ca.,2
-, +., -
3 .<
. - - c . .1.,
. .e . . . e. w e-..e.+..c.- .i. c ... u .. ,. o c... 4.n .. .,
e .
6 !
x,g .! 1..? IG.L ACES TA : i m Ths.v ' re keine. e.sked to .,.,,,
c..
- 4 trust as .crimari;.'r. -
.,I..
it
- e : .ci. :-: e :. a::: me. _ . 3:. s.ee:: .. :.c.i .- er. _ r:A:u.:cs.:.. . n. :7 t-
1 I
Clifferd & Gillhan - cross 2035 i
t I
(~.
. 1' .
- .R . GOEli:SE: Subject te chat cavent--
l
.t. t
.r, i j' -EE CHAImIAr: Subject to your chech. .
- e. ,.
T. t. m... . va- t :
.e. v. s vawLn*s -~e .1
.. g . )
1:. ,
4 0 Uill you accept, subject to chsch, l
-a=+
the provi.: ion cf the Code ths.t provides this f
C breathing space for the conpr.ny or debtor in question
?f is section 362 (a) r which in part produces an autcratic l .
8 . stay cf all debt interest and principal ebligations? I I
3 ,
'(Clifford)
. We are net e:: pert in that i
w ii area.
11 ,' G Will you accept it?
i s., 11 3 1.(Gillhan) Subject to check.
- 13. A. (Clidford) Subject to lecal confirma-J 14 ; tion.
i 15 4 Thank you.
16 i
Eill you also accept, subject to check, 17.l that under Sectica 362 (d) cf the Cods, any party in
- g . interest cca reque
- rt a te_-r.ination of the stay, and i
19 ' that includes r. secured creditor?
20 n.(clifford) The same answer.
.e. -A l 0 Now if a secured creditor were.
.e successful in having that stay of irr.ediate obliga-
,g hi. tiens terrr. int.tsi that is, the obligations again !
i.
(.. .c. ',' baca:.e inn: diatsl:r due and payable, vould that create e
s
-.c. ] an immediate and substantial cash drain for F.etEd?
u
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.t.- -
- n'" -& %-*---'
Clifferd G Gillhan - crec --
202e I
'S, t' '
L (Cliff erd; {
lf o
A: I undarste.nd it, this ? -
E ,h is in be.nkruttav. "cu are talking about?
I
't S jj G Yes, sir. t i
g P
i 4 ll L (Clifford) I'c g=ing to giva the .i d
0y same cuswer: I don't knew.
i }
6 i I L(Gillham) I would caly. remind you I i
t p
that the way the credit is structured, it's not just 0lg! Metropolitan Edison that could conceivably be! affect 9'
G I'm aware of that, sir.
101 Do you hslieve that if MetEf were in 11 I
< recrgani=ation, HetEd would have access to sufficient i
1Ej. y unsecured credit to continus its business operations? .'?3
\
22 rd j
.n L(Clifferd) I'm at a loss as to know '
10 from whom they would get it, unless it were the s te.te .
1:- 1s, O So is your answer no?
l 20s,- i A. (Clif f ord) I don't Ency whers they '
il t Up would get it from.
- 4 j
18 h.
t 4 Could you give me a yes er no 1 lyd answsr, please? Is your' answer t' hey wouldn't have 9
20 i0 access to it?
I 21' ,
A(Clifford) I don't know where they
,g,fwouldgstit from. The answei would have to be no.
i 13.! G Thank you.
Ic
~
24i*! i Do you believe that if MatEi wars in s' '
\
l l
25]1 recrganisation, it could obtain sufficient secured 5 i
! I
! r:nm:.i.=: mrn:.u = - =. :r. =.w- a 4 y:2. - :===. c. r.s :- .= .
. . _ _ _ -u.o --
O _it-ic ri & Gillham - crcss 2037 f:
-e-- zau = c .. .. .u. .:. . . n. + .s.- u, u ...-~> g s .,. .v. e , .: _ <.y-
. u. -- _a_= .
r'
.1 ' credit had tc bz secu ed by lions on the property I i: . I I
r, QI e ne d b .r . IIstEd thr.t is nc: otherwise suh..ioct to liens 7 !.
i.
4 1(Gillham) Would you repsut the last I I
E part of that question? ;
. .i .
t 1 i O. i Q. Do you believe that EstEd, i.f HetEd !,
r .. .
e t were in reerra.n., ::t.c;cn t coulc. obta:.:.n surra.cien.c ...
g G 3 securci credit to continue its business operations ,
i e
-0 i if tha.t credit had to be secured by liens en property '
I 10 ,. cwned b.v. lictEd and .=ropertv -
which is not ctherwise i
1 11 subject to liens?
12 L (Gillha:s) I have a problem with the l
/
- s. 13 , questic; that you ached with respect to the attaining i
1 '.'.
l cf credit.
15 clearly, the answer would be that it u" r. .
I locks doubtful that they would have enough secured t
.v. . ', 1 nrepert.v.
. but as Mr. Clifford commented there are i
-e s.c . ; other actienc that could be taken bv the Commonwenith. . , 4 l
19 l Einilarly, there are other citernatives )
i v I
- u. ,
or thinec ue might not be cognizant of which could l
25.. g chcnge the responce.
.. 2 think it's difficult to make e s i e.r.1 2 v ss I
- u. er no arswer to that quection, E
ce !! C. .kre von far.iliar ' tith Meted's
.- r -
1 f'
a '. c::istin.: crocertv?
4
-e i.. .' L(Olifford) We are fcmilicr with the i,
t versuc.7: e er. :c=.: :ae. .. re. : eei.w.:.ew rr - r.r .mm:r. ..n. :::m l
Olifford a Gillhn= - cross 2038 4 :
1p fact thzt uhore is propert;', and th:t there ars first
,4 i r'.. s
?
- t a :
'.ii mortgtge bonds, if that is whr.t you mean. 1 s
- n. I
.3 [ q Do you knot.- her much of Met 2d's
,i .
j 4 procert.v is not subject to existine. liens and i
i 3 creditors at this time? e 6 i A(Gillham) It's obviously a very 7' modest portion of their total assets.
6 G Do you think it's sufficient to 9
l secure enough money to enable Meted to continue 10
- its business operations if Meted wars in bankruptcy 11 proceedings?
11 e L (Gillham..) In. an. d. o f its e.l. f. , p.r. o b. a.b. l..v. rr
- b. (..;
n.o.t..
w
.,i-4 Would citibank and Chemical Bank U, permit Meted te secure credit by equal or senior liens l'
16 en property pledged to Chemical and Citibank?
17 A(Clifford) At the present time?
18 In reorganisation proceedings.
G 19j E(Clifford) We certainly would l
20 ' probably move heaven and earth te prevent it. I would I
t 21 have to revert back to the legal authorities on that.
9>. 4 q But you have the legal nuthority -
r.
vU to prevsnt it.,
-. you wou~d tr" . to *revent e it?
I I.
1
~j e-t(Clifeard) That's ccrrece. ec the i .l
- h. )* N/
25!!'
i best c: my .snowledge ue would have title and access I i ',
i
't .
l .::.sm.cn e :.:AS:32/.: IMC. ~ =F I*. 2.30MC.:.OW ME. - :U.RmG3 tit: e M.17:12 l
Clifford & Gillhat - cress 2 39 1
' I o rhatsver thcre is now in any avant--I believe nost n i
" it" Of it, anyhou. i 1
- f
- 3. Q. Have either of yet gentle =en ever !
4 {l.been '
involved on your banh's behalf in Chapter II
- ' proceec.ings? !
6 ! L(Gillham) Yes.
I I L(Clifford) No. k 6
{ L(Gillham) Not, fortunately, all that 9 '
intimately, but yes.
10 ] L(Clifford) I have been invcived in the 1
11 lequivalentinCanadaandtheUnitedKingden,butnot L-1 l in the United States.
13 G Are you aware that a reorganization 14 ; proceeding can be converted to a liquidation proceeding 1
As i given certain events?
I 16 l L(Gillham) You are talking about
,i 17 I
Chapter VII?
fn
-- G Yes.
I 19 ! L(Gillhan) Yes.
20 G And are you a' Iso aware that one of r
1 21 the events that can trigger a conversion frc= Chapter
- 22. XI: or reorganization to Chapter VII liquidation, is a 25 .
fiscrerse in the value of the debtor in possession as (g 1;. l'.
j an oparnting ccmpah j , and of ths debtor in possession's t
25 assets?
1
- 1 f.!?AT.2Ac:: L i. TAP 2*2A1. ::;O. -::: It T.CC:Cr.";L* CY? AVE. 4 ::fJt'tt3EUR2, PA *7212 I l
~ ~ ~
._.._. m.._-. .m .~_ 4..- -
Clifford O Gillham - cross
?.040 i
. l f-8)
IIR . G O 'c!I S E : the question is are you b-
%C rnarse t I
3 l 21R. M.LATESTA: That's correct. l
.j. IG. G C Rit I S E : Which may be a legal 5 conclusion.
g 6 Im MALATESTA: I'm just asking for ~l 7 . familiarity, f
S l WIT: Css CLIFFORD: No.
9 i 3Y 1:n. Is.LATEsTA:
10 C. Are you , lir . Gillham?
11 L(Gillham) No.
l I l 12 0 Are yeu awara that creditors who
~
m C
' ~
13 partic.i.p.a,te in a bank: upte_.v pro c..e.e. din.g h.av. e. t.he.
14 , a. ut.horit.y to requ.e s.t .a. co. nversi. o..n. f. rom. C.h. a.o.t. e. :c. X.I. to.
15 Chapcar VII?
l 16 A(Gillham) Are you asking me to accept 1
t;~ it subject to check?
Lg MR. GORNISE: I don't think that is lo the question.
30 SY MR. MALATESTA:
3-j G I'm asking if you know of your own
~;.
knowladge whether thr.t is the case.
i A. (Gillham)
_.2 i
Of m.v cwn knouledga fron !
-4,hhavingreadtheBankruptcyCode, j nc. I thinh that ; )
.s M I recall seeing something in Mr. Miller's
- u. i t
- s
- .23.7.:3AC"i a t!Arte':.*.L. 2:0 - 0:r f; LOC;naL*.C'?' N/L = EtantsEURG. PA. ti"!10
mm -. ,uc - .. = , ,
., -. _. -- = . , - . ,.,
cl_fford L Gillht: - cross 2041
.l e
I
(' ,, [6 cross-c::t--..:.natio:. by you to that effect but thct is J
.3i ny only hnc ilndge of it.
h {
. h..
- 6. 17111 von accent thtt a secured f..
t
.g b creditor has the .uthoritytoregrestaconversionfrs=!
- 1 Chapter ::: to Chcote VII?
6 !
- A(Clifford) The same answer as we i
{ l
- e. a care before.
1 5 l !!R. GORNISE: That is ac=epting your I
i
.r. trust?
10 .
I!n. IG.LATESTA: Exactly.
11 37 KE. MALATESTA:
12 C:,
Now, cccepting the fact that there
( 13 is this possibility of conversion from recrganization 34 to liquidation, do you believe that before you took,
- g you cs secured creditors, took any steps that r.ight 16 lead to liquidat.4.on, you would weigh the potential y degree of satisfcetion of your c1cias under either
" **#""* "*' #* #7"^i'**i*"
15 " li E"idati #?
19 L(Gillham) tie would obviously have to 20 nf'r with counsel and review our options as to which s1 world be more preferable.
g; .
I once again remind you it isn't just uj Notrcpolittn Eiisc [
~
Cc pany who would he invcited at t
M, .
l this point in tr.ts, anc ths implicaticrs would e:: tend p >
', ,! beyond the company, it would seem to me.
\
t estm:1.=: c w. .c :A: me.-a rc _ ::w::e_er: Av=.- au:mes:ms. n. rm:
l
. _ =_ . . :. .
k
.__ . , . :., _ _ . _ _ ._m 1
.....mm_.-- -
t, .
--- Cli:!ferd a Gillht4- - cross
. 2~42
- 1. I 1
i
~ l': .] 2y che extension of thJ inplic2- ; :--
21 t tiens beycud 21strepelitan Edisen, do y:: raan to GPU? .
l 0
i
.e !: .,
1 arsillhan) s I inst refer .vou to Mr.
t 4 ; Grahe.r's exhibit with the summary of terms of the t '
5 ,' credit agreement. Che collateral we have cvailable to I 6 us is cbviously spelled out.
? , The only thing I can say is these events 5 ,1 hopefully will not transpire. If they do, obvicurly f
's i Citibank, Chemical and the other banks are going to I
I 10 confer with counsel as to the appropriate course of 11 , actics to take.
II 12 Among things that involver is examining 13 the opt.ionc ue. have. a.va.i. lab.l.e. to.. u_s. . I I. t.' s.. v. e. r v 1A. ,
d i f f i c. u l. t t.o. s,ay -ight. n.o.w. wha.t. the. octions we would 15 choose to avail ourselves of would be, but I think
- 6 very specifically you are aware of the fact that we l 5
a have the GPU guarantae on our borrowine.s, succ.orted .
