ML19327B742
| ML19327B742 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 11/07/1989 |
| From: | Wessman R Office of Nuclear Reactor Regulation |
| To: | Fox H AFFILIATION NOT ASSIGNED |
| Shared Package | |
| ML19327B743 | List: |
| References | |
| NUDOCS 8911130022 | |
| Download: ML19327B742 (2) | |
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7 N0y 0 71989 a
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Mr. Henry S. Fox 39 Liberty Street Newburyport, Massachusetts 01950
Dear Mr. Fox:
Your letter of October 21, 1989 to Mr. Zech regarding the consideration of the financial status of Public Service Company of New Hampshire (PSNH) when judging PSNH's ability to safely operate Seabrook has been referred to me for i
response.
The section of the Newburyport, Massachusetts October 20, 1989 The Daily News, which you enclosed with your letter, had an article on the decision by the Nuclear Regulatory Comission (NRC) on the financial qualification issue.
The article quoted only part of a sentence (which you had underlined) from
. page 21 of the Comission's Decision.
I have enclosed a copy of that document which puts the matter on financial considerations into accurate perspective.
As discussed in pages 19-21 of their Decision, the Comission finds that the i
financial uncertainties involving PSNH do not lead to a nuclear safety problem.
Existing safety requirements, coupled with extensive staff monitoring of PSNH, provide assurance that any nuclear safety issues will be promptly addressed.
Other financial protections, such as property insurance will be in place before a full power license is issued. As you can see from the Comission's Decision, the Comission has carefully considered the issue of financial i
qualification.,
b With regard to the Seabrook facility, as well as other nuclear facilities, the NRC, in carrying out its res)onsibility to ultimately decide licensing a nuclear facility, will use t1e best information available with a full awareness of our responsibility. We take this responsibility very seriously. The 6
Seabrook plant will not comence operation unless and until we are fully satisfied that safe o)eration can be performed and that there is reasonable assurance the public 1ealth and safety is protected.
Sincerely,
/s/
Richard H. Wessman, Director i
Project Directorate I-3 I
Division of Reactor Projects I/II Office of Nuclear Reactor Regulation 1
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Enclosure:
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I Mr. Henry S. Fox 39 Liberty Street Newburyport, Massachusetts 01950
Dear Mr. Fox:
Your letter of October 21, 1989 to Mr. Zech regarding the consideration of the 1
financial status of Public Service Company of New Hampshire (PSNH) when judging PSNH's ability to safely operate Seabrook has been referred to me for response.
The section of the Newburyport, Massachusetts October 20, 1989 The Daily News, which you enclosed with your letter, had an article on the decision by
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l-Nuclear Regulatory Connission (NRC) on the financial qualification issue.
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l The article quoted only part of a sentence (which you had underlined) from page 21 of the Commission's' Decision.
I have enclosed a copy of that document J
which puts the matter on financial considerations into accurate perspective.
As discussed in pages 19-21 of their Decision, the Connission finds that the -
l financial uncertainties involving PSNH do not lead to a nuclear safety problem.
l Existing safety requirements.-coupled with extensive staff monitoring of PSNH, provide assurance that any nuclear safety issues will be promptly addressed.
Other financial protections, such as property insurance, will be in place before a full power license is issued. As you can see from the Cownission's Decision, the Commission has carefully considered the issue of financial l
qualification.
With regard to the Seabrook facility, as well as other nuclear f acilities, the i
NRC, in carrying out its responsibility to ultimately decide licensing a l
nuclear facility, will use the best information available with a full awareness l
of our responsibility. We take this responsibility very seriously.
The Seabrook plant will not commence operation unless and until we are fully setisfied that safe o)eration can be performad and that there is reasonable assurance the public 1ealth and safety is protected.
j Sincerely, T. +l,
wn Richard H. Wessman, Director Project Directorate I-3 Division of Reector Projects I/II I
Office of Nuclear Reactor Regulation
Enclosure:
l As stated I
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UNITED STATES OF AMERICA NUCLEAR REGULATORY COPNISSION COMMISSIONERS:
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- 9 CCI 19 All :E Kenneth M. Carr, Chairman e
Thomas M. Roberts 1
Kenneth C. Rogers James R. Curtiss
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1E VED OCT iS PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
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Docket Nos. 50-443-OL (Seabrook Station, Units 1 and 2 50-444-OL '
MEMORANDUM AND ORDER CLI-89-20 For a second time in this operating license proceeding, we are 1
l called upon to decide with respect to financial qualification whether i
there are special circumstances that warrant the exceptional action of a waiver of the Comission's rules.2 On both occasions, we were asked to waive those rules which, in sum, effectively find that public utilities s
are financially cualified because they are assured a source of funds for l
1 A group of New Englano owners, led by Public Service Company of New Hampshire (jointly " Applicants"), seeks a license to operate Seabrook Station, a nuclear power facility located in New Hampshire.
