ML19309D018
| ML19309D018 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| 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 8004090480 | |
| Download: ML19309D018 (156) | |
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5' In re:
I-70040208 - Pennsylvania Public Utility i
Commissicn versus Metropolitan Edison Corpany, d
et al.
7i Public haaring.
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u la Harrisburg, Pennsylvania 8
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February 28, 1980 n,.
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1-Page.2 2528 to 2582 i
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13I' 19
!!OHRBACH & MARSEAL, INC.
20 27 North Lockwillow Avenue Earrisburg, Pennsylvania
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17112 A@
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Sefors
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THE PEMUSYLVANIA PUDLIC UTILITY OCHMISSION I{}
2 1
In re:
I-79040308 - Pennsylvania Public Utilitv
)
- f Commission versus Metropolitan Edison company, et al, 5
Stenographic report of hearing held in 7
Haaring Room No.
1, North Office Building, Harrisburg, Pennsylvania, 8
- Thursday, February 28, 1980, o
at 10:00 o' clock, a.m.
10 o
11' BEFORE r!
SUSAN SEAllAMAN, CHAIRMAN, Presiding g.
MICHAEL COEUSON, Commissioner h
~
LINDA C. TALIAFERRO, Commissioner JAMES E.
CAWLEY, Commissionsr 74 15 10 APPEARANCES:
17 SAMUEL 3.
RUSSELL, ESQ., and 13 ALAN M.
SELTZER, ESO.
Ryan, Russell & McConaghey
,9 530 Penn Square Center P.O.
Box G99 20 Reading, Pennsylvania 19603 For - Metropolitan Edison Company and 21.
Pennsylvania Electric Company 21; 23 I
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2529 J
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1] APPEARANCES (Continued) :
j t
I, CRAIG BURGRAFF, ESQ., and DAVID M.
LARASCH, ESO.
I' S
1425 Strauberry Square Harrisburg, Pennsylvania 17127 4
For - Office of Consumer Advocate 5
JOSEPE J.
MALATESTA, ESO., and 6
ALDERT JOHNSON, ESO.
G-38 North Office Building 7
P.O.
Box 3265 Harrisburg, Pennsylvania 17120 S
For - Commission Trial Staff I
I i
9 i
BERNARD A.
- RYAN, JR.,
ESQ.
I 10 Dechert, Price & Rhoads I
800 North Third Street 11 Harrisburg, Pennsylvania For - Bethlehem Steel Corporation 12
~ ~.
=(U 13 JOHN 30WERS, ESQ.
R.D.
47, Box 388 14 York, Pennsylvania 17402 For - Holly Keck, Deep Run Farm, Inc.
15 16 KENNETH A.
WISE, ESO.
218A North Front Street 17 Harrisburg, Pennsylvania 17101 For - Louise Riley, S.P.A.G.
18 19 LOUISE DUFOUR Route 401 l
20 )
Chester Springs, Pennsylvania 19425 21 I
22 1
23 j
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24 25 uaxr:aACN C !SAltSKAL, C;C. = C N. I.CCT.WTI.T.CW.WE. - HARRISEUFtG, Pt. M IR i
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,l 2530 t
1 APP 3ARANCES ( Continued ):
2:
I LARRY SELKOWITZ, ESO.
3 P.O. Box 1597 Barrisburg, Pennsylvania 17105 4
For - THIA, Inc.
5 DENNIS S.
SEILOBOD, ESQ.
~
d Messer & Shilobod, P.C.
1530 Grant Building 7
Pittsburgh, Pennsylvania 15219 For - Johnstown Arca Regional Industries, Inc.,
8 Johnstown Area Economic Development Corporation, Johnstown Industrial Park, 9
Inc., and Johnstown Industrial Develop-ment Corporation 10 U
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20 21 22 23 25 me.=naan.
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2531 I
1 N_ g { {
ll WITNESSES _
Direct Cross ReDr ReCr 2
}1 3
B. E. Cherry, recalled ----
2534 2538 4
John G.
Graham
-and-recalled ---
2636 2646 2680 - -
5 Fred D.
nafor l
6 NET-ED/PENELEC EZHIBITS Mkd.
7-A-74 Pour-page document, Response to Com-8 mission Trial Staff Interrogatory No. 25 and TMIA Interrogatcry No. 13 ---
2634 9
A-81 Three-page document, Response to Con-10 sumer Advocate Interrogatory No. 28 --
2634 11, A-82 Multi-page decument, the first page of which is entitled "Hetropolitan Edison 12 Company, Pennsylvania Electric Company (Docket No. I-7 9 04 0 3 08 - Phase 2) " ----
2634 13 A-84 Two-page document, Response to Commis-14 sion Trial Staff Informal Data Request -
2634 15 A-85 Seven-page document, Response to Informal Data Request of S. McClaren, 16 Esq. ---- --
2634 17-A-85 one-page document, Response to Cross-Examination Data Request of John G.
18 Graham by David M. Barasch, Es at N.T. 1.'. 9 1 - - - - - - - - - - - - - - - - - q.,
2635 19' A-87 One-page document, headed " Pennsylvania 20 Electric Company, Increase in 6.5 Mill Level Charge That Would Be Required to 21 Recover Energy Costs Projected to be Unrecovered (Deferred) As of February 22 29, 19 8 0 ' ----
2635 23 K-1 One-pace docuinent, Response to Cross-Examination Data Request of W.
G. Kuhns 24 by Ms. Louise Dufour of Limerick Ecology Action at N.T.
17 7 5 --------
2635 25 u-.
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1 INDEX - CONTINUED
,o 2
NET-ED/PENELEC E:GIBITS Mkd.
3 M-4 Two-page document, Responses to Cross-Examination Data Raquest of Carl E.
i 4
Seligson by Ms. Louise Dufour of Limerick Ecology Action at N.T.
1942 ----- 2935 0
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_P _R _O _C _E E _D _I _N _G _S 3
3; THE CEAIRMAN:
Yesterday when we had
/r discussed when the partiac would have their witnesses 5
available to testify, Mr. Selbwitz, you were not 6
here.
Could you perhaps enlighten us as to when your 7
witnesses would be available on the proposed dates 8
that we have scheduled for hearing?
9 MR. SELKOWITZ:
Yes, Madam chairman.
10 My apologies for any inconvenience I may have causect 11 the commission by my absence.
I i
12
- - As I understand the scheduling, there
{M s
13 were a lot of people available the lith, 12th, 17th, 14 18th, and 19th, nnd coincidentally my witnesses are 25 most available the week of the 24th, 25th, and 26th, sc 16 r.here should be no problems that week and with some 17, minor difficulties the 17th, the 18th, and 19th.
gg TEE CEAIRMAN:
Okay.
Thank you.
i gp MR. RUSSELL:
If the Commiscion please-20 THE CEAIRMAN:
Mr. Russella 21 MR. RUSSELL:
No provision has yet been p
nade for any rebuttal testimony on behalf of the y
respondents, and in view of the absence of any such 24 pr vision so far, I would request that any additional g '
witnesses be placed in the preceding weeks, if possible l
seoenmAcn a====ar-n,c.-ay x.:.acrunLLow Avr. - staastissuma. PA. erasa l
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1 so hopefully the 26th or part of the 26th would be 7,3 g
2 available for such tastimony.
l I
3 THE CHAIRMAN:
Okay.
Mr. Wise.
4 MR. WISE:
I understand that the 17th is 5'
a relatively free day.
The witnesses who we intend to 6
call state that they are generally available on a 7
week or two advance notice.
The 17th may be about 6
the best day, judging from what I understand to be 9
preferences of scheduling on a later day that week.
10 The week after that is bad for me, because I have 11 arbitration trials.
Il THE CHAIRMAN:' Okay.
Thank you~.
~33 Have I missed anybody?
I don't think j
14 so.
~
Li, MR. BARASCH:
Madam Chairman, just to be 16 of some assistance, I am generally aware that at least l
17 several weeks ago Mrs. Smith was talking about wit-gg nesses and I note she is not here.
I don't know 1p whether she still intends to present them or not.
We 20 haven't heard from her.
21 THE CHAIRMAN:
We are aware that we l
22 haven't heard from her, but unless you are prepared to 23 tell us when she will be available--
(
24 MR. BARASCH:
I am neither prepared nor
)
15 interested in doing that.
I just wanted to make sure I
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2534
{'
I that you were all aware of that.
2 TEE CHAIRMAN:
Yes.
Thank you.
3 Are we ready to proceed, then?
4 Mr. Russell.
5 MR. RUSSEII:
Respondents recall Mr.
6
- 3. 5. Cherry.
7 8
B.
B. CHERRY, having been 9
previously sworn as a witness, was recalled 10 and testified further as follows 11 DIRECT EXAMINATION 12 CONTINUED b
13 BY MR. RUSSELL:
14 Q.
Mr. Cherry, I believe in your 15 statement, Meted /Penelec Statement E, and in your 16 resume which is attached as Appendix A, one of the 17 fields of your professional activity has been in the 18 area of fuel supply and the various energy sources; is Ig that correct?
l 20 L
That is correc.:.
I have worked t
l 21 in that field for almost ten years.
g Q.
During the course of the cross-23 examination of several witnesses who were not I think 24 literally offered as experts in the fie3d of fuel 25 supply, questions were asked with respect to the l
n- -. - -
mee. - ar n. seamm.imw avr. - manaresses, m. m aa-
el cherry - direct 2535 1
possibility of the emergence of a cartel in the
-- )
2 uranium field comparable to the OPEC cartel in the 3
petroleum field.
4 Have you any opinion as to the possi-5 bility of the emergence of any such uranium cartel?
6 A
Yes, I would like to offer 7
professional opinion.
As we are all aware, there 8
had been speculation and cliegations that such a q
p cartel operated internationally in the early seventies.
10 There had not ever been any allegations that the 11 cartel operated domestically.
-^
12 It is my belief that the prospects for 13 such a cartel operating domestically and impacting 14 the domestic market is remote and I reach that judg-15 ment on the basis of several facts.
16 First of all, the United States, in g
sharp contrast to the supply and demand of petroleum, g
the United States is essentially self-sufficient in y
nranium, and that is particularly true given the g
current projections for nuclear power growth in the United States.
The existing defined reserves of uranium in the United States, and by defined reserves 22 I mean reserves that.we are very knowledgeable in in terms of the quantities of material, the cost of' f) extraction, the degree of difficulty of extracting the I
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Cherry - direct 2536
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1 natorial, that defined reserve in the United States 2
is sufficient to support the lifetime needs of all i
g, of the existing nuclear plants in the United States, 4,
some close to 70 nuclear plants.
5 So that, were we never to do any 6
additional exploration drilling, develop any addi-7 tional reserves or resources, that existing defined a
reserve would be sufficient to support the currently p
operating nuclear plants.
10 sow, that defined reserve is something 11 in ex ess of 600,000 tons of yellowcake.
The future 12 needs of any expansion of the U.S.
nuclear industry b
13 are served by converting reserves which are somewhat 14 less defined than the category which I first spoke 15 f and there are reserves and resources in categories 16 s newhat more speculative than the first category g7 which would support the lifetime needs of up to'400 nuclear power plants in the United States.
g 79 Now, I think it is pretty obvious to all l
f 0
r here that the projected nuclear capacity in the U.S. by the end of the century is likely not to approach that figure.
So on that judgment alone'I think one could conclude that based on the existence 2s.
of antitrust laws operating in the United States and m
the plentiful nature of resources domestically availablu f
minen. --- mee. - sr x. s.earwu.ow wr. - mammevne. m. m sa
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o' cherry - dd. rect 2537
)
1 that it is unlikely that a cartel could operate to d
manipulate uranium cupply and pricing in the U.S.
l 3
In addition, I think it is important 4
to note a very significant distinction between 5
uranium and oil.
011, petroleum reserves, tend to 6
exist in distinct reserves.
You either have oil in 7
a particular geologie formation or you don't have it.
I Uranium, the ability to define a reserve and then 9
extract it, is much more a function of price, your 10 willingness to pay to extract the mineral than in the j
11 petroleum field.
11 Uranium is found in widely varying 1
j 13.
amounts all around the world in some 40 or 50 countries
~
14 to various degrees, and depending on one's willingness 15 to pay the price to extract the material, one can 16 then develop a supply.
17
~
For example, one can extract uranium IS from seawater if one-is willing to pay a significant 19 price to do that.
So in terms of availability of 20 supply, again there in a rather significant difference 21 between uranium and oil.
Finally, I think it is also important 22 23 to note that the reserves of uranium around the world are substantially more dispersed than currently are
]
(
24 25 the oil reserves.
we have uranium developments, i
I
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enume -
P
l Cherry - direct 2538
[
1 substantial uranium developments, in a number of 3
countries.
In addition to the U.S.,
Australia, l
3 Canada, severci countries in Africa.
4 There is some development of uranium 5
resources even in the Middle East. ~ There are a' number 6
of countries that are both users and producers which I
7 again I think differs rather significantly from oil.
S' So, on b O ance, it is my judgment that 9
the potential for the operation of a uranium cartel 10 which might impact the U.S.
domestic market is 11 rather remote.
12 MR. RUSSELL:
Mr. Cherry is available p-V 13 for cross-examination.
~
~
14 THE CHAIRMAN:
Mr. Malatesta.
15 MR. MALATESTA:
Thank you, Madam 16 Chairman.
17 CROSS-EXAMINATION IS 19 BT MR. MALATESTA:
20 g
Mr. Cherry, if you would, would 21 you please turn to your Exhibit E-167 22 A
Yes.
That is Table 1.
23, G
Yes.
Under the general heading 24
" Capacity Change" there are several references to the 25' years 1980 through 1983 for P.E. purchase.
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- ogsmo -em
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Cherry - cross 2539 l
l 1
P.E.
purchase purchass under a contract between
({}
2 Philadelphia Electric and Jersey Central Power and l
3 1
3 Light Company, dated July 13, 19797 l
4 L
I am not familiar with the con-5 tractual details of the arrangement nor the date on i
6 the contract.
It is my understanding that purchase 7
is an arrangement to acquire capacity'from the Salem 8
nuclear unit.
9 a
would that be Unit No. 27 10 L
I believe so, yes.
11 Has there been only one arrangement i
12 between a GPU unit and Philadelphia Electric for the 13 0
purchase of capacity cf Salem Unit No. 27 14 L'
I am only aware of one such 15 agreement.
16 g
After 1980, why do you propose to 17 decrease the amount of capacity purchased from 18 Philadelphia Electric?
19 L
Again, I am not familiar with the 20, detailed development of the contract.
My understanding 21 is that was a function of what Philadelphia Electric 22 foresaw being available from the salem unit rather 13 than a desire on our part to decraase our'taka from 24 them.
15 g
Are you aware that.the--
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t Cherry - cross 2540 o
1 THE CHAIRMAN:
Excuse me,It, Cherry.
l 2
Would you move your mike up further so that everybody 3
can hear you?
l f.
THE WITNESS:
I am sorry.
5 TnE CnAIRMAN:
we are having difficulty l
6 hearing you.
7 THE WITNESS:
I would be happy to do 8
that, if I can.
9 THE CHAIRMAN:
Thank you.
10 COMMISSIONER JOHNSON:
Would you renew 11 your question, Mr. Malatesta?
12 THE WITNESS:
Can you hear ~better now?
13 Okay.
~
~'
14 MR. MALATESTA:
Do you mean the question 15 Mr. Cherry just answered, Commissioner, or the question g
I was about to ask?
17 COMMISSIONER JOHNSON: No, the question g
that you had already asked, because I didn't get thau 19 and I didn't get the answer.
20 MR. MALATESTA:
I would ask the Reporter 21 to read it back, because I don't recall the precise 22 w rds I used.
23 (The Court Reporter then read back the y
last question and answer as requested.)
25-3secutaAcpt a 98AftsBRAL. 39tc. = p 3E.14C33TELLOur AVE.- MA:Utt3BtNMR. PA.17512 i
Chorry - croca 2541 1
BY MR. MALATESTA:
,q 2
s g
Mr. Cherry, are you aware that the 3-contract between Philadelphin Electric and Jersey l
4 Central Power and Light extends into 19857 3
A Mr. Malatesta, I have not seen that 6
contract for four or five months, and I really don't 7
recall the details of the term.
I am generally aware 8
that it extends past 1983, perhaps to 1984, but 9
I really don't recall the details of it.
10 g
Well, assuming that it does extend 11 into 1985, wouldn't the overall GPU reserve margin for 12 the summers of 1983 through 1985 be greater if the 13 Salem 2 capacity were purchased through 19857 14 L
Certainly if we were able to acquire 15 additional capacity in those years, our reserve margin 16 would be increased.
17 g
Mr. Cherry, do you know if the 18 Salem 2 unit is now operating?
19 L
My understanding is that the' Sales 2 20 unit is not now operating.
21 g
Is it not operating for technical 22 reasons or for legal reasons?
23 L
I don't have detailed knowledge of 24 the reasons it is not operating, but my understanding
()
25 from publicly.available information is that that~is i
mamannex. man mas, ma. - nr m. i.earensa.ow avn. - menisevne. ca. m ia em-
-eim
Cherry - cross 2542 p..
I one of the units which is awaiting an operating 2
license and, as far as I know, there are no technical 3
reasons which preclude its operation.
I a
Mr. Cherry, do you recall testify-f 5
ing on January 22 with regard to your projections as 6
to Meted's base and intermediate capacity requirements 7
to the year 19907 8
L I recall that general line of 9
questioning, yes.
10 0
I refer you again to Exhibit E-15.
11 L
E-13?
12 G
E-15.
Cb 13 A
Ye s. ' ~ -
14 O
Mr. Cherry, on Exhibit E-15, haven't
~
15 you projected that by 1990 Meted will require about
~
16 2100 megawatts of base and intermediate generating 17 capacity?
13 :
A That is correct.
19 0
Does that projection include the 20 PJM reserve requirement?'; ^ ~
21:
A Yes, the development of that number g.
is based on Meted's meeting the projected PJM reserve 23-requirement in 1990.,
24, O
Is it also true that Meted for u
l 25 economic efficiency maintains'a proportion of 85-l mews.nen. = -ar-nea.-sr n. s.eamws.amr avs. - - m. m as 3
~...
--,.a-y Cherry - cross 2543 l-
!' percent base and intermediate capacity to 15 percent I
\\m.)
2 L peaking capacity?
3 L
That is appro=imately correct, 4
yes, sir.
5 Now, if we turn again to Exhibit i
6>
E-16, Page 2, would it be correct in order to estimate 7
Meted's own needs for-its own customers for base and 8
intermediate capacity in 1990 to take 85 percent of 9
the summer peak in 19907 10 L
I am not quite sure what you mean 11 by differentiating between Meted's own needs and its 12 customers' needs.
13 I wasn't differentiating between 14 those.
I was differentiating between Meted's own 15 customer demands and the >JM reserve requirement.
16 L
I don't see how you can separate 17 the two.
without PJM, Meted would still have a 1
gg reserve requirement in order to maintain reliable gg l service and that reserve requirement would be sub-g stantially higher than the 25 percent that we project 21 as a PJM requirement.
1 g
a
% that as it may, Mr. Cherry, in y
order to estimate the base and intermediate capacity 24 demands of Meted's own customers in 1990, would it be C
25 Appropriate to take 85 percent of the summer peak in esamammanna e asAsasRAL. Ipse.== SF 3L tmeWELLANF ATE = = 3*N PA 17118
cherry - cross 2544 O
1 1990?
2 L
Based on your assumptions, yes.
3 g
What assumptions are you assuming
/r I have?
5 L
Ton are just suggesting that 2 6
multiply the summer peak by 85 percent to develop the 7
base and intermediate capacity needs.
I am willing S
to make that multiplication.
I am not willing to 9
accept the assumption that Meted should somehow ignore 10 a reserve requirement which is a part of the capacity 11 needs of the company.
12 g
Mr. Cherry, did I say that' Meted OC 23 should ignore a reserve requirement?
If L
Perhaps I Asterpreted that from
~
15 something that you said.
16 l 0
But I didn't say it, did I?
17 MR. RUSSELL:
Well, I think it is l
33 implicit in the question, yes.
39 BY MR. MALATESTA -
20 ;
O Now, if we do take 85 percent of 21 the summer peak in 1990, will you accept that that g
comes to a figure of 1674 megawatts?
3 A
If you suggest that you made that 24.
multiplicati n and that is the answer, I have no 25 reason to doubt the correctness of that multiplication.
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~~
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chsrry - cross 2545 I
g Now, MetSd's existing base and i
~
2 intermediate generating capacity, including both TMI 3
units,is 1762 megawatts, is that not correct?
4 L
That is approximately correct.
5 g
That is what you say on Exhibit I
E-15, isn't it?
7 L
Yes.
l 8
g Now, Mr. Cherry, assuming that TMI-1 9
and TMI-2 are operational in 1990, and assuming that i
10 Meted does not lose any of its other existing base and l
11 intermediate generating capacity over the next ten l
12 years, do roy still agree that, as you say on Exhibit t
13 E-15 in the first paragraph, that Meted will need about l
l 14 300 megawatts of new base and intermediate capacity 15 by 1990 to generate its own customer energy require-g monts without significant reliance on energy imported 17 from other utilities?
2 L
Yes.
g 4
And you agree,with that statement, 20 despite the fact that Meted's own base and intermediate 21 generating capacity as it now exists is greater'than i
g the projected need of its customers for that capacity in 19907 3
{
p A
I don't believe that is true.
]
3 g
In 1762 a higher number than 1674?
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- Cherry - cross 2546 r..
1 L
It certainly is.
2 Again, Mr. Malatesta, I believe you are 3
assuming go need for reserve capacity, which I do not 4
believe is a valid approach to generation planning, 5
certainly not one that I would esponse.
6 g
Well, Mr. cherry, accepting that the 7
base generating capacity of 1762 is higher than the 3
apparent base and intermediate need of 1674, and 9
despite the fact that you think a reserve capacity 10 provides a safety margin, how can you suggest that 11 Meted will be required to purchase significant 12 amounts of energy from other utilities in order to C-w 13 meet its own customer demands?
14 L
First of all, I flatly reject'the 15 contention that 1672 megawatts of capacity is an 16 adequats base and intermediate capacity.
I reject 17 that.
~
gg :
0 on what basis?
29 :
A on the basis that that level of go capacity is not sufficient to reliably serve the Meted 21 customers.
22 g
on what basis, sir?
l 23 L
on the basis of all of the system
~..
l 24 planning approaches that are used not only in this i
1 25 Company, but in all of the other PJM member companies.
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-srm.i u wmer.-man==
a man
+
ChOrry - cross 2547 1
You cannot plan without reserve.
~
2 O
Is it correct that a reserve is l
3 necessary to cover the unexpected event?
