ML19327A226
| ML19327A226 | |
| Person / Time | |
|---|---|
| Site: | Allens Creek File:Houston Lighting and Power Company icon.png |
| Issue date: | 07/28/1980 |
| From: | Copeland J, Newman J BAKER & BOTTS, HOUSTON LIGHTING & POWER CO., LOWENSTEIN, NEWMAN, REIS, AXELRAD & TOLL |
| To: | AFFILIATION NOT ASSIGNED |
| References | |
| NUDOCS 8008010302 | |
| Download: ML19327A226 (17) | |
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'1MOWNE3 UNITED STATES OF AMERICA -
4 1 NUCLEAR REGULATORY COMMISSION 2 jul.30 M > ~-
BEFORE THE ATOMIC SAFETY AND LICENSING BOARD &
4, **
p In the Matter of S O#I A !
S !
HOUSTON LIGHTING & POWER COMPANY S Docket No. 50-466 S
(Allens Creek Nuclear Generating S Station, Unit 1) S l
APPLICANT'S RESPONSE TO FOURTH SET OF INTERROGATORIES FROM FINANCIAL l QUALIFICATIONS INTERVENORS In response to the Fourth Set of Interrogatories from Financial Qualifications.Intervenors, Houston Lighting
& Power Company (Applicant) answers as follows:
INTERROGATORY FQ-4.1:
Please define the following terms as clearly, precisely, and unambiguously as possible. Define them as they are, have been, and will be used by officers of, employees of, or witnesses on behalf of, Houston Lighting
& Power or Houston Industries, in applications, briefs, ex-hibits, other documents, or in hearings, before either the Texas Public Utility Commission or the Nuclear Regulatory Commission. If the meaning of any term varies according to time, place, or individual usage, please so specify.
- a. Allowance for Funds Used During Construction
- b. Construction Work In Progress (CWIP)
- c. rate base
- d. rate of return on rate base
- e. common equity
- f. rate of return on common equity l
8008010%N l - -
- g. allowed return on common equity
- h. percentage of CWIP allowed in the rate base
- i. magnitude of CWIP expenditures allowed in the rate base
- j. financial integrity
- k. ability to attract capital on reasonable terms
- 1. internally generated funds
- m. externally generated funds
- n. interest coverage
- o. balanced capital structure
- p. net income
- q. equity security
- r. financial standards
- s. investment tax credits ANSWER:
The commonly used meaning of the terms listed in this interrogatory may be found in the following texts:
Public Utility Accounting, Theory and Application, James E.
Suelflow, and Encyclopedia of Long Term Financing and Capital Management by John F. Childs.
INTERROGATORY NO. FQ-4.2:
l Interrogatories FQ-4.2 through FQ-4.6 refer to Applicant's answers to Doggett's First Set of Interrgatories (June 5, 1980). Subsequent to consolidation of the financial qualifications contentions, these interrogatoriec became the Third Set of Interrogatories From Financial Qualifications Intervenors (FQ-3) , and have been renumbered FQ-3.1 through FQ-3.21.
- a. How, if at all, has the problem of " rapidly in-creasing construction costs," referred to in reply to FQ-3.6 as partly _ responsible for deferral of ACNGS, been ameliorated since 1976?
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- b. What change has there been in the " estimates of' the growth of electric peak load requirements" since 1976?
Provide the following specific information: 1970 projection of peak for 1971, 1972, . . . 1999, 2000; 1971 projection of peak for 1972-2001; 1972 projection for thirty future years; etc., through 1980 projection. Also provide the actual peak for each year 1971 through 1980.
ANSWER:
- a. Construction costs have continued to increase since 1976.
- b. Applicant cannot answer the first part of this in-terrogatory without specification as to the time period in which the request is related. The table of historical fore-casts comparing the actual experience to forecasted ex-perience from 1960 through 1977 is provided on page SH-85 of the ACNGS-ER Supplement. The foregoing table does not show the actual peak for 1977, which was 8,445 MW. Actual peak for 1978 was 9,114 MW and the actual peak for 1979 was 9,336 MW.