2 Two requests for waiver or exception from the rules were presented t
by Applicants in this proceecing.
The first, to reduce the size of the EPZ was rejected by the Licensing Board, Public Service L
Ccecany of New Hampshire, (Seabrook Statien Units 1 ano 2), LBP-87-12, 25 NP.C 324 (1987); the second, to seek an exemption from the requirement for an onsite emergency exercise within one year of the issuance of a full l
power license, was decided by us and similarly rejected.
Public Service Company of New Hampshire, (Seabrook Station Units 1 and 2), CLI-89-19, l
Sept. 15, 1969.
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safe operation.
The first waiver was sought in order to embark on a-financial qualification review with respect to the Applicants' financial i
ability to operate their Seabrook nuclear fecility at low power.
We found that there were special circumstances which undercut the rationale supporting an assumption of financial qualification for public utilities, but once we had established certain decomissioning requirements for low i
power operation, no significant safety problem remained that would justify such an undertaking. Public Service Company of New Hampshire, (Seabrook Station L' nits 1 and 2), CLI-88-10, 28 NRC 573 (1988). Today, we find, as we will amplify below, that the circumstances do not undercut the assurance of the availability from governmental rate-setters of a source of funds adequate for safe operation pursuant to a full power license.3 Nor have we been shown any other significant link between Applicants' financial situation and a safety problem. Accordingly, we do not grant the waiver sought.
I.
Backoround A.
The Framework Established by CLI-88-10 Less than a year ago in this docket, we construed and applied the Comission's waiver rule,10 C.F.R. 9 2.758.4 We applied a three-part test for certification of a waiver petition to the Comission.
Two parts l
followed from the explicit terms of the rule:
(1) The waiver petitioner must have presented "special circumstances" in the sense that the petitioner has properly pleaded 3See 28 NRC at 597.
- See 28 NRC at 596.
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j one or more facts, not comon to a large class of applicants or facilities, that were not considered either explicitly or by necessary implication in the rulemaking proceeding leading to the rule sought to be waived;
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(2) those special circumstances must be such as to undercut the t
rationale for the rule sought to be waived.
28 NRC st 597.
1 The third prong of the test was implicit in long-standing Comission law, that a rule waiver would be granted only in unusual and compellino circumstances, Public Service Company of New Hampshire, (Seabrook Station, Units 1 and 21, CLI-89-03, 29 NRC 234, 239 (1989), and explicitly served notice that the Comission would not exercise its discretion to waive a rule for less than significant safety reasons:
(3) from the petition and other allowed papers it should be evident that a waiver is necessary to address, on the merits, a significant safety problem related to the rule sought to be waived.
28 NRC at 597.
1 Applying that test, the Comission found that the bankruptcy of Public Service Company of New Hampshire (PSNH) and the applicability of 5
New Hampshire anti-CWIP statutos were "special circumstances".
In SAnti-CWIP statutes prohibit the rate authority from authorizing increased rates based on the costs of construction work in progress. Only when the plant begins connercial operation or delivering power to the public, may any of those costs be passed on to the public in the form of increaseo i
rates. We need not determine whether New Hampshire's anti-CWIP prohibition will terminate when the Seabrook facility furnf shes net generation to the grid or at some later point.
In the normal course of l
(Footnote Contirued) i 3
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,,s addition, the Comission assumed without ceciding that delay anc cessation of project payments by some of the minority owners cualifiec under the first part of the test as a "special circumstm" The Comission rext founo that bankruptcy and anti-CWIP in I
6 combination undercut the ratienale of the rule.
This was so because l
under anti-CWIP "the utility cannot, strictly speaking, recover any portion of th costs cf low-power testing" so long as it was not licensed to and did not produce commercial power.