4 L
No, that is not correct.
5 S
Is it necessary to cover the
,6 expected event?
7 L
so, that is not correct.
8
.O What is the purpose of a reserve?
9 L
The reserve is there to cover both 10 the expected and the unexpected events.
11 G
All of the above, in o'ther words.
12 Now, Mr. Cherry, using the numbers 13 that I have referred to you and that you apparently O
14 agreed with, with some philosophical reservation, 15 that would still present Meted with a reserva of g
approximately 88 megawatts, isn't that correct?
17 a
I believe if you subtract the 1670 gg l from 1762 you get 88 megawatts, that is correct.
gg
,, G.
Thank you.
Now, even assuming that i
3, both the unexpected and the expected occur, isn't it l
g true Meted could then purchase energy from other g
sources?
23' L
I a n't know.'
p Do you have any reason to think
.]
25 that Meted could not do that?
w.mmunen a mansmas. see.-sr m. smacumu.aw mm - % m. mts
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A.
I have no basis to know whether a 2
company with a zero reserve margin will be able to 3
purchase--strike that-with a very small reserve
/,
margin would be able to purchase sufficient energy 3
and capacity to meet its needs in the 1990's.
f I believe that the company today is some-7 what fortunate in being able to meet its needs in 8
that the interconnection as a whole has some signifi-p cant excess capacity.
That excess capacity is a 10 result of a slowdown in the growth of energy use it which began in the 1974 time frame.
I have no expec-l 12 tation that the situation will be that in the 1990's.
k 13 In fact, prudent planners would antici-14 Pate that all of the companies at the urging of 15 commissions would be doing their best to balance g
their supply and demand needs in the future and would 77 not be in a position to find themselves substantially g
long in capacity or long enough to support the gg needs of ano,ther company which purposefully under-y planned.
.c
.3 0
If the expected and unexpected do y
not occur, will Meted then be in a position not to y
have to rely on significant amounts of imported energy?
['
p I don't understand that question.
A.
1 25 G
I will rephrase it.
It is a little i
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1 awkward.
fm.
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3 If the matters the reserve exists for, 3
the unexpected and the expected, whatever they may be, 4
do not occur in 1990, isn't it true that Meted will 5
he in a position to meet its own customer demands 6
under its existing base and intermediate generating 7
capacity?
8 L
If the 762 megawatts of capacity l
l 9
which are projected to be available in 1990 ran at 10 loo-percent availability, which is impossible, then 11 Meted would not have to rely on other companies for l
l l
12-their. capacity needs.
~~'
C 13 O.
What would you project as a reason-14 able running rate overall for the potential 1762 15 megawatts?
16 L
I believe for the mix which we have 17 I would project a 65 to 70-percent availability, per-I gg haps a little bit lower, and if you really need to L9 know the detailed projections we can certainly get 20u those, but 30 to 35 percent of the time the units 21 are expected to be out of service either due to l
22 planned or unplanned outages.
l 23 QL would you describe 65 to 70 percent 2g as an optimistic projection?
]
25 L
No.
necessams: a saanssud. me. - ar a s.ouxwiu.ovr avs. - n=r==me, pa, snia
l Cherry - cross 2550 C
1 g
It is a pessimistic projection?
\\
2 A
No.
3 g
So it is somewhere in between?
4 L
Yes, I believe it is a realistic 5
moderate projection based on our best experience 6
and knowledge.
7 o
What would be an optimistic projec-8 tion, but one that is still within the realm of 9
reason?
10 1.
75 percent.
- t.
11 g
Mr. cherry, when GPU and its 12 affiliates determine an appropriate reserve margin, U
not for PJM purposes but for their'own service if purposes, is that done on an affiliate-by-affiliate 15 basis or is that done on an overall basis?
16 L
The development of the PJM reserve 17 margin is first done on the basis of the overall"GPU 18 system, and that reserve margin is then allocat'ed Ip using an approach analagous to the PJM approach for 20 allocating reserve between companies to the iriidividual 21 GPU subsidiary companies.
~
22 g
What is an appropriate reserve y
margin?
(-
24 L
Is that a philosophical question?
y' S
I hope not.
What percentage of
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reserve would you consider reasonable?
2 L
Well, an appropriate reserve 3
margin is a function of what an acceptable level of 4
service is, and the guidelines, the ground rules that 5
are used in the PJM interconnection, in fact across 6
most of the United states, is that a system-wide outaga 7l of one day in every ten years of system operation is i
S' tolerable.
9 one then having that ground rule i'n 10 place develops appropriate reserve margins based on 11 operating statistics of units and projections of 12 demand and peak use as to what level of capacity is 13 required to sustain that level of service.
I believe O
14 that we could probably have a long discussion on 15 whether one day in ten years is parhaps too reliable 16 or may be not reliable enough but in any event that f
17 is the planning guideline that is generally used'.
i 33 O.
So you don't aim for a specific l
Ig percentage of reserves?
20 L
No, and the reserve percentage to 21' meet those kinds of system reliabilities varies from 22 system to system, depending on the ic-0 characteristics 23 and their generation characteristics.
It turns out 24 that GPU is about average or was perhaps before-the
]
Three Mile Island 2 accident, among the companies in 25
,.~
Cherry - cross 2552 I
f- -
1 terms of unit reliability and peck availability and 2
slightly off-average in terms of the variation in 3
system load from season to season.
4 The flatter the load from season to l
5 season, the higher the reserve requirement.
The higher 6
the peak, the lower the reserve requirements.
7 0
Mr. cherry, would you say it is 8
unlikely that the GPU system can provide adequate 9
service to its customers in 1990 if seward-7 and coho-1 10 are not completely constructed and operational before 11 19907 12:
L I think that our ability to provide U
reliable service in the 1900's would be severely' 14 compromised if capacity at Seward and coho or 15
~ equivalent to seward and coho were not in place'in 16 the 1990!-a or significant reductions in current g
17 projections of use.were not accomplished by that time i
g period.
19 0,
would that compromise of GPU's 20 ability necessarily mean that GPU could not provide 21 adequate service absent the construction of those 22 facilities?
23 L
No, I believe that the compromise 24 e uld come in a number of ways.
If capacity were not 25 available to be purchased from other utilities'at that mannsacu e maassu. anc.-ar r. i.oc=wn.s.cw avs. - xarianssinne. ex. rF812 I
i e
,m
~ - - -
Cherry - cross 2553 L
1 time, either on a contract basis or through the q
J 2
interconnection, that compromise could manifest 3
itself in terms of reliability of service.
4 our current judgment is that the 5
construction of sne seward ar:d the coho statio'ns, 6
combined with our load management and conservation 7
efforts provides the most economic approach to reliable 8
service to the customers so that if we were to va.y
'9 substantially from that strategy, the compromise in 10 provision of service to the customers could come not I
11 in terms of reliability, but perhaps in terms of addi-12 tional cost.
C 13 So there are two areas of compromise 14 that could occur.
15 4
I assume there are also two areas 16 ;
of compromise that may not occur.
Are you saying 17 with certainty if these two plants are not coristructed 33 in 1987 or 1989, that either thera will be a compro-19 mise of GPU's ability to serve or there will be 20,
greater expense to ensure GPU's ability to serve?
21 L
No, I don't think I said that.
I 22 think what I said was if those two plants or equivalent.
23 capacity were not in place in the 1990's or that load
.]:
24l reductions consistent with a substantial fraction of
)
25 that capacity were not in place, then these compromises m wamacs a mansn.s., mes.-sr m. s.aaews.n.our avs.-namesmme pa. mia e,-
Cherry - cross 2554
(~'
1, could occur.
I 2
O Could occur?
SlI L
Yes.
l 4
G And you have said the 1990's and 1
5 my question said 1990.
In order to prevent even the 6
likelihood that one of those two compromises would 7
occur, is it absolutely necessary that Seward~7 be B
completed in 1987 and Coho-1 in 1989, or is there 9
some flexinility?
10 L
I believe there is some flexibility, 11 but we believe it is important to pursue those projects 12 on the schedules that they are now on.
If you are 13 asking me if seward slipped two months, would that if upset the GPU system, no, I don't believe that'it 15 would.
~
16 O
what if it slipped two years?-
17 L
I believe if it slipped two years, gg that would have an effect on our ability to serve the 19 customer again, unless some vehicle were developed to 20 fill in the time frame during which that slippage 21 occurred, and I think that what we have tried to do in l
22 king at these future plans is tried to develop 1
g3 strategies.which have some flexibility in them and y
those are the kinds of approaches which we are now 25 attempting to develop so that we are not in a. situation menneaan a mans-m. me. - sr a:. imsewn.v.ow.ws. - naaniseums, ca. enes m --
r
-"--J
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Cherry - cross 2555 I
where if the Seward plant slips two years, that we 3-are dead in the water.
3-g You would not be dead in the water 4
if seward slipped two years, is that what you just 5
said?
6-A I said that we are trying to 7
-assure that we wonid not be dead in the water and I
we would approach the problem of such a slippage in 9
a way to try to cover those problems through some
- 10) intermediate contract purchases, thronyh arrangements 11 with the interchanges if possible, through load 12 reductions, and so on.
S If the in-service date of Seward 0
i 13 14 slipped one year, would there be a significant effect 15 on GPU's ability to serve or its cost to serve?
16 L
Well, again I think we are getting 17 into a kind of grey area right now.
I believe'a 18l prudent planning approach ought to be able to cover 19 minor slippages, minor variations in schedule.
To 1
20j me, two months is clearly minor.
Six months is 21 Probably minor.
Two years is probably major and when l
22 we get down to the one-year level, I don't think it l
23 is prudent to plan on a one-year slip..
C u
z thi=x e one-reer =11, 15 #eee==arr, 3
9 l
25-could be accommodated perhaps at some additional m-m --
mar.-sr m. v.acimen.s.ow 4ve. -==- w mia l
I r--
cherry - cross 2556 f'
1 cost.
3-MR. MALATESTA:
There are no further 3
questions for Mr. cherry.
Thank you, Mr. cherry.
4 THE WITNESS:
Thank you, Mr. Malatesta.
5 enE CaAznMAu:
mr. sarasch.
6 MR. BARASCE:
Just a couple CIuestions, 7
Madam Chairman.
8 BT MR. BARASCE:
9 c.
Mr. cherry, is the development of 10 western oil shale at the present time commercially 11 feasible?
12 A
O T can give you a personal judgment.
13-I am not a professional in the oil shale industry.
14 My personal observation is that when the price'of oil 15 was $5 a barrel, the projections were that oil shale 16 could be brought in at $10 a barrel and it would be 17 commercial.
13 When oil went to 10, oil shale wezit to 29 20.
When oil went to 20, oil shale went 'to 30.
20 And with oil now at 30, oil chale is now about'50.
21 That looks like a moving target to me, and it is not 21 at all clear to me with a host of environmental 23' restrictions and prchlems associated with the develop-24 ment of the oil shale deposits in Colorado that we 25, are ever really going to have a commercial oil shale
. nnmaan a man nu., me. - n m. imam,n.zaw avs. - nawesome, m. m m.
9 i
,w-
Cherry - cross 2557 i~
II source of supply in the United States.
]
7' G
This rise in anticipated price per 3:
barrel, would you say that is a question of a reac-4 tion to the market from the increase in the price of 5
oil, or is it a question of the technology necessary 6
to extract the oil becoming increasingly expansive?
l 7
A I think it is a combination of 8
three things.
First of all, a good fraction of the l
9 cost of production of oil shale is in turn related 10 to the cost of oil in that there is some energy l
11 required to extract the oil from oil shale.
12,.
Second, the technology has become more 13 expensive as time has passed.
And third, and I think 14 impod antly, the impact of environmental restrictions 15 on the kind of large-scale excavations and so on that 16 would be required has in turn increased the cost of 17 extraction of that material.
18 4
Let me try to ask the question 19 another way.
If you were to go back to the time when 20 ; the price of oil was $5 a barrel and people were saying 21 oil shale could be developed for $10 a barrel, why 22 was it that oil shale was twice as expensive?
Is it 23' because basically it is a question of the concentra-24 tion of the petroleum product in the shale and the j
25 difficulty of extracting and consolidating that l
- -. - - mea nrm.zeemusu.m,mv.- namensmane pa. sn:n.
1 l.. _.. -,._.
i Cherry - cross 2558
^
1 deposit?
2-A Yes, I think basically that is 3
the case.
4 g
And if for some reason today there 5
were a way of guaranteeing a market for oil shale at 6
let's say $100 a barral, do you believe we have'~
7 significant quantities, that we P ysically have signi-h 6
ficant quantities of oil in shale deposits out there 9
to be developed in the United States?
10 A
I am trying to recall the asti-11 mates of barrels of oil in oil shale.
My recellection 12 is there are two kinds of major categories of oil r..
1 D -
13 shale.
L-
-r 1(-
0 One more readily extractable than 15 the other?
16 A
well, one more readily extractable 17 at somewhat higher concentration.
I think three or gg four barrels per ton of rock versus maybe one to two 29 barrels per ton of rock..
20 g
And, generally speaking, Me 21 it that the oil shale that is more readily extract-g able or present in higher concentrations is cheaper 23 e
devel p than the enes present in lower concentra-1 24 tions; is that correct?
l L
Tes, that is the case simply because 25, BeettitRAggg e an-naar ggggg gy 3g, Laagwghtsgy AvgL = MAnalgegas, PA. tyt ts f
cherry - cross 2559 6
!I I you pay to excavate a ton of rock and if that ton of l
2 rock has three times as much oil in it, you get that 3'
oil for one-third the price, in terms of the excava-4 tion portion of the operation.
5 3
You then have to. extract it from the
-2 6
rock and that carries with it some costs.
I think the 7
point is, in the western oil shale deposits, there 8
are substantial quantities of water required, substan-9 tial amounts of earth to be moved, rocks to be moved 10 in an area--
11 4
Regardless of the concentration?
12 A
Regardless of the concentration, O
13 in'an area where people have been extremely conscious 14 of the environmental impact.
It is one of the more 15 scenic areas of the United States.
M S
So then, in short, the case with 17 oil shale is not unlike the case of uranium which g
. you were describing r>crlier.
It is a question'of 19 at what price the oil becomes worthy of commercial 20 investment or production, and as we get into lesser 21 and lesser concentrated deposits, the cost goes'up, l
22 just as with uranium; correct?
23 A
In the specific case of oil' shale, y
that is correct.
The analogy to uranium is not quite 25:
so good, however, because uranium in contrast to oil wommenen a mansnas. mia. - sr z. saamen.a.ow avr. - na:musevne, ca. nasit
~ ~.
Cberry - cross 2560 I
f 1
shale which exists only in a few selected locations 2,
in the United States, uranium is found dispersed 3-widely across the United States.
4 There are, for prample, very low 5
concentrations, but nevertheless significant quantities 5'
of uranium in Pennsylvania coal.
7' n'
Yes.
E' L
And in New Hampshire granite, and 9'
in Tennessee shales.
10 MR. BARASCH:
Thank you.
11l COMMISSIONER JOHNSON:
Mr. Cherry,'did i
123 you say "significant amounts *?
i 13' THE WITNESS:
I said low concentrations, if but nevertheless significant quantities, yes.'
15 COMMISSIONER JOHNSON:
In Pennsylvania i
16 coal?
i 17 THE WITNESS:
Yes, sir.
i 18 CO!MISSIONER JOHNSON:
Can you put a 19 handle on that, some frame of reference as to what
~
20 significant might mean?'
~~
l 21-THE WITNESS:
Well, Commissioner 22, Johnson, to me significant means something which 23 might support a uranium mill and that might be e.
y concentration which could result in five to ten 25 million pounds of uranium.
t,en an. mansum me. - er m. s.nearm.s w ays. - m-- PA. SM12
~ ~ ~ -
l
l 1
Cherry - cross 2561 1{
The fact is in Pennsylvania that the nJ 2
concentrations in the coals are so low that under l
l l
3 the technology that wa now have it would be extremely 4
expensive to try to recover that uranium.
5 CoMxISSIOmEn aossSov:
Thank you.
l f
MR. BARASCH:
I have no further ques-l y
tions of Mr. Cherry.
8 COMMISSIONER TALIAFERRO:
Madam 1
p Chairman?
g THE CHAIRMAN:
Commissioner Taliaferro.
11 COMMISSIONER TALIAFERRO:
Mr. Cherry, 12 would you distinguish or would-you acknowledge a i
U distinction between the kinds of uranium in general 14
.and the kind of uranium that is necessary for a g
nuclear fuel plant?
16 TEE WITNESS:
Certainly.
The uranium g
that is required to operate a nuclear reactor contains- -
mil, let me start over.
g g
The energy developed in a nuclear power y
plant comes from the fissioning of Uranium 235, which g
is an isotope of uranium and as naturally found in the earth, that isotope occurs only slightly less than in one percent of the total uranium.
So that for 100 pounds of uranium
)
extracted from the earth, a little less than one monamnen a mansnas. use. -sr x. r.omanu.sw avr.- naamssons, m spess-
-~
--m
^
~~~
Cherry - cross 2562 9
1 pound of that uranium would be Uranium 235.
In fact,
.s 3
saven-tenths of a pound would be Uranium 235.
S !
In order to use that uranium as extracted 4
from the earth--and we call that natural uranium--in 5
order to use that uranium in s nucisar reactor such as 6
the ones we use in the United States, the concentre-7 tion of that Uranium 235 needs to be increased to 8
between two and three percent of the total uranium S
so that for a hundred pounde of nuclear fuel going 10 into the reactor, the concentration of the Urnnium 235 11 would be two to three pottnds per hundred pounds.
12 Uranium as used in the nuclear reactor 13 is called enriched uranium, enriched in its Uranium 14 235 content, and that is contrasted to the tern 15
" natural uranium," and that enrichment process occurs 16 in enrichment plants which are operated by the United 17 States Department of Energy.
13
~
Is that a sufficient answer to yotir IS question, Commissioner?
20 COMMISSIONER TALIAFERRO:
That is fine.
21 I have a couple of other questions.
22 Are you familiar with a GAO report'on 23 uranium availability in this country?
24 TEE WITNESS:
Not specifically, no.
25 COMMISSIONER TALIAFERRO:
Are you familia e mennmaex a wAnanar., me. - sr m. i.oamma.saw as.
====e, *A sessa.
l
~.
Cherry - cross 2563 I
with when ths last major uranium discovery was made n=)
2 in this country that would support a uranium mill?
3-Would you accept that it has not been within the 4
last 20 years?
5 TnE WITuBSS:
no, I would not accept 6
that.
7 conuISSIONER TALIAFERRO:
The amount of S'
uranium that is milled, the input in terms of your 9.
statement of what that would support, is that not 10 controlled by the government, the Federal Government?
l 11 TEE WITNESS:
Could you restate 12 that question for me, please?
13 COMMISSIONER TALIAFERRO:
The amount of 14 uranium that would support the refining process, is 15 that amount not controlled by the government, the 16 Federal Government, in terms of the output from the 17 mill?
.-c g..
TER WITNESS:
If I understand your 29 question correctly--well, I am not sure I understand g;
the question.
Are you asking me if the uranium i
21 production from uranium mills is controlled by the g
government?
23 COMMISSIONER TALIAFERRO:
The amount 24 which is available on the market.
)
y THE WITNESS:
The amount that is meummax = saanmaar. neo. - ar m. s.nenwn.amw ms - =-- m. wasa
~
T-T w
-r w--
m
Cherry - cross 2564 f-1 available on the market?
w 2
COMMISSIONER TALIAFERRO:
Yes.
3 TEZ WITNESS:. I don't believe it is 4
directly controlled by the government._
One could 5
speculate that the government has some impact ozi demandh 6
through the policies that they put in place in terms 7
of managing their enrichment plants, but I don't '
S believe that the output of the uranium mills is S
regulated by the government.
10 THE CEAIRMAN:
Mr. Bowers.
11 MR. BOWERS:
I have no questions.
11 TEE CEAIRMAN:
Mr. Wise.
C 13 BY MR. WISE:
g,,
E a
Mr. Cherry, were you the person who 15 was responsible for estimating the total system load i
16 of Metropolitan Edison through 1980 in order to make 17 your prediction as to system load through the eighties?
13 A
Yes, those projections were carried 19 out under my direction.
20 g
Could your calculations incInde a 21 breakdown showing the average demand per class of 22 customer and the average number of customers estimated 23 te exist within each clacs for a given year or other
~
24 unit of time prediction that you use?
25; A
Yes.
wortazact & asJutstEAL. INS. = EF E. LEN*.EWILLOW AVE. = NAMttSBURS. PA.179 IS P
n
.d
- -, c.
s~
n.
m.
Cherry - cross 2565 t-1l 4
Would you be able to supply cr do
'{
t 2'
you have im:nediately available to you data showing year -
3 by-year estimates of demand for each class of service 4
and showing for each class of service and for each 5
year the total number of customers, the average 6
kilowatt usage per customer per class and the total 7
predicted demand per class?
would you have that I
information available?
9 L
Let me just clarify the request.
10 when you speak of class, there are a number of 11 different kinds of classes of customers that we deal 12t with in terms of rate categories and so on.
We can O:
13 certainly provide to you the breakdown of use by 1
14 major sector, residential, commercial, industrial 15 if that is what you are getting at.
16 o
I was referring to all of the' 17 oubclasses identified under tariffs which would I 18 think include three or four classes of residential 19 and various classes of connnercial and industrial and l
20 l I assume street lighting.
would data for those be available?'
11 22 L
I believe data is available.
You 23 would have to check I think to assure that the data 24 was available in the form that you are requesting.
certainly when we do our forecasting, we do a breakdown 25 :
-m-e asseminar DOCL -W IL LOCRWILLOW AVE. = 9tARRISSURS. PA.11PtIE
-m,
--c,
,m
--?_m._m Cherry - cross 2566 5
}.
{
1 !
to that level.
2 O
Could that be provided?
I 3
A If it is available, we could 4'
provide it.
5 g
can you tell us briefly with that 6
information in mind, are there any trends as to what 7
sectors of the system will experience a heavier 8
demand than others, what classes of customers will 9'
e=perience greater demand?
10 A
Are you speaking of the Meted
?.i situation?
12 g
Meted, yes.
13 L
In looking at the pro-)ections of 14 growth over the next ten or so years, we have tried 15 to target some load management and conservation 16 efforts at classes that look like they are increasing 17 in use, particularly in use per customer, particularly 18' commercial and industrial areas, and we do see some 19 substantial increases in use per customer in those 20 sectors.
In residential classes, the use per customer 21 is declining somewhat.
22.
G If I recall fr a past rate pro-
- g. :eedings, I think the average residential customer m
l 2f' usage per month was around 473 kilowatt hours.