33 by the pledge of the common stock of threa operating .
1o , . subsidiaries, as well as the pledge of uranium et.
1 20]specificallyundarcontracttoMetropolitanEdison, l
e,
~. ;
and aise, cf course, we have the certgage bond
~ } position with natropclitan Edison.
-.a y
~.e. ) 4 In censidering the titarnatives 1
.w !:I that you might tahe, and not from a legal ,.erspectivs "m ~
t-t V t l
-. o; but from a financial parspective, vill an important
,y h
v
_ u=xi.w. u w:. := - m:. :.-- ;.m:.:.oc x. . n:nsaa e..,.:. m = '
\
l
=. ..
71ifford & Gillham - cross 2043 P ;
G l
h, "[ facter.in cheosing betwect citsrnatives bu the i
9 i 2 potentici &cgree of catisfcezion of your claims i i l under the vcricus citernatives? -
i !
- 4. L (Gil ham) of course that is something i 5 that we're going to be leching at, our potentici 6 ,
degree of satisfaction under the various alternatives.
l 7 L (clif ford) Agcin, I accept that E caswer, but I'm not that fcmiliar with all the legal 3
'l F .' ramificc: ions which would have to be checked also, i
10 l 0 Do you think that other secured 11 I
creditors and unsectred creditors will also consider 11 I potentici degree of satisfaction of their clains in i
b 13 adopting t. particular course of action?
I 14 i, L (Gillham) The same answer, I guess.
1 15 G Well, do you think they will?
l 16 l L(Gillham) I'll have to say the chances I
..' 4 i are that thev vill exanine their various citernatives.
5 l
- g 4 S And do you think they vill consider I
_m, ;
e degree of satisfaction oz--
i 90 L(clifford) You are taking us through i
n! areca that us rec 11y have no familiarity with.
- 2
(
. .' . -a would like to defer to counsel on this because we
'I don' t reall - kno-- for cure what I:.ctions uc would be l
l
- e"*
c taking in the ecse of a bcnkrcptcy.
25 l : think one thing ue should bring to
- .:: eue : o r.:7.ne:a: :x=. -:n:. :. : ,:w::.:. w r.._- no -.wntes. .-i :rs:s 1
_m... . . . _, _
...,.4 .o. _, ,.
s . _4 =
.a _2 _,
. .. m . .c e. n. >, ,.
I
.i
~ .;..
,. o .. . ..... ,......:.. _4 _ ...
- . o... . 4 .. o u -
e- u. , .
. ...:--..4,..
.w.._s ,. .
. l
- e. L uhen wa gat in a ritus.tien like thic we voc"d
. 4
- e. d I
-i,. n ., rm t _3 _, ,;. - e. < .-s
. s.
... _a4 . , ,
-o a,.. c .e . v. . .
c , s. .,c-1.
.. .. . .m
_. 4 .,:, ,t
- e. . i g
4 I denis with 32.nhru tcy situs.tions where they have the t
- 5. i
- v. .
femi iarity with c1" the various cotions and the legni i.. -
CounS21 who Sp6cicli30 in banhruptcy. I thinh that c.
4 i3 I E the r nO .'".".h 'i. for ECst DEnh5 1s fEr as I know.
m It's not thct we don't want to be
- n. .
>1 responzive te vcu, we . uct con't know. -
l 10 :o G Mr. Gillham, when I first brought i 11 up the cubject of recrganization., didn't y,u say you
- 12) agreed it Tcs nct a, decirc.ble cou,rs,e,of a'Otion?
- 13-T.(G111hcn) I'm trying to recall. J 14; When you brought up the subject of bankruptcy, I said 15 it is' not c desirable cource of action? I think I lo, c, a :.n .act say semetn.,ng a.,ong en.ose : ..:.nes, and 3 g
.U. t ,
thinh I also qualified it to the extent I said we 1gi I
arsn:t attcrneys, but what we can read into it or 19 li speculate about based en our limitsd knowledge would l
l
' 20[
6 1 ecd us to believe it would net be k desirable a_
- course of action.
1
\
m,
.e Por those reasons I think for exanple n
. . 3. :
..a , ,-_.... n. , .,. .. .:
.,,. . . g u wu.o _. e ,. .:_ . gna a a _,. m; .u -un.o .. .. s _zu .o.2 ., o& n h-
.. $ Earvey 1 iller and I gusse ycu've cross-eramined him.
m
! think .crobab1v. Er. Miller and other bankruptcy I'
'.e
.. E" M 4 e.. .,de.** '. .g.> .*P e
, q. _, v .,. _.. c . -x
- ~. n. -
-t-= ~ ~ ~ ~ ~ < "
Clifferd i Gillhem - crcsz 1C45 i
- j. it i
5' N srpe:ts are mere apprcpriate to refer to questions en l
(
r i e 't the ryscifion cf henkruptcy than are we. 1 e
I
.9 i; t 22 you ac feel you want tha banks to be i I
4,jenrecordwiththisastotheirposition,myguessis t
{
. h.. ,-
3-t
' we would have to ao back and confer with our experts i in this ersc 5
6 it r and then appear at a later date.
7 i : guess my question is whether thtt is n ,
ki productive use of time r given wha: you already have en !
I C i -
- ne record.
10 L(01ifford) In ny recollection of the I
11 way in which you directed your question in the dirst 12 i
- I instance, it was hind of an agreement thct bankruptcy l
s lae uns not a particularly viable solution for all'
'I'r concerned in this particulcr case, given that it is a 15 l utility serving a 1trge pcpulation, and that the l
16] product, which in electricity, is one which is needad.
I 17 As we have testified rather erplicitly 10 , in our direct testimony, it is very difficult for us , )
.9
..o see who is ge,ng to gain in any ..rinc c:. E reor- .
20 ! ganication other than the hordes of lawyers, 2;, ' necountante, so on and so forth, the people who will i
.,e L. ' have to trv to redress the is:ue and correct it.
b C Eut, nevertheless, if thth becomes l 23l1 .
o t
24 retlity. if banhrnptcy does become reality, you are 35 t goiog to have tc. pcrticipate in those proceedings,
- x::r.cu o ::ux: .: ::::.-e ::. _c=::v ::..er 4ve. - >:uuus :me..n :-::s l 1
l a *m '
w u _w - -
- u= ,u -- - - -
e e v.
4.
. .. .: .c.
p.
c: .
- 1. ~9 .",.-p_.g. e.
.. f. ce w .e .i -S(s' = .f
- t. .
.t 4
.r b.
- s ,. : .
.. c . c n. .. . u.i : .
{
1 a ; ...-
, - ?
.. r%a. _n _. .. ., _c f .
u s.a .-
c,. .__ c. ..
4... . . , . . , . ...
c
.t. b. 3 i
22hwas.'tyourquestion, I don'.t think. 3 I
- i. . !
l .
.( C. And when you pr.rticipcta in these I i
5 )provecf.ings,youcragcingtohavetotake eteps thet 5 , tre in the bcah's best interest?
h I i 1 n, ; L s c ;._... .a w. . ,.e. )
mnc+. .: .
o c ._ , c u. , amu -n we ..
i E ' will be ver.'.' inperts.ntly cuif.ed in cur perticulcr hanh !
$ , b.v the lawver: and the unit which handles reorganiza-
- m. . tions.
i .t. )!
. 0 When 2"ou elected to enter into this 12 revolving credit a.greement, did you censult with 131 mechers of ycur Scnh who are familiar with these
.t s ~'
t er I so _, ,_ 3 _ ._
.cw u .t. _. .. .c ._
l.y a.m.s.?
15 l L(Clifford) In our particular case we i
,f, li did review I think to get some understanding of what it il
- -[ caant in a general sence 4
but I think that we'were e
- n. strongly crienting curselves to try and develop a
.I
..9), colucion which would maintain tha financisi viability I
- c. . }4 of :he compt.ny for the near-term future.
l -.
l l ,g l Us did not believe at that time that
- a- l that we.s a vithis eclutien to the crises of Hav and ~'
la
, . i' Juns
?nd wars focusing Our Ettantien princrily on i
.. h; g I
i A*)* E. s tha purchaaa ene;gy 7testien before this Oc= mission !
p, 4 v
.g ', cnd the New Jarssy Cor.miLsien.
i.
5 l
- e.:r.::: a :: . .:::: ::ie. _ i::. r. -- m.t.:.y i.v_ .cixt :: , c. in::
- m. -- _
e -
Clif fOri E- Gild.nm - cross 2007 s
're 2*On beli378 the Ont:n=3 c ** &
! (t .
-t, ..
n .
. ._. .,. _ :... . . ._:. _.t _i .e. 4 .;.
.. . s na... ., c + c.i~. .e u.
- ahe o.nse ,., c :_ e
+:
- o nc.us: .
- c: ;.t. ceneanv? - -
.*' g I,. ,
. .. i,._. , ,o c,. ) .:. .
_. c._, _, g. ,.,. ., . n c.n.
, _ u. nA.
'l the v.ssets of a utility in liquidatien per se tre i
worth shout e.s nuch c.s the licuidation of a .cin.eline, o ,
- Ett pipslins which hne nc gcs entering anf no gs.s -
nn cse ,_a e...a .:. .
_ . c.1. .:
- .w . .. _4 . . a .. -. 4._,_4 a c. _4 s sc v_s .: ; . .
G ,
. an a.res like in this state. you have a group of con-
.C .
10 i sumere who will wcnt to continue to receive the
! product. The product is not bugev whics; it's y, , .. .
s.1 i.
. :. t electricitv. -
e ,,
1 i 40 1
. , 2 Do ."cu thi:0c it would be easier to
- u..
sell a fully operational electricity-generating 15
- facilit.v. er a fully-eperatiencl autoncbile tssembi.v t
. line facilit.v?
.t6 1 A. (Gillham) That cuestion in view of 2!
a 1
- recent rublicity of certni. automobile manufacturers
.f. t 19 :. nicht be debetchle.
l In
- answer to your c;uestic 2, it's very 20 I
' hcrd to say. I think it's quite.clecr the value of a LL br.se lord electric gsners. ting ple.nt e.nd the zarhet-
.. 1 l 1
.e t _J , 4.. - V. cf .'.d' &"'- a r .~. t c _4 .'. ' a"
-- ' ' ' - ' " " . - .co'*
.. .. ' .r.- 'he I
1 .
I1 s. . .s *
- c. t.. _2 1_e. .w y o. ,
. ... . m . .a. n .. ,3,......,
._ . . 7, ,., .1 a : _u 4m .. __ e .e. o, e.; _,c_4 n ,
.v:- >
.' but en the other he.nd, given the fact that electricity 2-Si I
1,
- ua.m.:v.cn ., :un= : ::::. -
.~ : . _e::- ..:.t. .n.n _ :u xes.r: c. .s :: ::: --
I
.a w
. 2 .
t~. .~ _s_.e .< c ._. ._e .v C. .2, _, t. ,. ,_ _ , , , . -. -.~
v ;~o n.
s
'? is a needed ccnnedity in and cf itself tr.ct dcas i ..
.5. h n:t prac~.uia e. brse loed grnennting pitat h2"ing It s
if *
... ., I
.a r. ~. ,
- . _4c , . ,, : .. s .
, ,4. ._ m.= ~ _. .
a n..a
- s. s '..'.c . .
u >
i
.,I feel mora ec=fortable having thoca much : ore familiar ,
6 si ,
- d . 4. . s....u..,.,.,
ap v ._,,_. 4. _ ..<. , - 4 e..,
_ e n . ,.....--;
.o--
- _ "- .= a t e.. ' - -
- - e e e c a'-
i' d' te r but I think the case is fairly clecr that there T j is substential n.lue.
6 I uculd peint out in 1574 r.nd 1975, I
Gl Censolidr.ted Edicen Cor.prny of new York in fact sold t [
10 lli two base ice.d generating plants to the Power Authosity 1
11 il of the State of New York, cnd I can't remember the l', + ce'-
_ A.. _i.'.~ _e " '. o.v . e . *. _' v e d , . .' ~ ' . * .h ,._v c ,,.. c x .4..... ' a. d i
- m
.)
13:
y something in the area, I thi.n,'c., e o f.. $ 8. 0 0 c.'.111o n , or t
l?lI !*.o rG . CVer u pe.r,iod of 't.3 c - 14 months .
15 I think the sale was consummated in two 16d steps. There you have an example of the fact that a U
li 17 l1 substantic.1 value was placed to these assets, and I e
- .i can't really tell you exa.ctly how the value was i.
1; crrived s.t. I think i:~s certcinly something that would gg haar investigation.