The Comission, on the strength of its recognition in its rulemaking that regulatory delays and phase-ins by ther ratemaker did not undercut the rationale of the rule, said that the anti-CWIP provisions, standing alone, might not be critical for most utilities, but that those provisions in combinatien with PSNH's bankruptcy did undercut the rationale of the r';;e because the bankruptcy signalled that the anti-CWIP provisions' bar of a source of funding had been critical to PSNH.
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(Footnote Continued) events it would come relatively soon after comencing operations under e full power license.
For the most recent 10 facilities to be granted a i
full power operating license the average time to achieve full comercial operation was four months from the date of license issuance.
See "Ifcensed Operating Reactors, Status Sumary Report Data as of 6 30-89",
NMEQ 0020. Vol.13, No. 7, passim (1989).
In some cases a low power licerse had not been granted in advance, and thus the tirne was lengthened by inclusion cf the duration of low power testing and time that was necessary to accomplish any remedial work.
6Because it was not pivotal to the decision, the Comission assumed without deciding that the minority owners' celay or cessation of project payments also undercut the purpose of the rule for low power when in combination with bankruptcy and anti-CWIP.
28 NRC at 599.
728 NRC at 598, n.25, citing 49 Fed. Reg. at 35,749 (1984).
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The Comission then looked to the underlying safety purpose of the requirement to conduct a financial qualifications review from which the rule sought to be wafved provided an exception for public utilities.
The Commission concluded that the sole reason was to " provide some added assurance that a licensee would not, because of financial difficulties, be under pressure to take some safety shortcuts." 28 NRC at 600.8 With this framework, we briefly set forth the administrative history of the petition for waiver certified to us by the Atomic Safety and 1,1 censing Appeal Board (" Appeal Board").
Public Service Company of O
The Comission quoted its 1984 rulemaking:
A financial disability is not a safety hazard per se because the licensee can and under the Comission's regulations would be obliged to simply cease operations if nece:sary funos to operate safely were not available.
At most, the Atomic Energy Comission, in draf ting the rule, must have intuitively concluded that a licensee in financially straitened circumstances would be under more pressure to comit safety violations or take safety " shortcuts" than ene in good financial shape.
Acccrcingly, the drafters of the rule sought to achieve some level of assurance, prior to licensing, that licensees l
would not be forced by financial circumstances to choose between shutting down or taking shortcuts while the license was in effect.
1 Id. at 600 citing, 49 Fed. Reg. at 35,749.
The Comission then comented that:
"[w)hatever may be the legitimacy of this safety purpose for full-power operstion, it stretches reason to suppose that the safety rationale would have any bearing on a limited license for low-power 1
testing.
Shortcuts in safety at full power conceivably could avoid shutdowns or derating and thereby contribute to greater p'ent availability and revenue from power sales.
But shortcuts in low-power testing safety will not lead to generation of more revenue that would benefit the plant owners."
1 Id.
(Emphssis added.)
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New Hampshire, (Seabrook Station Units 1 and 2) ALAB-920, 29 NPC,
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(1989).9 B. The Passachusetts Attorney General's Petition for a Waiver On February 1,1989. the Massachusetts Attorney General (Mass AG),
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filed a petition under 10 C.F.R. I 2.758 (the petition) that the rule l
exempting utilities from a financial qualificatien review be waived so
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that Applicants would be required to " establish prior to full power 1
operation, financial qualifications sufficient to cover the cost of Seabrook Unit l's operation for the ceriod of the license."
Petition at 2.
The petition ergued that the contirued existence of two of the "special circumstances" found to exist in CLI-88-10--(1) the bankruptcy,
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and (2) delay and cessation in project payments -- was sufficient to undercut the rationale for the rule. Massachusetts also asserted that the Comission's reasons in support of its conclusion that there would be no significant safety problem at low power would not hold at full power.
To the contrary, asserted Massachusetts, there are incentives to take shortcuts in safety at full power, the amount of money to operate the plant at full power is significant, and the safety risks at full power are substantial, t
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Less than a week before MassAG filed the petition certified to us, l'
Seacoast Anti-Pollution League (SAPL) moved for admission of a financial cualification contention assertedly based on its assumption that the Cornission had effectively waived the financial cualificatien exception by recognizing that its rule was undercut by full power.
The motion was denied by the Licensing Board.
SAFL oid not take a separate appeal; i
however, SAFL submitted a brief in support of MassAG's appeal of the Licensing Board's rejection of his petition.