That 25, would have been around 1975.
non=naen. mansans ine. - cr u. a.es::wn.s.e,r.ws -==- ra. na s 9
9
- %'S p.-
m.-
.m
-e, w.
---e...
-w-
l 1
Cherry - cross 2567 1!
Now, as I understand it, just about q
[
J l
2 the average kilowatt usage per residential custoner 3
is now around 5007 4
L Yes.
5 g
Is thac figure expected to change l
6 in the eighties and, if so, in what direction?
1 7
L We see that decreasing somewhat i
l 8
in the eighties in the residential sector.
C G
Do you have an idea as to what l
10 percentage of decrease will be experienced per 11 residential customer?
12 L
Again you have to recognise these 13 are projections based on assumption of the economy 14 and so on.
15 1
. Let me see if I have that here.
I am 16 not sure I have that information with me.
Yes, let l
17 me give you the breakdot.n in terms of the nontotal Ig electric class, that is customers without electric 19 heating and then customers with electric heating.
20 In Meted our projected growth rate' 2,1 annual over the '78 to *88 period was an increase 1
22 in use per customer of about a half-percent per year.
23 g
That is nontotal electric?
)
g.
A Nontotal electric.
And in the 25' Period beyond 1988, we see a decrease in use per
- -. maassau nea.-sr u. ie mm.- nassessues, ca..smis
~
, c, Cherry - cross 2568 I
c_
1 customer of about a tenth of a percent a year.
In 2
the total electric class in Meted we are projecting
(
3 a decrease in use of about four-tenths of a percent
/
per year in the '78 to '88 period, and about five-t 5
tenths of a percent per year in the 's8-9s period.
6 0
Is this per customer or over the 7
entire customers of a class?
8 L
This is the use per customer change 9
in those two sectors.
10, a
okay.
Has that prediction been 11 modified since Meted /Penelec have submitted their 12.-
conservation plan?
O-D L
No, and we would expect that pre-14 diction to change in a downward direction as we are 15 able'to understand the impact of our load management 16 cnd conaarvation plan.
17 g
Are you saying data is computable 23 now and hasn't been computed or the raw data has not 1g been gathered to date?
~'
~ ~
L No, we have the raw data.
We are 20 in the process of computing and putting in place our 21 22 revised projections.
23 0
How socn would projections be' c.
available?
v a4, w
l 25 A
well, we have committed to the I
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-m Cherry - cross 2569 L
1 commission to have our revised load management and
.3 J
2 conservation plan to the Commission before the end 3
of this month.
4 g
This was in response to Commissioner 5
Johnson's inquiry of yesterday?
6
- A No, this was in response to an 7
order received by the companies as a result of the 6
June order and a submission which we made in response 9
to that June order in July, we agreed to provide a 10 revised load management and conservation plan to the 11 Commission by the end of February, 12 we are running about three weeks behind Q
13 schedule on that right now.
The document is in final b
14 typing as of today and we need to run it by some 15 management reviews before final submission to the 16 Commission, but we expect to have it here in approxi-17 mately three weeks.
1 I can't be any more specific than g
gg l that at this moment.
We do see in the program a i
2D!
reduction in the MetBd growth rate of about 50 percent g
over the 1980-to-1990 period.
g G
During the entire period that you y
used for your predictions, till there he any change 2t in the service territory of Meted?.
)
l A
Well, we are not projecting'any y
U tegeImmace a asanastas. 3980.== SF N.LocEWE.LSUF AVE.= IRAABEMUste, PA STtt*
m----
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,1 i
Cherry - cross 2570 1 I change.
In the load management and conservation
^
i 2
activity we are sirply looking at serving the 1
3 territory which we now serve.
4 g
For instance, Bershey' Electric 5
at one time was supplied wholesale power by Meted.
6 Would there be any similar changes in the system?
l 7
A We are not planning any in the load 8
management and conservation activity.
We are looking 9
in our overall strategic planning effort which'is 10 a separate effort being carried out at a number of
)
11 options for future service by the GPU companies and i
12 among the options that are being looked at is elimina-0 13 tion or sale of portions of the service area.-
~
14 B
Would this be referring to the sales 15 to the rural electric cooperatives?
16 L
I don't believe that we have ape-17 cifically targeted on any sector as a focus for 13 elimination of service.
19 G
Bave you considered that, elimina-20.
tion or curtailment of sale of wholesale power to the 21 rural electric cooperatives?
~
~
22 A
8
i 23, G
Do you know of any contractual 24 allocation that Meted or Penelec currently have for 25 Providing power to the electric cooperatives"that sammemame a =^*=a'a' IBOR. -8F 30 IJDCEWEJJpur AVE.= MAREERBSURS, PA. 878IS'
,_m-
-~
.,y,
Ch0rry - cross 2571 g
f 1
would be up for renewal or up for change in the b
2' immediate future?
3{
A No, I don't believe I am the 4
appropriate witness to answer that question.
5 Ma. RUSSELL:
This is getting into 6
essentially legal matters and the jurisdiction of the 7
rBac with respect to the wholesale sales for resale.
8 MR. WISE:
I am asking for his under-9 standing in tarms of what went into the long-range 10 projections and what were considerod and discarded in 11 the projections.
I am not asking for his legal opinion.
12 TEE CHAIRMAN:
To the extent that he is 13 asking for the underlying assumptions of the testi-14 many, I
- M air that is valid.
15 Would you answer it, Mr. Cherry? ~
16 THE WITNESS Yes.
As I earlier indi-17 cated, we have not assumed any shrinking of the service 1g area or the sectors that we served in terms of' carving Ig,
out a sp,ecific sector and not serving it other'than the 2c Hershey sitration which you earlier mentioned.
21.
BY Ma. WIsm 22 g
Have you ever received any advice 23 or understanding as to whether the terms of these Zh contracts with these rural electric cooperatives couid
)
g 25 '.
b* 80difi*d?
~
=aammu:n. manam. see.-er m. imaces.n w mm, = -- ra. mts..
Cherry - cross 2572 i
1 A
I have never requested such advice 2
nor have I ever received such advice.
l l
3!
9 This wou.14 also include any other
[
f.
wholesale bulk sales of power by either Meted or 5
Penelee?
6 L
I am not at all conversant with the 7
contracts which the company is involved in in supply-S ing those arrangements.
C 0
Okay.
There are, I guess time-of-10 day incentives for certain classes of commercial and 11 industrial users?
12 L
We have time-differentiated rates
~~
13 for residential and insutrici classes, yes, 1/r B
would there be any such time-of-15 day incentives for the energy clause adjustment?
16 L
I am not sure I understand your 17 question.
2 e gg :
B In other words, for the energy Ip' clause adjustment would all surcharges of power-20 Purchased and reflected in the energy surcharge be l
21 charged at the same rate,' irrespective of time of day 22 that the electricity is used?
l 23 A
one of the options we are looking I
l 24 at is to reflect the fact that the cost of energy 25 Purchased during peak periods is higher than say the nemannen. -- me.- sr m. s.oaxwn.ow mm.- namamone, ca. inia j
I
?-
...---_.------g---.----
- - -.. - - - - -. ~ ~ - -
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_u Cherry - cross 2573 1
cost of energy purchased or generated at an off-peak N
1 time und those are the kinds.of things which are being 3
factored into our overall program.
4 g
Are there any other sort of 5
rebates for any class of customers that use electrie 0
in off-peak hours?
Ij A
currently,in place or contemplated?
I g
currently.
I L
Oh, I think we have in terms of 10
.our interruptible rates an incentive to customers who 11 are on that interruptible rate w;Rch in effect says 12 during peak periods you are subject to being requested
^
QI
~
to eliminate your use.
14 That, in effect, tells the user that he
~
15 ought to be concentrating his use in off-peak periods Id if possible.
So I think that might qualify as an 17 incentive to move things away from peak periods.
18 MR. WISE:
That is all I have.
Thank 19 you.
~
l 20
' Tus csAIRMAN:
Miss Dufour.
21 Ms. Doroon:
May I wait until Mr.-
22 Selkowitz has gone durther?
23 THE CHAIRMAN:
Mr. Selkowitz.
24 MR. SELKOWITE:
Thank you, Madam 25 chairman.
medmissacss a enammene, usc. - my g, gangggMnr Ayz - MaagnBatage. PA.17152 e.
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Cherry - creas 2574 1
BY MR. SELKOWIT2:
2 G
Mr. cherry, you will recall, I am 3
sure, that as a result of the commission decision 4
regarding interrogatories filed by Three Mile Island 5
Alert that you and my cocounsel held an informal 6
discovery session.
7 L
Yes.
~
8 0
What I would like to do now, sir, 9
since some of the material you provided during that 10 was not embodied in any written documents, is to go 11 through some of those questions so we can have them 12 in the record before the commission.
G.' '
W-13 This is especially in regard to your 14
-comparison that is contained in your Statement'E of 15 the relative costs associated with Three Mile Island 16 versus a hypothetical coal plant.
17 May'I begin by verifying if I am correct 13 that it is indeed a hypothetical coal-fired plant that 19 is the subject of your comparison?
l 20 A
Yes, you are correct.
Tha' coal 21 pinnt is a surrogate for a plant which we believe--
22 well, it is a surrogate for the costs which would
. 23 have been incurred by a plant built in the same time
^
24, frame as Three Mile Island Unit 1.
w i
y; 0
And it would be'a 1100-megawatt menneaan mansnar me.-ar u.e - m.t.ow avr. --- es. sms
]
......n-.-
.n.--.
~.
i Cherry - croca 25h5 I'
coal plant?
2 No.
3' S
I take it you had some experience 4
with large coal-fired plants due to the company's 5
having built somer city 3 and Keystone stations ~1 and f
- T
==
71 L
Correct.
'~~'
6 And am I also correct that you con-9' clude that assuming that the Unit 1 is back into 10 service on January 1 of 1981 the end of this year, 11 that it will still have a better capacity factor than 12 your hypothetical nuclear plant?
What I am curious 13 about, sir, is how f ar into-- excuse me, let me restate if that.
15' Am I correct that if the unit doesn't i
l 16 return for let's say six months after the date which 17 you use in your projection, that at that point'the
(
13 capacity factor would be equal to or below that of 19 yexr hypothetical coal plant?
20 c: L Yes, that is correct.
21 Would I also be correct, sir, if 22 we assume for purposes of your comparison that you g
had built two 650-megawatt coal-fired stations, that 24 you would have better system reliability?
]
25 A
I don't understand the question.
monamaan. - - =r men. -ar m. s.oezun: aw Avu. - naammeane. Pa. ers ta
~
Cherry - cross 2576 1 :
nould you repeat it, please?
I G
Sure.
Assume with me that, instead 3
of having built one l'300-megawatt coal-fired station, 4
that the company built two 650-megawatt coal-fired 5
stations.
All right?
6 L
The hypothetical coal plant'we 7 e used to compare to Three mile Island was a coal ~ plant 6
of comparable size to the Three Mile Island planti.
9-G I understand that.
10 A
which is not 1350.
11 O
Fine.
Assume that you built two--
l 12 would 550 be a more precise estimate of half of the 13 value?
14 L
No.
~
15 g
what would it be?
16 A
Well, half of Three Mile Island' 17 would be about 385.
18 0
Well, Keystone is what, 13007 19 A
Yes.
20 g
Let me ask a question about Key-21 stone, then, because it is really the principle 22 that I am interested in as well as the detail.
l 23 L
All right.
l e
24 g
Assume, instead of having built 25 reystone, let us say, you had built two 650-megawatt n. -.-- me. - sr x. ummar.s.ow av:r. - umuussues, n. rm
-W M-~
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4 i
Chorry - cross 2577 i
I !
units, coal-fired.
would I be correct, sir, from a b
2 system reliability standpoint that two 650 units'would 3
tend to give higher system reliability than one 1300 sj unit?
5 un. acSszLL:
Well, are you implying i
6 that Keystone is a single 1300 unit?
7 MR. SELKOWITE:
I am just asking about 6
the principle in light of the reliability.
We can 9
call them the Smith and Jones plants.
r I
10 THE WITNESS:
If the question is given 11 an individual plant capacity factor of say 70 percent, 12 l if two 650-megawatt plants are going to be on-will 13 provide more system reliability than one 1300-megawatt 14 plant, the answer is yes.
15 However, the tradeoff there is that the 16 two 650-megawatt plants would cost more, and that is 17 whY the tradeoffs are made at times to larger plants.
ig BY MR. SELEOWITE:
19 0
Am I correct,.s'ir, that Seward, g
the most recent Seward plant is 625 megawatts?
l A
Yes, it is 625 megawatt net capacity i
21 g
4 Am I correct the company decided y
to build a 625-megawatt plant because it had reviewed
.. ~
y the questions of system reliability and economics and
]
25 decided that size plant was the economical size to
--.. b -.
.,a Cherry - cross 2578 1
build?
2 L
There we2:e a number of reasons for 3
choosing the 625-megawatt plant.
one of the principal 4
reasons was that we did a study which attempted to 5
correlate the effect of plant aize versus projected 6
economics.
As I indicated earlier, the small units 7
tend to cost more in terms of unit capacity.
The 8
larger ones tend to be cheaper.
9 The smaller units tend, based on 10 history, to run n little better than the larger 11 units.
We looked at a range of units from as I 12 recall in the study, a 250-megawatt size up to some-Q i
13 thing in excess of a thousand megawatts and my 14 recollection of the result was that in the 400-to-700-15 megawatt range, the difference in economics was not 16 that significant.
17 We opted for the 625-megawatt size is because it was a replica of. the Homer City 3 plant i
19 add we believed that the experience in building and 20 operating that plant for several years would help us 21 to construct the seward unit more cheaply and'to' 22 hopefully operate it more reliably.
I 23 We did not opt for a san 11er plant 1
24 because it would have involved accepting a for-sure 25 Penalty on the unit costs in return for only a me ex. mansnas. ma. - ar m. ima:mu.ww wr. - naamsmana m m ia
~
l
(
Cherry - cross 2579 1
potentisi benefit of somewhat higher unit availability. O 2
So we made the judgment to opt for kind of the mid-3 range.
4 g
And I am assuming that you made a 5
similar analysis and decided not to opt for an even 6
larger coa"-fired unit which would hate given you the 7
smaller per-megawatt cost, but perhaps less system 8
reliability and less economic operation?
9 E
again, we made the judgment based t
10 on the operating statistics that we had seen that 11 the larger coal units tended to perhaps not run as 12 well as the smaller ones.
We believed that the idea of 13 replicating a unit which we had just finished made a 14 lot of sense for the system in order for us to fix 15 on a design and gain some experience in it, and-it 16 was on that basis that we decided to move to the'625.
17 we had previous 11y targeted the 13 Seward unit to be about 800 megawatts and we reduced 1
l 19' that somewhat as a result of the study.
1 20 THE CHAI3tMAN:
Mr. Selkowitz, excuse me 21 just one moment.
l l
22 MR. SELKOWITZ:
Surely.
23 TEE CHAIRMAN:
Without hopefully creat-(
g ing any problems for you, we need to take about a
)
25 een-minute breah.
mounmaan mansunr use.-sr m. s.esmen.zmar ms.==--- a mm
Cherry - cross 2580 1
2iR. SELKOWIT:::
That is fine with me.
1 THE CHAIRMAE:
Thank you.
3 (Short recess taken at 11:33 a.m.)
4 5
THE CnAIRMan:
Mr. Russell, would it 6
lie all right with you if we break for lunch at this 7
point?
6 MR. RUSSELL:
I would be delighted.
9 THE CEAIRMAN.
Okay.
We will break 10 for lunch and be back at 1:00 o' clock.
11 (Luncheon Recess at 11:54 a.m.)
12 O
D 14 3
16 17 g
21 22' 13 e
24
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2501 1
1 AFTERNOOH SESSION O
2' 1:00 P.M.
5 i
4 B.
H. CEEP.RY, having been i
5 previously sworn as a witness, was resumed 6
and testifiad further as follows...
7 8
THE CHAIRMAN:
When we broke we were 9
in the middle of cross-examination by Mr. Seikowitz.
10 Are you prepared to go forward?
11 MR. SELEONIT :
Yes, I am.
12 MR. BOWERS:
Madam Chairman, could I 13 address just one very brief prel4minary matter?
h 14 THE CHAIRMAN:
Mr. Bowers.
l 23 MR. BOWERS:
I have to leave before the 16 end of the afternoon and I would like to take care of yg this now.
g We have just racestly completed making 29 arrangements with a second witness who we would' like 20 to present to testify on our behalf and I would'7.ike g
to advise the commission and other parties of that 22 fact.
That witnass is Miss Elizabeth Brooks,'who is
~
23 a member of the city council of the city of York, and
'~
24 she will be presenting testimony on the efforts under
]
25-way in the city of York to investigate the desirability
""*a"
- RfAltestAL. spes. = EF 3L Leegtr3L2.gw AVE. = MARR:ssung, pg, tyg 33
Cherry - cross 2582 i
l 1;L cnd feasibility of establishing a municipally-cwned 2
retail electric supply systen.
And I hope it would 3
make sense for her to be available on March 17,.which i
is the day that we will have our other witness avail-5 able.
6 MR. SELKOWITZ:
Madam Chairman, could we 7
go off the record for a moment on the scheduling 8
business?
S.
THE CsAIRuan:
Okay.
Off the record.
10 (Discussion caf the record.)
11' THE CEAIRMAN:
Back on the record.
12 Mr. Selkowitz.
~
MR. SELKOWITZ:
Thank you.
14 CROSS-EXAMINATION 15 CONTINUED 16 BY MR. SELKOWITZ:
17 c.
Mr. Cherry, during your conversa-t 18 tion with Mr, Widoff, he asked you, I understand, I
1 Le whether it would be possible to rerun your cost-203 comparison based upon the ascumption of the capacity i
L 21 factor for the nuclear plant of 55 percent,of the 21 coal plant, 70 percent, and you indicated you would 23-consult with counsel and advise us as to whether'you
{
24, would be able to do that and would so supply it;, and 25 I was wondering'whether you had that contersation with mesmeAc,I a n!tJtsPJf. INS. = w N. LacEWELLant AVE.- HAantescatA Pt. TFtta.
+
i
\\
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Cherry - cross 2583 I
counsel?
O 2
A We did have the conTersation with l
3 counsel, yes,.we did.
l 4
S I presume from the fact that I 5
haven't seen that comparison that you have indicated l
6 that it would not be forthcoming?
7 L
Yes, that is correct.
l 3
S Now, about your cost estimate, am 9
I correct, sir--let me rephrase it.
1 10 Did you take into consideration the 11 Department of Energy estimate of the waste disposal 12 cost of nuclear fuel?
(
13 L
The estimates of the waste disposal
()
14 cost are not reflected in the initial exhibit that was 15 provided.
However, in a follow-on answer to that 16 Interrogatory, we did provide those costs.
17 a
and you are referring to your gg ;
Exhibit E-307 3p L
Yes, that is correct.
gg.
4 And you indiccte in there, am I 21 correct, sir, that there was already a determination 22 by the company that some consideration of waste 33 disposal costs should be included in an upcoming rate
,{'
24 request, but other events have intervened?
()
15 A
That is correct.
- -. -- > nsa -arm anczunu.ow aw.-- pa. ms:
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Cherry - cross 2584 b
1 g
An I clso ccrrect, sir, that in your cost comparisen you did not include any retro-S fitting costs that might result from the NRC*s review 4
of new safety requirements for the plants?
5 L
That is right.
6 B
And am I correct, sir, that an 7
estimate of those might be in the range of 20 to 30 8
million dollars?
9 L
That was the working estimate that 10 we made, yes.
l 11 O
Now, you did reduce the capacity 12 factor to 65 percent for what reason?
13 L
We projected a 65-percent capacity 14 factor for both units and the comparison as in
~
15 effect a conservative feature of the calculation as 16 it related to the nuclear option for Three Mile 17 Island.
Although the plant had run substantially 10 better than that during the period that it operated, felt that it was conservative to usa'the same-19:
we 20; capacity factor for the coal plant and the nuclear 1
21 plant in the projections.
l 22 l O
Is that 65 percent chosen in any 23 l way to reflect what you feel vould be an increased
\\
24 climate of regulation by the NRC as far as safety 1
25 1 goes?
memaan a canexa. me.-sr x. z.capre_ow e.vu.- maammur.s m. sms.
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Cherry - cross 2585 y
1 1
L I think that was one of the factor:
f.
l 2-that we considered in using that lower capacity S
factor.
The plant had run at almost ten points higher 4
than that during the five years that it operated.
3 G
Now, did you take into consideration 6
because of this increased climate of safety regulation 7
any additional levels of maintenance that might-be 8
required?
9 L
uo.
10 g
other than the inflation factor that l
11 you did build in, did you take into account perhaps 12 any more maintenance work that will have to be done 6.
13 to decrease lag time, for example, between discovery 14 of a problem and the repair thereof?
15 L
No, the OEM costs were based on g
projections of historical cost:s at the unit, projected 17 to account for inflation that were not modified to g
include any of the factors which you have just 19j mentioned.
20 So that you also did not take S
21' into account additional security costs over and above the y
inflationarf factor?
g a
No.
34 g
And there is no cost in there for
')
l 25j additi nal civil defense e mmunication costs?
a--m a manmus. um. -er x. saamwn.s.ow as. - naamemano, ps m es
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Cherry - cross 2586
.A A
No.
1 G
What additional insurance costs 3
did you in-lude?
4 A
We did not include any insurance 5) costs beyond those which we had been incurring prior 6
to the accident.
7 B
Thus there is nothing in there for U
the purchase power insurance program that we have
)
9 been discussing thrshwh these proceedings?
10 A
That is coc.:ect.
when these calen-(
11 lations were done that program was not yet defined.
[
12 g
In your E=hibit E-3r> I think you O.
13 also indicate that the decommission costs were only 14
'those costs that the Commission approved.
Am 'I 15 correct, sir, thet those are not the decommissioning 16 costs that the company would really expect to' incur?
i 17 A
That is correct.
18 g
You indicate here that you would 19 expect something on the level of $2.5 million a year 20 to be a more realistic number.
~.
21 A
That is'our expectation, yes.
22 g
Do you recall indicating to l
23; Mr. Widoff that it might be as high as $8 million per 24 year?
25' A
I don't have the specific newsmacu a ::monat., me. -sr n. a.:=anu.ow mm. - zu==suna, ca. sviss -
i
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~
a..
Cherry - cross 2587 1
recollection, no.
I don't recall.
{)
1 g
Do you recall that you told him it i
3 was also 2.5?
4 L
I frankly don't recall the dis-5 eussion that ue had on the subject of decommissioning 6
costs in terms of levels of costs.
~
7 g
Now, on the spent fuel costs, you i
8 did not include any additional ccats in your first 9
estimate for that, did you?