INTERROGATORY NO. FQ-4.3:
- a. What are the " program improvements learned from the experience on STNP (which) will be added to the ACNGS quality assurance program"? (reply to FQ-3.13) . Please be as specific as pcssible.
- b. Does Applicant acknowledge the fact that there have been substantial construction deficiencies at STNP?
ANSWER:
- a. On April 30, 1980, the NRC issued an enforcement order directing, inter alia, that the construction permitees provide a list of modifications to the South Texas QA/QC program designed to improve this program. HL&P's response to the enforcement order will be filed by July 29, 1980 and will include several such improvements. In addition, Appli-cant will, in the future, periodically review the QA/QC program for the South Texas Project to determine whether additional improvements should be made. It is anticipated that such changes made at STP which are applicable to con-struction of the ACNGS will be incorporated into the Allens Creek QA/QC program.
- b. The NRC's special investigation of construction activities at the STP site concluded that "no major defi-ciencies were found in any of the construction already completed." (Investigation Report, p. 10).
INTERROGATORY NO. FQ-4.4:
- a. Has Applicant or its representative (contractor) yet taken any disciplinary action against construction personnel for harrassment or threatening of quality control inspectors? (FQ-3.15) . If so, please give details.
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- b. What specific steps have been taken at STNP to 1
. insure that "all personnel shall be encouraged and told how to report any incidents of this type (harrassment of QC l inspectors) . . . without fear of disciplinary action," as I outlined in reply to Interrogatory FQ-3.157 Will these same steps be taken at ACNGS?
ANSWER:
- a. Yes, personnel have received suspensions without pay. I 1
- b. Training sessions have been given personnel con- !
cerning the subject and refresher training will be given for the duration of the project. Also, information on the ,
procedure to follow if reporting any harassment is posted j on the site. Yes. '
INTERROGATORY NO. FQ-4.5:
- a. In reply to FQ-3.17 through FQ-3.20 Applicant stated in each case sat it "does not make plans based on .
such remote speculation." What possibility raised by In- l terrogatory does Applicant consider " remote", that Applicant i I
or its contractor would " engage in substandard construction practices," or that it would "ever experience a shortage of funds."
- b. What level of probability does Applicant consider
" remote"?
ANSWER:
- a. We fully answered the question before and this ques-tion is simply argumentative in nature,
- b. Applicant has not performed any calculations to estimate the precise probability of the subject occurrences. l 1
INTERROGATORY NJ. FQ-4.6:
Applicant's reply to FQ-3.21 implies that the estimate of construction costs included in SER Supplement No. 2 (March 1979) was two years out of date even though the
" estimate is reviewed at least annually and may be reviewed more often . . . . " *
- a. Is this impression correct?
- b. When was the last estimate made before March'797
- c. What was this estimate?
- d. Was this estimate provided to the NRC Staff?
When?
' ANSWER:
- a. No.
- b. The estimate provided to the Staff was current at the time it was given to them in June, 1978.
- c. See answer to (b).
- d. See answer to (b).
INTERROGATORY NO. FQ-4.7:
Applicant's answers to Interrogatories FQ-1.4 and l FQ-1.5 indicate that Applicant has given little or no thought i to the cc2ts associated with unexpected premature shutdown I of the facility (a la Three Mile Island) or even to the !
inevitable costs of waste storage and disposal. I l
- a. Does Applicant acknowledge any responsibility for meeting these costs associated with protecting the public health and safety? -
- b. If so, what does Applicant consider that responsi-bility to be?
- c. Does Applicant consider $300 million in property insurance adequate to protect its financial integrity against a loss-of-plant accident?
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ANSWER:
- a. Applicant will comply with whatever relevant laws and regulations are in effect at the time it ever experiences an unexpected shutdown of the ACNGS.