It was SAPL's brief that carried the day for the MassAG before the Appeal Board.
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f Staff joired Applicants in opposing the petition, and on Perch 8 f
1989, the Licensing Board denied it.
Public Service (cmpany of
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y New Hampshire. (Seabrook Station Units 1 and 2), LBP 89-10, 29 hRC 297 I
(1989).
The Licensing Board found that the MassAG had failed to rebut
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i the presumption that the ratesetter would allow Seabrook's rate base to include the costs of safe operation that were prudently incurred.
_!d. at i
303.
In addition, the Licensing Board found the Affidavit of E. A. Brown, President and Executive Officer, New Hampshire Yankee l
Division of PSNH, to be of particular importcnce.
Id. at 304 The Massachusetts Attorney General appealed and was supported in that appeal by SAPL.
C.
ALAB-920 After receiving briefs, hearing oral argument and receiving response to a request for supplemental briefing, the Appeal Board decided the i
matter before it on August 21, 1989.
The decision concluded that a prima hc3 case for waiver had been made.
En route to its ultimate conclusion the Appeal Board had rejected l
the original position of the MassAG set forth in his petition and brief.
t The rejection specifically included any argument that bankruptcy standing l
l alone sufficed as a basis for waiver.
See ALAB-920, slip op, at 18.
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Appeal Board also found no warrant for speculation respecting ultimate 1
ownership of Public Service Company of New Hampshire's share and other uncertainties respecting what regulatory ratesetting authority will 7
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govern Seabrook.10 Nonetheless, addressing itself to MassAG's " secondary argument", incorporated from SAPL's brief, the Appeel Board fcund that l
the effect of anti CWIP could be felt for as long as 18 months into operations at full power and thus that the same combiration that the Commission found to have undercut the rule at low power also would be I
i present at full power. The Appeal Board then considered whether there was a significant safety cuestion and decided that "under the
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Comission's analysis (in CLI-68-10) operation above five-percent, unlike low-power testing, potentially gives rise to a 'significant safety problem' warranting waiver of the 1984 rule."Il ALAB-920, slip op. at 25.
The Appeal Boarc provided an additional reason for referring this l
matter to the Comission.
That reason springs from the Appeal Beard's concern that under the UCS caseII yny review by the Staff of financial i
qualification requires a rule waiver, and from the Comission's conclusion, shared by the Appeal Board, that the utility's bankruptcy
" clearly signals that something very unusual and serious has occurred."
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10The Appeal Boero noted that the license recites "that Public Service 'has exclusive responsibility and control over the physical construction, operation and maintenance of the [Seabrook] facility'" and thus, under our regulations, that a transfer could not be effected i
without Comission approval.
ALAB-920, slip op, at 17, n.30.
II The Appeal Board claimed additional support from the Comission's f ailure to exempt public utilities from its 1987 rule requiring all licensees to notify the agercy upon the filing of bankruptcy petitions.
12Union of Concerned Scientists v. NPC, 735 F.2d 1437 (D.C. Cir.
1984), cert eenied sub nom Arkansas Power & Light Co. v. UCS, 469 U.S.
l 1132 (1985).
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ALAB-920, slip op, at 29.
In these circumstances the Appeal Board relieved the matter should be referred to the Comission for cecision.
D.
Positions of the Parties On receipt of the Appeal Board's certification of the petition, the I
Comission promptly established an opportunity for the parties who opposed the waiver to address the Appeal Board's finding and for a response to those papers by the MassAG and any other party wishing to
" Applicants' Response to the Comission's Order of August 22, respond.
1989" (Applicants Response) was filed on Sept. 7, 1989, as was the "NRC Staff's Opposition to Waiver of Financial Qualifications Regulations i
Applicable to full Power Operation of Seabrook" (Staff Response).
i Responses were filed by the MassAG (MassAG's Response) and by SAPL (SAPL Response)onSept. 26, 1989.
SAPL also provided supplemental information in a cover letter which the Comission has considered.
1.
Position of the Applicants t
Applicants argue that the Comission's holding in CLI-88-10 is not i
i transferable, as the Appeal Board would here it, to the circumstances surrounding full power licensing because in CL1-88-10 the Comission was presented with the possibility that after low power operations there would not be the grant of a full power license.