10 A
wo, 11 0
You indica'te in E-30 a reason for 12 that at the bottom of Page 2, top of Page 3?
13 Ot A
Yes.
14 S'
can you tell us, sir, how the 15 President's recent proposal for a national fuel storage 1
16 plan will impact your estimate of the cest?
17 L
I don't believe that it changes l
18 it significantly other than to extend the time under 19
. which such a final fuel disposal facility will be 20 available, so we might add'four or five years worth 21 of escalation to the cost of the facility which is 22 reflected in these numbers.
23 I believe the earlier numbers we were 24 using assumed an availability of a spent fuel storage
.)
~
1 25-facility sometime in the late eighties, and I think
-u-nee.- ar v. umene.ww 4ir. - naamenme, m. m sa_
l
Cherry - cross 2583 1
I
{
i 1
now tre are probably looking at the early nineties.
ZI C
Did you take into consideration in 5
any way in this eatinato of the relative cost the ej advantages that flow from the tax treatment of'a 5
capital incentive pro 3ect such as the nuclear power 6
plant?
7 L
I am not sure I understand the 8
question.
9 O
Let me try to rephraso it for you.
10 In determining the relative costs of the 11 two types of generation, did you give any specific 12 weight to the additional tax advantages that exist fz..
v 13 to the company because of the additional investment 14 it takes for a capital incentive nuclear plant?
A 15 L
I don t know what sort of weight 16' you have in mind.
We have used the FPC and IRS ~
17 gnidelines for the development of revenue requirements 23 for both of the alternatives.
19 g
But, sir, did you give similar
~
20 treatment to any job development credits which might 21 be earned through either project?
22 L
Yes.
23' c
It would be the same answer for
'-~
the investment tar credit?
3; 25' L
788-u uns.um o rumnw me.
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Cherry - cross 2589 1
G Do you in any way give any special
)
2 attention to the fact that the fuel source of your 3
nuc1 car option la capitalized and earns a rate of i
/
return versus the coal being expensed in a coal plant?
5 L
well, again that difference in 6J accounting is reflected in the development of the 7,
revenue requirements.
Beycnd that treatment, there 8:
is no special consideration given to those differences.
9 I shculd observe that there is an amortization l
10-component associated with the nuclear fual.
It is not 11 all rate base.
12 G
Did you factor in in assigning 13 value to the health and safety and property risks to If which the general public might be szposed for a nuclear 15 plant versus a coal-fired plant?
16 L
No, we didn't, and I have no basis 17 upon which to make such a judgment.
- g G
This is a question that.perhaps 19: was1d be addressed to counsel as well.
There was 20 a conversion study of TMI that was mentioned earlier in 21 the proceedings and my recollection was it might have 22
' been included or concluded by the end of February by 23
' Gilbert Associates.
24 Can we inquire as to whether that has s) 15, been concluded and whether it can be submitted in this I
MosfREACN & MAR 132AL. DtC. = =y 3, um,WE, - star!ttsstrsHB, PA. 37512 r-
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9
l Cherry - cross 2590 i
af proceeding?
^
2 Mr.. RUSSELL:
There was a reference to 3
the very prel hinary study and Gilbert ne undertaking i
4 the next step.
Do you know the status of that, Mr.
3 Cherry?
6:
THE WITNESS:
Yes, that study was carried 7
out under my direction by Gilbert Associstes.
The 8
first phase of the study was completed in October, 9
as I recall.
10 BY MR. SELEOWITZ:
11 0
Is that what we en11 the prelimi-12 nerv phase?
~
U L
We call that the Phase 1 report or lir preliminary phase.
That report was provided to the 15 Commission at the time it was completed.
The second 16 phase of the Gilbert study has just recently been i
17 completed.
The final report for that study is in the g
process of being distributed and is likely to be 19-distributed before the week is out.-
20 The Commission will receive copies'of 21; that report.
That report in and of itself is not a t
22 basis for determining the attractiveness or unattrac-23 tiveness of converting the Three Mile Island' Unit 2 l
v g.
to a fossil-fired plant, but rather it provides an 1
2p. assessment of'the technical faasibility of the unecmaan 3 m.usr.u==. -e n. _marm:.OW AVE. - MmmBURS. Pt. Wut i
-m
=
l Cherry - cross 2591 I
conversion and provides a capital cost estimate for
-]
2 making the conversion.
3 Other factors associated with the 4
attractivenssa of the conversion, including the pro-5 jocted fuel costs for the plant, the cost of disposal 6
of scrubbers, sludges, environmental effects and so 7
on have been carried out in parallel by members of the 8
GPU Service Corporation staff.
The overall evalua-I tion of whether or not it mL'es sense to convert that 10 unit will be finished in about thres weeks.
11 I can share with you a very strong 22 preliminary judgment based on the Gilbert study, and 0:
L.
that is that if one is evaluating whether or not one 14 fixes the Three Mile Islitnd 2 plant or converts it to 15 a coal plant, the economics very strongly favor fixing 16 ' the plant.
I will give you the basis for that just 17 briefly.
18 I don't want to get into it too deeply.
19 I why don't we wait until we get the ve.rious summaries 20 and then you won't have to be going on recollection, but we wil5 have the whole thing.
21 22 MR. RUSSELL:
Well, may we go off the 23 record just a moment?
24 THE CHAIRMAN:
Okay.
Off the record.
25 (Discussion off the record.)
- --. - -- me. -ar m. r.aaren.r.ow s.va. - ausussume. m. msa
l Cherry - cross 2592 1
e i
e i
1i THE CHAIRMAN:
Back on the record, then.
I 2
Proceed.
Ob MR. SELHOWITE:
Thank you.
4 3Y MR. SELKOWITE:
5 4
Mr. Cherry, I am not sure whether i
6 you are the appropriate person to respond to these 1
7 next several questions.
It may be Mr. Carter.
It j
may be a combination of the two.
9:
Are you familiar with the energy con-10 servation report that was filed with the Commission 1
11 on July 197
~
i e
11 A.
Yes, I an.
O' k-13 O
And are you the appropriate person 14 to address some questions to con =arning that at least 15 preliminari1y?
1(I A
I believe so.
If there are ques-17 tions which you have which I can't answer, I am sure 16...
Mr. Carter is available.to help.
l 19(
0 That would be fine with me.
20 A
I do not have a copy of the docu-21 ment before me, if you are going to refer to the 22 document.
l I
l 231 a
Well, I was, and I can show you l
24 references as we go.
I think they are fairly obvious.
25 Perhaps by just stating them, you will know what we I
noem3Asse a MAREN& FMC., = 5 N. LeeKM. Low Avr. -lit.**3ttsstJIMB. E SFtf E
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1 are discussing.
g 2
You mention on Page 25 of that report a 3
new energy master plan.
Is that the same plan as 4
discussed this morning as the consarvation and load 5
management plan?
6 L
Yes.
7 a
This is just a new title?
S!
A That is correct.
I think in our 9
document we are still calling it the master plan, but 10 in these proceedings we have referred to it by a 11 number of other names.
12 MR. SELKOWIT3:
Mr. Russell, do you have A*
13 a copy of this plan available in one of your many 14 boxes of material, the original energy conservation 15 report of July 197 16 MR. RUSSELL:
I don't have that.
17 BT MR. SELKOWITZ:
18 g
On Page 13 of that report you men-19 tion that the company in response to ordering Paragraph-6 will undertake the use of newspaper advertisements, 20 21 bill-stuffers, and other similar means and then list 3
program objectives, et cetera.
23-The auestion is whether the company has 24 taken the staps that they outlined and when were they b
23 completed and what was the cost of the steps?
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L It is my understanding that we have 3
undertaken those steps.
We have had a number of news-
"' paper advertisements and bill-stuffers on the subject 4
of energy conservation.
I don't immediately have at 5
hand the costs of carrying those out, although I' 6
believe that they were the subject of one of the-7 Interrogetories.
8 g
If indeed they have been the subject 9
of one of the Interrogatories, perhaps cou,sel at some a
10 point could just refer me to that and that would be 11 sufficient for my purposes and we can proceed in'.the 12:
meantime.
1
(?r.
\\
kar'
\\
13 no you know when the activities scheduled i
14 in that report were completed?
J l
153 L
I believe the activities scheduled l
16 in that report are ongoing.
In fact, just yesterday 17 in my office I got an ad, copy of a new ad which will gg be run in the service area news ~ papers regarding conser-1p-vation and the benefits of off-peak energy use.~
20 g
On Page 22 of that report you' talk i
21 about the self-generation survey, and you state that 22 the survey has been completed.
Can you tell me when g3 that survey was st2-ted and when it was completed?
24 L
You will have to give me a little bit more of the context of that.
Is it self-generation 25 :
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or cogeneration?
A J
2 g
self-generation.
3 a.
I will have to defer answering 4
that question for the moment until I get seme more l
5' information on that.
d MR. SELEOWITE:
Would Mr. Carter be the 7
person who has information on that or some member of 8
your staff?
9 Mr. carter, if the commission has no l
10 objection, perhaps I can repeat the question to you and 11 see where you are and in your booming voice you can ansi rer.
12 I an asking about the self-generation survey that was 13 reported to the commission.
Are you familiar, sir, 14 with when that survey was undertaken and when it was p
15 completed?
Would it have been sometime prior to 16 July 19 of '797 l
17 MR. CARTER:
Yes, it was prior to the is submittal of the report of July 19 of 1979.
I 19 MR. SELEOWIT5:
Was it a survey under-20 taken and completed in just the fsw months before 21 that, or had it been undertaken several years before 22 and was very complets?
23 '
MR. CARTER:
In the year prior to the 24 TMI accident there.had been substantial analysis of 25 cogeneration throughout the state of Pennsylvania.
messionen o rmnanna. ma.-e m. imamw.aw me. =- en. mm j
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l Cherry - cross 2596 t
^
1 The PEA companies were preparing a report which I 2
believe was furnished to this C a. mission and it was as 3
part of that effort that we made this survey.
~
4 MR. SELKOWITZ:
I see.
1 l
5 TEE CHAIRMAN:
Just to make sure, Mr.
i 6
Carter has been sworn previously, has he not,~Mr.
7 Russell?
i 8
MR. RUSSELL:
Yes.
S BY ER. SELKOWITZ:
10 g
Mr. Cherry, it says on Page 23 of 11 the report--and Mr. Carter perhaps can land an ear--
12 that the companies will follow up that survey by d
13 quest.ioning all of the respondents and the indicated i
14 restrictions, qualifying reasons, et cetera, as to 15 their limited ability to operate self-generation' 16 units.
l 17 aas thnt followup taken place?
gg A
I defer that to Mr. Carter as well.
19 NR. SULKOWITE:
Mr. Carter, were you
)
go able to hear the question?
21 HR. CARTER:
Yes, I heard the question 3
and I was looking at one of our responses, E-26, where I
we talk about efforts to convince indurtrial customers y
y
'to install cogeneration as a source of power.
s 25:
MR. SELKOWITE:
Are you differentiating, monamaan e =a-==r-sec.- sr m. 3.acewiu.cw AVE. - #-
N WSSS
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gentlemen, between cogeneration and self-generation?
']
l THE WITNESS:
I am, i
3 ER. SEk,EOWITZ :
I know Mr. Cherry made 4
that distinction and I am wondering, Mr. Carter, this 5' particular report talks about self-seneration and you 6
seem to have referred us to the cogeneration study of 7
PEA.
I MR. CARTER:
Well, I believe it has been 9
stated earlier that chose customers who are self-10 generating, for instance Bethlehem Steel, have been 11 generating to the maximum of their capabilities, and 12 they generate on an economic basis the same as we Q1 13 operate in the pool, so above a certain level it would 14
' not be economical for them to run their generatorz 1
25 more intensively.
16 BT MR. SELKOWITZ:
17 a
well, what is self-generation and 18 what is cogeneration if there is a distinction ~to be 19 drawn?
'~ '
20 L
" ell, the distinction between the 21. two is self-generation is simply a customer producing i
22 his own electricity.
l 23 g
Totally?
24.
L Totally.
25 a
okay.
meammasse. - - use.-ar m.nas:nnsamw.ws.==- m. mas
Cherry - cross 2598 f
i l '
L Cogeneration is a combination of 2 - clectricity production and the use of waste heat SI from the generation process to more efficient 1[ use 4
the fual.
5 G
Fine.
Now, with those distinctions 6
in mind, let me pose the question again.
It says 7
here that the companies will follow up the initial 0
surveys to talk to those people who had reasons why 9
they couldn't self-generate.
10'
'I am wondering whether that followup
'd, has taken place.
12 L
We have had a cogeneration study
,,O 13 which has been carried out over the past several 14 months which is essentially complete right now which i
15 attempts to evaluate cogeneration opportunities in 16 all three companies.
17 -
0 Is that going to be part of the 18 master plan?
19 L
Yes.
And we have identified in that 20 survey some 120 megawatts of possible cogeneration 21 opportunities in the two companies and we are following 22 up on those opportunities.-
33 So it is my understanding that ri'ht g
r 24 now we have in excess of 200 megawatta of cogeneration 25 already in the GPU nystem.
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i G
But did you identify any additional
]
2 self-ganeration opportunities?
3 COMMISSIONER JOHNSON:
I didn't' hear the 4
answer to your previous questa.on.
I don't know if the 5
mike is not working or what.
6 MR. SELEOWITZ:
Perhaps the Reporter 7
could read it, 8
COMMISSIONER JOHNSON:
You are talking 9
about 200 megawatts of cogeneration?
10 THn WITNESS:
we have currently in the j
l 11 GPU system 200 megawatts of cogeneration already in 22 operation.
13 COMMISSIONER JOHNSON:
Would you breah 14 that down or break out the Meted portion of that?
15 THE WITNESS:
I would have to come,back to 16 you with the Meted portion.
About half of it is 17 Pennsylvania and about half of it is in New Jersey.
gg I don't immediately recall the breakdown between 19 Penelec and Meted.
2D THE CHAIRMAN:
If you could provide that 21 for the Commission?
22 THE WITNESS:
Certainly.
23 BY MR. SELKOWIT :
p; 0,
How much of the two hundred 25 megawatts of cogeneration has come into being since sea. - ar m. s.nasunu.aw me. -- m. in ta.
r.
Cherry - cross 2600 4
1-the accident?
2 A
Hone of it.
3 g
Now, bach to my original question:
/r Have you identified any opportunities for self-5 generation among these companies that responded with 6
the reasons why they couldn't do it?
7 A
I don't have the information avail-8 able as to the fcilowup regarding your question.
I 9
think I would have to query members of my staff and 10 perhaps Mr. carter's staff as to the status of that 11 followup activity.
12 0
could you provide such an answer 13 in w'riting?
That would be sufficient.
14 L
Yes.
25 0
And also would you include, l
16 please, as you state on Page 23 any alternatives for 17 offsetting the impediments to such use if is economically practical that might have been dis-19 covered by such followup?
20 A
okay.
I should say to you,~Mr.
21 selkowitz, that we are quite actively trying to.
22 develop cogeneration packages that would be l
25 }
attractive to both industrial and commercial customers, i
24l and we are trying to overcome some of the impediments 25 which have existed in the past.
They are not all mesmanew a mansa,u. me. - e a s.nexwiu.ow avs. - nn:x:navne, pa..in sa
.n' Cherry - cross 2601 1
economic.
There is a range of reasons why people'do
]
3 not opt for coganaration or self-generation.
3 0
on Page 24 of the report, also in 4
response to Paragraph 6 of the June 15 order, there is 5
your response to the need for the implementation'of e
6 a voluntary load curtailment program, and I 7
wondered whether since the date of that order any of 8'
your customers, commercial or industrial, have, 12.,
9 fact, voluntarily curtailed the lodas say at times 10 of system peak?
11 L
I would defer that to Mr. Carter.
12 MR. CARTER:
No, the voluntary curtail-0 13 ment is part of set procedures which are implemented 14 at very critical time periods and only for short 15 duration, and we have not asked our customers to do 16 that.
17 BY MR. SELKOWITE:
IS S
Have you asked your customers on 19-- a voluntary basis to simply reduce peak demand on a 20; regular basis daily throughout the GPU system?
21 L.
Let me respond to that.
We have 22 had in place over the past five years a, we think, 237 aggressive loaf management and conservation effort 24
- particularly focused at the industrial sector,'and 25 the cornerstone of that activity was the setting'up I
-.- mnasius. mc.-arm. i.earwa.r w aw. -- PA. mIR
- 3..
Cherry - cross 2602 i
1l1
^
of energy management committaes in a number of our 2'
larger industrial customers' facilities.
Through those afforts on a systemwide 3
4 basis, we have conserved or shifted almost 600 mega-5 watts of peak capacity and a little less than half of 1
6:
that has been in Meted and Penelec and I think we 7 g rerer to the details of those load shifts in. I think vi S
it is E-27.
9 So many of the hinds of voluntary' reduc-10 tions in use or load shifts that you are talking about l
11 g have already been accompli =hed through the use of those 12 energy management committees and through the urgings O
d 13 of our company representatives in dealing with these 14 various organizations, and they have accomplished this 15 on bases which they find to be in their interest and in 16 the interest of efficient use of energy.
17 4
Do you consider it even more g
important since the time of the accident to achieve 19 the goals of that program?
3 La Absolutely.
21 B
And can you describe to us how g
you have intensified those efforts since the 33 accident, if, indeed. you have?
/
24 A
Our company representatives,'tiae 25 service representatives, have been in constant W
6 y
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./
Cherry - cross 2603 1
communication witi these various energy management 3
committsas pointing out to them the increasing I
3 cocts of electricity and trying to convey to them the 4
urgency of managing their energy affairs.
5 The companies we believe have responded 6
well over the period of the program and they continue 7
to respond.
I should observe, though, that the actions 8
that have been taken have been in effect, our ability 9;
to get the kind of easy conservation, the stuff that 10 is obvious and easy to get at and obvicusly cost-11 effective, 12 :
The industrial organizations what we 13 serve, however, are unable in most cases to produce 14 products without using c, certain amount of energy 15 absent some additional help such as changing out of i
161 motors, old motors to energy-efficient motors, more 17 sophisticated computer management of energy-using is facilities.
19l So I think the challenge that we have I
20 in this voluntary program is to maintain the gains 21 that we have already achieved.
The next step of our g
activities, and we outline these activities in the 23 master plan, is to go beyond what has already been 24 achieved on a vol'untary basis and begin to move into i
25 areas where hardware changes, very strong economic wennouns a -- nom. - sr u.amanen.s.aw m - namassavaa. pa. m ra y
+,
Cherry - cross 2604 1
incentives, and in some case mandatory measures are
^
1 required.
We think we have gotten all the easy stuff.
3 our challenge is going to be to maintain 4
those gains and then, to go beyond that, the program 5
has got to get a lot more aggressive, a lot more inno-6 vative, and a lot tougher.
7 0
sow many people have you ad5ed to 6
the program since the accident?
9 L
I don't know what you mean by 10 added to the program.
11 g
Well, it seems to me, sir, you 12 just described what the program has been doing over O
13 the last several years, and my original question was 14
' how you had intensified these efforts since the 15 accident.
16 so let's get more specifici sow many 17 employees have you added to the company's efforts 1S" since the date cf the accident? -
l 19 A
We haven't added any people to the 20 company's efforts since the accident.
21 O
You mentioned earlier today as 23 part of some additiional direct I guess it would be,
- 22) corroct me if I am wrong, that it was your opinion that l
n 24 the urcnium cartel was not going to have a sigtiificant v
25
' impact on the United states electrical energy market.
H
.,, wonamnen a manssas. me. -ar s. smenwn.um ans. - wammissues. ca. mia 1
e,
c, Cherry - cross 2605 i
II Is that correct?
3{-
A That is not what I said.
3 4
What impact do you see the uranium 4
cartel having on the market here in the United 5
States?
6 MR. RUSSELL:
Are you assuming that there 7
is one?
8 MR. SELKOWITE:
Well, if he feels there 9
is none, he can tell me that.
He just told me he 10 thought my characterization of there being no impact t
11 was incorrect.
12 THE WITNESS:
No, I just said that I 13 thought your characterization of what I said was'
)
14 incorrect.
15 BY MR. SELKOWITS:
16 S
All right.
What do you think about i
17 the subject of the uranium cartel as it impacts the is U.S. market for electricity?
19 :
-=,A I think the statement that I made 20 earlier, Mr. Selkowitz, was that I. thought that the l
21 prospect of a uranium cartel substantially impacting 21 the United States uranium market was extremely 25 unlikely.
241 4
Perhaps I am having difficulty a
l 25 hearing.
Did you say "a uranium cartel"?
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Cherry - cross 2606 I
^
1 A
Yes.
7 G
Ly that ace you assuming there i~s 3
in existence no such cartel?
4 L
I neither assume that there is nor 5
that there isn't.
I said a uranium cartel,whether or 6
not it exists, is unlikely to have an impact on the 7
U.S. uranium market.
8 9
Are you familiar at all with the 9
difficultics that the Mestinghouse Company had with 10 the delivery of uranium fuel?
11 L
I am somewhat familiar with those 12' difficulties.
O 13 g
And are you aware that the' reason 14 given for the inabiliu3 of Westinghouse to meet 15 those commitments was a uranium cartel?
16,-
L I am aware that one of the reasons 17 that was stated related to the existence of a IS uranium cartel.
19 n
Do you agree, sir, that the diffi-20) culties that Westinghouse had had an impact on the 1
21:
U.S. market for electricity?
i 22 MR. RUSSELL:
On the U.S.--
23 MR. SELKOWITZ:
On the costs to U.S.
24 producers of electricity.
25 :
THE WITNESS:
I believe that the massinaca a mansna: sua.-sr x. ame: wn.unr avr. ---una, cA wtta i
i I
1 -
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l e
Cherry - cross 2607 l i I
1' Westinghouse difficulties were one of the contributors 2 }. to the price rise which occurred in the uranium =arket i3i in the middle seventies.
4 BY ER. SELKOWITZ:
5 4
And not only did they cause an 6-increase in the prices of the uranium market, but they 7
in turn have had an effect on the prices of the 9
8 services that electric generating utilities provide, 9
is that correct?
l 10 1
I believe that is correct, yes.
11 MR. SELKOWITZ:
That is all the questions 12
'I have.
Thank you very much.
13 THE WITNESS:
Thank you.
14 THE CHAIRMAN:
Miss Dufour.
15 3Y MS. Doroun:
16 4
I only have a couple questions, 17 nr. Cherry.
x. selkowit= covered most of mine.
18 In your response E-30, although you 19 didn't include it on' paper here, are the factors that 20 you enunciated, have they been calculated into the 21 cost per kilowatt hour anywhere in your paperwork?
22'-
A Which factors?