1 l
l
. . > . 'y l, 4 In the Consolidated Edison situation
! , y'l you
.. q, jus.: refcrred to,. Sc112.rs that were n: cd to pur-
. .1- .
t ch se thcan tuc 3 1E.nts were della.rs surelied by tz.x- ..
a i
l ; d payers .nd not b.r util!.tv invas:crs
~g e'
.; ware they not7 j
.'l
_)
w A. ( Gillham) Ihs dollars 'rere provided 'ev -
i
== : ::. = :: - 2 u: : ::. - 1r n. :.cw- r. :e m=. - a mt=w : x :~: n k {n
C
- if f 0 rd E. C-illhlm - Cross 2 O ( .0
, U,.
.,,I e
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2
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.. . ,. . _. .. 1.. . 4.
. . 50 :
e
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.1 4 2..
- ;,! r. e J. .;. , O n 2 c. '.". . . . . . .
i
. cr3 *7Crth. C'.
c - D31i373 revenuS .
- f
.;; se
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., yg u. n _4 ,. e_ u..t.u - u_ 4 m _,. .
t, pi 5
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. . v. e..u e '. . - P -. # ". , 7 ba_'4 eve e u_a . t.r. o.~- _ ^ e # ^nv
_ l f
O' the saics of electricity generated by there plants .
f 6
print.rily to municipalitier., to the City of New Yorhr s.
,'t t
the City Subvcy systen, et cetera.
- c. II
" ,i
- n shore rec 11v. those bonds are essen-D i, . 4...a _, . .. .. _ e ,., m. . ._. e.. m _.:. ,- v-ne e ew.c .4...u e e s *. c.u c. -e_. _4 n, .a.p r..,.
10i . cre cevered b.v. the scles of electricit.v.
11 0 Kr. Clifferde in .vour su.e-lementc1 e Lm direct testimony you referred to GPU's decision to
-.3 cmit a dividend c.s the quote, 1 cst card dealt, W:
unquote.
.3' Do yet reccli using that expression?
16 L(Clifiord) Yes.
17 0 J.nd by that did you menn in your 13 .II cpinion this wts the it.st stap that the companv. could .
19 take to save monc5' Et this time?
20 L(Clifford) My reason for saying it 21 was tc the best of my knowledge it's the last material a
s . .
M .
cs Ic.r es cczn a.s concernec. ta r.t A knew of.
~ .- r. av:.n c.-
t
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n
, .,- a. + , ,
h .'
- ..;. ] one might sty E n s.b s c .~. u t e m i n i m u m .
I'?
I 23j I have to rely on others who are more i
- . :. r.y. tr ce :.:. ce:: e. : ee. _ : ::. s.::::ve::. . eve t.es. - r u.: mr.:ne .=i :r. :
_ m. * "
- _ -3.". -
6
. _ _ . . _ - m..... _ _ _ _ _ _ _ _ . ,g _ _ _ _.
1 1
Olifford & Gillhar - cross 1050 I
. i t
. !' v.... _, .
o . .. _4 . ,..< ,, i. _.,u .: _- . . gy ,.9. 6 . .4 ". ' * '* * } .
. . . .t +_
..__ '~
(. .. . . . . . y- * < .C. _ a-p-
4 . and cusstionef then en the e::ncnditures, and I'm i i 5' --
e asnna_k.i.." - c 'm .'. .' _d .#. e d _* ". ' ' .... 4... _ e d"_c c a.b. _l e
..#. "..d ~. "+ ,. e-e ,4 4 !i low it's prehabl" not sustainable at its present level.)
t E
I 3;
h C emehasize the need for reinstatedent .I I
6 l t
of the dividend is necessar_v in order to hopefully _
{'
n 1 I
! at scme point restore the financial health to ulti-i I.
0 mately accecs the equity market. !.
l 9 ! , G During vocr sc'u.lemental direct
.i 10 ] testimony, I believe you also said the use.=f the l'[ money now available to Meted and GPU under the l
12 t revolving credit-agreement to finance a deferred O
! energy account was a poor use of that noney.
i
(-
Av, .
L (Olif ford) I uns speaking to Meted. ;
u I think the sane comments apply to the others, but 16 , speaking of HetEd that is correct. In my opinion 17 I thought that was a poor use in the sense that they 1h were going to have other needs for credit, and they 1
19t, i had just about e:.:hausted the amounts available to 20j them under the revolving credit, l
i 21]i L(Gillham) I would agree with Mr.
,t.
13f Clifford, to ure as much of the available credit tg
- f. .
- ,.-n i. finance the deferred energy balances seer.s to ne to i i
. i.E we I' T 3.. -- ve m_-4._4
.~ m _.t , y a' 3 c 7 _4 ..e_ v_ _n _. _ v ., .,._n a .m.;, _1 _43_4 u_ e d _s_, _ ..,4.s. _e _; i u.u l
?. ' f t: havs mone.ys available for other important uses.
3 ne:=:s ex ca. e.:x .: r::. - c- n. :.c :.c.r.:.ew .w=.- .u.:xc=ur.o. n :n te,
, ,. ..nu. . . . , . - . , - , . . . , ;. . x --.. . . w . .
. ~ . u ra :.- . n .,na. . - . .
Cliff.crd s Gillhan - cress 2051
.u: ,
t'
( '. j. C You've c1:caiy s= pressed an
{
2 ;I. cpinion in your uncorste.nding or yon: c= clysis, thnt .
t.
Il recrgcni::ation would not oc .= desirable event fron l l'
i KetEd's er GFU's perspective., isn't that correct?
i o :2. GORNISE: Son mean a Chapter %I '
f recrgan!. .. tion?
,..> 1 e
, . _ . . c. ..m- u.m.
ue .e. r.,.g .. v. e s . i, E 1 UITIESS CLIFFORD: I think our comment
- I,
.C is wa fail to see how anyone benefits from such a !
, t
.i.0 precipitant action.
l 11 l EY MF. . FALATESTA:
i l
i
- 12. 5 O. From your perspective e.s creditors 8
i+
U,, 1
- i of GFU and MetEdr would reorganization be cn undesir-If ! able event?
,i . e 15 1 L (clif f ord) i I think obvious 1y we cre I
16 ; anxious to see the. company continue as a tiable 1
t 17 ; entity. Us feel that that best serves the consumers, I
i 1cfitbest serves the state r it best serves the banks, i
,i 19 ,
, and it best cerves the others who are involved in the 20 company, as well as the industry, because, again, 1;p v the cuestion you have to ash yourself is: What is
~!
u the cituaticn onca y.ou are in reorc.aniration?
I r }
.?.nd I think the fact of the matter is ycu t
t 13
- I 7 1 I
I s- 2 ,. .e,
. - cre going to have to turn the lights cc and somebody 25 i is going te have to pay for thct purchase power.
i The i
- r .r./.e: e .:A: c-:r.: me. -::7 n. :.o:: vz:.ew s.n:. - n.v.:wv.s. n. :r. a
.. 9
. . . . ~ . . I
-. :. .- _ . , . . , . _ . _ . .:- 1_- ~ .. -- _-. -
1 C.i.n.ff::rd a Gillha.m - cross 2 ' 5 ;.
- O L.. .:.i.
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. 3 .. e .e. ; .;,. .A . ..- .m.
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- 4. .. , a- e ,. e n 1,., .-- u , . e.. e. --
- s. 1'I ~ ,.... .. , , ., e . e ya-~ a.. g u.e A < .. . i t
5 i f it's coing to be organi=ed like 1
6b ether utilities, it's going to have to return,as we II .
said in our direct certimer.yr some sert of senbinnes 0 $ of ct.rital strn=ture rinile.r to thrt of other equivalany d
( '; * .
I
<l 81
.gnOs E Of coSpanies. l 6
10i Ct But r.n I correct in deriving fron i
11 1
, thct rtatement the best interests of Chenical Bank E.nd 12 't
- the best interects of Citibank will net be served by R reorganica. tion proceedings?
14 ! 2(C1.ifford) We do not perceive that i
7Ij our i'ntererts are any different from anybody else's, i
16 ' which is to go back to the original comment which is
.i."I in our ersonrei testimon". He cannot see how anyone 16, hencfits frac a reorgani;ation.
t.
! I1?. . In!.ATEETA: Those tre all the if.1 7.h! questions I have of these gentlemen. Thank you l
1
.va,.$ verv . nuch.
I d
1 Ei' !!n. ELPJ.SCH :
.i. 0
-: t'
.,. a al O Ny r.tr.e is David Sarasch. I have P
,74, -
t
scma quastions I trould like to c k you this afternocn.
.o~ r ' A con.cle matters were brought up in the
- r.:s.en :,1:;:.:w.: n::.- a::. :.e:w:. :.:.cw r.vx. :.v.msw.c,.n. :n::
j
/
/
l
..._w- wa o_., a. _t _o. . e. e .m. - n . ..
,, ... o . .. r - --o f-
'P course o f Lir. iia .ctestt's croe z-snaninction. I -eculd l O.
't. ,
- 7. . - lihe to enplers :.t nich you a little further. i d
s
1 . In thG C0urse of Cnswering son 3 questions;;
l l
/,. ,I'I. .v. on made a statanent re:rcrd.ine. cenercil" a the circu=- i i
i 5 i:[i stances that erist with lines of credit.
.You cay ;
s-6 y those lines can disappear very quickly.
- l
- f. e 7h Do you reccil that s ta tene.nt , 2ir . Gill- !
o, . I nam?
'i l'
9' L (Gillhan) Yes.
10 -
L (Clif f ord) Yes. .
11 G Could you differentiate to me the 121 difference with which the ease of linos cf credit can 13 , i disappear under normal lines of credit circum, stances I
14,i and the ease t.-ith which you bcnhers and. the other 15 parti ~cipating banks can withdraw your lines of r
16 ! crsdit under the terms of the RCA? .
.'t Can't the lines disa.c.cear relativelv. .
18 just ts cuickly under this contract as they could 1 f!
i.
have prior to the creaticn of the credit agreement?
9' 20 tiR. GORNISII: To the extent they're P
q: answering again, I nahe the caveat to the extent a na lega' conclusion is being sought, they're not few tl a;
~.
ccupate.h to do no.
IIR. EAPJ.SCH : I'm just interssted in
. d. it n.
. i' s 7,g '. getting a charactcrination.
They used the phrase t
l
.:: r=ucx c :mr:i.: r :=. - = r .e =w:.:.:n m. _ :une.mme. n m m maw w __
l
Clifferd & Gillhac - cross 205/.
. . , " 9.is: ;;a c: very qui.:hly" referring te linas cf credit. .
t
- . . .....~.--.a
..>,. 22. ..
. ,u..
, , . _ . . . n,u ... c.;,. z .. - . t c
a, . ~ . .. . . . . . . ,. . . . a . .
. .s. . .,,..
i
- h:t conpares t.'ith how they see the lincs fiss.ppeerins !
.p with the terns cf the revolving credit e.greement.
. f.
+
5 ;
CTICS5 GILLE.U1: The ccmprry at the f I
6 !
,i time of the accident had $225 nillion worth of 2.ines I.
- t 7
i t.-ith "9 diff erent banks. The probler. that they faced 8 t
0 ;
I e.f ter the accide:it even in the wake of having r.shed f i a F:. their banks te substantially increr.se the availabile t
i 10 i
' lines cf credit was thct etch of the 89 banks was i i
c.'.
.)
4
' e.=eratine. indeoendently of one another so that for .
i
, 'd. exacple Chemical Bank cr Citibank, or any other of i I i l (T 15 the 09 hanks, could ::.nilaterr.lly cease to fund other !
l 14 , lines of credit, leaving the other SS banks deeply "5
, cones'rned about their own positions.
i 16 !
What tends to hcppen in this kind of l c situaticn is you get a cascading effect.
q.. '
- Once Bank nL. ,
A finf.s out that Bank B hcs cancelled its line of I
'I
- c. credit, it vill do se ns well.
go a
I The revolving credit has placed a t
-e-4.:. i fabric in place under which the banks essentially can
../. a opertte in concert rather than oceratine in a dis- - -
, c 3 ": organized fashion which engenders a feeling of
! .K i
.:.., *. seriene ocncern .ncause c: the fact tnat eacn nank
.M, t
does not have or is not bound into a contractual l i I
- m:r.: nc e w.u -:r.: ::::. -:r :c :.cer:w::. : c .v. - nu.n:w u. m. :r:n I
l
_ -._ _ _ , _ - . . . _. ~ - - - -
_.g. - - _:-
1 Clifford s Gillham - cross 2055 !
s, - .
l
- s. I is ,
1tt. COOdit Uhich can h3 eSO3ntia11y TOvarn5d in a Zuch t l ,
., s .
4hs: Cors uniforr. faShien.
It $.
3; UIT'!533 s CLIFFORDs Could I ftst maks 1
'i t,
+7 ' Cne CthCr cD*d?.Ont?
I C '
e a v. .tA
~ s. . -.
r_-
. aeC.v. ..