In addition, they argue that the Appeal Board erred in considering regulatory delay following enti-CWIP as significently different from the regulatory delays found by the Comission not to affect recovery of operating expenses.
In sedition, Applicants criticize the Appeal Boaro for speculation that the regulatory delay will be sufficient to cause a problem and for not addressing, in its consideration of safety significance, the I
P Licensing Coard's reliance on the affidavit of the President of New Hampshire Yankee.
2.
Position of the NRC Staff Staff asserts that the Appeal Board improperly overreached to cetermine that a prima facie case for waiver had been made.
Staff's next major point is that the Appeal Board wrongly concluded that the CL1 B8-10 tests for waiver had been met for the relevant period of the full power license.
Staff understenes the relevant time to be that period before a power level is reached that would justify inclusion of costs in the rate base regardless of when higher rates are in fact permitted.
Finally, the Staff maintains that the Appeal Board erred in finding Stsff's actions impreper under the UCS case.
In Staff's view. it may gather infonnation on financial qualification in order to advise the Commission on whether a waiver is necessary.
3.
Position of the MassAG and SAPL13 MassAG argues first that PSNH's bankruptcy meets the Consnission's three part test:
(1) Bankruptcy is a special circumstance, (2) the operation of the anti-CWIP lawn and the effect of the bankruptcy on the extent ano timing of any rate recovery of the construction and operation costs undercut the assumption on which the rule is based, and (3) safety i
significanceispresentbecause"[n]omorepowerfulexample[than l
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13 We treet the positions of MassAG and SAPL under one heading since each has specifically adopted the arguments of the other.
MassAG also argues as a separate point that the Appeal Board was correct in finding that the celay in cost recovery due to anti-CWIP does not disappear on the grant of a full power licerse, and notes that the Appeal Board found that some delay was a virtual certainty, M
Y ao bankruptcy.1 of a company encountering severe pressures to cut corners can be imagired." Resperse of MassAG at 3.
See also SAPL Response at 2-5.
MassAG next argues that recovery cf the construction and operating l
costs of Seabrook will occur outside of the rormal ratemaking process and will oe significantly and materially celayed. He asserts that the
- bankruptcy has triggered an entirely different rate setting process" from that contemplated by the Comission. MassAG Respotise at 7.
see also SAPL Response at 5-12, arguing that anti-CWIP will remain ir, force until the plant is "used and useful," not merely providing net i
power to the grid.
SAPL's response aeditionally emphasi:es that financial qualification review is needed in light of the defaults of i
certain other Seabrock owners.
See SAPL Pesponse at 12-14 l
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II. ECISION The Comission has reviewed the record en the waiver petition before I
the Licensing Board and the Appeal Board and has particularly considered the Appeal Board's certification (ALAB-920) and the papers of the parties. One fundamental issue--the effect of the delay in a rate increase beyond full power licensure-- governs our result, and thus we turn to it directly.
Thereaf ter, we address the remaining matters requiring our attention.
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A.
Whether Delay of a Rate Increase Undercuts the Rule The Appeal Beard correctly recognized that bankruptcy, not alone $
but in conbination with the anti-CWIP law, was the basis fer cur holding at low power that special circumstances had been shown which uncercut the basis of our regulaticn exemptirg public utilities from any requirement to demonstrate firencial qualification. Bankruptcy remains a factor in full power licensingI0, but the critical dispute centers on whether the potential for delay in receiving the increase to cover the costs of safe operation is a special circutrstance that.tndercuts the basis of the Comission's exemption for public utilities.
One side would have it that the following circumstancer obtain: (1) the Commission had not considered anti-CWIP in its rulemakirg; (2) the delay in receiving the costs of construction was due to anti-CWIP; (3) the anti-CWIP causeo delay in receiving a rate increase on construction costs makes critical an immediate rate increase to cover operation costs; and (4) such a raise is prohibited by anti-CWIP until the plant is *used Therefore, the argument concludes, anti-CWIP remains a and useful".
10This is not to say that bankruptcy stencing alone could never f
We do not here speculate on what undercut the purpuse of the rule.
circumstances ceuld elicit such a finding, but simply note that the i
circumstances of this Chapter 11 reorganization do nr>t, insofar as we are aware, undercut either the presumption that an adeounte source of funds for safe operation will be allowed by the ratesetter or that the Applicants will be able to use those funds for operations.