23;'
S All of the factors thrt you' cited 24 in response to the Interrogatory, insurance costs, C
25. commission costs?
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Cherry - cross 2608
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1 L
They are all in there.
2 g
All of these are included in your 3
cost per kilowatt hour now except the ones that we 4
have -inst gone over that were excluded?
5 L
Well, I think 2-30 describes--the 1
6 response to E-30 describes those costs which are 7
alreney included in the earlier exhibits and iaenti-O' fies the level of costs for those costs which are 9
not included.
10 g
Do you have a calculation for the 11 cost per kilowatt hour with those that have not been l
12 included?
-.O 13 L
No, I have not made such calcula-14 ticas.
15 g
Are the load reductions described 16 in E-27 primarily the result of industry efforts?
17 L
They are primarily the result of is efforts in the industrial sector, yes.
19 g
Without prompting from Meted?-
20:
L No, that is not correct.
The '-
21 results we believe were accomplished in respons~e to 22 the urgings of the GPU companies to our various 23 industrin1 customers.
As a result these industrial C
24 customers took voluntary actions to more efficiently v
25' use the energy they were using or to shift energy use manamen o mansnar. nee. - sy n. w ar. - rmaise:ns. n. mis 1
D n.
M
04' Cherry - czcss 2609 1
to off-peak times in response to the discussions and
]
3 information and so on that was brought to them by our a
3 service representatives and which was further i
4 einbcrated and daveloped by the various energy 5 !
management committees in the industrial organizations.
6
.2 4
can you briefly give me a history 7
of when Meted began instituting award programs for 8
conservation efforts?
i 9
L I think it began back in the 73-74 10 period.
)
l l
11 S
Eave you stepped up any awards
)
l 12 since the accident or conservation efforts?
13 O!
L No, I think in response to Mr.
i 14 Selkowitz's question I indicated that we had intensi-15 fled the level of communication between our service 16 representatives and the companies.
However, we'
~
l 17 had not added any people to that effort.
i la Again, I th4nk the challenge that we 19 have is maintaining the gains that have already been i
20 accomplished.
I believe it is going to be very i
21 difficult on a voluntary-urging basis to make any 22 substantial additional gains,, particularly in the 23 industrial sector.
24.
O.
nd lastly, canyou tell mer4 o is h
25 represented on the customer energy. management
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._..m-I Cherry - cross 2610 l
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1 committees?
I 2
I think it varies from company to a.
j f
3li company and I am not able to provide a gensral i
4!
description of the individuals that are on there.
5 They are kind of at the intermediate management d'
level, maybe the second line supervisor level.
7 G
So that you don't draw any of 8
your customers into a committee?
That is not what 9
you are referring to?
10 L
No, these are individual committees 11 that do not have any GPU representatives on them, but 12 rather are comprised of individuals from the L
13
~
i particular industrial operation, like Bethlehem Steel, 14 for example, they have an energy committee rhich deals 15 with these kinds of managers.
16 HS. DUFOUR That is all I have. ~-
~
17-MR. WISE:
Hadam Chairman?
18 TEE CHAIRMAN:
Mr. Wise. "
19 MR. WISE:
With permission of the-20 Commission, could I ask some additional questions?
21 THE CEAIRMAN:
Go right ahead.
gg, BT MR. WISE:
23 G
Mr. Cherry, is there any evidence v
2j of record which indicates the percentage savings of 25
'.NetEd's bulk purchases off-peak versus peak power monamacu wansnas me.- sr m. :.oczwiu.oW Ayr.- Mamnesuno. M. mt2.,,
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Cherry - cross 2611 1 } periods?
l 2{
In other words, how much of a percentage 3
savings does Meted realize when it purchases all power 4
off-peak?
5 L
Rather than on peak?
6 4
Pardon me?
7 L
Are you interested in the differen-0 tial in cost between on-peak and off-peak purchases?
9 3
Yes, I am.
10 L
I am certain there are records of 11 that.
I am hard-pressed to list them.
- 12 g
Do you have a percentage figure as
()
13 to a percentage savings that is realized?
14 L
The difference in on-peak rates 15 and off-peak rates is a factor of three in terms of 16 energy cost, if that is the number you are after.
17 How, what is actually realized in a transaction is gg something that I think you would have to go back and 3
19 look at.
But if you are just interestad in the 20 relative PJM running rates say on-peak and off-peak, 21 it could be as much as a factor of three.
21 g
Three times?
23 A
Yes,-60 mills versus 20 mills ~.
24, 3
Say thero is a thousand kilowatt
)
-s 15s hours.
That would cost three times as much to purchase
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.o Cherry - cross 2612 l
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on-peak as off-peak?
s 2'
L It could.
l 3
g What parcentage of the purchases i
4 that Meted currently makes is off-peak?
5 L
I don't know the answer to that.
6 9
Is that percentage increasing?
7 L
I don't believe so.
8 4
Getting back to the questions I 9
asked you concerning growth of the system, could you 10 briefly describe the sampling methods used in your 11 predictions?
12 L
The sampling methods for what?
O 13 0
Used to predict system growth.
14 L
You want me to describe the model 15 we used for forecasting?
16 g
Yes, if that can be done briefly.
17 L
It can either be done very briefly 18 cr at very great length.
The description of 19 methodology,by the way, has been provided to the 20 commission's staff as part of their review of fore-21 casting methodology by the Pennsylvania companies, so 221 they have already received a very detailed description l
l 23 of the =sthodology which is used.
1 24 very briefly, we use an end-use approach 25 to forecasting where--
menus,aan,. mansnar sue. -ar w. r.earwas.ow er.- nuurmainee. n. rssa.
w
4 Cherry - cross 2613 f
1 g
I am sorry...
O 3
A An end-use approach to forecasting, 3
where the use per customer is estimated through the 4
number of devices or appliances the particular customar 5
has and the energy use by that customer.
The,use 6
per customer is then summed over all customers for a 7-particular class,' residential, say, and then we-6 develop a forecast of the number of customers from 1
l 9
some economical demographic models we obtain from 10 outside forecasting services, and then overall'use by 11 customers.
12 We follow an analagous approach kind of 0
13 in the industrial sector and also in the commercial 14 sector.
15 g
would your model consist of samples l
16 of use by customers on the system itself?
17 L
The use per customer in terms of 18 appliance usage, heating usage, industrial and commer-19 cial usage is based, in part, on load research' data 20 which has been carried out in the company over the 21 past ten years.
22 g
It would involve what, looking at 3
records for classes of ratepayers?
24 A
Well, it is based on the load s
25 research efforts which we carry out which studies the manna.ex. mansmas. nar. -ar x. mazem.r w ava. -:unnmanne. n. in en
g m. --- ~,w~sxx,n_u-=,
~=,r_,-ww=== w =
--cm =
- w:w _
Cherry - cross 2614
{a_.
I behavior of various rate classes and it is also based 2[
in part upon z.n analagous use survey that we perform.
e 3
Last year, for example, we sent out something like i
4 50,000 survey forms and received some 30-odd-thousand 5
responses from various customers.
6 g
would these be overall classes, 7
industrial, commercial 8
L No, the survey to date has been a 9
residential survey.
The industrial and the commercial 10 data has been developed independent of that kind of 11 survey.
We plan to do a commercial survey next year.
12 l
G What are some of the typical' 13 questions asked in the residential survey?
14 L
Bow many typical questions would 15 you like?
I have the whole survey here.
If you
)
16 would like to look ct it after the proceedings, you
~
17 are welcome to it.
gg g
What general areas do they cover?
29" L
Well, it covers number of appli-3 ances, level of insulation, type of dwelling, type l
21 of heating.
We tried to get an income level.
That 22 is rather difficult in a survey of this type, future y
plans for appliance purchases, the level of temperature that you keep your home at.
Do you work during'the dayP 2j Don't you work?
Do you wash your clothes at 9:00' 25j I
monumen a mansas. wa. - sr m. i.eemvn.:.ow avs. - naamsonna, n. mia
.~
w.__.
cherry a cross 2615 t
1 o' clock at night or' 7:00 o' clock in the : corning, that
]
2' sort of stuff.
There are some 48 questions that we 3.
have in the survey.
f MR. WISE:
All right.
That is it.
5 Thank you.
1 0
THE CEAIRMAN:
Mr. Cherry, maybe you 7'
can help me understand some of your testimony that 8'
you gave this morning.
S' THE WITNESS:
I would be happy to.
10-THE CHAIRMAN::
How much did you say l
11.
was the raserve supply of uranium?
t 12 THE WITNESS:
I believe what I said was 13 G
that the defined reserves, that is reserves that-we 14 know, cost, degree of difficulty for extraction, 15 and so on, are in excess of 600,000 tons of tranium.
16 f.
Those reserves are sufficient to support the lifetime 17 ;
needs of all of the existing nuclear power plants in IS the United States.
19 Actually, they are sufficient to' support j
20 somewhat more than the existing capacity.
I think up i
l 21 to a hundred plants could be oupported by the defined, i
22 proven reserves that we have in the United States.
I 23 believe that I said beyond that, there are potential 24 resources, that is resources that need further 25 definition, more drilling, more investment.
These i
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l Cherry - crone 2616 i
1.
I
?
1lI resources are somewhat more speculative than the t
R-(
l 2
stuff which has been drilled out extensively and 3
very well known, that those potential resources, when added to the proven resources or the defined t
5 reserves that we have, would be sufficient to, support 6
the lifetime needs of ubout 400 nuclear power plants 7
in the United States.
8 TEE CHAIRMAN:
Are you aware of an 9
estimate put out by EnnA which indicates there'are 10 approximately two million tons of uranium in reserve 11 in the plus probable category?
12 THE WITNESS:
Tes.
That is the' number v
la, -
which I relate to when I speak of the probab1'e and 14 potential resources, and that two million tonsris 15 about that required to support the lifetime needs of 16 400 nuclear plants.
17 A nuclear plant requires about.5,'000 Ig" tons of uranium for its life.
19 THE CHAIRMAN:
I am sorry, maybe'it 20 is just a dense afternoon.
4 21 THE WITNESS:
It is probably my' fault.
22 THE CHAIRMAN:
Get me from 600,000'to 23 2 million.
First of all, you said 500,000, new you 24 are agreeing with ERDA's estimate of 2 million.
25 THE WITNESS:
Okay.
There are levels
- a.:
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mas
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e d
Cherry - cross 2617 i
2 of definition of reserves.
Starting from the stuff q
J 2
you are really sure of, thct is you have a reserve 3:
staked out, you have drilled holes every 50 feet, 4
so you know eractly how thick the other body is, you 5
know the grade, you know where it goes, you know how 6
many pounds are in it, and you know pretty much how 7
much it is going to cost you to extract those pounds, 8
that is a defined reserve.
That is the 600,000 tons.
9 okay?
10 You go from the 600,000 tons.
When 11-you get beyond that you get to more speculative 12 reserves.
These are reserves that may have had some O
13' exploratory drilling on them so that there is a 14 confidence that there is uranium there and there k.s 15 some understanding of the grade.
There may not be 16 complete definition of the o re - body, how far it 17 goes, whether it has discontinuiuies in it, whether 13 there is water that has to be contended with in i
19 developing the mine, and you get more and more 'specu-20 lative to the point where.you, complete a category of 21 resource which is called " probable."
Okay?
22 ;
When you go from probable, which'is up
'23 to about the two-million-ton level, you get even y
more speculative and you begin inferring reserves 25 from geology.
You say I know in this kind of sandstone agogggggger a naa-ae. 333,.= EF E.1dlBCIEME.T.OW AWE.== **==""""""* PA.1:Ftit-m -
.y
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.=m l
cherry - cross 2618 I
we found uranium before.
There is lots of this S gl standstone here and there are even a few little l
i 4
3 'I uranium outcroppings here.
so you begin estimating 4 :
how much uranium there might be in that kind of 5
reserve.
That is a potential reserve.
6 so those are the three levels of' ~
7 speculation and the challenge for a growing industry E
as the nuclear industry had been was to convert some 9
of those probable and potential resources into proven 10 resources, and that requires money and drilling and
~
1 11.
time and effort and requires an incentive for
.I il companies who are in the uranium business to go out gW 13-and drill those holes and define those reserves.
M I think we see a slackening of that kind
~
15 of effort now because the nuclear industry is' net 16 e=panding, and there is some degree of comfort"w'ith-17 the defined reserves that we have in terms of their 10' ability to support at least the plants which are 19 currently committed.
So I hope that removes some of 20.
the confusion.
\\
21 There are a lot of numbera, I must admit.
21 TEE CEAIRMAN:
I think the definition of g'
going from defined to probable to whatever the third
..M y
one was--okay, what is the normal expe=ted life'of 25; a nucient plant?
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Y I
1 TEE WITNESS:
We usa for our planning O
l I
J 2;
purpcses 30 years.
3 THE CHAIRMAN:
30 years?
4:
TEE WITNESS:
Yes.
5l
- nE WITNESS:
It seems to me or my l
6 recollection is that I have read somewhere reports 7
indicating that we have a--again I don't want to use 8
a term that isn't appropriate, whether it be defined 9
or whatever~n 25 to 30-year supply of uranium.
10-Are you aware of any such reports, and l
11 I am wondering, you know, how does that coincide with l
12 what you are suggesting which is we have got enough O
13:
uranium for the life of, you know, including from 14 what I understand you to say, including plants that 15 are presently under construction?
16 THE WITMESS:
A lot depends on the 17 assumptions you make on both demand growth and supply 13 growth.
You can take a static world as I did'just a 19 l ninute ago and say for the existing plants and for the 20" defined reserves we know we have enough in the ground 21 today to support the lifetime needs of the existing 22 plants.
That may translate into a 25.to 30-year 23 reserve, 25 years plus, and that implias that the 24 person making that judgment is dealing only with the I
defined reserve.
25
- ~ '
i
._..._.,__.m---.-
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Cherzy - crces 2620 1
THE CHAIRMAN:
When you say e:i:isting, 2
you mean those cuzrently operating?
f 3
THE WITNESS:
Yes.
4 TEE CEAIRMAN:
Not any under construc-5 tion to operate, be it one year, two years, or three 6
years from now?
7 TEE WITNESS:
As I say, I think'thei B
defined reserves can support the lifetime needs of 9
about 100 plants, so that would include a number of 10 the plants currently under construction.
(
11 TEE CHAIRMAN:
Okay.
12, MR. BARASCE: Madam Chairman, I couldn't 13 hear the number.
- "- 0 14 THE WITNESS:
About a hundred.
15 THE CHAIRMAN Mr. Barasch.
16 MR. BARASCH:
I don't want to further 1
17 complicate the proceedings, but I am confused end-gg maybe I could just make my confusion apparent. 'T 19 thought Mr. Cherry said something about 400 plants, I
3 and now I heard a hundred.
~
l gg MR. RUSSELL:
Could I ask just one'or g
two questions that might clarify soms of my g
confusion?
THE WITNESS:
I am sorry I have'been g
~
25 so' confusing.
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i
l Cherry - cross 2621 i
l' THE CHAIRMAN:
So we keep some sort of Zi order to it, first of all can you clarify the 100 and 3
400 which you used, and then,Mr. Russell, you enn ask 4
some questions.
5 MR. RUSSELL:
Mine had to do with the 6
100 ar.d 400.
7 Tas esAznMAN:
All right, then ask your 8
question, Mr. Russell.
~~
9 MR. RUSSELL:
Thank you.
10 BT MR. RUSSELL:
11 4
Did I understand you to say the 12 lifetime requirements of a present vintage nuclear O
13 plant is about 5,000 tons of uranium?
14 L
That is right.
15 g
And 5,000 times 100 would be about i
16 500,000 tons, and is that in the range of the 600,000 1
17 tans that you talked of as being proven?
gg L
That is right.
Ig ;
E.
Now, 400 plants at 5,000 would be 3g 2 million?
1 g
L Correct.
l 22 4
And does that tie in with the 1
1 23 probable that you are talking about?
L Correct.
24 g
l MR. RUSSELL:
All right.
That is what I
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Cherry - cross 2622 I
have.
2 THE CHAIBMAN:
Mr. Barasch.
3 EY IGt. BARASCH:
4 g
In other words, what you are 5
saying, nr. Cherry, is we have enough for the life 6
of ~all of the existing. nuclear plants and a hundred 73 would be approximately the number of existing nuclear 8
plants?
9 L
Existing plus those under con-1 10 struction.
1 11 g
Approximately a hundred?
12 a
A little more than a hundred.
b" 13 g
And they would all be taken care of 14 out of defined reserves?
s 15 A
That is right.
16 g
And the 400 plant number lines up 17 with the probables?
18 A
Right.
,?
39 O
Thank you.
That clarifies it for I
s 20 i
L' It is a confusing subject, I must-21 3 j admit.
We go through this internally every time we 3
start talking about reserves and resources and c-pr hables and I have to sit down and work the numbers 24 25.
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cherry - cross 2623 l
A 1
TEE CHAIRMAN:
Your underlying assumption s 7].~
2' relating to supply and the recovery of uranium, be l
3-they the defined or the probable reserves, is any' l'
4 part of those underlying assumptions the use of a 5
breeder reactor?
l 4
THE WITNESS:
No.
s 7
TEs CEArauaN:
I think that clarifies 8
this morning's atatement.
Thank you.
9.
TEz wzTuzss:
sorry if it was confusing.
10 TEE CHAIRMAN:
Miss Dufour.
11 BY MS. DUFoun:
12 4
Not realizing this occurred this O
13' norning, could I ask just a few brief questions.
I 14 missed it when it was going on.
15-
. THE CEAIRMAN:
Go ahead, Miss Dufour.
16 BY MS. DUFOUR:
17 g
Are you familiar with any studies 13 which contradict the uranium supply which we just 19 heard?
T x-i l
20 A
I am not familiar with anything i
21 that contradicts the defined reserves that I have 22 talked about.
I know that there is speculation as 7,3 to what probable or potential uranium exists and I 24 think there is probably a range of speculation'that 25 goes anywhere from slightly over a million tons to
_ m-~
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e
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,o Cherry - cross 2624 1
well in ascess of 600 million tons, depending on the 2,
auther and his particular point of view, but I am not I
3 aware of anything which would contradict the defissd 4
reserve number.
5 g
And in relatien to the probable 6
reserves, isn't it true that there is some question 7
as to the cost effectiveness of extracting those 6
probable reserves and its impact in terms of nuclear 9
power being economical?
10 L
well, I think the figures that I 11 was quoting would relate to reserves which would 12 be extractable under economics which would be at' C.
13 least competitive with the alternative fuel sources.
e 14!
O And that applies to the two million 15 tons that you were referring to earlier? -
16 L
Yes.
17 g
Are you familiar with the is requirements.of enrichment facilities for amounts of l
19[
v.ranina?
1 20 A
Yes, I am.
21 o
Is it true that in the past the 22 amounts required has risen?
23 L
I an not e::actly sure what your e-.
O 24 question is.
25 a
- okay, wall, based on my reading, t
i nsestasAces a DLM tasc. = 27 IL LCCiKWiLLtnr AVE. - SEAmmwJtsst45, PA.175la
Cherry - cross 2625 1
it is my understanding that in order to have enrich-2 ment services provided to you, the utility must pro-3 vide a certain amount of uranium.
4 L
Yes.
5
.a The way I understand it, it is 6
almost not as collateral, but it is not something 7
that you are automatically going to get back, but to 6
get a given amount you have to give a given amount, 9
and that that amount given has risen recently to get 10 the initial amount.
11 Have I lost you, because I won't go 12 into it if I have.
0 13 L
I think I know what you are driving 14 at.
The fact is tha't the government enrichment plans 15 balance the cost of the uranium which must be pro-16 vided to the plants and the amount of energy which i
17 must be put into the plants to perform the enrichment gg process.
Ip In the face of rising energy costs, the 1
20 government has. opted to tilt the balance toward 21 uranium and away from energy input into the plant, 22.
thus causing the uranium feed requirements of the plant 23 to be increased semanhat.
(
y In terms of the cost of the product 25; delivered from the plant, I don't believe this has had m imuni a==-. see. -ar is.t.aeawe.r w avs.- nammisevne. pa. spi;
_. _,...., _ _ _ _ _ _ _ _. -...... = - _ _
Cherry - cross 2626 l>
II e significant impact.
^
2 g
No, I an. not so much concerned I
3 about the cost but the supply, because it was my
/t understanding--and this is a question-that in tha 5
last two years the amount required rose 20 percen::
6 and it is expected to rise another 20 percent in' 7
the near future, and I am curious if that is true, O
to your knowledge.
{
9 A
I know it has increased over'the 10 last couple years.
I am unaware of any planned 1
l 11 additional increases in supply needs.
I shoul'd 11 point out, however, that the uranium which is put
{..
13 into the plant in areess.of some equilibrium level 14 is net lost but rathe:
.s stockpiled in the form of 15 processed tails, and those tails can be reprocessed 16 or reworked at such time as the economics mah rs'ense, 17 so you don't really lose that uran'ina.
18 It is maintained.
19 S
Except that we don't have 1
20 currently reprocessing facilities, do we?
21, A
No, this isn't reprocessing'in the
,. t, sense that you and I might talk about it.
l
,D E
okay.
24 A
It is really the reclaiming of the 25 Uranium 235 which goes through the enrichment plants,
-e
n' Cherry - cross 2627 L
1 but is not delivered to the custc=ers.
2 :
g Okay.
And lastly, do you know 3
what effect that recent increase in requirement will 4
have on uranium supplies and needs for operating 5
reactors, whether your figure of 100 plants being 6
satisfied by 600,000 tons holds true with this 7
increased requirement?
6 L
I think the figures I gave encom-i 9
pass those kinds of variations.
10 MS. DUFOUR:
Okay.
Thank you.
11 THE CHAIRMAN:
Commissioner Johnson.
12 COMMISSIONER JOHNSON:
Mr. Cherry, E-2
/~'s 13 and E-3 put the actual and projected costs in the case
()
14 of E-2 of coal from 1970 to 1980 and E-3 is the
15 actual and projected cost of oil from 1970 to 1980.
ig When did Meted commence or when did 17 TMI-1 actually start on a commercial basis?
What ig year was that?
gg.
THE WITNESS:
1974, September, I'believe.
g COMMISSIONER JOHNSON:
I think I saw in 21 all of these E exhibits a similar kind of layout-for g
uranium, but can you tell me what uranium cost in g
'74 per pound?
24 THE WITNESS:
I think uranium cost in
]
3
'73, if you go back a year, because I think in 874 m--
- -- me.-ar m. t suun.a.ow ave.- sanmsmans, m. :vs s
,m. n,wn.s_ mar:.n -.
x-
-=
-n-
- - ~
1 Cherry - cross 2628
{'
1 they were already in transition, in '73 uranium costs 2
were in the six-to-seven-dollar-per-pound range.