. s.M 6 -
3 tt Yes, in response to =y question.
- I 7j 4
L (Clif f ord) I agree wholir with what j 1
Ci !
Mr. Gillhar has said. I I
9 i Lines of credit are canec11abla at notice!
i 101 h by either party, the customer or the bank. In normal t 11lp situations, which is almost all situations, a banh l
! U i-12 that is in business over a ceriod of tims would -
m s
la- t.:;-
si )'
cancel a line of credit to a company who is deserving 1 '
14] cf it at its great peril.
3 15
- In times of adversi.ty--
I i
16 l 2 Encuse me--
i 17 A.(clifford) --at great peril to 16 [ the bank:s reputation.
I lo In times of adversity, lines of credit e
1 20 have traditionally had a habit c' disappearing at l
e
~A the vorst possible time. What we andeavor to do, l
ei.ml as Mr. Gillhan said, is to put together a recciving og t
credit schich ic not a lina of credit. Lines of l i.
- =-
r.,t
~ A : :.
w .~ s s. - - .s .~. g M .=. .P. .:. .. .. ,s .e .n .n.,3 .., ,n 3. ... .t .a ; .n. _ eru.a t. . -.
.t .
n- H revolving credit says the Lions.v. is availabis under
-p I
- u.=:n ui.n.mv.: re -::: : . a - .~ uw s cr. - uis,.twene. vi :e:-
p :
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a, . t s
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- n.= _J-a~e - = 2 2 2__ ao -- e
.i .
8 u. ..e .t. a , ;.
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& l. ,
4 I;
- I
- a. .e. m. <. u. . e _:e.% .4. r, .a. ._ .r. -e. r. _~ .T.
- . ...=. c 4 _. _n. . , a -.:. v~.%.r. .';. s.r
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. . - < .. -,. -- -m_e- .. _ ,-
m t.4 . u;, .4. _; _4 <.,.
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. .: . = .~ s .
4: * .
- o ..,c.
_ ....a,,
u . . . . . , .t,.s
_e .4. 2. s _< < .i. a,. a..a1., v ao1e.. !
. i p.
You -inst clarified the whole notion P. l of materie.1 a.d.trse change which voeld precipitete l 1.
, a e_;. .4.u_e. u,. ,c._ t..i.e m .v.oy
. . . ., -. ..nde-
. ha . e v ._' v.4. 'e. - e#_d^
v c.
1:rescent.
~
i
-I
.:. 0 ;
t Eow =cnv. pe c.t " a , end what :>ercentags of y
_1, I the outstanding loans uculd have to vote that a caterial
. \
~.
f9
' adverse cht ce occurred :*sfore the line could dry up i
G?- 4.: - under the R".'A? .
),
i
.~ (Clif.. crd) You refer to F.r. Grcham's
.w !
- l
! Exhibit A-11 3rge 2 out of 3r under Events of Default.
5 :'
1 It's in the cpinion of a two-thirds I
.t.6 .
j r.c-lority of ths bcrks who feel that there is a sub-li f
} stantial increase in the risk, the notes will not be 16
- l*
, ~._, _ a _4 d .
j 19 !
j G So they all must stay in unless
' l 20 I m
i two-thirds vote a materir.1 adverse cht.nge has occurred?
as e r, w A. ( ,. . _4 _a _s, _ d ) ..a4 2 4
= co _ect.
.'2 ;
1 i
O
- '2 ell me somethind-- -
1 l
$~ .a. .
i
)J ..vt v _ =. . _ ,s ,. r.n.., a s. a .e.,
. am. ,,,,- . .u. .
1 I
.u#*
n.'
.i s
C. 2 understand. !
.O I q'.
%".'0/.0% .*. ".1 A*'.*NA*.,1140. - 27 ". L:' *1 ".". '.CW AVE ItsJ.itt I:*;;".3. PA.17! 3.".
t
. . . . - . . . . . - . . . _ - - . ~ . . . _ . . . . - . . , . . . . . . - . . _ . . . . . . . . . . - . . -. . .
w_ ._ _ ._
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ss
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s
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~
ft A ( C ." .* .". .". o .* d ) .i.n a.v,. . "".'-4.4"".'.a'*~
w c. ass 4'.
9p e
e.. .- s .g .c a. l ., va.
,e o uk w a-
-- ge.J.o_ c.ed46 e44
e.v o. d
+ha. i p
i e~
- u. ,
bank I am on3 cf them, that is tWe Senior credit ut t
n ,,
gg w - c. ,, . e..,~
cno a424u.c - c.. . o..e.,,,e
. - , ,n . t%- c1so I
- 1. 0 a reviewed thic with the Chcirman of our Credit Policy I
L.7. .
Cor.mitte e.
g 0 Is there anybody who is rsViering m
( ... von: race =r.cndation?
i "
us :
i er l' T. (Clif ford) The Chairman of Credit
,_k f d'. g* _8 ,? . *. *h
.D d.'%. .I dw.
--** a* T T .- .I.*% g .
.La
,, 3 He is ycur supericr?
.i.c
,2.,;. L(clifford) No r he is not but, you
.w knot . he ccn raise tusstions and if he hcs . dis-
,_ ) agreement with us. then we would go to the Prssident.
- W :
/,Q l But that did nct occur, it was basicall.v, the ~rou.n w I
p.*
c ~ ' wt*..*" .
,i il 11
,er 0 Mr. Gillham?
6 4/e h *
- r. . f-4 .*. .*.._h. r e-]'
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m ve, ,,, 7, . g. a a.
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q g P N ge aup
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e , ; e n ,s u.- .
- u. n a , v. tw a---. - -
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.. . . . . f
.s :- interes:, the degree a.2 . cvel c:. in.carest within our s
1 5 ' institution van such that I don't think--there was 1 1
fLf. nateriti ciren;cted to all accound officers on a c, ---, . u. ,- ua, .- .: u-n ,. erg-=- u e u -.v.e .n .- --
- ec u- . y -- .
s.hs n -u:-.
r: a.-- ,. L;
.. u.s. > c s ,. ,-, . . i e- - u .. .
. .n.. r. . ,- r ay < - na c,. ,.:+ua,
. . .a-- c ,. - - )
6 orn crgcni:Etion ces quite aware of this, it was in the 1
J' 11 ]i thousands.
i U. l 4 Ocli ne something, Mr. Clifford, i
13 ! following up a question from Mr. Malatestn:
- In i
14
( general, when your bank 1 cant noney, I csr.une a very I
.5 , serious consideration, perh:3s the biggest fc= tor in i t
f 16
' nahing a loan is the likelihood of repayment under
.. t i that loan; isn't that correct?
e
,,..E- { }-(* 4f4o'At t.p g-+E4-,y
-- - E r8es-- us --E- &
p
_c we will be rescid, .ves. I 10 g But that rill probably be a tanta-
- .;; . nount censidere. tion in =cking the lean, the biggest I
ce
.m ,
, consideratien that eoes behind all of vour delibera- -
<r .; n e. < .
,g. .- - . .. . ..,. .. 3 :w. .. m. e ., .n.o; . .gr-. ..- , . s c. . .4. y, - .:. g %,e
.. . e, g ? c.y g
i.
o t
- 4g L(Ilifford) I thish that is given at
, {
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E. on t.%. edge of Ennhruptcy?
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t has to be yes. If something is tsetering on the cdga I i
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i r
19 j cf repayment; is that correct?
.c0 A. ( 01'if ford) It depends z.s to why the -
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there is c. trenandcuc c=0unt of difference. !
.P Eli .
c res, certe. inly Fcod .~cir is not thE.
s oq subject of this question. The question ir certcinly j 1.
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I 10 P. ( 3illhcr.) I would hcvs to agree.
11 :
i G So ths likelihood cf satisfaccion 1
11 j of your lor.ns would be a very important consideration
. ',t u i for both of your banks when considsring taking actions ',
14 ,f s
at the present time that night perhaps prompt reor-15 geni'etion or liquidation of GPU, isn't that correct?
16 L.(Olifford) I think til the banks 17 would review thEt very carefully.
I IS G These questions are really aimed 190 tt each of you. I'll csh the question once, you can 20: Enswer it in turn, i
21 De either cf you own or control trust
.mB . funds chat own stockr or bonds in GPU?
1 a.u
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i L (Gillhari) think I have mayhs e 1
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t 10 C. Mr. Clifferd, could yot tell us 11 t'.e enount of stock or bends that you hold.?
11 'I L (0lif f ord) I hava several thousand w h. s h e re e. .
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? . G Mr. Ilifford, r. e you aur.re cf the t
0 .i . fact GPU or.id 25 cents .mer share co==en dividend the s.
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11 l .t 0 And were there any substantive }
f 11 discussions betwacn the henh and GPU manager.ent 0 -
7.3 regarding the propriety cf that decision to pr.y that
.3 .
m _z, va..cenc? l i
i 15 i E(Clifford)
I don't recal'. that they 13 ] discusE.cd it with us.
t They mcy have discussed it 17 i.
with some of ny r.ssociates, I don't believe they i
..c 22. :urses _,:. u:.th me.
) i 19 ; O Are you aware of any discussions
,0- ' uith your tssociates?
31 l >
A. ( C'.if f ord) I'm not aware.
- e. . ' O. L.'r . Gilihz.m?
(Gillhan) I*t not aucrs of r.ny I
- [
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., . .gy Circu;Ei0nr va'v.: had Uith ther ca the fin &l quarter I
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i 6 I "-'TEESS CLIFFORD: The questien is were I
7 " we invci' ed in thct discusrion?
. l 0,! 31' MR. EAEASCH: }'
l- l I
9j C. Here you involved in the.t disc.csionf a
s 10 4 cnd as cend1-i--
11 L (Clif ford) We were involved in that
.'.2 I discussicn enactly the sens wcy in which we were
- , 13
%: involved in the discussion in connection with the
'2 , most recent decision.
i
.4 1 0 Could vou elaborate on that?
i 16 j 1.(Clifford) les. They reviewed with e
l 17 l us whr.t their options were, reviewad the pluses and 10i!r.inuscaofthat End crrived at their own conclusion.
1 19 0 7nd yeu expressed no opinion? I f
20 A. (Clif f ord) We expressed purposefully, !
.v,1 . , to ths bast cf mv. recollection, as far as ry partici-t l
t '
. ...' patien ic c ,ncar: ei we went to creat ps. ins not to
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Do you know rhethar anybody else 3.g. ?.
-) .
lI s ,.,5 j in ycur bank made try recommendatienc regtrding I
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P. Hr. Gil.'.hau, wculd you raspond to
..; . . the same? f o' .i(Gillha.n) : uenld czy carte. inly : us.c
$. party to the dis,cussionc and it was exactly as Mr.
' i 7( Cliffe S has said.
The proc r.nd the conc of diffe. rent I
E '] courses cf action were discucsed t.-ith us , the banhs !
?i took no positicr. on what tha company's actions ought l 0
, I i
10 1 to oe, anc 2'm .ot aware a.nyona else in our crgani=a-
- a. 1 11 ! tion had any cerversctions with the ec=peny on the
\
l'. l subjeet.
.. t I
15 j O And the banks ca.ve no indication ~
J it."-
1 prior te that dset.sien ar to how thsy .ight respond 1
15 (
if the company wora to cut its dividend? -
16 i
. is (Clif f ord) These were in times when t
17 .' ve ware just starting to get cash ficws.
. I don't thinh I
in :nybody had c.ny knouladge as to . chat the r+jcr issues t 1 3,g ware coing h.bs. Testinony hadn't hasa preprrad and t
- y filed.
,;1 r
4 YouEre sayi.ng in no way for l
. ,. !: e.: ample w a. .e there n quid prc quo because of the 3
f,
.c . 1: diviisna ir e.::cht.ne2 fcr--
it I
!f 1.(Gillhtm) 7.bacluntly not. s 1:
, r: i; n.
G Any other such consideration? .s O cc:: =;,eu r. =w:e. :::. -: : . :.ec::,.r.:.:w e.i - an:m :::te...v : :::
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_ _ _ . . . . - . - ~ . . - . . _ - . - - . . - - . ~ , - -- - - - - -
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.'. j. ;(clifferd) unr such :ensideration .':o.: '
t.
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- 4. 8! ,
I.tclifford*, h made as I tcld you 1,
5' before, and I'_'1 s.tich with thtt, we made no co==snt l 1
8 6 one wcy er the other.
[
? G iscw, ther. go thsti and get to the I, C' cther que: tion : tshed, which I misled y:n on. 7.fter 0
that decision to :nt the dividand in the spring, what f
IChjwasthefeelingofthebcnkstboutthat dete_minctics, ,
i 5
..1 .
I I
whether thet was t .o.csitive sign or a nec.Etive sign, !
s t positive or negativs cc.negement decisien, cerocrate 3,
3 i
'f 13i decision? l
(
i
- .4 .