1t is less clear that defaults will remain after the grant of a 16 full power license in that full power operations can be expected toF provide a source of revenue.
owners do not appear significant and appear to have been made uo by other In any event, our analysis does not depend on this coowners as neeoed.
L factor.
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special circumstance relevant to full power which, together with bankruptcy, continues to undercut the assumption of the rule that a source of funds for safe operation will be available.
I Applicants argue the other side" that anti-CWIP by its tems is not a factor that diminishes the assurance that ratemakers will allow sufficient rates to produce adeounte funds for safe cperation at full power, on which the Commission relied when it promulgated the rule excepting public utility operating license applicants from financial qualification reautrements.
We believe the Applicants' argument better reflects our intent.
It was not simply a delay in recovering costs from low power until full power that dictated our result in CLI-88-10.
Rather, because significant hurdles lay between the Applicants and a full porcer license, the possibility that such a license would not issue following low power was t
at the heart of the matter.
The anti-CWIP law, in the no-full-power-license circumstance that the Comission hypothesized in CL1-B8-10, would operate so that recovery of construction costs and costs of low power operation could never be allowed.
Indeed, this conclusion infused the Commission's entire censideration of the issues presented in CL1-88-10 and led to a requirement for assurance in the sum of $72.1 17The Staff asserts that anti-CWIP has force only until a pcwer level is reached that satisfies the recuirement that power is being supplied to the publ!c.
For that interim term, staff argues that power levels would be so low that the same holdings that applied at low power would be applicable for the same reasons.
Beyond that point, the Staff says that any delay is too speculative to warrant consideration.
We agree that delays are speculative but, as discussed in the following text, our cecision here is based on the ground that the Comission i
considered such delays in its rulemaking, t
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V million for cecomissioning af ter low pcwer if that became necessary.
We are satisfiec that had Applicants then held a full power 'icense, the anti-CWIP law would rot have been a f actor, rnuch less have played such a critical role, as is argued by petitioners here, when Applicants undertook low power testing.
Nothing in the er.ti-CWIP law, as we understand it, prohibits including Seabrook's operating costs in the rate base when the plant is operating to serve the public, as it will be fully authorized to do if it receives its full power license.10 While a delay is possible, and some minimal delay is probably likely, such a celay is of the kind that the Comission recognized in its rulemaking and accepted as a circumstance that would not undercut the rule. No party has shown that the potential delay in New Hampshire for a rate relief to cover operating expenses is exceptional and outside the range of regulatory delay acknowledged by the Comission.
Further, the Comission has not been shown any other factor that I
would trake it unreatenable for us to continue to rely on the presumption of reasonable assurance of acequate funding for public utilities.
4 noted above, commercial operations that would trigger rate relief at a i
reasonably to be expected within a few months from the grant of a full l
power license.
In addition, materials provided by MassAG appear to l
indicate that PSNH has access to adequate revenues and cash on hand to l
cover its share of Seabrook's operating costs during the period in which 10Although we place ro reliance on it, we find that MassAG's failure originally te make the anti-CWIP argument at full power and reluctance to espouse it when suggested, is at least an incication that he too found it a bad fit.
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it has not yet reached comercial production.U Moreover, the grant of a full power license, without more, by reducing the possibility of cancellation and making eventual recovery of prudently incurred costs likely may te expected to significantly enhance the ability ef the company to raise cash in the credit markets. Cf. Coalition for the Environment v. NRC, 795 F.2d 168, 175 (D.C. Cir. 1986).
Thus the Comission finds that the grant of a full power license can, as presumed in the generic exemption for oublic utilities, reasonably assure that
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Applicants will be able to bridge the gap of any reasonably expectable regulatory delay and will be assured recovery of the costs of safe operation.20 Because the rule serves its purpose under these circumstances, no waiver is warranted, and none will be granted.
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PSNH's 10 0 filing with the SEC indicates that PSNH likely does have adequate revenues to cover its 36% share of Seabrook operations, particularly in the few months between issuance of the full-power operating license and rate recovery allowed by the New Hampshire PUC.
In any event, the filing does not support Intervenors' position that there is clearly such a lack of funds as to raise a significant safety problem.
1 The filing shows that 95NH generated cperating income (i.e., operating revenues after expenses other than interest and taxes) of $17.8 million for the three month period ending June 30, 1989 (compared with $21.9 million for 1988).