By 3
'74 they were moving up to perhaps in excess of 10, 4
These are kind of general recollections.
Don't hold 5
me down to the nearest dollar.
6 sy '77,
'7s or '77 they were up in the 7
S40-per-pound range.
So they were increasing rapidly S
during the period.
9 COMMISSIONER JOHNSON:
What were you 10 paying in January 1979?
11 THE WITNEBS:
For uranium?
About $11 12:
a pound.
V
\\
13 COMMISSIONER JOENSON:
It cane-from $40 14 a pound down to sil?
15 THE WITNESS:
Mc, the contracts which we 16 had entered into on behalf of Meted and Penalec in 17 the~1969 through 1974 period were being honored'by 18 the suppliers and those contract prices were in the i
19' eight-to-eleven-dollar-per-pound range.
$11.50 'I think i
20 is'the Price we are paying this year.
21 COMMISSIONER JOHNSON:
In other words, g
the other prices you were quoting to me were market 23 prices?
24 THE WITNESS:
Yes, market prices.
I 25 thought that was the thrust of the questions.
monamacn a==-at-mee.-erm.i.osman.s.owave.===- k :::a
- J --
0.
Cherry - cross 2629 1
COIG1ISSIONER JOHNSON:
But this was the
- ]
2 cost to you.
If you hadn't had such an excellent 3
contract which you were determined to see that it was 4
enforced upon the seller, you would have had to pay 5
$40 in '77 instead of about eights is that right?
6 THE WITNESS:
That is correct.
7
. COMMISSIONER JOHNSON:
How oome you 8
didn't do that for coal?
9 THE WITNESS:
I am not sure I am the 10 right person to answer that question.
11 COMMISSIONER JORESON:
Of course this
)
12 is ycur exhibit and you show us that you paid $13.86 i
(9 13 in 1973 and $26.09, just dsuble, the next year.
Then 14 in '75 you paid $30 a ton.
These are not market' 15 prices.
This is what Meted paid, isn't that right?
16' THE WITNESS:
That is right.
17 COMMISSIONER JOHNSON:
Now, I am'not 13 going to ask you the same question about oil, because 19h if you had an option about that price, you would be wheae 20 Carter : rants to stay.
I am talking about President 21 Carter.
22 THE WITNESS:
I thought you meant this 23 Mr. Carter.
COMMISSIONER JOHNSON:
No, we will talk 25 to him when he gets here.
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Cherry - cross 2630 i{
1l Can you offer an opinion as to why 2f there was an escalation in the price of coal?
S' THE WITNESS:
You are referring at. this 4
time to the market price of coal?
5 COMMISSIONER JOHNSON:
No, what you were 6
paying.
The market price may have been higher; ~ is 7
that right?
0 THE WITNESS:
Yes.
9 COMMISSIONER JOENSOE:
You weren*t 10 paying more than the market price?
11 THE WITNESS:
No.
My belief is the cost 12 of coal increased for a number of reasons.
One was
{I 13 that just following the oil embargo there was a higher 14 degree of awareness on the part of all suppliera of 15 energy fuels as to the value of their material, and 16 I think suppliers in general became more aggressive 17 in the prices which they were looking for and"which 18 they were able to receive.
~~
39 I think in addition to that, the" -
20 unsettled oil market caused more people to look'at 21 coal as a primary fuel and created some demand 22 pressure in the coal market which perhaps didn't 23 exist before.
24, C020tISSIONER JOHNSON:
That was an' 25
- Pensive look, wasn't it?
. seanssas me. er u. amemw avs.- naamssume, ca..sms l
i Cherry - cross 2G31 i
1 TEE WITNESS:
It was a very expensive l
[}
2 look.
4 l
3 Additionally, there wore emerging l
4 environmental regulations which were adding to the l
5 cost of coal.
There were mining, health, and 6
safety changes which were occurring which was in'creas-7 ing the unit costs of production and decreasing the
~
O productivity in the mines, and all of those factors 9
coming together caused a rather significant runup in 10 the cost of con 1 over that period.
11 COMMISSIONER JOHNSON:
300 percent in a 12 matter of five years or six years?
D TEE WITNESS:
That certainly was the 14 result.
15 COMMISSIONER JOHNSON:
You don't know 16 the impact of the Onited Mineworkers
- contracts on 17 the price of coal, do you?
13 THE WITNESS:
I don't specifically know 19 the impact of the centract on the coal cost, no.
20 COMMISSIONER JOENSON:
But would you 21 agree that the impact, whatever it was, in no way-22 justifies a 300-percent increase in the cost of ocal 2y which you were paying over a period of si=-yes:s*
- 1**7 24 15 :
TER WITNESS:
It would be my guess that moiseman a mansnar nea. -sr n. imenwn.s.aw awe. - mannessana, n. s$t s's" p
W w
__ -., n n_ r.. ~, -. ~.. i c-x._~
u: w,c
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a.
Cherry - cross 2632 1
the contract taken by itself would not contribute 2
that n.uch of a cost increase to the production cost 5
certainly.
4 COMKISSIONER JOHNSON:
Who is your 5.
principal supplier of coal?
6 TEE WITNESS:
We have a number of 7
suppliers, a number of smallar suppliers.
I don't 8
have at hand the list of those suppliers.
There are 9
a number of Central and Western Pennsylvania coal 10 suppliers.
11 COHB 1ISSIONER JOHNSON:
Well, can you 12 give me the names of one or two of the more prominent N'.
13.'
ones?
-^
14 THE WITNESS:
I am hard-pressed to come 15 up with one at this moment..
16 COMMISSIONER JOHNSON:
Do you buy from 17 Consolidated Coal?
gg TEE WITNESS:
I think we have purchased 19 from Consol.
I don't know if our contract is still t
20 in force.
21 COMMISSIONER JOHNSON:
But you have 22 bought from them?
23 TEE WITNESS:
Yes.
24 COMMISSIONER JOHNSON:
Do you know who 25 was Consolidated Coal?
m-~. manexu. mc. - ar x. s.ee:wiu. w ave. - nuoussuna. m. m es
-a Cherry = cross 2633 1
1 THE WITNESS:
At this moment, no.
1 l
~
COMMISSIONER JOHNSON:
Ian't it a major l
j 3
oil company?
f.
TER WITNESS:
It certainly could be.
5 COMMISSIONER JOHNSON:
Who is your 6
b'asic s3pplier of uranium?
I 7
THE wIru2SS:
At this time our 8
primary supplier of uranium is the Anaconda Company.
I 9
COMMISSIONER JOHNSON:
Anaconda?
10 THE WITNESS:
Yes.
11 COMMISSIONER JOENSON:
Thank you very l
12 much.
t O
13 THE WITNESS:
Thank you.
14 THE CHAIRMAN Does that conclude the 15 questions for Mr. Cherry from the parties?
16 Is there any redirect by respondent?
17 ~
MR. RUSSELL:
Could we have a second?
gg.
(Pause.)
19 MR. RUSSELL:
No further questions.
3 THE CHAIP. MAN:
3efore we get to our 21 next witness, wo will take a five= minute break.
g (Short recess taken at 2:35 p.m.)
y1, 24 25 N e tEAngBIAS. Issc. = W 31. 2.80EWILLOW AVE. = MARH903URG. PA. :7512-
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- m.- - -
2634 l
1 TEE CHAI2 MAN:
Mr. 2nssell.
s 3
MR. RUSSELL:
If the Commission please, 3
we have handed copies of various documents to the l
4 neporter which we ask to be marked for identification 5
as Meted /Penalec Erhibits A-74, A-81 and 82, A-8'4 6
through 87, inclusive, X-1, and M-4. -
7 (Pour-page document, aesponse to 8
Commission Trial staff Interrogatory No. 25 and TEIA 9
Interrogatory No. 13, was marked for identification 10' as Meted /Penelec Erhibit No. A-747
~ ~
11 Three-page document, Response to 12.
Consumer Advocate Interrogatory No. 28, was marked O'~
13.
for identification-as Meted /Penelec Erhibit Not'A-81; 14 Multi-page document, the first page of 15.
which is entitled " Metropolitan Edison company, 16.
Pennsylvania Electric Company (Docket No. :-79040308 -
17 Phase 2)," was marked for identification as NetEd/
13
-Penelec E=hibit No. A-82; 19 Two-page document, Response to' 20 Commission Trial staff Informal Data Request,'was-21 marked for identification as Meted /Penalec Exhibit 22 No. A-84r l
23 seven-page document, nesponse,to r.
L 24 Informal Data Request of S. McClaren, Esq., was marked 25 for identification as Meted /Penelec Exhibit No. A-85; mongmann o wanesas. me. - ar u. i.oanwn..ow avr. - naamsauna, m. imar
2635 t
1 One-page do.:tment, Recponse to Cross-2' Eramination Datn Request of John G. Grahan by David M.l i
3 Barasch, Esq., at N.T.
1191, was marked for 4
identification as Meted /Per.elec Erhibit No. A'-863 5
one-page document, headed " Pennsylvania 6
Electrio Company, Increase in 6.5 Mi11 Level Charge 7,
That would Se Required to Recover Energy Costs O
Projected to be Unrecovered (Deferred) As of. February 9
29, 1980," was marked for identifiention as Metsd/
10; Penelec Erhibit No. A-87; 11 One-page document, Response to Cross-l 12)
Examination Data Request of W. G. Kuhns by Ms.' Louise
=
0 D
Dufour of Limerick Ecology Action at N.T. 17754'was 14 marked for identification as Meted /Penelec Exhibit 15 No. E-1; 16 Two-page document, Responses to Cross-17 Examination Data Request of Carl H. Seligson by Ms.
16L Louise Dufour of Limerick Ecology Action at N.T'. - 1942, ig(
was marked for identification as Meted /Penelec Ezhibit 20 80- M-4-)
l 21' MR. RUSSELL:
Respondents recall Messrs.
22; Graham and Hafer.
And if there is no objection, I 23 will finish what brief redirect I have with respect 34 to those and make them available for cross-
)
i l
25 examination.
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,o 2636 n
l 11.
THE CEAIRMAN:
Procesd.
2 3
JOEU G. CRAHAM and FRED D. EAFER, 4
having been previously sworn as witnesses, were 5
recalled and testified further as follows 6
~
s DIRECT EXAMINATION 7
CowT:suso-
~
l6i BY MR. RUSSELL:
o Q.
Mr. Graham, various exhibits have 10 been marked for identification today n= der the names 11 of yourself and Mr. Bafer.
Of those exhibits'which l
12 have been prepared by you or under your supervision,
{.-
13 have you any comments or explanations to make?
m 14 L(Graham)
Yes, sir.
I was responsible 25 for Erhibits A-73, 74, 81, 82, S3 and 86 Erhibit A-82 167 is an explanation of the new insurance policy that is 17 becoming available to deal with replacement power at g
nuclear stations as a result of an accident which
(
g occurred at that station.
- e g
There were questions addressed by 21 Commissioner Shanaman, as I recall, about t51e provi-sions of that policy.
There are a couple of things g
y that I would like to note about this kind of insurance.
p First of all, it was not available prior t
y to the accident.
The offering brochure, the descriptio 2, asettstaAces 3 ftA8Hmat gesc.- rl* E LagsgWEL99' AVE.= MARfttsBUpe, PA. tM 88
Graham /Hafer - direct 2637 l
Ij explicitly notes that it ccms about as a result of 2,
industry action taken after the accident.
3 Second of all, it is insurance that 4
will be available to cover a portion of the replace-5 ment power cost as a result of an outage of a nuclear 6
station resulting from an accident at that nuclear 7
station.
A large part of the cost that is being 8
experienced by Meted and Penelec and Jersey Central 9
is a result of the outage at TMI-1.
10 In participating in the formation of 11 this new kind of insurance, the GPU companies took 12 the position that we ought to try to have insurance 13 that would deal with an outage that was not necessarily 14.
directly caused by an accident at the particular 15 nuclear station involved.
The other, participants 16 did not feel that it would be possible to bring such 17; insurance into existence at this time.
13 My understanding is that the feeling Ig was that the world insurance markets that will reinsure 20 portions of this new insurance did not feel that they 21 would be able to deal with that at this time.-
r-22 should also note that while it appears this insurance 23 will become available this spring, it was not av'ailable 24 at the time of the accident, and, of course, there 25 will not be any relating back of the new coveragis that
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I Graham /Hafer - direct 2638 l
1 is becoming available to our particular accident.
2 I shocid else note that on Page 22 of 3
the offering brochure, there is a description of the 4
fact that member companies in order to be eligible 5 ' to parts cip' ate must be able to demonstrate that 'they 6
would be able to meet the financial requirements 7
associated with the retroactive billing feature of i
8 the policy.
In the event of an accident, each member 9
company is potentially liable for up to five times its i
10 annual premium.
11 This is a very common form of izisurance p
12 billing and insurance premiums.
It is usually not
- q.. -
15 of much consequence because usually the operating s
14 companies would have 'the financial credit available to 15 them to be able to deal with that.
16 aoth in the case of this company and l
17 NHL, the Nuclear Mutual Limited, which is the captive Is insurance company that provides liability coverage on i
19 Unit 1 at Three Mile Island, the companies have raised 1
20 fairly substantial question about the ability of' the 21 owners of the Three Mile Island units to be able~to g
meet the financial responsibility requirement and we y;;
are in the process of attempting to deal with that y
question now.
25 There is some doubt as to our ability to mowneren a nansnu., nee. -sr n. Loczenu.oW AVE. - HAnRMBURG, M. m 22-hil
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Grahan/Zafer = direct 2539 I
i 1;
convince NML, Nuclaar Mutual Limitad, that we would O
3 l.
have that credit available to us.
We do hope that i
?,) f we will be able to tonvince them that we will have 4i enough credit available under the revolving credit 1
I 3
agreement that they will continue to ist us be insured 6
in that way in tha case of NHL and that we will be able 7
to get this insurance in the case of the new company, G
Hnclear Electric.
9 g
P.r. Hafer, of the additional 10 exhibits that have been marked for identification, are 11 there any of them which you are sponsoring and as to 12 which any additional e=planation or comment is 13 required as you see it?
O i
14 L(Hafer)
No, sir, I don t believe s
15 there are.
I think I might note just to be consistent 16 with Mr. Graham that of these new exhibits, I am 17 sponsoring zzhibits A=75, 76, 77, 73, 79, 80, 84, ig!
85, and 87.
~
19 3
Mr. Hafer, you are familiar, are 20 you not, with this proceeding before this Commission?'
21 L(Hafer)
Yes, I am.
22 G
Are you also familiar with the 23 parallel proceeding before the Msw Jersey Board of 24 Public Utility Commissioners involving Jersey Central
.]
25 Power and Light Company and the various utility rate I
sacoststatise a RSARDMAI. INCL =2F N. N.WlL = StAttamstfRG. Pfm 171la
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Graham /Hafer - direct 2640 e
1 ramifications arising from the Three Mile Island 1
2 accident?
3 L (Enfer)
Yes, I am.
4 g
Eave you had occasion to discuss 5
either of those two proceedings with representativc.;
6 of the Nuclear Regulatory Commission?
s 7
A(safer)
Yes.
As a matter of fact, 6
and my staff carve as nha central point of contact 9
by the NRC staff, by their technical people, f6r~'
i 10 information concerning the cases which are going' 11 forth before the state commissions in New Jersey and p..
12 in Pennsylvania.
^"-
O' 13 0
Eas the NRC made any request ~as 14 to data provided to the respective commissions in 15 New Jersey and Pennsylvania with respe=t to those 16' two proceedings?
17 A(nafer)
The NRC has made a great 18 number of requests for data and information concerning 29 the two proceedings, particularly the proceeding that 20 is going on here in Pennsylvania and has been ongoing 21 since the accident.
22 We have supplied to the NRC staff' 23 hundreds, if not thousands, of pieces of testimony and 24 exhibits and various documents that have been intro-25, duced into this proceeding.
I personally have:had
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~
Grahan/Hafer - direct 2641 I
any number of extensive and quite involved conversa-(])
E tions with the individual who is involved on the 3
technical side, the financial side _of the NRC staff, 4
concerning the proceedings, the status of them, 5
the information that is going on here, and I know 6.
for a fact that several members of my staff have 7
been heavily involved in discussions with the staff 6
at the NRC and in supplying them information on an 9
ongoing basis.
10 The principal informatics that has'been 11 supplied to them has related to any questions which 12 can be related to the TMI-1 in rate base show cause 0
13 proceeding and the financial viability proceeding.
14
. However, there have been requests from time to time 15 that the exhibits and testimony regarding the energy 16 clause of Meted also be provided.
17 4
A request was made at an earlier 18
- hearing that the status of the so-called PJR cost-plus-19-10-Percent contract revision he brought up to date.
20 could you enlighten us as to the~ current 21 status of that proposed contract change?
22-L(Hafer)
Yes I can.
I can give 1
23 the parties the benefit of as much as I know about it y'
at the present time.
25-I think it had been reported here earlier
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Graham /Eafer - direct 2642 1
that before the parties wonid agree the parties of r
s 3
the PJM agreement, would agree to filing of the 3
modification with the FERC, they required that it be 4
filed with and receive the approval of the commissions 5
in the District of columbia, Maryland, and virginia.
6 The proposed modification was filed with the D.C.
?
Commission, as I recall, in late December.
That date 8
is in the record here somewhere.
9 It has been before that Commission 10 since that time.
Corporation counsel has now put 11 forth a schedule which would contemplate extensive 12 discovery by the Commission's staff beginning with 13 the deposing of several or at least two of GPU's 14 witnesses next week and would by his own estimate 15-involve a period of perhaps four to six months until a l
16 decision could be forthcoming from the D.C. commission.
17 I have not read the formal document, but 18 I have spoken to our attorneys and it is my under-l 19 standing that while he recognizes that the whole 20 question of the modification may be moot before the 21 decision is ever handed down, it doesn't seem to dis-l 22 suade him from his intent to get into this rather 33 extensive discovery proceeding, i,
24-I should add that corporation counsel 25 I believe is the counterpart of staff counsel in this
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_m Graham /Hafer - direct 2643 l
l' state, where the District of Columbia Commission I 3
on't think has its own legal staff, but rather 3
relies on corporation counsel appointed by the 4
District of Columbia to represent them.
5 similarly, many state commissions will l
l 6
be represented by a inwyer from the Attorney General's 7
sta'ff.
There has also been an indication in that 8
proceeding that several different parties want to 9
intervene, giving further indication that the 10 proceedings could become protracted.
I don't recall 11 the names of them.
I do recall that the one inter-
[
11 venor was the people's counsel I think is the title O
13
' which again would be sort of the counterpart of the 14
- Office of Consumer Advocate in these proceedings, 15 and thers are several others who tend to be more of l
16 the antinuclear groups or that type of involvement l
17 who indicate that thay want to be involved in these i
13 proceedings.
l 19 our witnesses are going to be deposed 20 next week.
That will be the first opportunity for us, l
21 since we are not parties to that proceeding, to have an 22 opportunity to discuss it with the corporation counsel 23 and some of the other parties.
We will make every 24' attempt that we can to point out the importance of 25, expediting those proceedings and allowing this
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Graham /Enfer - direct 2644
^
1 centract amendment to go forward and be filed with 3
the FERC.
3 I think Potomac Electric Power Company, 4
who, of course, is one of the big sellers and who 5
serves the District of columbia, has testified /them-6 selvez that they thought that the cost-plus-10 contract' 7
coul/ in fact work out to be better for their customers G
than the existing split savings, since cost-plus 9 percent could be better than split-savings on ao 10 transactions at all.
~
n That is the price of a split-savings 12 transaction might take it out of the economic scale, g
9.
D whereas the price of cost-plus-10 might keep it in 14 there.
Nevertheless, we have no way of knowing'how
~
15 long that proceeding,will take or whether we will be 16 successful is our efforts to have it expedited.
17 I would say that the company would welcome gg any assistance from this Commission or any of the other 39 parties to the extent they are able or willing"to l
20, become involved to encourage that that matter be i
l 21 expedited, since it, of course, has been Npproved here 22 and I think has the support of the Pennsylvania 23 companies who are members of PJM.
/
24, O
Ynat you have described is the 25,, pr ceeding with respect to that proposed contract asesestaACSI & m-me gagg, gr gt Loggw3LLoWr AWE. ** 388"t7348. 3'A 3F333 I
Graham /Hafer - direct 2645 I
modification before tho District of colcsbin
/)
2 ccamission.
What about the Maryland and virginia 3
status?
4 L
The corporation counsel in D.C. has d
suggested or at least indicated that he might find it o
6 desirable that the D.C.
Commission include in their 7
deliberations the Maryland and Virginia commissions I
as well.
It is not clear to me exactly what the 9
legal basis for that is or how it would be handled, 10 but he has indicated that perhaps it could be handled 11 as a tripartite-type proceeding.
12 MR. RUSSELL:
I believe that is all we O
13 have of Messrs. Hafer and Graham at this time.
14 THE CEAIRMAM:
Mr. Johnson.
15 MR. Josuson:
Madam chairman, we received 16 today some exhibits being sponsored by these two 17l witnesses and have not had an opportunity to inspect 18 these exhibits and, therefore, I would respectfully 19 : request the opportunity-it may not be necessary-20 but at least the opportunity to have these witnesses 21 recalled for further cross-examination at a later-22 date.
23 THE CHAIRMAM:
I think that would only 24 be fair, Mr. Johnson.
)
15 l
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, a Graham /Hafer - cross 2646 l
~
i f CROSS-3XMIINATION
,s, 3
BY HR. JOENSON:
i 4
0 nr. Graham, I believe you indicated 3
that you are the responsible party for Exhibit A-E2.
6 1(Graham)
Yes, sir.
2 g
Now, generally dealing with the E
area of maintenance expense, the maintenance arpense 9
which is presently being deferred or the level being 10 reduced under the austerity program, is it your ~
11 testimony, based upon the material contained in this 12 particular erhibit, that in effect uhat you are doing O
13 is building up a number of I.O.U.'s, that for every 14 dollar in reduction of maintenance expense now there l
15 will be an additional calle.r at some later date?
16 A(Graham)
I am not sure that I mean 17 tr state it is like the Frr.:a oil filter ad.
)
18 O
Pay me now or pay me later?
l 19 l
A(Graham)
Yes.
And I don't know that 20 there is that direct relationship.
I think in the 21 operation of any facility there is an opportunity to 22.
do some delay of maintenance.
23 Generally speaking, the:vork has to'be
\\
- n 24 done, but I think there is some give in the system,
+
25 and I am not sure that there is a dollar-for-dollar wonesaca e,====u tsc. -e u. Locrirns.ow avs. - Mannassuna. PA. Ist12.
I 1
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I Graham /Hafer - cross 2647 I
I relationship e=cctly.