L(Clifford) I think it was a decision *
,i I
3 :
, which'the coreptny r.ade which in the light of events t i
- .g ' which transpirod really after the time they made ths
- 7 decision seened to suggest to us that one would find it i
.m
.a a
, hard to are.te with the loc.ic thct the.v ap. plied to i
19 l their decision-making process.
i tg l G Is that your view as well, Mr.
I LL a
- Gillham7 f
9 ,.
L (Gillharc) Yes.
s.
, C. Were you tware of the fact that i I .
i i
GPU hr.d to borrow money from the banks in order ?
n I
l . , -
. .i.a i that common dividend in the second quarter--strike i
1 i
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s Sf Uerc ycu atcrs that in order fer G??* $ -
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'g 5 I(Gillham) I think it's clear to say 6
under the circunctances thct the banks tend to be the 1
7 . orimars- source of funds for the e. ster. I e not cwars C 1 we were the sole c.curcs for the fourth c;ur.rter 9 divide.nd. I wr.s under the impression there might have 10[ been some Penclac dividends that wers pcrtly used ,
11 for that. I think ee:haos Mr. Graham could speck cc p.
4
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a 35j1 Mr. Clidford?
16 A. (Clif f erd)
I think I would agree with j 17 what Mr. Gillhts raid. I think part of cr.: cdvances 1G- to GPU usrs used for that purpose. What exactly I 19 rec 11r would ht.ve to refresh =y recollection of. j
?,0 .
C. Were there any discussions with the m.I banhe re9crdine. the .onvaent of thh.t fourth ~suarter .
It divic.and ir vit. e cf ths 5 a c t r o n s.'.r wa3 :> cin. no ocas t-1 i .
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. L(Clifford) Whan the credic wrs put v 0 l ee:: .cs.::: t m.:~.c-.:,
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t So thc answer to you r.uestion 1:: thers I i
5 1 was ne special--that I am cetre ef--no spacial dis-6 cussion with regard to the fourth quarter dividend.
?l Maybe Hr. Gillhan har a different answer.
t 8 1. ( Gil' h ar.) I do not.
9 C So then can I assume that the 10 ; bankers thought it was a good idea to use ceney from i
.M. the short-term credit nereements to finance the c.ay- s 12 , ment cf the du _dend?
%.] s v 13 l 2.(Olifford) I think our concern was If to see improving fintncial viability. I think that 15 was the reason why we were tgreeable to the revolving 16 credit, including the portion available for GPU back
.;.-( in June, in that L.t thtt time we helieved that it was
.d very important to keep a vindow open to the equity I
. i.
o ,' scrhet, and I don't think in November er whatever t .
t 30 date it was v; hen the fourth quarter dividend was -
- dealt with that ue would have had c material change in
. s.
view frem whtt we had in June.
- g. O .Lat no. r.E.hs cure I understand
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~' correct to say you've !.ndicated i
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e 3 ! 2. (Clif f-c rd'- Che ccmpcny ecms in and (
1 1,
6 ' discussed with us their various options, so clearly '
?L it ucs a mrtter for discussion with the agent bcnks.
i 1
S
- don't believe. the .- diccussed it with c.nvece.v e 2.s e ,
I
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10 i i our statement of thic no ning speaks fer itss2.f in i 2 i
11!! that we did not recommend to them, nor did they ash.us I
.,.ey
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t
. to reconnend wha. .. shou.,.c. o.o . : at.y .
. er us rev.' etiec .
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13 l the optienc and the pluses and minus.sc with thz=..
i ,
M G And with the passaga of tha.t divi- !.
I 15 4
. dead, failure to pay it, what is the opinion of each ofi e
i 16 {ycurayardingtheproprietyofthatdetermination?
.i 71 M C'ifford) I thinhr as we stcted this
- u oql corning in our =dditienti direct, there are two facet
- -
I 19 ; to that. One is cist.r".y it helps the short-tern 4
.;. n.
l cash flou in that the dividend for the most recent e
1
.y -,1l. qucrter hr.s besn omitted. '
I i
.. i Chs questien is a 2cnger-range ons na to [
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. s cn,aec.. w u .t I I 11 G Is that tiso your fseling, Mr.
.i l .
?.2" Gillhc=? i I
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.'.'i ; 0svsously t.ae restcrat;.on or une cav;..cend at scme point a
- 5.
l in time is >c ine. tc he critice.1 to the con.r.anv's M ,I abilit.v. to sell common stock.
4
.t."t ,
9 Jou've alread.v. stated .vou thinh t
ie. I there are pluser and minuser. Could .vou venture a.n i 4 1 If. ; opinion whether on uhole ucighing the short and long-i 10 . tern cenciderations here, whether or not the passage
--l of that dividend tas a positive or negative move?
A,
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D" 25 , Mr. Clifford. D 3'
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.gi.f hach in Ilay of '75 the bcnkers viewed ths removal of l i e FP THI
- from i
- 8. rate base as a, quote. crtremely negative l ll '
6 i
, develonnent; is that correct?
4 7' A(Gillham) Yes.
G ; Q. A little ee.rlier today under l
E questioning from nr. Italatesta you inficated--correct 1G1: 'l me if I:m wreng--that the mere removal of TMI-1, 1
11 regardless of the ultimate effect on overall revenue i
.:.svels, vou c. .ca newee as a negative development u, .
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4 14 j' Am 7 c;rrecti.v characteri::ine. .voer 15 tastimony?
16 ;
A. (Clif ford) I thish that's correct.
17 ! o. would it be fair to say in terms I
.5! cf ths bankers' position that the bankars are far I
Ic. : ,.
. more concerned with the r.bsolute cash .==siiiion of thasel I
gra r companies that might result from a ?.U.C. order than I
a-
.a i thev :?ould be with the theoretical rationale of such l
.:,!' an order?
-a Isn't that your tantamount concern?
l ,\
\ . o.de E. ( ~!lif f o rd) I think in the past WS I i' I
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- 2. ;.: .ht: thct is probr.bly the singlemost impertant thin-1-
I,' o"Cr tin 3 We hE73 loc.*;ed Lt. t p.
j 4 '- C. It's the ove.rcli cach position of I:
l 1
.7 the comp ny? l t
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4 5
t Malatests at to whether er not if the cash result wts t
l 5p, the .
s arae whether we would feel the same if the ccsh 10 'i var provdded in a form other than TMI-1, e.nd I thinh i
l I
11 cur response to that was that we would view that as 12 . negative.
. l.
~.-) 13 C'. Ue alrecdy went over this.
14 L(Olifford) That's right.
15 C. My spr.:ific question is: Isn't it 16]truethebankswhenlockingat'thistwocircumstances f
v-
-t I would be far nore concerned with the absolute cash i
i
- g 1
- position thtt restits from the order than they would i
i' be with the rationcle in the order itself?
s c.
.,;0 7.. (C-illham) I don't think I can over-
. e:r.phtsire the impcrtance e f the issue of TMI-1 to the banking gror.p. not just thess two bcnks--
i
-a. -1 Encut
.1 C. ne, I think I asked a .orett7 1
"_s j direct question.
I won.' d like to get an answer to it. c
- g t
l Yotir tanecmotint concern is the cash
~ l 4
uc:2::7. :u m.r.c::= :::. -:. n. :.. =i.::.:.o.e ec. :. - m.:xa:= . u. :m: ;
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Cliff:ri G111 ham - cross 2.772
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- I
, .c con r.idera tian , isn't it? It's core imperzant than
't.
I'3 , tbs thaeretical ba.:is of the deci. tion itself, isn't n
4 ' it? !
h I it I s
51 L (Gillham) No, net in this ccse.
.c 0} 4, It is very important, the cash position 1
7 [1 of the company but in the case cf TMI-1, I can't it c
1 emphasise to you we feel that we cannot just measure
.I E ! the cash posizion in this instance.
4 10 i 1 In cther words, that isn't as direct a i
i .
11, . question as you would have us believe. We've got to
,I 12 look at this in a framewcrk nhat is radically different 13P 9 than just string dellars and cents are the deciding (~.
14 factors entiral".
15 L (clif ford) The way out for :letEd, it 15 appears to us, is for T!!I-l to go back into operation
. i.
I 17.I at some point, and I think that by taking out TMI-1, I
IEh dollar for dellar it has more impact than dollars 1
IS given back in the same ancent or even slightly mora 10? another way.
11,[ Tc get THI-l back--we fear that to get I
.~.g *"T-1 back inte ths rate base would become a ver.v 9 :
21 difficult thing to accomplish once it's been taken .
il -,
, U.h out.
e a i.g That is a fear that is es:oressed b*v many banks = j a ! ,
25j' in this revolving credit. )
it It F!*XI*J V!( C f * * ".CIC'= !.*C. - C' !*. LOO:tyn!!.D*.7 f.1*L - ;L'% tat tJKG t'A. 371!2
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'. h 0 *ir . Clifford, 10 '
i.
indicated the ;
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i 6
l L(Clifford) 2 an aware of the fact that l 2 7,. the n'.timate decision on licensing is not yours to a
i 6 I do not accept the fact that you have no
- h. make. l
.c + 4 .,....e. .,..a e. c a :-
-.. e. : ,.. , m .
- a. c _.,. .- u:n.1. o n e- c. _ -u e _,ae . a 10 . that we take such a strong view on TEI-1 being tr. ken i l
11 t
l out of rate base is that seemc to flash a position to i
11 ! a n" 'er of different observers as to what your 1
- i t
', la ! ultint.te intention is, and I think given the fact t
14
- i that it is a unit which.can be put back into operation 1 15 . that 'every other Ecbcock & Wilcox unit has been retro-t, 16 ,' fittsd and is opere. ting as best as I underste.nd it.
17 i i
It suggests there is every reason to l
- m. j s::nect that this should operate and should remain in a .
If;i re.te base. Why would yet ta.ie it out?
l 20 ME. 3ARASCH: Madam Chr.irman, I'm.at a 21{icss. He're now getting legally concluscry opinions.
t
~,
~n , : My previous objection was overruled, but counsel for l-3 4
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1, 9..: as to legal matters r so I would like to inter.cose an
- C'7.2 * ** Ca *.*.Af*.O.*L*.L. 3
- *0 = .'- !!. *. COT Y.'.".* O*.7 AV." - CAT."*3C*J.~.G . M. IP 1R
. . .. _ . . . . . . . . . . ; l
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r Clifford a 3illham ___ , rocs _
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. ... . ' t 1;; he is responding to your question. j e
.(. UR. DARASCE: Ho, I put s very direct j i
5 ,, Ll question to him I believe nadam Chairman, regarding 6
whether or not this Commissien--whether he thought that.
7 'i this Cc==ission had ani control over the restart of .!
0; TMI-1, because he brought up the question cf the i
I 91 tanuamount importance of the return to service of "1
10 )TMI-1. ~
i 1
11 Certain1r there was no discussion--I 11 certainly have not brought up the question in ny 10 cross-es: amination about THI-l rate base or used and r' 14' useful. I think the record would show that.
13, T.EE CHA;[DIAN: Are you making a formal 15 objsction?
17 ER. 3ARAsCE: Yes. I would like to have
,g i legally conclucory statements by an incompetsnt witness.
o removed fror. the record. .
7.0 CHE CHAIRLIAN: Would you care to co$:nent, 21 Lir . Gornish?
,2 IIR. GORNISE: I think hs was simply g 3
7,3 l
l trying ec annter the questien f
and I think to the u- .j e::tsnt it's a lagal conclusion, I think that the
-~.
i.t. i i
,if] Commission will take note cf that. 1 J
1 l
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i l 6 5 l C.
turn your attention to Page 4 and l 6 1 l 5 of your testimony. "here I believe you are t
?- indicating that--botter cf Page 4 nnd over tc 5--the hf (J
SS bankers in the eftermeth of that June order recogniced t
9 ';! the er.istence of a continuine. rec.ulator.v. rish becauss
,I 10 " of the unce.:tainties surrounding the TEI Lecident;
< e.
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- f. .
12 L (Clif f ord) Did you ask a question?
')'
13 G Yes. Am I correctly chcracteri:ing 14" your testimony? I 15 1:. (clif f ord) I think you read it at
..c
' - -- .e -- +.ly.
17 G And at that time back in the .
Ig , spring, did the banks perceive as one cf those - '
Ip centinuing regulctory risks the possibility that this ; l 30 commission night determine that it was best for the e
- e. '
.u . public interest that GPU no.lenger be the provider of )
.- electric service in its service te.rriterv? -
.~. h 1
-.N sa Ncs that ene of the parcsived risks?
1 24 L(Clifford) I thinh.cnc of the rishs s.r. that was mentioned at the time was that the cuestion -
l c:7. =i. :: cf. :r :.- me. -: n. :. c::vtc.t.cw r.: ;:i.u:esa ., yi s:.:.a
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I think what wo are reall.y icokine. to !
i i
11 as we state in the last page of our testinony is a 1 12' question of confidenca, z.nd I thilh we recognize
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I 15I T.t tha ==:r. ant of last May and June, we 15 were really dealing with an instantaneous life or I
i 17j des.uh situation, and the issue as far as we were t
I
".. . ;; cenearned basicall" J revolved around ths c'uestion of -
t.