For the six-month periods ending on June 30, 1989 and 1988, the respective amounts are $46.2 million and $58.4 million.
Additionally, cash flow for the six months ending on June 30, 1989 and 1988 was $60.3 million and $122.4 million, respectively.
" Cash and cash equivalents on hand", which are good indicators of the degree of short-tem or medium-term solvency, was $91.7 million as of June 30, 1989.
See PSNH's filing of SEC Fom 10-Q for Quarterly Period Ended June 30, 1989, provided as Exhibit B to Response of MassAG.
20MassAG tells us that reorganization plans are under consideration in bankruptcy court and are all expressly contingent on the consumation of rate agreements.
The agreements provide for temporary increases that do not provide revenues to the utility until after final court approval of the reorganization plan and necessary accuisitions are complete.
(FootnoteContinued) 15
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Indication of a Significant Safety Problem Given our cetermination above, we need not reach a discussion of whether a safety-significant problem would be shown were the rationale of the rule undercut. However, we believe it is useful to address the issue
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in light of the misunderstanding by the Appeal Board, MassAG, and SAPL, i
cf the Comission's discussion of its finding that there was to significant safety problem at low power.
Even were the Comission to agree with the Appeal Boaro, and we do not, that MassAG had made his case l
that special circumstances were present that uncercut the rationale of f
the rule, we disagree that the pleadings of these parties irdicate in terms of CLl 8810 that a waiver is "... necessary to address... a t
significant safety problem related to the rule sou;ht to be waived."
28 NRC at 597.
In CLI 88-10, the Commissirn said:
i l
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(Footnote Continued) i MassAG Response at 7.
MassAG thus concludes that if " licensure were to t
occur prior to the completion of the bankruptcy a potentially very lengthy time period would exist in which a bankrupt utility would have a full-power operating license with no or virtually ro rate recovery of the costs of construction and operation of Seabrook." MassAG's Response at 8.
We think that MassAG's premise does not necessarily support such a conclusion.
It appears to us that there are other more obvious explanations for en agreement not to permit revenues to en accuiring utility that has not received all necessary approvals to its acquisition than to exhibit an intent not to grant legally required rate increases to the current utility licensees.
In this regard, it is also far from obvious to us that an injunction against a rate commission f rom a proceeding against a utility reed also be read, as SAPL reads it, to bar a successful application for a rate increase neeced for safe operation of a nuclear facility. Ana, were it to be so read. it would, in appropriate circumstances, be subject to alteration by the court that issued it.
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i Whatever may be the legitimacy of this safety purpose (213 l
for full-power operation, it stretches reason to suppose i
that the saf ety rationale would have any bearing on a limited license for low power testing.
Shortcuts in safety at full power gneeivably could avoid shutdowns or
~
derating and thereby contribute to greater plant availability end revenue from power sales.
But shortcuts in low-power testing safety will not leac to generation of more revenue that would benefit the plant owners.
Low-power testirg does not generate revenue from power sales.
The only purpose of low-power testing is to i
further ensure plant safety... There is every incentive to do the jeb well and no rational incentive to cut I
areadded)[. emphasis of "only" in original; other emphases corners.
28 NRC at 600.
Contrary to the apparent er professeo understarding of the 22 Intervenors
, and the apparent reading that led to the constraint felt by the Appeal Board to certify the instant petition to us CLi-88-10 can not f airly be read that the Comission found that where exceptional circumstances at full power undercut the rationale of the exception for public utilities, there is necessarily a significant safety problem.
In j
the quoted material and following text, the Comission contrasted the circumstances of full power with icw power testing operations where it said there was no conceivable incentive for cost-cutting. And, in many other ways, the Comission made clear that in its view there could be no l
l 21The only safety purpose of the rule discerned by the Comission was the intuitive judgment that some additional assurance could result from avoiding a situatien where a lack of funos~ could cause pressure to cut corners. 28 NRC at 600. Nonetheless, the Comission retained its prircipal reliance on other regulatory means to assure the public health and safety.
22 SAPL would have us believe that it read our language in comparing low power with full power as so strong as to have corstituted a waiver of the rule at full power.
We reject that reading.
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significant safety problem at low power that required attention in the t
circumstances that prevailed. What vias inconceivable at low power was merely stated to be conceivable at full power.