- b. Applicant cannot speculate as to its potential i responsibility in the event of such a remote occurrence.
- c. Applicant's ability to protect its financial integrity against any expected event will depend on a large number of factors. Applicant cannot conceivably speculate as to the possible impact of an undefined, remote event on the financial integrity of the company based only on a hypothetical dollar amount of property insurance in ex-istence at some unstated future date.
INTERROGATORY NO. FQ-4.8:
Several witnesses for HL&P in PUC Docket 2676 (HL&P rate increase) testified that a large part of the construction cost overruns at STNP was attributable to changes in "the regulations". Vice President Oprea in particular complained that since 1973 There had been a quadrupling effect of regulatory guidelines that affect what you do and you have to do some retrofitting or retro-engineering in regard to meeting guidelines. (Tran. 225).
Later he explained what he meant by " quadrupling effect":
That means that we go for maybe eighty or so regulations up to well over four hundred some odd regulations that we have to comply with. . . .
(PUC 2676, Trans. 292).
- a. What specific " regulations" is Mr. Oprea referring to?
- b. Please identify any regulations which have led to cost increases at STNP. Please include a list of the specific changes in construction which were mandated by each particular change in, or addition to, regulations, and the cost of those changes in construction.
- c. What is the total cost to Applicant of changes in regulations affecting STNP?
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ANSWER:
- a. Mr. Oprea's answer was based upon his general knowledge of the increase in regulatory requirements which he has become aware of in his capacity as Executive Vice President for the Applicant in charge of Applicant's nuclear power program. The problems he referred to are well docu-mented in published articles.
- b. Applicant believes that almost any new regulation which applies to STP will increase its cost. To date, Applicant has not prepared a definitive list of the specific changes in design of the STP plant which were mandated by
, regulatory changes nor the costs related to such changes.
Applicant did prepare a preliminary analysis on this subject in December, 1978, but that analysis was not totally compre- l hensive and it has not been updated since 1978. I
- c. Applicant has not made an estimate as to the exact cost added to STP as a result of regulatory changes.
INTERROGATORY NO. FQ-4.9:
In PUC 2676 HL&P officer Hollis Dean was asked what would be the effect of " whittling down" the allowed level of CWIP from the requested 100% to 90%, 80%, etc. He replied, "You can go through it all the way down to zero and
. I'll say that we're dead if you got down there." (Tran.
498). What did Mr. Dean mean by the phrase "we're dead"?
ANSWER:
Mr. Dean was attempting to convey with emphasis the idea that the total construction program of the Appli-cant would be in serious jeopardy without any CWIP in the rate base.
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INTERROGATORY NO. FQ-4.10:
In PUC 2676 HL&P officer Dean agreed with the ,
statement that "unless the overall package of compensation I meets various guidelines of financial integrity, the Company will be unable to raise additional capital." (Tran. 542).
What are the "various guidelines" referred to in this state-1 ment, and what values of these guidelines are considered to be'necessary? Be specific and inclusive in replying.
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.v.
ANSWER:
The various guidelines are described at pages 3 and 4 of Mr. Dean's testimony in PUC Docket No. 2676 which was.previously provided to you.
INTERROGATORY NO. FQ-4.11:
In PUC 2676, investment banker Eugene Meyer, testifying on behalf of HL&P, made the following statements:
I would rank HL&P in the top five in this country in the utility industry'so far as inflexibility as to future financing requirements, and this stems primarily from the enormous absolute amount of dollars that this Company needs to raise as it goes into the next one, two, and three years.
Thus, I place it easily in the top five in the least amount of flexibility. It's hard to imagine 1 a month going by over the next two years where this Company will not either be selling some form of security or completing the preparation for the next months sale of them." (Tran. 585)
The Double A rating should give the Company as l wide a market into which to sell its debt se-curities as is necessary to finance the program. !