.O.. i.. .eurchase . cower. ,f 20 If purchase pcwer was dealt with in a
(
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5i decline. with a brccder ranse of issues
,. and that Y
6 rather than dealint in a crisis situation cc us were 7 then, that t:s -eci e should be seeing some nors t'
6 ' tangible es-iiance e that we are moving towcri better t
? . fincncini helt. throngl. the rec.ule cr.v erecess.
10 :I . 0 I'll cry again. Perhcps I'm not I
lijbeingclear.
i l,,'
~. side from the possibility of the
- - l,
')) R franchise issue ac en outstcnding question bach in i
14 ' the cering t.s ion've answered, what soecific other
- l. -
i 15 ! elemo'nts, if any, if you can identify them, did the l
i 16 : conpcry perceive of e.t that time?
i l = .
.i.7 ;' CE. uCP.NISE: You mean the banks?
.. . HR. E.S.PJ.E CH : The banks thank vcu. -
.::- v. .,,.e.
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. G cust coing from .vcur testimony at 21 , the tcp of Page 5. If there are ne specific. elements, t
I
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I'll be perfectly happy tc accept thct ce cn answer.
.u.
- c. i
- 2. (Gillhr.n) I think to raco vnited thr.t
.)
L c,. i the cenpaniec vere gcing to be over the next two to V 25 ? three yer.rs et le ct -i going through their commissions,
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i The rec.ulctorv climate is something I.,
7". lenders :.cok ver.v carefully at. -
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.U.fitemsavsnaftertheJunsorderwashigherthanitwas 13!,, for ouher utilities? jh i
- t
~4 i L(Gillham) I
- i e
I veuld cav m..c ::urelv. . . .
4 t 15 subjective opinion is yes.
t i
16 i 0 So that is the way I can explain II
.;,-: what you tro saying at' the tcp of Page ' 75
..t , ,
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! A(Gillham) 'les. But I would say the w, . ! rish is of nore concern to us because cf the situction
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'h
.gg y'l the ccmpany finds itself in both financially and also 1
y ,l obviously from a publicity point of view. !
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6 ei v1 g In effectr .v o u c r e s u e. c. a s t i n e. here
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I Di that the bs.nks felt th:t the P.U.O.g that is they 1
Aa !
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1 i
M:! cated their intention to provide the increased revenue l'
.C'j .i levci: necesse.ny to maintain GPU subsidiaries as y- u Il financie.11y viable organi::ations; is that correct?
n M L. (Gillhar.) Clo c.rl.v the thrust of the 15 4 crder'an I recall'it--I don't have a co.n.v in front .
16 cf me--dstit <.ith treating the compan.y as if the U[ accidsnt had not occurred, r.nd dealt with the issue t-0
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- 9 1 I'bslieve the issue of bankruptcy sur-faced in that cestimony to'the degree it uas' stated
,O.
m.s o it was net r.direcsed at thr.t time, becauce it di.d not
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I I-f j that the Ccmcission had addressed the issue which we !
3 1 5lspantthe::jorityofcurtimadiscussinswiththem, ,
e.
6 1 I
- i. which was that parties other than banks should be 7 1, e
rascensible for .cayine_ "cr purchase _ cower.
I think I
8lt that wcs the iscue that was pri=crily concerning t l
9 ! avarybody, and I think this Commissic l arplicitly i i
10 in its o:Cer referred as we have stated _n en: testi-mon.v to the responsibility od consumers to pay for 11 !
g d' . purchasG power.
i 1 -
13 G s that the entent ed how you inter-14 preted tha' order? .
E L(Clifford) And the order we delt had 16 l
. the mechtnics surrounding it uhich at that time, given I
1[1 the assumptions '..-hich vere made et that ti=e, dealt a
mlil substantially uith tha problem that we had prasanted 8
l
~~ h I g, { o them and al.~. owed us ultinntsly to recover costs en : cor purchase power.
t a1.,; O This beine the case. whv did the
$,t
_e.3hn banks at that titas , despits such a clear order. insist I
i
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a
- credit acreement -
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t
.o._g i(Cli" ford) We were clawing back from )
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- 2. ; fincnciz.1 healt:. ha cocpany clearly wac in dire
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3 C s.,tre.itz , : hey oculd not iscue securities. the; could j l.
.h, not chtain-ercept they vers able te get c verv e
.i 1
5 f, limited cmeunt cf first mortgage funes but chey I
basica11.v did not hcve eccess to unblic =crhets . the i
- nn on.
- .y source of funds wts from the baths, nnd I think Il 6.
C[ everybody recifced it uns going to be a long hard 1 h.
pjpull*:achtoutrdfinancialhealthwhichrequireda I
i t oI fabric in the fors of a revciving rredit e.greement f i
{
.q which brought all the lenders together under the same !
n >
g l ter== and conditiens.
f s.
.13 CL I.nd in short thers was still sub-l 1 I
,n;. stantici feeling on the part cf the be.nks even in the l
I u:
- aftermath of the accident as to the ultimcts outcoms
.t6 3 ,
of GPU as a fincncially viable institution?
i p i(Clifford)' If we haf. strohgly felt
,:.u, !! that GPU wie not financicily viable, we uculd not s
- g. .; have isnt the noney.
~~ l.
g C. On the other hand, if you felt ,
they ware viab~e et thct peint, would there have been r
any need t: deal with ther.--or thtt they veuld
- 1:,
nI ulti.tatcly becc.m..e Eve.i!.thle--would thers have been tny
,,.,., b.fneed to ds.a1 vith them cn.v. f.ifferenti.v. than other rp
,5
. d utilities are dealt uith under short-tarm credit lines L
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!i 8 5 l. :.c. i in t-hich we ceu'.i ha- e der.lt with the fintacial
.P 4', :rch:.cas of the company e.t ent.t tima ether t:.an by 1
' i.
i f ljb pulling all the bs.nhs together whsre ad.rs.nces and g 01 securities were all on a pcripassu basis.
I I 7 i.
G .;;cin referring to the same phrass l 1
6 ' on Pcge 2 and 4 1
you are saying there the br.nks !,
9,e.
L rer.d the Jure order as concluding that the best t +
r 10 !. alternatite for all concerned would be to keep GPU I 11 i and its subsidiaries ac :. nnne: ally vichle institu-i .
.te, , tiens, correct?
1.
13 3 i.
l.
A (Clif ford) Yes, we believe the.t was !
+
q t.
I the conclusion they ccre to at that time. '
i I'm sorry. -
i 15,',
o th.ey wers not fian ciall.v vichie, the.v should get a i, 16:' il crach at rebuilding financial vie.biliti. t 1
17 !-
4 l-G I don't think the question said !
15 th r.t anyway. %
i e
19 -' When you dsscribe and characterize the t i;
I l ".0ll P.U.C. decisicn in that fashion, are you meaning to l i
21 equate the phrase financially viable merely to netn l 9
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25 t: particular sentance ths.: you cre readi.g from? I 6l m== . r: ., =, .c:.u,: _ - ,:. . = .. .m ..=. _ :m=r.=. ,,. :m:.
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5 ! r(Clifford) Perhaps yet better repeat
, }
E 6; it again. i i
? ., Q. i? hen you describe and chEracterice !
i G the ?.U.C. decision in that fashion, tre yo.u meaning i t
f' : to ec.utte the phrace " financial viabilitv" merei- to 1
. . 2 i l
TO ;. necn not bankrupt, or tre vou tr. vine. to sa.v something
. 2 11 ', beyond that? .I 8
.~i! e L (Clidford) I think honestly all we ;
i l !
s.?
13l meant we were scying was we interpreted the Commicsion 14 i
. te agree with us thct there wcs not any pcrticular 15 ! advantage to anybody at that point in ti.ne of a i
! bankruptcy l 16 i
and that they had taken overt steps in )
i
.m..} ,
dealing with the purchase pouer issue to deal with I
ya
, our erinci ci concern Lt that time which gavs us a a
- i.o. , . feeling thtt they were interested in helping rebuild ,
11, e
financini viability. i
. o !
6 i
y&
- t C. I.E., keeping the company out of g i
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- ,, h!.nkruptCv?
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,. i 0 In other wcrds ycu didn't read I
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' that crder to preclude further consideration bv this t
4
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5 u authorities, at actara, if such things uculd still 6 leave GPU viable?
g .; .
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'tl p, other evenua. cr cny avenue that they wished to con- g S
10 l eider; I think all us were scying was we felt that
- i. i p- l the" Egreed with us the.t it Was not going to benefit I
i
-,; a n.v. b o c.v. at that ju.ncture to have e bankruptev.
- u. . !
l1 13 l 0 That is all you thought the '
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a col".::'.Sn. ting On th3 prSciZe fo*L undSr Which GPU :3ight 4
..b
- l
-.- (, 4 ContinuG and und3 Which PCWer Would h6 COntinuSd to o.
s.
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.(r!.3 he .trovidSO. to th3 ret 30EverS?
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0 I'm trying to accertain your I
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h e.7- U cr interpret th t c dar to say that it would lecd you
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5' to the conclusicn that the P.U.C. had nled out and .
6 . disca.rded the bankruptcy cite _"ative?
i 3erhaps yon
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r i t Perhc.os . vet can hea.-e me
. ,. < i
.r.' i! here. I belic re the Cht:.rntn at thtt time, Commissiona:
i 11 .i Goods, referred rpecifically tc the question of
! I
.l . . bEnhru.ote.v not baine. en issue in the ecse.
I I'= sure
-. 1 M ! it's in here comewhere, but I frcnhly would need a
.t 14 ! little tins to tr.v to find it.
i 15 1, g Page 6, perhcps; is that what '
1 I
16 i you're referring to? The second paragraph parhaps?
-,t i ,
7.? { I.(Clifford) Yes. And I think that--
q ,
c n.
l
.e u . o. e _.-F .s -ue .e.. .v o n ~.- " d '
~n s .'.n, ". h. e- i If , Cemcissicn bece. css they ne.y not have it in front of 4
3 l
t 20 them.
j 11] i ~E . C-ORNISH: 6 or Page 4?
- l
. T. . El.D.SCH:
i q.,:t rg; Y.ru hr.vs a different conv -- ,i
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t 25 l , Mr. Clifford, is your copy of ths order I 3 .
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6 G I just wrnt to be sure we're
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t
- 7. talking abcut the sans phrcsc. Are .v.eu talkine - about 3.,
f I
S' the irnguage that appecrs in the secend ccmplste 9 t.:. paragraph on the pcse?
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. the whole icnguac.e. uhroughout this whole order talks 12 about an ongoing concern, and as I sr.if befora, the
(
..t<
- p rin = 2.p c.r. issue .as
- :cre t.ne Com. ssion at u..nat time 2a .
./
} ' +
1.t ,! clearly understood was thct the banks were not going 1
a to pav for .nurchnee .couer r and that if thev . were 16 l e::psetad to End the order cc:na out that way, then II
-P us would apper.: to be having a bankruptcy.
.. t 18 Se hv - indirection. if vou will, because - 4 t I 1
- g the Chairne.n was very a=plicit en that subject in this .
1 401, ord.ar as to rho should preserlv beer the cost of I
t .
,I .curchtss pc'tcr
,,1 tec.sthor with ths statement on Page 6,
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, procesiing which t.-ill nc c be Lt rish in this ords: ars ;
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1.a j, the questiene concsrnir ; the in=inancy cf rs.spondant * ? 3 i
Su h' inro.:.vency er acnhruptcy. " as meaning thr.t they i, I
- . t. .
~iscarded bankru.tcy es z.n issue? I i
1 5 l 1. (Clif ford) I think so. l
'] 1 6 ; G Similcrly, you see the sentence
{.
e 7 ' that rends "In spite of the censral pleas of - i t
,t C
respondants for financial aid through rate in=rstses )
i 9
uhich were repscted throughent thess proceadings, the 10 ,
Commission is unpersuaded that there is cny imminent .
1 7,1 ' threat of bankruptcy," as natning that the Commission g
' i s
w'9 ,
was disnosing for all time the question of bankru-te.v.?
r e i 13 i L(Clifford) I never said that, ever, i
14 , ths.t is your language.
I i
15 ';
g I know it's my language, I'm asking i
1(U dc you agree with it?
n n
! E(Clifford) I said in this particular i
- ,.[ or, der which we were dee. ling with in June, we believed ,
1 te thtt he had reviewed the possibility of bcnkruptcy,
't 20, 1 clearly it uac discussed openly in these hearings, ,
l and the pe.th was well naved as to what actions could 6
~.L
.c. ~
~
i 1 t .
be taken to insure that that happsnad, bankruptcy,
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~
/4 ; and clearly the Cor.niscien e"nted not te follow that r.