I think some things will
(])
i 2
probably be somewhat less a= pensive if you don:t de l
j 3
them now in total.
l l
4 other things that you put off will and 5
up =osting you a little bit more because you have put 6
them off.
7 g
More than they would have otherwise?
8 L(Graham)
Yes.
If there is machinery 9
that because it was not maintained, you know, does 10 some wearing out, it would have been better to have 11 maintained that equipment along the way.
I think, 12 you know, that is the idea behind the Fram oil filter O
13 ad.
14 4
Then, in effect, it may be if you 15 don't pay me now, you.will pay me even mora later on 16 than you would if you paid me now.
Is that what~you 17 are saying?
18 :
L(Graham)
In some areas, I think that 19 '
is true.
In other areas, I think, for instance, tree-20- trianing there is some ability to absorb some time, 21 and I am not sure that it does necessarily cost you a 7
little more later.
23:
S ifith regard to the maintenance 24
, portion of the deferral, do you have any evidence to s
25 date that any deferrals have had any impact up' n the o
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.a Graham /Ecfar - cross 2648
["
1 quality of service of Metropolitan Edison company and/or 3
Pennsylvania Electric Company?
3 L(Graham)
The answer is I have no 4
evidence that it has had that impact.
I think that the::e 5
are two separate areas to think about.
one is the 0
maintenance of the distribution system, and there you 7
are talking about very small increments of change.
O You know, the reliability goes from 99.3 percent to 9
99.2 percent.
10 You know, it is a very small change.
You 11 think the other area that we have not seen and that 12 ' the customers would not feel is station maintenance g..
U where maintenance of generating units tends to increase 14 their reliability across their lifetime.
We have not 15 at this point seen a deterioration in capacity factors.
16
~-
I think that could occur in the future I?
and there I think the danger is that if we don't do 18 the maintenance that is required at the coal stations, 19 we lose the benefit of the relatively low fuel-20 component of the cost of coal-fired generation.
21.-
3 What keys or what things would you 22 be looking for to determine that you would he' defer-23 ring your maintenance too long?
What types of
' things would have to happen for you to say, "Now'we 24 25 are going to have to stop deferring maintenance.
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Graham /Hafer - cross 2649 1
are going to have to start picking it up again"?
/])
3 L(Graham)
That is not something that I
3 I would see directly.
The operational people would 4
he seeing that and hearing it from their people.
I 5
think te a large ertent it io not something that 6
there are, you know, keys that you see along the way, 7
.but rather it is a matter of judgment that the people 8
who are responsiblo for supervising the coal stations, 9
you know, start to say to their superiors, "ney, I 10 am getting worried that we haven't done this and 11 we haven't done that."
12
.I don't think that it is something that O
13 you see in analyzing computer data or that kind of 14 thing.
I think it is much more a matter of the 15 judgment of the people who operate the generating 16 stations and who operate the transmission and 17 distribution and the substations and things like 18 that.
19 g
When that time comes that you are a
20 ;
forced or you feel it is appropriate to increase the 21 level of maintenance, although, as you have indicated, 22 you cannot say it is going to be a complete setoff l
23 dollar for dollar in incremental dollars versua
'--)
24 the reduced level of dollars today, and, in fact, it 15 may be an incremental amount which you have indicated i.esmanam. -
- me. - sris. wennr.s.mr avs. - naminismiseen, ca. ::rira
.~
- o of Graham /Eafer - cross 2650 9
r I
could occur, won't you again be in somewhat of a 3
financial bind and by that I mean now at this point 3
you~are attempting to put in an austerity program.
I I
I 4
some day in the future rather than going to e normal 5
level, you are going to have to go to what we will 0
call a catchup level for want of a better phrase?
7.
L(Graham)
Yes.
E g
At that point you will need funds 9'
over and above those funds which you would normally 10 require?
11; L(Graham)
I agree with your statements 12 and I would say two things about them, nr. Johnson.
13 one is--and I think this was very well pointed out 14 in the Rogovin report--the nature of the rate-making 15,,
process is that we tend to be allowed dollars as 16' expense items after we have spent them and it is 17I very difficult to convince the regulators to give us 13 dollars for programs of maintenance or operations that 19 ;
we have not yet spent them.
20; on the other hand, if we have already 1
21 spent the dollars, they tend to be allowed as ongoing 23 operating expenses in the rate-making process.
If 23 you think about a ccmpany that has limited fir.ancial
-(,
24 resources and that is cutting down its erpenditures 15 to save cash, in the rate-making process our concern x--. mm.au m._ - a m. i.ec=wru w.wr. - man==une, m. mia l
I i
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Graham /Eafor - cross 2651
,I 1
and our fear is that in order to get bach, we will
(])
2 have to have spent dollars when ve don't have the i
3 financial resources to spend them.
4}
On the other hand, we would hcpe that i
5' we could move back slowly and as our financial health t
6; 1s restored and as'we use less of our limited avail-7 able credit for the financing.of deferred energy end 3-as we tend to have some ability to sell debt 9
securities or equity securities, we could finance 10 those programs as part of the ongoing operation of the li business.
g 12 g
But in any case, insofar as the 0
13 impact of this type of program, the reduction or 14 austerity program in the area of maintenance and 15 construction, what, in fact, it does is it stretches 16 out the period of time when the company will be in 17 a position of having inadequate funds, because not gg only are we talking about the Lamediate situation but, 19 in fact, you have created a situation for the future L
20 which will requira e greater level of funds than 21 w uld therwise be the case?
22 L(Graham)
I don't think I would put 33 it exactly that way.
We are preserving our limited 24 financial capability to finance deferred energy which
\\
25 in the case-of Meted is a very substantial part of the w-.-. mansem. nic - ar x. uw:rwn..ow ave. - nnamenans. pa.ssug...
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l Graham /Hafer - cross 2652
~
1 limited credit that is available.
We could not do 3
both.
Eventually the maintenance will have to be j
i 3
i dens.
Some of it will cost more than it would have 4 l cost.
Some of it I don't think will cost anything i
- 1 incrementally more than it would have cost, and we 5
6 will have to get back at some point in the future.
7 I don't view it as a debt that we'are 8
building up.
Rather I view it as a way of allowing 9
us to use our limited financial capability to finance 10 the deferred energy expense.
11 MR. JOENSON:
I have no further 12 questions.
~
13 TEE CHAIRMAN:
Mr. Barasch.
14 MR. BARASCH:
Thank you, Madam 15 Chairman.
16 sr nR. BARASCn:
17 4
Mr. Enfer, a few minutes ago you 18 were testifying on redirect regarding the PJM cost-19 Plus-10 contract and I have a few questions that 1 20 want to ask you in that regard, i 21 Under normal circumstances, it would be 22 either highly unusual or it would never even occur I
g3 that state commissions would be asked to approve'a 24l FERC contract.
Are you aware.of that happening in the
~
25, past?
i teoststeAsst a N Dec. -EF IE. LOCitWILLO9R* AVE.- MARRt83UR8 PA* 8FIII: - -
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Graham /Enfer - croco 2653 1
2.(Hafer)
I am only nware of the cir-l 2
cumstances that caused this Commission to examine the 3
same contract and give their approval.
' lou are l
4 right, it is my understanding it is pre-empted by 5
federal regulation and it is subject to the jnrisdic-6 tion of the FERC.
7 g
-I am not sure whether you or 8
Mr. Graham can answer better, but the two of you are 9
here and so perhaps one or the other of you can i
i 10 answer:
11 I wonder if you know in the course of 12 negotiations for the PGM cost-plus-10 agreement,'how 13 it came to be that prior approvals by state commis-
~
14 siens became a condition procedent for that contract?
15 were there particular utilities that demanded the 16 insortion of that provision, or was that the consensus 17 of the : nesting or what?
l Ig L(Hafer)
The precedent was really set 19 here in Pennsylvania.
The agreement by Pennsylvania 20 Power and Light Company, you will recall, to sell the gi generation or at least a portion of its generation 22 from Martins Creek to GPU was conditioned upon their 2.3 receipt of the approval by this commission.
24 I don't think that was necessarily an 25.
agreement which legally required the approval of wenemen. =a - a-me.-a n..oeza. Low avs. -
FA. tMS m
- _r__ _ _. - -
a...w=
-m.: - =~
.c Graham /Enfer - cross 2654 1
this Commission, but nevertheless they wanted to be 2j assured that this Commission approved of it and agreed 1
3l with it.
4 The same kind of thing was true in the 5
modification of the PJM agreement, but it was for 6
slightly different reasons.
The members of the'7JH 7
system, including PP&L, were concerned that this S'
Commission had entered an crder which in its ordering 9
provisions directed IletEd and Peneloc to petition 10 FERC for modification of a power agreement which'had 11 been in effect for many, many years which has a l
12
( ['
long history to it, which is subject to federal s-13 regulation and which is similar in many regards to 14 others throughout the country.
And they were 15 greatly concerned about thct, and so before they 16 would enter into an agreement to modify that purchase 17-power agreement to provide GPU some less-expansive 18 energy, they wanted assurances that we wouldn't be 1p going before the FERC and petitioning to have the 1
20 wh le contract itself modified for all times.
f l
21 And so it is my recollection that/~of j
I 22 j urse, the three companies who were the driving 1
~
23 f r s in this were the thra,a,who.were the salling i
24 mpanies and who were anticipated to be selling C mpanies.
That was PP&L and PepCo, and Baltimore 25 manBACH & MARSM41. MC. -2P M.1.cc=ym.t.OW AVE. - M.UmW3gMS. M.17112 m -
Graham /Hcfar - cross 2655 1
Ges & Electric.
p 2
g When you spec.h of them as being the' 3
driving force, do you menn the driving force in the
.}
creation of the cost-plus-10 or the driving force 1
5' in insisting upon prior commission approvals?
6 L(Hader)
No, the driving force in insisting 7-upon prior commission approvals, but, you know, they 8
were the companies that, of course, carried the most p
weight in the negotiations, since they were, in fact, 10 the selling companies, and they were the ones who were 11 going to get less moneys than they otherwise would 12 have gotten as a result of the accident.
i
' O U
S At least hypothetically?
14 L(Haver)
At least hypothetically, 15 yes.
16 g
You refer to a corporation 17..
commission counsel directive regarding a four-to gg six-month period for discovery.
I wasn't quite~sure, gg referring to the D.C. action, is that in fact what g
the schedule is before the D.C. Commission, or is 21 that merely the recommendation of one party?
g A(Hafer)
It is my understanding g i.
that that is the reconmendation.
Let me put it a p
little differently.
I don't know it is so much a recommendation, but the corporation counsel has mounmen o masmu me.- ar m. s.maxwr_unr 4vs.==
- m. m t:
m
,y Grahan/Zafer - cross 2656 i
[,
1 scheduled to take depositions from tuo of our people 2
next treek and has indicated that the D.C.
Commission 3 " staff will require extensive discovery before they 4
will bo in a position to make a recommenCation to 3
the commission.
6 He has indicated that it is his best 7
estimate that that would allow a decision by the S
commission in something like four to six months.
9 He hco also indicated or.acommended that perhaps 10 the Marylar.d.and virginia commissions could be
~~
11 involved as well.
El It is my understanding that that is the 13 staff's position and the commission is still free to 14 accept or reject that or direct the staff to work on a 15 more expedited basis.
16 O
But for GPU's operating purposes, 17 do you people consider those developments to 10 indicate that the PJM agreement now will not be ip
' approved for a 5.inimum of four to six months?
20 L(Hafer)
Well, I think we certainly 21 view those as negative developments and that they wil'1 gg-add time to--it will extend the period in which we have 23 to opercta without the modification of tha agreement.
'f..
24.
I think it, you know, makes it impossible, 25 for example, now to meet the March 1 date which we had womenaan. - -
me. :::r z.smarwn.une avs.- summeone, sa. mis-i
~
o' Graham /Hafer - cro s 2657 1
- assumed, tihether it will be four to sir months I
^
.3 I really can't say.
I would hope not.
I would hope tha-3 we can be persuasive and get all of the people to pull 4
together and try to get the modificaticu through.
t 5
g okay.
en the same point, I think 6
j
. this is probably a' question Mr. Graham can answer 7
better regarding the delay.
iour Exhibit A-1, 8'
supplement 1, whatever documents you filed that supple-9 mented that, are projecting a negntive effect on cash 10 flow arising from putting into place of PJM cost-plus-11 10 in March; isn't that correct?
12 A,(Graham)
Yes, there is a negative
,.q Q
13 working capital requirement associated with it.
14 That negative working capital requirement is biggest 15 by coincidence when oyster creek is being refueled i
16 so that if it comes along in March or April the working 17 capital requirement starts out at a large number and 18 it then starts to get smaller as the year goes on.
29 This is a simple question, just so 20-,
you understand.
I may be able to short-cut it, because 21 I know Mr. Selkowitz has been waiting a long time to l
22
. conduct his cross.
23 Do you see the recent devalopments before 24 the D.C. Commission as being raasons for perhaps 25
' adjusting your cash clow projections further now, unwnsaan = -.* :ma.-ur w. t.acawsuw mz - saammaans, ca. inta.
a,y,. :. r e e v, s..c
- - : x - r-
- - m ;
=
4 Graham /Hafer - cross 2658
[1 s -
1,
because of the likely slippage in putting into place 2
of PJM cost-plus-107 i
l 3
3 L(Graham)
The answer is that I spoke 4
with my office earlier today to ask them to begin to 5
loch at that.
- niso spoke with Mr. Liberman, because 0
-I am one of the people who has to go down there.
He 7
feels that we should wait until ne=t week to see 0
how realistic the time schedule suggested by the 9
staff is and that we should wait and see ne=t week M
whether wo should make a change in our expectations.
11:
I just wanted to make scre that you 11' understand that while working capital is reduced if 13' the PJM cost-plus-10 agreement is not approved, the
~
14. underlying cost of energy goes up, so that at the and 13 of the year you are pretty much back to where you 16 would have been, but there is a timing. difference.
17 n
I understand.
Thank you.
18 Mr. Graham, on your Exhibit A-23, Page 5, 10 there you show that Meted is planning to issus $40 20[i million of long-term debt in December of 1981; is I
21 that correct?
22 L(Graham)
That is correct.
25 0'
As a hypothetical, strictly as a 2,4 hypothetical, if TMI-1 were removed from the bas's f
i 25 rates of Meted and Penelec beginning now until March 31,
{
Momam a leAmeRAr. INC.-C IL LSCIftnLLew AVE - MAmtss3Ulte. PASM'E g-
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Graham /Hafer - cross 2559 l
l' 1981, would Met 3d be able to generate the coverages
'N 3
necessary to issue that debt in December of '917 1
3 L(Graham)
I guess I have to ask all 4
other things being equal?
5 g
correct.
6 L(Graham)
Because we did assume a 7
base rate increase to offset inflation the 1st of 0
the year for both of those compcnies.
I should also 9' note that we have Panelec scheduled to sell debt in 10 the fall, and that is an important part of our plans.
11 The answer is all other things being 12 equal, no, you could not sell the 40 million.
You i
O 13' nesd in 1981 both the basic rates associated with TMI-1 14 and the I believe it isS20 million ennual increase in 15 base rates to offset inflation at ths 1st of the year 16-to have two times coverage at the end of the year to 17 se'11 the $40 millien bond.
18 a
rollowing up on that, if it was, 19 in fact, removed and then returned to service and back 20 into the base rates in March cf '81, at what point 11" beyond March of '81 would your coverages then be high l
22 enough to complete the transaction that you would like i
23 to complaca the end of 19817
~
24 L(Graham)
I haven't done that exact s
25 calculation, but my ballpark would be that it would a-. ----- :=c. - er x. umunn.:.aw ms. - maanssons, a tum..
~
.n_
t.-.
.s G nham/Eafer - cross 2660 take-2 0
,A year?
7 L(Graham) - Well, a year after the 4
return to base rates so that it wonid probably mean 5
that debt financing could not be accomplished until-6 0
March of '827 7
L(Graham)
Something like that, yes.
8 G
Now, I think you just stated that p
your plan calls for a $20 m.illion base rate increase.
10.
That is for Meted in 19317 l
11 L(Graham)
I think it is 20 million.
I m
12 Yes.
Q-13 C
Just for Meted, right?
14 L(Graham)
Yes.
15 0
And you are assuming that that 16 rate increase would take effect on January 1, 19817 1
17 L(Graham)
Yes, that is an amount
,g calculated to essentially offset the effect of l
39 inflation during the year 1980.
20; a
well, w uld you say that that 21 intenti n to file that base rate, attrition rate
cr.s e, is a recom::tendation that would be made regard-g g
less of the outccma of these proceedings?
In other words, regardless of what g
happens here we have at least a $20 million rate' base I
mensmaan e uamana me.-ar m. s.oezwn.a.ow Avu.-m-- PA mas
Graham /Eafer - cross 2661 r
f 1
attrition to "cok forward to?
p l
3 L(Graham)
I have been encouraging Mr.
1 l
3 Hafer that we cannot wait until the end of this-1 4
proceeding to make that filing, a.d I might suggest 3
that our bankers have been saying to me over and over 6
again, "What are you waiting for?'
7' o
I am not sure that is an answe::
8 directly to the question.
9 In short, we can expect a minimum of 10
$20 millien regardless of the outcome of these 11 proceedings?
I am not talking about the timing now, 12, but just the fact that you are going to make such a O
13 filing.
14 L(Graham)
Yes.
What I was trying to 15' say, Mr. Barasch, is I think that filing would be 16--
made before these proceedings were over, because of the nine months that is required to get to January 1, 17 13 1981.
19 ;
a so then you are anticipating making i 20 a filing sometime in the next month?
21 L(Graham)
I don't exactly know, but 22f I would hope so.
23-G If that $20 million base rate 24 increase that you have indicated you will be requesting l
l 25 would take effect earlier than January 1, 1981, would u-a mansnar me.-a n.toexwn.r aw avr.- manessans, ea, sm l
a.
c;;_x. -
- m. = men
~ ~ ~ -
u i
Graham /Hafer - cross 2662 l
[..
I that base rate increase improve the coverage you E
would need to sell the bond in 19817 5
L(Graham)
Yes, you would essentially 4
month by month be able to sell that $40 million bond.
5 g
Moving to a slightly different 6
subject, am I correct that Meted expects to experience 7
tax losses in 1980 and 1981?
8 L(Graham)
Yes.
9 4
Would that also be true for GPU?
10 L(Graham)
Yes, for 1980 and I am not H
sure about 1981.
We can get you an answer to that.
12 i
Subject to check, I think the answer is yes, that we 13 would anticipate a tax loss for both years.
14 0
For both years for both Meted and 15 GPU?
~
16 Ar. Graham)
Yes.
17 g
If the revenues of Meted were 18 decreased by $27 million starting March 1 on an 19 annual basis--the reason why I am using 27 million is
{
20 it appears that that might be the approximate value of 21 TMI-1 in base rates--
i 22 L(Graham)
Tnat is calculating that at 23 the al" owe 6 rate of return?
24 4
Right.
Just take that as a hypo-l 25
-thetical.
i RSONN' & t.3 Aft 3NA8. fMC. = 3r 3& WJIslew Ayg,. mage, pA, gyggs-
c' Graham /Hafer - cross 2663 l'
L(Graham)
Fine.
s m
3
?
Then would we see your net income 3 k from Meted being reduced by 27 million, or would-4 net income be reduced by an amount equal to 27 million f
reduced by the various tax factors, in other words 6
about a 13.9 million dollar reduction in net income?
7 which would be more--
i 3l L(Graham)
It would reduce net income 9
by approximately half, something less than half 10 because of he gross receipts tanes and income taxes 11 :
and all that kind of thing.
It would reduce cash by 12
$27 million because we do not anticipate paying any 13 O
federal income taxes in 1960.
14 4
How, would that revenue and'the 15 related net income effect be the same regardless of Idj whether or not Meted and GPU vare going to be ex-1 17j periencing a tax loss in 19807 L3"i L-(Graham)
Well, it is because you are E?
experiencing a tax loss that the effect is dollar 33 for dollar on cash.
21 0
Can I infer from that the corrolary, 22 that if you were not in a taz loss position it would 23.
not be dollar for dollar, but it would be about one-24 half cn cash?
b 15 L(Graham)
That's right. if you were geoprigAces e unmat.13f4 - W M. LeccRFILLew X/E. = HARRISSENte. PA. S7t *3.
Graham /3 afar - cross 2664
[
l '
nnticipating paying tares you would pay less to the 2
federal government.
3 G
In tarms of net income the effect 4
vould bo the sane?
5' A (Graham)
That is right, as long as G
we have enough carrybacks and all that kind of thing 7
and we are anticipating that we do.
~
8 MR. BARASCB:
Thank you.
9 Madam chairman, I have no further 10 questions.
one second.
11 BY MR. BARASCE:
12 O
g Mr. Graham, were you able to get w
13? an answer to that " subject to check" which you took?
14[
A(Grt. ham)
I think Mr. Carroll was i
15 making a phone call.
If the answer is any different, 16 we will let you know before the and of the day.
17 MR. BARASCH:
Fine.
Madam Chairman, 13 I have no further questions of these witnesses now, l
19 but as Mr. Johnson stated, I haven't had an 20; opportunity to review the latest Interrogatory Answers i
j 21} and it might'be possible that we would have further i.
22f quections after we reviewed them.
23 TEE CEAIRMAN:
The Chair will be con-24.l sistent and what is fair to Mr. Johnson will be' fair l
25 to you.
)
l
.,= aen. =ansur ma.- e u. soenen.u==.- maru mau. Smia.
l
i l
l wt'
>E Graham /Eafer - cross 2665 i
1 Ma, manascH:
Thank you.
m 1
3-THE CHAIRMAN:
Mr. Wise.
3 nr na. WIs2:
4 G
Mr. Hafer, I haven't yet seen the 5
exhibits, but I think you referred in your testimony 6 - t'o Exhibit A-82, which is the insurance policy which 7
other utilities in the industry got together on.
O A(Hafer)
Mr. Graham did, yes.
Mr.
9 Graham is sponsoring that erhibit.
10 g
oh, I am sorry.
Mr. Graham?
11:
E(Graham)
Yes, sir.
El 3
Bas an actual policy been worked 13 out to date?
14 L(Graham)
The offering material pro-15 vides that the policy will become effective the later 16
, of March 31 or when I believe it is $50 million of 17 annual premiums are committed, and I thinh $50 million 18 means something like 30 companies.
19 So my undarstanding is the ' policy" wili 20 actually come into effect approximately April 1.
21 g
sow much is Meted's annati premium l
23
. -for both units?
t
- 3' L(Graham)
We cannot get insurance for i
24 TMI-2, and would have no reason to buy it while the
%)
i 15' plant is out of service.