I do not believe that is so of an A rating, given )
the absolute size of HL&P's program. (Tran. 586) '
I'll warn you that I think there is a first class chance this company will not raise all the capital it needs with either an A-rating through the markets that I see in the next two or three years ahead, especially given the size of its construc- ,
tion budget. I think that is one first-class l gamble, to gamble that this company can get the job done with an A-rating. (Tran. 620)
- a. Does Applicant agree with these statements of its witness, Mr. Meyer?
- b. Would Applicant be able to sell A-rated bonds in sufficient quantities to cover construction costs of ACNGS?
- c. Would Applicant be able to sell sufficient A-rated bonds even if no CWIP were' allowed in the rate base?
- d. Please provide basis for answers to parts (b) and (c) of this Interrogatory.
ANSWER:
- a. Mr. Meyer was sponsored as a witness by Applicant in rate proceedings before the PUC and as such Applicant en-dorses Mr. Meyer's testimony when taken as a whole so that any statement made by Mr. Meyer may be placed in proper context, in both his testimony and the testimony of all other HL&P witnesses. .
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- b. Applicant does not sell bonds to cover the cost of specific construction projects. Applicant cannot speculate as to what changes would be made in its construction program if it had a change in financial rating.
- c. It depends on the other components allowed in setting the rates.
- d. Not applicable.
INTERROGATORY NO. FQ-4.12: l l
Dr. Steven Sherwin, testifying on behalf of HL&P in PUC 2676, spoke of the accident at Three Mile Island as i follows:
I If a company loses one of its generators, as happened to General Public Utilities, and then doesn't have sufficient spare capacity to meet its customer requirements, it is forced into purchas-ing power on a large scale basis. And, as you may recall, the Pennsylvania Commission was not im-mediately willing to grant that company reimburse-ment for the increased purchase power cost.
We computed, our office, that it would have taken 118 days only, without reimbursement of the in-creased purchase power cost, before the entire equity of all General Public Utility subsidiary would have been wiped out. (Tran. 829).
- a. Does Applicant consider that the Texas PUC would automatically provide " reimbursement of the increased pur-chase power cost" as well as the cleanup costs in the event of such a financially devastating accident at ACNGS?
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- b. If so, what is the basis for such a belief? If not, does Applicant have any plan for avoiding bankruptcy in the event of such an accident?
ANSWER:
- a. Applicant is not able to speculate as to what steps the Texas PUC might take in the event of such an accident.
- b. See answer to Interrogatory No. FQ-4.12(a).
INTERROGATORY NO. FQ-4.13:
In PUC 2676, HL&P Comptroller, R. S. Letbetter, testified that "if you continue your construction program without recognizing CWIP, it will affect the continuing operations of the Company. In other words, it will not be able to fund its payroll, meet its normal operation ex-penses, or anything." (Tran. 946). What precisely did Mr.
Letbetter mean by the phrase "without recognizing CWIP"?
ANSWER:
Mr. Letbetter meant exactly what he said and Applicant is not able to discern what is unclear to inter-venor about the phrase.
INTERROGATORY NO. FQ-4.14:
Schedule C-4 of the pre-filing package submitted by Applicant in PUC 2676 is a list of " Projects in Construc- i tion Works In Progress in Excess of $100,000 as of March 31, ;
1979." Expenditures to " Install Unit 1 - Allen's Creek" are given as $130,689,000, which was over ten percent of the total estimated cost of construction.
- a. Is this figure correct?
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- b. What is the most current figure on expenditures to I install Unit 17 When was this figure last updated?
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- c. Please give as complete a breakdown as possible of l the components of the'CWIP expenditures to date on ACNGS.
- d. How does Applicant expect to recover these costs if it is denied a construction permit in this proceeding before the NRC?
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ANSWER: ,
- a. Yes. 3
- b. $215,175,773.00 as of June 30, 1980.
- c. The foregoing number included $202,707,090.00 of expenditures for payments to the architect-engineer, pay-ments for engineered equipment and costs attributable to Applicant's internal engineering environmental and quality assurance work. The remaining $12,468,684.00 is for AFUDC.