Jr ~tath.
t g ;
i G Che fact that I]ankruptcy was not i- !
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i O i .tossibilit.y cf that subject coming up accin b.v.
-1.
.1.
... ;. cubsecuent ccaniscions. Ecch commissien has the' 17.,j right to review whatever it is they wish to revieu.
13 hr MR. BARASCH: Thank you. (*
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j'! is a pr codent thrt is sat as a commission deale with i
g problems in an issue, especially as complicated as
.v..pa this ene.
r l'
..C,, ,tg M2. SARASCE: Perhaps Mr. Gcrnish could 1
.3 jenlightenhiswitnsassuggestingthsuseofthephrase ,
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. p scedent er '4.ch taareof in this kind of en issue to v
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- n. en.
'.2. !
0 The nk v. ou. Uculd v.ou ae.ree, sir r -
I 1~' ; the 7:incry cours of MetId's in=retsed fuel coste is 1<.*- that TMI-l's return to service has been further 15 delcyed?
16 ', E.("lifford) I should be able to 17 , cuantify the impact of TMI-1 cs distinct from i
e_c
' increased eil grices from utilities sueelv.ing the .
10 1 .t.urchtss pouer.
I reall-r am not. - I tt. ink perhaps Mr. l
, ,9 ' Gillhas can, b::t it's the combination of those two l 3
-:i reasons.
~ a.
I*
.n.. , : Q. I'r. referring to the bcttom cf Page ,
i 6
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, cp. tron. riate t ., cch the compcn'-
. te :ive . vou the 8
6 a specifics you cite baccuse I:n not chie to give you n .
7 [ the excet components. i f* l i
E G I'm not interacted in czr.ctly; I'm l c, L ' ns .r. . "- ~....'..~~..~..m..e_>='....
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10 '
, the principn1 reasons that the issue has resurfr.ced
..i
- 1] are the increr. sed fusi ecsts and the cutage cf TMI-1, b.
o
- ,. ;,. whether .veu undarstand or haie an.v understandine about 13 3 ' tha relctive shgnituda cf those two prchlems. .-
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L. ( Gi' 1 ham) I understand had TMI-l 1
gone back into service in Janua.ry, und.ar the leveliced i ,
t t
.u. a,
(
energy adjustment clause that had been bcsically !
! anacted in "une, there wculd have been a substantial !
.)
.c 1
amortization of seus of the deferred anare;v balcnces. -
h This I believe plus I think the amount of the I a
I g 1sveliced energy cdjustment c'ause that the Commission li y>.4
! adoptad in June, contenplated return te service cf I I
I 1
TMI-l ct thet tims., and as a result the os=pany re- I I
l
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a l
4
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6 tecept, sub-iect to chech, thtt the predominant cause i 5
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10-L(Gillhem) so far. t
,, A {,. ,
J.,(m .u..o u-a) 4 n e .". c. ..i. 'w.' .. E 'w . ' . ' : .4 d ..a ' +.
1:
cc2e in of c0urts ratnt v.on had to eo to purchase .
) t i
n'"t
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-- . ..".a c e y ow= . i . a .i.o ' . k..'.gk .". - not<- *h=
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~.4. .i t.'as br.ch in June or forectated to bs.
I 15 l C. Is that a yes or no?
g]- I(Olifford) ':'he answer is yes, I f.
i I 7y wculd s.ccept your premise sub-}ect to clarification,
, G. C I believs you stcted that you've
)
1g. t* rer.:.d that June le crder ca.refully =a.ny times, is that i.
.r,0f .,Icorrect?
.i
,,, l us e L(Clifford) I've read it revercl times, l
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t 5 ,. I*r. sure if it's in here .v.en could dirset to to the 6
- o.rener unge.
. . . I believe thct's correct, but I would [
71 *
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T.1 . whct you tre testifying today? g i
.m,. .
- o. , . 2. 4& o _-, s, _,
s e.
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. ,c.,4.ng tc ..,a&.
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. I refer you to Pages 1. 12, and 15 i
. i
. o ..c t. s a --y;
.s ., < ..u o_ 3, o. c r.__,, , ,_
.,..,s_4,..,,. ..m- + . ce . a .-,_
.. 2 - e _3 c 16] tence on Page 1 which reeds "They should net pay the
},
t.
47 :< costs z.or p_, ant rant. erect ut e .,.e s s e. .nroue.n nc c.auAt or I
I
.;..r. 1 their own; nor shc.uld they receive needed electric f
I 1;. ,l ocue: . without reonvment." . .
1 7,0 >i PEce 13. the second complete santence e
,;; h
. ;. at the top of the pcge, which says, "It is equitable i.
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Lnd on N.gs 15, the first complete i
s/
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i 1.i' l! 1 cf cil costs e.ssociated t?ith THI-2 that the recovery I
- 4. . frca rctepa-'ers cif costs of eurchase cot.rer acccm.elichss !,
t 5 : e. f e.ir , just, and equitable result."
l I
6 l A. (Clifford) What is your question?
l I
7 ti u G Eculd von say those portions of the i 3
6 crier specifically related the rate base treatment of
.' THI-; to the treatment of purchase power costs for i
I w r,:.e -2 7
. v 3 1.1 I.(clifford) Thsv spe=12icellv. dealt )
- 8
,4
'2 I
rith the fcct that TKI-2 was confirmed as being out G l
?~%. *"
15 ' of the re.te bace on the used and useful argument, or 1.f.
l
. used er useful argument.
15 1 G I
.I I refer you to Page 9 of your 1 i
16 jtestimony, sir. I'm looking at the seconi-to-the-last 3.. ! aintance of that laro.e partgrach t' hat stcrte up at
,1 .
.g,
- tas uco of Pace 9.
t There you crc. indicatine., are .v.ou not,
.i..o. '.
bs that had we all known in the surine of '7E thr.t TMI-l
&O ! . -
u:1 would not return as originally projected, that the e.
n ). P . '.f . C . would hcve includod such information in its t
, . , n ,. ... c. ,. .
- c. .,.np -
w- ,..m., 4 .. 6. s o .'. e ~< a .'. .: .. u -' . . . . .
- e ar e .. .m, I
1
, , . . e.e.n.,
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. V,
- dit Would that he a correct inference to I:L - t:::- . .e.e : e.:ua.e x: :: =. -: ::. :. ::.m .=re re.-.-::. :mm: , : r. min
I-e .
.= e *
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6 e .(
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8
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i 6 G Ann. zurthermore, you are suggesting r
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s
. ..is c.. -. : e c. <. , > m...s.... ,... e,- + ,. _. . - u a., .. ,. , . o c. c a,. ..,g a,
t
,5 i chct this Cemnizzien would perhaps have included ths i, l
. :u
- . ,m., _ .e . . . e c .:...4..._.,. _._mc_ . :
_ot +n .n
_ p..- ,, .,, .m . ,. ., .. 3. . _2 ., w .. .e <. u .
{
l i I 10 ' that date. and that the levelized energy cost rate l
_.: L ,i.veuld hr.*s beer. pagged at a different level?
1 i
- a. ( c .r 4. '_e_ c_-d) o r.e' ."' ' w., y o +.b.es .4 ..,.
. v. . .x. C "
in fECt.d'id.n't hLppen, but I thCugh't th3y Would hEve
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s.
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d .' -' - J. 2 .T .s . . .
- - ,= - "3
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-LS,W t'Eg i.-35. '" C"C .
1 w
' reclistic data fcr it to come bach. into action rculd be. 4 g ,in G In your testimony are you hypo- l
- c. .
u- .. . . <
..u : ness = ng? I i
P
, , . .i L ( Ls 7 _ 4 _.=.4w o- ). v. a s . I
.a -
$1
- g[ G In view of th.e language of that l h I gij June c
- -der. specifically tha la.nguage quoted to you {
i
, fron P w,es 1r 13 and 15 isn't it also 7.ikely that !
t*
.c.
t
,. f the ?ublic i'till:7 Co.uission, had it had thet infor-
. i i
Ie "i
. ! action WO f 6. hr. r = treattd THI-l as Shay trer tsd THI 'i i k6 I
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ti w. . 9 4 c1 %. ,.,.. . %. ,., o !
5 , te concluds bcsed on thr.tr it would esan to me P
i r 1
6 ; reaconable to consider Tt*T- ' 'n a somewhct different 1 *
[
?d ..
light than TIC ~; . which cs I reccl1 had caly been I v I S! cperating for sene. thing under three menths. l
{.
f ': , B Y IC . LARASCE: I 1.' !
10 l- t.
G In short, yet: answar is you de e
11 ' not view the language cf that order that i referred 1
12ui, te .vou as indierting cnything in the wz.'r. to use .t' cur .
11 13 ewn phrase prscedent cbout hcu TMI-1 n.ight be treated?4 /
14 l A. (Gillham) As I recall the innguage E 15 ! in the order, thare was indicction that, were the unit I
i 16 I nct Sc=h in service on January 1,
- i. the issue of THI-l
.J U... 4,. in rcte bcse would bs re-eracined, uhich c
- course it
- 1 is ; is being.
, I
. t 1p t G I turn your attention Oc Page ~' cf I j
gf
[
20 the tactimcny, please. 1*cu rsfer tc a minimu:n of $55 I
31; millien in additional revenues to cover the cost of b
g;h additional purchtce pcus: toward the betten Of that
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4,N.
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t.* L Y C. t0 b& necc 3ctry 00- h.ndle th2 increas3d ccSt? i,
.* . . 't r i s' ;.n c.
. L00 61.** C It o . t h e u n a n t .t c ., e* E t a 0. C e
- E V. S in I
2 5 .* re t t'.rn t o E O ***?i C G cf TMI-l* iS that CerrLet7 f f s
- 4 ,.r .
( ,, , s _.s .e.
. .. ., d j .r. . :3 - , v ..a,a.vn ce. ,
I e l
? that 5 plus very, very substentially higher energy l t .
5 ceste from supplying utilities.
7 G You cre not suggesting cre you, I t
E i cir, that the recovery of that $55 million would or a [
f I will censtituta r. full recovery of cn incretse in
,i t
10 i replacement power 'sts that are presently being i
11 1 incurred by Met:::d, are you?
I -
12 I:. (Clif f ord) Uc, wc'rs not.
n
'--~ 13 G Do you have any idea what the 14 :ngnitude everall, full-cost recovery of increa. sed .
15 ; replacement power costs would be? .
16 L(Clifford) My understanding is at 17 the end of the year the total amount will be in the 16 nsichborhoed of 110 to 120 million dellars. .
io l G Olcrify something.
- That inst 20 ;
. number you ge.ve us, is that supposed to represent the i
1
- i
.. t total shortfall on :s.eIncement power recover.v.i or '.
' l e.
, merely the size of the deferred ensrgy balance at l'
- . [ the end of the yscr?
l1
- g. .((Clifford*; The latter.
. , i 25 ] O And it's your understcading that
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.e h th: .rca 19'0- is that acrrsct?
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6e I. (alif f e rd) !!y understanding is it 7,,' would hcvs bsen s7 333,000 in Janner.v and rebrucrr. l 1
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I6 11 j. 0 The:'s corrset.
1 12 I think I'm cahing : relatively sinele 1
- q 3ction. 6.? = ills en c 12-nonth basi would produce -
'3l1 s 1.'.i $35 millica, that is hs.sically the question, and had j i it bee- ranted January 1, therefers, in the eclsndar i
16 . year 19 6 0 i uculd hcve produced $55 million?
- l. 1
.h 17 .r ( ,.,i"* - - --'o - - ) '." .h a ' ' .e., -
igh'..
I i
q j
C Wow sir, were ycu and the other I
19, banks censultad in any fashion during the discussions j j that GPU had last fall that led to the filing of the y Ncvember 1, '79 petition that requested that G . 9 mill i
u,p incratse in the leveli:ed energy cost? .
,: vs ,. .i
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c = .. :. r_ _' .'*. _1,v ..e r< , _-4 m,. r .
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. 1.4 ,5.. . .y w, . g =. r.. .. . e ,. . u, . , un
- i. .
s
.J Senterber. t
- s. -
I t
I rie::- .r.: :a :n .ne. :::=. - : ::. r.=. :w.:.:n e- .v.e.r n:::::r.e. r.r :m * '
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i e (C".if f cri) Ett I thin.. ?ince thec .
6
- 4. . ,
.'.I:' zitt--I thi.k thct wcs the btcis on which this E55
.}y nil". ion case was foundsd, and since thtt time I thinh i f
3 glI. there hr.s been a. very substantial inersass. tt I e.1 6 i think us ware at that time aware of what they esti=c.ted-7.i. the purchese. power and deferred energy cost to bs. ,
f, '!