So for Unit 2, Meted's us:mmaan a s.nassar nea. - sr m. s.camuu.s.ow avr. - n.uuns:runo, ra..mia
~
a
,e i
Graham-Hafer - cross 2656 1
1[l premium is =aro.
The annual pramium for Unit 1 is s
2
$1.51 million.
11etEd will be responsible for half of 3
that or three-quarters of a million dollars.
4 The way that captive insurance companies 5
work is that the companies collect something in a 6
premium, buy as much reinsurance as they can, usually 7t in the London markets, but then also create an obidga-8 tien on the insured to pay some more if the total 9
of what they have in reinsurance they have isn't 10 enough, so in addition to an annual premium, there is 11 an annual standby obligation to pay some more in the g
13 event that the insurance company needed it.
v-13 In the case of Meted, that some more 14 would be five times the three-quarters of a million 15 dollars.
16 ~
This five times wonid become due, 17 for instance, if there was an accident?
Ig A. (Graham)
If there was an rccident ec 19 another company's plant, if the insurance company 2'). looked at what its reserves are, how much it has in 21
. its cash drawer, it looks at how much reinsurance it 22 has purchased, if the total of those two was not enough 23 to pay the claim, then everyone else who is insured 24 kicks in some more to pay the. claim.
i 25 It is simply a way of having some of namn nen a nansaar.,:na.-arz..oaxwn.un,aw.-man===une.m mt:
W' r.'
Graham /Hafer - cross 2667 1
the premium pcid after the fact in the event there is s
E a loss.
It is a very common provision in the case of 3'
what are called captive insurance companies.
4 g
It would be similar to what we 5
know as a mutnal insurance company?
6 tGraham)
No.
A mutual insurance m
7.
company simply mean; w t it is owned by the insureds 8
in the sense that there is no one other than all of the 9
automobile owners who are insured with that particular 10 automobile company.
l 11 A captive company is usually one that is 12 owned by a limited group of insureds in the same 13 business and who pay part of the obliga. tion in the 14 form of an annual premium who have some of the 15 obligation reinsured but who also pay part of the 16 oblication by committing to put up some more money 17 if it is necessary.
13 4
Is Meted or Penelec or GPU a 19 aemser or a participant in any similar type of ec-l10 lasurance plan?
gi L(Graham)
Did you call it a co-l g
insurance pic")
23l 0
I believe yoar term was captive 24 insurance, 1
s 25 A (Grahan)
Yes.
There a.e several of Woect3ACH e LtA ESRA8. INC.== 2Y EL LOCCNELCtf N/L = HARRISW185MB. PA.171:2
~-
r c
Grahnm/Enfer - cross 2668 1
i 1
them.
s l
2 G
For example 7 i
3 L(Graham)
Our Workmen's Cc=pensation
.f insurance is through the same kind of a company that 5
is owned by a group of electric companies.
Nuclear 6
Mutual Limited which is one of the ways of insuring 7
the S300 million or, I am sorry, the $160 million of-S
- was right the first time, the $300 million of P
property insurance is a captive company, and again 10<
there is an obligation to come up with some more 11 money if necessary.
12 There may also be some other small nD 13 insurance premiums that have that same kind of an 14 assessraent feature.
None of them come to my mind at 15 this moment.
?
16 a
now much would the premiums on Unit 17 2 cost?
Would they be proportional to the capacity igj size of the unit?
19 L(Graham)
No, the premium is $1.51 20 million per year, but when there are two units on a 21 site, that goes up somewhat for the second unit on the site.
I don't remember, I think it is in, bare, 22 23, aractly what the factor is by which it goes up.
24 0
It wouldn't be double?
25 L (Graham)
No.
tecettMnt a eeMt2 MAR. Die - st? 3L N AVEL = MARIttSMme. PA.17f12
'ry.
Grahnm/Eafer - cross 2669 1
- 7. l MR. WISE:
That is all I have at the o
l El.
present time.
I would reserve the right to further 1
3 examination of these witnceses since I haven't seen 4
the documents before.
3 THE CHAIRMAN:
The same response.
d Mr. Selhowitz.
7 MR. SELKOWITZ:
Thank you.
O BY ER. SELKOWIT3:
9' 4
Gentleman, we have not necessarily I
10 saved the best for last.
11 L(Graham)
Was that a question?
11 THE CHAIRMAN:
Mr. Selkowitz, could you just give me an idea of approximately how long?
O 13 i
14 Ma. SELKowzTz:
Ten minutes.
15 Tam enAInnAs:
Thank you.
16 BY MR. SELECWIT3:
L 17 0,
Mr. Graham, your Statement A-1, 13 Page 17., indicates an expectation that perhaps you 19 : could increase Meted's sub limit on the short-term s
20
- borrowings up to perhaps $440 million, if there is 21 a conclusion in this proceeding acceptable to the 23 banking connunit1 23 I am wondering, cir, whether that sort 24 of acceptabla decision would raise the total ceiling h
25
, as well, rather than just Meted's sub limit?
NOICERACM & 94AftstL1:. INC.
g E LectWILLOW AVE. = N432fpstMts. PA. 275IA
~
_. _ - +
-=
c Graham /Eafer - cross 2670 1
I r
I f A(Graham)
Yes, I believe it would if 2
both commissions in both states found the orders to
~
3 be acceptable to them from the point of view of the
- 4 risk involved and the commitment ta future viability.
5 :l I think there may be an opportunity that d
if one state acted in a way that was acoeptable.,
7 perhaps that state's sub limits could be increased, 8
but not the other.
C 10 u
On u
14 15 16 17 18 Q
l
- 20..
9 1
i 21 22 13
^
l l
hk 25 BerN39AC3s a wnmar_ gygg,-gy 3L m Ayg, 33g3g33gygg, pg, gyggg
~
~
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j n'
3.c?
Graham /Hcfer - sro s 2671 I
g All right, en n different =atter, am I 1
2 cerrset, sir, that the ecmpany continuas to record deprecia-3 tion and the cd valoram tases for Unit 2 on ite hechs?
4 L(Graham)
We continue to accrue depreci-5 ation and charga income for the depreciation on Unit 2.
We 6
pay our taxes 'on Unit 2 - I don't know how much they are -
7 and charge them against current incese.
6 g
And the coverage computations that we 9
have talked abcut throughout this proceeding, are, therefora, 10 made with the depreciation being recorded as you just indi-11 cated?
12 L(Graham)
That is correct.
'l 13' S
Therefera, I guess as a matter of logic, s
14 if in sema manner you were not recording that depreciation, 15 those indicators would tend to improve, those coverage 16 indicators?
17 L(Graham)
All other things being equal, i
that is correct.
There is socs doubt in my mind trith I
i 19 respect to the accounting treatment of the cleanup expenses 20 if we did not accrue depreciation.
21; 4
I see.
can we turn to Exhibit A-16, 21 page 37 23 3.(Graham)
Yas, sir.
]
24 g
And this is a TMI-1 azhibit.
Am I 25 correct that the accounting entries and accounting mestaaen a manens. nee. - ar w. i.ccewne_wr avr. - wa==,ume, ra, mn
.-,4__,.==_
~
=. -
...n.
- = -
t A 4.
(4 Graha=/ Safer - cros:
2672 f
i
- 1. r.athodology is the same for TMI-2 as is here depicted?
.s s
E L(Graham)
I think that is essentially 3
cerract.
t g
concentrating on TMI-l for the time being, 5
the line where you indicate book depreciation and $6.2 6
million, that, of course, is not a current cash disbursement
?
amount, is it?
O L(Graham)
That is co.m.et.
D G
And, for exc::1ple, if the Cosmistics could 10 cr should order you to stop depreciating Unit 1 until it was 11
' back in service, it wouldn't have any necesecry impact on 12 vour cash disbursements at this time.
nC 13 L(Genham)
Well, are you assuming that they 14 reduce our rates by $6.2 million?
15 g
Not necessarily.
16 L(Graham)
If they make no change in our 17 rates bat tell us to stop depreciating, book income would 18 change.
There would be no change in cash.
3g g
Would I also be correct, sir, if we 3
wanted to adhere to the principle of matching the customers 33 with the equipment that was used to serve them, one of the 22' things we might want to do is to stop depreciating that 23 unit until it is back in service, if that was our only 24 principle by which to operate?
25 L(Graham) could I haar the question again.
mounsaan a mansnas. me.-sr m. t.assoma.i.ow avn. - naamissonas rA. in22 i
I
Graham /Hafor - cross 26f3 (i
(The reporter rend the pending questien.)
.R p,1 WITNESS GRA354:
With the c?vsat thct you 3
added at the end, I agres that you might hold that view.
4 EY MR. SEIEOWITZ:
5 g
The uh--t line indicates a provision for 6
decommissioning.
That is also not a current cash outlay;
'l.
is that correct?
8 1(Graham)
Mo, that is not correc-L.
9 g
This is the provision that you are 10 banking this meney, buying securities, I guess it is?
Is 11 that why it is a current cash outlay?
12 A(Graham)
Those funds ara delivered to a 9
13-trust and are taken off of the balance sheen of Meted.
That 14f is a cash outiny.
g g
That is a essh outlay as a result of the 16 Commission's order as to what to do with daccamissionfng 17 cests?
g L(Graham)
That is correct.
It could have gg been a form of cash like depreciation rather than trusteed g.
funds.
g E
And that is subject entirely to the Commission's pcwer to decida hc:a to do that?
g l
L(Graham)
I think that is corract.
g g
Am I als rra t, sir, that the provisien: ]
2{
3 for deferred inecma tamea does not represent a current cash esosectIBAC33 0 f4AltsN.% Dic.==3lF M. f m2EistILLetlT AVE = MA!tarJatme. Pt 37112 O
.. a. ~ - _ u S
e u
E Grahr.d Bafer - cross 3S?0 u
4 4
F 1
1l outlay?
^
3 L(Graham)
That is correct.
i 3
G Am I also correct, sir, that if THI-1 4
ca== out of the ratas of the company, that there would no 5
longer be a return earned on that unit anc, therefore, the 6, current income taxes to be paid would not exist either?
7 LtGraham)
There are no current income taxes 8
being paid with or without the revenues associated with TMI-1, 9
co it mskes no difference for cash.
10 G
Than for purposes of datamining the 11 revenua requirements as shewn here, that current number of 12
$3,982,000 would bs =ero, if there is no return being earned
(.,r 13 j cn the plant and there is no enwam.
s.-
14 :
L(Graham)
That 10 correct, but you asked the 15 question for cash.
Is G
I understend.
I have gone on to another 77 qum= tion.
I could not disagree with your earlier answer.
ig L(Graham)
Oh.
a so do we agroe, sir, for purposes of this gg l gg l exhibit that number would be zero, if the unit were taken l
1 21l out of tha rate bass and the rates were so adjusted?
I gl L(Graham)
I think I agree with you.
I,at as 3
cae if I can put it this way We have attributad to the 24 n cos:ts:n cnd preferred equity that is shown on this return 25
' exhibit the need to assceiate income ta=es with that return.
I men-en. - mm - n.e. - e x.
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I
a' 5
Gr.*w/Eafer - crosa 2675 i
2 If there were no such rei. urn, you would not attribute any n
2 incesa taxes te it.
3 g
Is it also then, sir, a correct stats::mnt
.(
that the cost burden en a current ench disbursement basis 5
is less than the ravenue requirement that is shown on this 6
exhibit or any other exhibit for TMI-17 7
L(Graham)
Yes, TMI-1 being allowed in rate 3
base, like all othar elen:anta of plant, are a source of 9
cash for the operatics of the business beenues of depreci-10 ation and deferred ta=as not being cash items.
That is true n;
of the distribution pole that you ses on tha street, too.
12 4
On a different subject, am I correct, sir,.
13 when you refinance hcuds, you don't have to meet the O
14 coversges in the manner that you must when you want to nell 15 bonds initially?
16 L(Graham)
That is correct.
17r O
If you would turn to sahibit A-28, page 1, I
gg' which is a chart:, do you have that, sir?
19 L Graham)
Yes, sir.
20 g
The title of that chart says, " Impact of 21 Base Rata Increase Upon Charges.*
Does the " charges" thers 22 includa all charges and, therefore, include fuel charges and 23 sur=harges as uall?
24 L(Graham)
Tes.
What we did was we used the
]
25 budgeted energy adjustmsat clause figures,.which was the senamacu a =a-= me. - n:r u. a.cerwn.s.=w mir. - xmansanw. m wisa
'n
'x Graham /Hafer - cross 2676 5
4-S.9 mills effective January 1, and then we ande changes 2
from those budgetad revenues to do this analysis.
3 g
Can you give us just a brief e=planation 4
of what the minus 6.C figura represents that is in the first 5
column there?
6 1(Graham)
Tes.
If you took the $27 million
?-
that Mr. Barasch was talking about there and that appears 3
on the exhibit that we were just discussing away from Meted, C
you would reduce the customar's cost c= an average kilowatt i
10 hour1.157407e-4 days <br />0.00278 hours <br />1.653439e-5 weeks <br />3.805e-6 months <br /> sold.
That would change c little bit from customer 11 class to customer class, but you vocid reduce the customer's 12 ccat by 6.8 percent from that which we have budgeted, which G
13 means from essentially the ratas that will become effective M
on March 1, 15 4
': tat assumes you removed '2MI-1 from the 16 rats base and the rates; is that correct?
17 L(Graham)
From rate base and -
16 4
And that accunt of money from the rates.
19 A.(Grahami That in right.
It is essentially the $27 million that is shown en the othr.r exhibit.
20 ;
.1 21 4
And if you were allowed to, for example, 22 if the Commission said for rata-meldng pu_vses they want 23-you to accrue 75DC at the same amount that you would be 24 earning on the plant itself, world anything happen to that 25 minus 6.8 percent number?
wemismen a ut.asans we.- e u. a.ona.m.ow,va:.- naamsoeno, ca. :ma i
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cs Grcham/P.afer - creas 2577 f
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.s.(Graham)
If the Os==icsion took away
~
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2 j
$27 million in rat:es, cs I undarstand your question, and said l
I 3
to accruo AFDC on TNI-1, and I think implicit in your ques-4 tion is that the Cor=icsion would also order the cassation 5-of depreciation--
6 0,
Correct.
7-A(Graham)
Assuming thnt we could book such 8
AFDC consistent with the regulations of the F33C, and there 9
is substantial doubt in nr1 mind about that,' then there would 10 he no changa in return on - oh, I c= sorry, the customar's 11, cost would still go down 6.8 peresnt.
The other two 12 m ancial indicia that are set forth on that page would 13 change.
14 0
Which two are you rafarring to?
15 A(Graham)
Interact coverage would still go 15j down substantially, because you have taken $27 million of 17 cash away, and I don't thinkyou trould be able to use all of 18 those AFDC earnincjs for coverage calculation.
Common equity 19
. would not go down to the minus 2.5 percent figure shown 20 there.
Assuming that we could accrue the AFDC and report 21 that as income, return on m - n eq.tity weeld stay at about 22 one parcent.
23 g
on page 979 of the transcript of the 24 carl.*ur preceedings in this matter, you indicated that you
)
i 1
25 felt in 1983 that GPU might be able to issue equity
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S Graher/Hafer - cross 2678 I
g securities provided that TMI-2 was operating.
Do you
^
2 ISC'1' making a statsmant like that, or wocid you like to j
3, chech that transcript page?
3.(Graham)
No, I think that is essentially
- t
=
correct.
It is what ic set forth in my long view of the 6
cystem, and we do anticipate the sale of consson stock equity 7
in 1983.
3 G
I wonder, sir, if you could justify that g
prediction with tinat you are saying on page 980 of the 10 transcript, when you indicate that you have no idea what 11 the capital markets will look lihm as soon as 1980.
12 L(Graham)
I guess I would like to see that 13, reference to kncv the context.
2,.
14 MR. assELI:
cculd we have the page number
'd again?
MR. SELEONIT 980 gg WITNESS GRABAM:
Mr. Malatesta was asAing ma
?
at page 980 what I thought a fair zate of return would be in w
g 1983, and it was in that context that I.made that statement.
i I guess I d n't see an in nsistency such that it is l
20 necessary for as to I think you said justify the two state-LL ments.
perhaps you could ask me further.
BY Pm. SETEGUIT3 24 g
Well, let na be more specific.
I 25, wondered by what mechanism you can predict that you will, in nommaan a marunuu iwe.-grm.m= w.u wave.-wa-ma.Pa.mla l
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Graham /Eafer cross 2679 1
fact, be able to sail securities in a market in which you m
2 have no idea what its condition will be, and if those two 3
statements by you are = rrect, what is it in what you de know t
l l
4 about the market in 1983 that tells you you are going to be 5
able to sell the securities?
l 6
a.(oraham)
The financial projections I have 7
put in assume a need to earn a return on - equity 8
something like what we have seen in the inst many years in 9
order to sell common equity something below book value, in 10 i the way that we have been forced to for the last many years.
11 If,'in fact, capital markets in the next four years or so 12 require much higher returns, then it would be necessary to 13 have a higher return than I have projacted in my Exhibit 14 A-29.
It was in that context that I was answering Mr. Mala-
)
15 testa.
16 I continue to believe that when TMI-2 is 17 operating, it will be possible to sell common stock equity.
13
, Exactly what return will be required to do that is something 19 that it is very hard to predict.
Exactly what effect divi-20 dend policy and our ability to return to paying the cash i
21 dividand will have is herd to predict.
21L 4
I have no further questions.
Thank you.
23 Excuse me, Mr. Hafer, I do have one question.
24 You indicated you supplied material to the NRC
]
25 staff.
which of the many staffs did you supply that to?
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A4 Graham /Eafer - cross 2680 10 1
Do you know which one? When I say which, we have c:xanission 1, staff and agency staff and technical staff.
i Who were these 3
people?
4 L(Eafer)
My recollection is it falls under 5
the te + 4ad staff.
It is Mr. James Peterson.
In fact, it
)
6 is a shame Mr. Bowers has left, because.he' has some of my 7 ' tr===4ttal letters that he carries around with him as part j
8 of his case, but I don't recall exactly what bursau be is in.
9 1
I could find that out and let you know though.
10 MR. SELKOffITZ:
Thank you.
No more questions.
11 REDIRECT EIAMMATION 32 C.
\\
g 14 n
I believe, Mr Graham, you may have some 15 information with respect to the 1981 tax picture.
16 L(Graham)
Yes, for 1980 both Meted and GPU 17 are anticipated as being in 'm -loss positions.
38
~
In 1981, assuming the base rate increases that 19' are" set forth in nry. exhibits and the levels of deferred 20 energy recovery that are set forth there, GPU is' expected 21 to'be in a slight taxable-income position.
Metad would stil1 21 be in a tax-loss position.
23 MR. BARASCH:
Thank you, Mr. Graham.
t
~'
yl THE CHAIRMAN:
Do you have anything further, 25 Mr. Russell?
moesuma w a mansans. nea.-sr n, t.oazwar.ow mz - namusmana, n, m aa
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f.af 2681
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1 MR. RUSSELL:
No further redirect.
i g
2 THE CHAI5EAN:
A couple things the Commission i
3 would like to note.
One is that the next schedulod hearing
)
4 is March 11 at 10 a.m.
The tastimony of the parties is all 5 ' due to be filed March 4.
I would indicate, as we have 6
tentatively discussed, how those witnesses were to be 7
scheduled.
That depends, of course, a lot on exactly the 8
testimony that we receive, but so that we may know how we 9
are going to proceed on March 11, I would' indicate that the l
10 Bethtakam Steel Company and the trial staff should be pre-n parted on March 11 to proceed with their testimony, and that n
on March 12, again if further time is needed by the trial D
staff and also if any witnesses are to be put on by the l
14 Limerick Ecology Group.
g In addition to that, we have bei m us a 16 petition or a request of the intervecor Lepoco for extension 17 of time f r distribution of testimony from March 4 to March
't g
18, and the Commission would rule on that now and deny that 19 : and indicate we will inform the petitioner by secretarial y
letter that she will have to have his testimony by March 4.
^
21 MR. SELE 0 wit 3:
A question, Madam Chairman.
g THE CEAIRMAN Yes.
g MR. SELK0WITZ:
How many copies of direct testimony need be filed, and does that incande the number
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. that goes to the cr==4=sioners, or is that an additional iwansaca. --
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TE C2.U2MAU I-bclisvo you should sar7e all i
,1 3 h, thG Farties of rsecrd. a copy for each of the Ces=issioners,f t
e
,; { ccd thrse copics Scr the reportor.
I i-He that ic it.
j 3
La. SEL 0!fITZ:
Eow r.acy for the Sec::ater.*'s l
1 t
3 6'tOureau?
7g IE. CGHESCN:
The cosios for the C smissics cc j
i C
to tha Secretary's Bureau, and the Secretary would then he f
i
- 9. 'r2spensibia for distribution.
I 10 THE CHAIPJ M :
Let r.a ar.and that and ccy c=c l
11 extra ocpy for the Secretary's Bureau which should be filsd
- i 1;
there, and the copics for the N miscioners should be directly e,
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15 i sent to their officas.
1 14,
Mn. JomSon:
7.nf only one for the Secretary.
{
1 33 TZI CE.U7F.nN:
20 there anything further?
j I
16 MR. SUSSELL:
May us go cff the record fer some i 171 further discussion?
i 1
10 TE CHAIRIM:
Okay, off the record.
i
~
3 (Discussion off the record.)
1 g
THE c'nIMMR.N. :
If that le it, we arc adjourned un W March 11 at 10 a.m.
44 I
i l
Ao,
~{
(Adjournusst at 4:20 p.m.)
l..i 1
24 Haperted by:
Craig Winfsor Wallace, RPR i
g( Transcribed by:
James P. Gnen 69, III and l
Craig Windsor ticllaca esor.=Aen o r. mas::A: 2::c. - :i r:. :.s=::vt:1.' e.i ne. = MAR 2fC3URG. PA.1M E:
l l
.I l
F
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J.=as l
I!
.m L
2 I hereby certify that the proceedings and 3
evidence are contained fully and accurately in the notes 4
taken by me during the hearing of the within cause, and 5'
that this is a true and correct transcript of the same.
6 7
rernrunaca a nutsnaL, INC.
8L 9
ay
%kM.00 m_-
j Craid) Windsor Wallace, R.P.R.
}
i 11 1 1
12 Deted:
February 23, 1980
,Q 13 v
4 14; (The foregoing certification of this 15 g transcript does not apply to any reproduction of the 161 l
same by any means unless under the direct control and/or 17' supervision of the certifying repcrter.)
ISL l
190
///
20(,
D 21!
23 N.
24 I
tEONEDAC3t a CAfteHAL. INC.=EF N. LosEurILLOW AirN.= N
. PA. 97tta
_