- d. Applicant cannot speculate as to what steps the 1 PUC would take with respect to recovery of these expendi-tures under the scenario described.
INTERROGATORY NO. FQ-4.15:
In answer to previous interrogatories, Applicant stated that Mr. Hollis Dean would testify as to Applicant's financial qualifications, but that he had not yet prepared his testimony or identified the documents upon which he will rely.
- a. Will Mr. Dean be prepared to explicate, repudiate or defend the testimony of other witnesses on behalf of HL&P in past, current, and future rate proceedings before the PUC?
- b. Will Mr. Dean provide Intervenors with copies of documents upon which his testimony is based as they become available to him?
ANSWER:
- a. Mr. Dean is going to testify on Applicant's fi-nancial capability to construct ACNGS. It is not Mr. Dean's role, nor the Applicant's burden, to try a rate proceeding before the NRC.
- b. At the time Mr. Dean prepares his testimony and determines what documents he will rely on, those documents will be provided.
INTERROGATORY NO. FQ-4.16:
It is my understanding that Houston Lighting and Power is a wholly owned subsidiary of a company called Houston Industries (HI) .
- a. Is this understanding correct? If not, what is the exact relationship of HL&P to HI?
- b. Is HI subject to regulation by the NRC? How?
- c. Is HI subject to regulation by the PUC? How?
- d. Could HL&P survive the financial failure of HI?
- e. Is is possible for financial difficulties within HI as a whole to affect financial integrity of HL&P? ;
- f. Are construction bonds sold by HL&P, HI, or both?
- g. Which company would be liable for damages caused by routine operation or by an accident at one of HL&P's licensed nuclear facilities?
- h. What role does HI play in monitorring (sic] and directing HL&P's nuclear plant construction?
ANSWER:
- a. Yes.
- b. No.
- c. No.
- d. HL&P is not able to speculate on whether it coul.d
" survive" the financial failure of HI.
- e. HL&P is not able to speculate as to whether fi-nancial difficulties for HI would affect the financial integrity of HL&P without knowing all the circumstances surrounding the assumed financial difficulties.
- f. Applicant is not familiar with the term " construction bonds".
- g. HL&P is not abl'e to speculate as to legal li-ability for damages caused by routine operation or by ac-cidents at a licensed nuclear facility.
- h. HI has no organizational responsibility over HL&P's nuclear plant construction program.
Respectfully submitted,
. HAMO OF COUNSEL: J. Gre'go ydopeMand C. Thoma(s Bjddle, Jr.
BAKER & BOTTS Charles G. Thrash, Jr.
3000 One Shell Plaza 3000 One Shell Plaza Houston, Texas 77002 Houston, Texas 77002 LOWENSTEIN, NEWMAN, REIS, Jack R. Newman AXELRAD & TOLL Robert H. Culp 1025 Connecticut Ave., N.W. 1025 Connecticut Ave., N.W.
Washington, D. C. 20036 Washington, D. C. 20036 ATTORNEYS FOR APPLICANT HOUSTON LIGHTING & POWER COMPANY
STATE OF TEXAS S S
COUNTY OF HARRIS S BEFORE ME, THE UNDERSIGNED AUTHORITY, on this day personally appeared H. R. Dean, who upon his oath stated that he has answered Interrogatory Nos. 4.1, 4.2, and 4.5 through 4.16 of Houston Lighting & Power Company's Response to-the Fourth Set of Interrogatories From Financial Quali-fications Intervenors to Houston Lighting & Power Company in his capacity as Group Vice President-Accounting and Finance for Houston Lighting & Power Company. -
s - - -
H. R. Dean I
1 SUBSCRIBED AND SWORN TO BEFORE ME by the said !
H. R. Dean, on this 28th day of July , 1980.
y .. .y l Y A f w ,r r : he n i t i My Commission Expires: Notary Public in and.for i March 14, 1984 Harris County, Texas l
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STATE OF TEXAS S S
COUNTY OF HARRIS S BEFORE ME, THE UNDERSIGNED AUTHORITY, on this day personally appeared L. D. Richards, who upon his oath stated that he has answered Interrogatory Nos. 4.3 and 4 4 of Houston Lighting & Power Company's Response to the Fourth Set of Interrogatories from Financial Qualifications Inter-venors in his capacity as Lead Engineer for Houston Lighting
& Power Company, and all statements contained therein are true and correct to the best of his knowledge and belief.