Bb D I think you are misn=ticip: ting }
9 tis purpose of the cuestion. i 10 ",
i ver.v s i m : 1 v. , were you =onsulted in c n
I substantiva Scshion reaardine the desirr.bilit.v of
- * ?. ' mr. king that filing en Ncvember 1 cnd whe.t was geing l.
O r ! eo he rn u-eed when ehce fuing was mede = uove=be=
i e
14 .1?
t Thr.t is whr.t I'm trying to elicit.
I 15 ;
L (Gillham) The company made aware in i
16 a ! its prcjoctions what they were pinnning to do. Ife 4
17 l wars not specifically consulted as to the level. '
13 2 f
n Perhr.ps ycu could further enlighten d ma, in whct ntnner if cny were you specifictily con-
.e.c> sulted reecrding that petition? -
I
<gi l i
L(Gillham) 17e were generally cware of
.r , nJ the vs.rious elements of their filing.
.e I don't racell 3' tt ict.st I was specifically censulted upon any cspect q.
n.
..f, ' cd it e::actly.
b.u g I l 3 Did the ba.nks in any way encourage ,
i b====.
- t?!"tt:".2ArH e !".A*t?".".L. U!O. ~ :l" .*L LC *::"/.*ff.LC 7:' A*.T. - MAF.KfE3L"'O Pl= 1*1312.
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rate re.iefr and the cori.can.v had inferned us the.t it I F l 7 .is.
- wrs u ss e s --- -
4 . e.
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4
~ _4 _1 _4ng. !
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9 ,' Ssptaber foracast was to show us pre forna be. sed en 10 1 their vrricus asar.nyticns uhc: the r.ccennts vonld be )
I.t. b.i looking like.
u,l
.n. u
- _ *
- k. .*.ni.
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.- .k.e.' : n e d .k. e *."e *_= _- * .k. e.. 'w I l
- t. .
t.<.m _ t.ra l .,. , i...m- t
... -_u
_e .e. a _ m n ,_ c. ,, .. ,_ y. a. , c, _< u. .
- z. ._. ~_ I z u .. _a , ,
/
N 14 L
.. they did let us kncw what the cash flow--I matn e that 1:!s wz.s the thing wa revieued uith them.
i l
16'lI, 0 That is not the question. Perhaps p
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_ a _4 .= _. .: <. .o .aw. e _4 .:.. -t e c _ .,.y .
3.
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- .e. n,.. .. n a. .s ., nt.
- .. _ a _o . u .s,... .s. u _:.,, 3 e.,. s. w., _ e m-una -
g .; filing ncks e.n7 recommendations whatsoever, sither
.;rp ' chout the timing of that filing er encouraging the
.s h. ll
.,4
~.
, . , ' co==any to make the filing or encouraging the company es .i.. e.,
. .i. g......,..._.._e_,,o._,.,
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. I u
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s _ u _e .,. _ e. g u ., e c. v _o.. .;n c-T.S e.'- _i s l
.i.I . hat I'm tevine' to find out.
1 e -
1
- m:r.:: . :.i..:m*.:.. r::. _ ::. .:.- : :. cr .v;:. _ :::, .:=: .e. c.> :- ::
1 1
i e . . m..- g . . . =
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5
.... g r ,; s
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.i...
, :. u. : ., .,.. ;. :.. ., = . . a .
s
. .-. .. . . . . . . ' .u. 2.3,g., .
= v. t. . . :. ,... _a _2 .
. , , s.
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. . . . _. a. .e..t. J
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c.
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. ._.. - u. . .r. S I s
3
-i - ,. < . . . ....:,. ,
ag
-- . ,. ,, w -.. uy. . . _ - .:. ...o... .. .ywee cs - -
'.k.e '. .. '.s , !,
t!
, . .- ,,3 ,_, g __ . .w ,e .i e a _4 -. . m w _4 ~ e. . .deve
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, .. - n e .e '.. " u_'d
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y, ~, _ :
m -,..,._.n_ ~. . . .; . !
I o L (Clif ford; No '
. I don't think we did.
a, , .,
._r._' ..,'. u .- _ e . o ....i. . s .: " h. u- '- '. .' .c , _ .'... . .4. p .'. e _e o_# d.*.*.e.._-e4 .
u, ,
- -a o u n"_ 4-- -u , t ~'- ". _' # - c_" --"- - se e's
-- be *Sa c.
12 ( I'= r.shing ycu specifically what
- 13 . reu thought i.as gcing on beck in Novc=ber.
Your 14., a tactimony is even in November you knew ft11 well that i
t 15 l the 0.9 r.ill request was not going to preduce a full i.
16 ! recever, cf rcpiccenent pover costs; is that your i
.; ,. :.w e_ ,m. :. _2moea. *) .
5.6 . L(Clifford) The 6.9 mill in our opinion s .
~
g, j would hr.re produced s. full recovery in the sense the i
g , de_,zrred energy accotat wouir .. ne 2.ncreasec.
, cnc the -
i.
3 question was whether or not we thought the deferred ;
h
.i
.,o energy acccunt woula. .os e.l.z snatea. or recuced to sero. .. . .
- r. a e e r..u a .<. . .. _,, a,,r
. . t.. -:c. . + w.,s.,. ,. c ,La . ye.c. ::=
e 4
,.,. .! n . ,.L . cn annte.:. .,.ncrc E s a ,. you cian :. t n. . . inn back in
.-r a
.. y W
-li n November thtt the.t uculd produce a full current recovery 1
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. _ . . - _ _ . . . - _ I
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, . . . . _ . eC I.
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- j. i.
11 6 ir that what your tactimony 137 i
- t -
"e, *
,3 A ( v13 .* _i h ,3 4f _ A..J b. 4.= k u.. s . m..e.1..J. .a g *J A .*.. g _- e l I
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i.
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4 E,l
- c, ; _
4 .". _# _'. . u=_ c l .e c va _- = a . a.. * * .s'. '.h.- _# .e. ~ ". " a_ -'o , c.".tr .
j:
10 ; centSr. Plated dilins fer expedite:=. hearir.; en the '
11 . issus to have that clcuss cc into coerttien en er about . .
.v.4 . . Januar.v 1.
. t
- b. - .i, g.
,i o v. .. s .
^
p a .
. st.re . a.h 3 :. 2.3 r 4. " '.to.s .va.u.". ' '
t I .
.. p. .
c, u.. .P. g. . e. w.a. c. .-4 .J. s=
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. . _ a.'.- d.= .49.=
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. L.
. ': 4. ,'.o = u".".e ~"- u*a .ur... * .i.
a .
. ' . .' . . " tk _= a--' au.e a c ._' d r. t k...
. ,e 1
yp producad a situation undar which incretsad purchace r
M i! power erponses ware scin7 to be raccrered on a
,.i' .
i h I nf J.c s current basis?
P g, .;,+ . r. g.e.. 3. .. .. , . g
+ ws...
44 :
. 3 ._s , . 4 '. O Sav .
.9 e
WS
/.61 t tesre c.wnre there POuld DG R SCr6 eZhended CGeoV92V -
b -
L..3: ;: Ca O.S GrrBd entry? hl.,anceS.
I
.,e
.., ..a ,
s n
- a. [ m t .e.
. w .:- e ,.,..t & s g .4. _.}. ,g . . . ., gi g ,.z B ., -
o r
- I
. ..-
- t.m.g *g
.y .=. a:. .. g.y as.
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e..e.,. .J.. _ .4 b J.
e..s t.. .t. .. e a.g , , ,6 . g.4 Ea.6 f
. :1 i
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. ;. . _. -%.._,. ..,3. .,,. a .Ei. wr.f_ u. t ' .. e . m c. 3 .. .4. ". " A,. o L. m. . . . . . - .
s of th-: in rause in oil prices was dcing to the price of /
c*
r :c: .s m ::=. : m _ . :. .- ..-.:.ew e :::. -:w. : emn. v. :nm
- . _ _ y _ _ _m _ -
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6
I THE CEAIF.MA": We'll te.ke a five-r.inute !
. a.. ..
t C: I.
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t.q .
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w S w. . , .t. . ._.-s .,eep?
,, . .%: w 2 t 1
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u I
t-11 Y a E. Olifford, do you remer.ber e.t
(' ;
V. .'.3
, the.t point c.fter the June '79 crder that you and the ur .
e.,enhz cr.mc, tc cht unterstancing er knowiecge s..nat . .
I 15 - 1"'I
~ 's reter . to sorrice wcs going to be dsicyed
- a
.;.,:, , .., ..,o A
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1 t
{
17 ti L(0115 ford) It seems te me it ua.s i l'.i 1
..,e.,,,i 7. , n,., . a 7 cge.w e. s.e .,ze. ; n2... ..
.e.oc. s . s,
'n.
.a a, ( : , . .;ntr)
.:. : vas t,ie r. ccle or. Jua.y 4
501 or the latter part of July.
2.l y 9 At the.t point e g entleraen , I tr.ke it 2: g , t !
,. 3.,,,.. - m. .
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a
- 4. 1 auc. e:t sc ::o wh such a suc.e.ss:icn re.: not r. cia? !
2
. a 3 l 11R. G a a ld 2 5 E :
think thet:s 3.n argu-
,1 A.
usatative quest 2 en.
7 p. .r. m...3. w. e a u- .,. 2.- m. n. .. -
g3.4. - ,. t. ..g .. .=.. :
- 4.
eP !
c
' enever is us prebth:.y shculd have irrtadir.tely eetten
, i j
)
f '* cn our horses and ccdo t hig issue cut cf it. The 1
i
'l 10 i t
ract is we didn't, and that the cc::ptny wcs working 11 l on their forsecsts rond vorhing on an order, cnd I 11 thin % vs er.psated it to be decit with in the case 13' ths..* wers .cre.ocring for. .
y, i., 3s., 1. ,
e v..e~m. I 1: G 'lon mecn in the fuel filing they
-r a.c h: ware wor;._Jne on? .
i +
17 jI -
I. (Clif ford) Right.
E i
C Am I correct tha collt. terr.1 the 3 j'o;nh3 hava under the terms of the revelving cred.i:
l 2On cgrear.er.t he.rically consists of the uranium fuel,
<t l
id'i' shares of G:?i.i cubsidir.riss t.nd come bonds?
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f:
e
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b 25 tharG C.n'-thin c.t ! ;liSSGM . I
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s SC. l -
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6 purchase.
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c.,ey. , ... .e.. ..: s. +- h ,v, 1
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e il l is the vcite of the chcres of the operating sub-
.. . . t.
..: j s:.r .,.cr2.e s .
JJ j g Certainly the bulk of the =ciltteral i
W is tied to E. .i re.nress.ted by shares in the e.nerating
'l e- 1
., 1 3 a. m. 4. g .e ,. . ..
. . . . ,.. .. e .. - u. . , c o . oec w.3 u.
1
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i I.(Gillhan) '/ would be inclined to
, u.
- j. m, l z g. .a 2.. ,. y on ..u s. e .agne.
r l
,w, ,1 v
. + .
.,-. . u .d. e.... s ' .a. d d .u., *het the
, .v. .
i 19 ; terr. of the revolving credit cgreement and the t'
~.L, e::istence Of ths.t ca.reenent in.nroved the position of 6 i the banks i. anv fashion as e creditor in the svent -
i 1 i
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3 5
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9
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1 10
.i evsst that GFU t.'ent fer be.nkruptcy? :
8 11 L (Cliff erd) I don't think thers was l;
vvo_ u..3 3 ,, : _w _ .. , g. ,cu3u. 2_
__: . . ,.f _. .. , g _. .,. .. c y3 me , ,og e u. zen.,
l t
13 O. Is that "<.'ocid":?
u.
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=. . o g .,. a:. _sm .,. .ove o t.. . ,.,.,..a 1 +:nn..
' I
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O. I believe both of ycu testified in 5
(,
a
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- p. m. ._ ..e.c.4. e _. ..- 3. v. a b a.n l.. ' p "- c v
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n n .s. e.._A__z ., .c , .
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o.
p a
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- a. m. .. 4. _ = _ ,_.,
.i. r p,
., # m. _, .. ,.+ 2 ..., 'whe c
E
""" i D United States. e
'I t l 20 4 4 Net in the United States, but I 8
.t e, .celieve ir. G_4 3t._ n t.m s a .2c. ne .nas acc, some exper.4.ence. .. .
n.
3.(Gillhs.n) ~
also said it 3 baan rer.ll-i,' ~ .
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- .' complets lack of knowledge er precedent.
71 f 0 But in general from yeur experience.
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6U. .. encarience in Ctanda cad Enc.icsdr both ccses tre :ve e r : .. . c _' -
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t . (Olifford) IM understr.ndine is I hcve 4
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t 15 t(Gillham) We believs it:s around 16 ,
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,15 4.{Gillham) Yes. We would have to i 16 multiP l:/ the 292 by our pre re.tc percentages which y, .r. y..._-. 2
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411 L(Clifford) It's a proportionate share
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