L. D. Richards SUBSCRIBED AND S ORN TO BEFO ME by the said L. D. Richards, on this/ M day of , 1980.
V V Qaw Mlz N,jtary Public in and for Harris County, Texas i
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UNITED STATES OF AMERICA 2 JUL 3 0192 > N l NUCLEAR REGULATORY COMMISSION I' --
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BEFORE THE ATOMIC SAFETY AND LICENSING BOARD g gg
. .. aJ .fo NijtS\\ ,
In the Matter of S !
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I HOUSTON LIGHTING & POWER COMPANY S Docket No. 50-466 l S l (Allens Creek Nuclear Generating S l
Station, Unit 1) S CERTIFICATE OF SERVICE I hereby certify that copies of the foregoing Applicant's. Response to Fourth Set of Interrogatories from Financial Qualifications Intervenors in the above-captioned proceeding were served on the following by deposit in the United States mai , ostage prepaid, or by hand-delivery this gfYf day of , 1980.
Sheldon J. Wolfe, Esq., Chairman Hon. Charles J. Dusek Atomic Safety and Licensing Mayor, City of Wallis j Board Panel P. O. Box 312 j U.S. Nuclear Regulatory Commission Wallis, Texas 77485 l Washington, D. C. 20555 l Hon. Leroy H. Grebe l Dr. E. Leonard Cheatum County Judge, Austin County 4 Route 3, Box 350A P. O. Box 99 l Watkinsville, Georgia 30677 Bellville, Texas 77418 1 Mr. Gustave A. Linenberger Atomic Safety and Licensing Atomic Safety and Licensing Appeal Board Board Panel U.S. Nuclear Regulatory Commissioq U.S. Nuclear Regulatory Commission Washington, D. C. 20555 ;
Washington, D. C. 20555 l Atomic Safety and Licensing Mr. Chase R. Stephens Appeal Board ;
Docketing and Service Section U.S. Nuclear Regulatory Commissio$
Office of the Secretary Washington, D. C. 20555 ;
of the Commission U.S. Nuclear Regulatory Commission Steve Schinki, Esq.
Washington, D. C. 20555 Staff Counsel U.S. Nuclear Regulatory Commissiom Richard Lowerre, Esq. Washington, D. C. 20555 Assistant Attorney General for the State of Texas l P. O. Box 12548 ;
Capitol Station l Austin, Texas 78711 l i
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Mr. Bryan L. Baker D. Marrack 1118 Montrose 420 Mulberry Lane Houston, Texas 77019 Bellaire, Texas 77401 J. Morgan Bishop Brenda McCorkle 11418 Oak Spring 6140 Darnell Houston, Texas 77043 Houston, Texas 77074 Stephen A. Doggett W. Matthew Perrenod P. O. Box 592 4070 Merrick Rosenberg, Texas 77471 Houston, Texas 77025 John F. Doherty F. H. Potthoff 4327 Alconbury 7200 Shady Villa, No. 110 Houston, Texas 77021 Houston, Texas 77055 Robert S. Framson Wayne E. Rentfro Madeline Bass Framson P. O. Box 1335 4822 Waynesboro Rosenberg, Texas 77471 Houston, Texas 77035 James M. Scott Carro Hinderstein 13935 Ivy Mount 609 Fannin, Suite 521 Sugar Land, Texas 77478 Houston, Texas 77002 4-J Grego pela(nd I
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