But the stanoard for I
showing a significant safety problem has never been "what is conceivable".
Thus the Comission did not intend to and did not resolve i
i the question for full power.
The Comission made no determination on a matter not before it and left for a later day, if necessary.,to decide in the circumstances then before it whether a significant safety problem was presented by any certified petition for waiver on which it was ruling.
Also, there can be no doubt that the Comission intended that the indication of a significant safety problem be something more than simply showino that exceptional circumstances unoercut a rule with some basis in safety.
Since the vast majority of Comission rules have some basis in safety, if that was all the Commission meant it would have been superfluous for the Comission to announce to its Boards that it did not want a rule waiver certified absent the indication of a significant safety problem.
The Comission used the terminology "significant safety problem" to note that it intended to reouire something more than a theoretical--or conceivable--issue, but insisted on there being a real matter that required resolution. 3 As we stated earlier, even were there to have been a showing in the matter before us that the rationale of the rule was undercut, the 23 0nder Comission precedent and the Commission's rulemaking pronouncement, predictions that PSNH will not properly use its source of funds may not be acdressed in financial qualification hearings were they (Footnote Continued) 18
.e..
i Comission sees no indication that PSNH's financial uncertainty will i
overcome the substantial protections that the Comission has in place by t
means of all its recuirements to prevent the occurrence of a significant nuclear safety problem.24 in the event any full power license is granted, the Comission requires a greater than usual presence by the 1
staff throughout power-ascension.
This will be the case at Seabrook as well. After normal full power operation is underway the Commission can direct greater than usual surveillance, if there is any indication that it would be advisable to do do.
Any scrimping on compliance with safety requirements will be dealt with prorr.ptly and aggressively.
C.
The Comission's Role in 2.758 rule waivers We have concluced, in the part of the process that is tantanount to a review of the certification of the petition, that the petition failed to make a prima facie case and to indicate a significant safety problem.
Because the arguments of the parties suggest that the Comission's role in a 10 C.F.R. I 2.758 proceeding is simply to affirm or overrule the certification of the referring board, we think it is important also to l
(Footnote Continued) l initiated.
Financial cualification review is satisfied if there is an l
adequate source of fundin9 49 Fed. Reg. at 35749.
How funds are spent is a management integrity issue.
24We cannot now know whether a case could realistically be hypothesized where we would disturb the financial qualification rule exception for public utilities.
Perhaps public utilities' status makes them less likely to succumb to a temptation to cut corners to save money because the prospect of savings is not a realistic one.
When funds i
expended for safe cperation are recoverable and when a rate of profit is allowable on the investment portion, any incentive to cut corners could i
be highly speculative.
In any event, we need not decide this generic matter at this time.
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discuss briefly the Comission's role, even though the Comission does not here reach the policy decisien that is contemplated under its regulation at section 2.758 in that it has found that Interveners did not make a prima facie case.
Under i 2.758 the boards are not permitted to make a rule waiver cecision, but a board must simply certify a rule waiver petition to the Commission after finding that the petitioner has met extremely high standards--compelling circumstances in which the rationale o a rule is undercut. What the Comission has protected by this process is the ability of the Commission itself to decide as a matter of policy, once a prima f acie case has been made, when, anc if so, to what extent its codified regulations are to be waived.
This is done only after an infonned judgment in the totality of the circumstances, recognizing and evaluating any relevant circumstance that in the judgment of a majority of the Comissioners should be taken into account.25 Only the Comission has the necessary authority and perspective to respond to whatever exigent circums.ances it finds upon review of a waiver reouest.26 Indeed 25 It is significant that under 5 50.12(a)(2)(vi) the regulations pennit the grant of a rule exemption where "there is present any other material circumstance not considered when the regulatien was adopted for which it would be in the public interest to grant an exemption." No less latitude would be available to the Comission under 2.758 when deciding tc let en exemption stand, i.e. in this case NOT to waive a rule.
200n a related point, we egree with the Appeal Board that the staff may not rake financial qualification detenninations relative to licensing without a rule waiver. On the other hand the staff is surely correct that it may make threshold inouiry sufficient to decide whether to seek a rule waiver. Any such threshold inquiry will be conducted outside the adjudicatory portion of an ongoing operating license proceecirg.
Staff inquiries without more cannot be sufficient to waive the rule contrary to the Commission's carefully constructed Section 2.758 regulation.
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there is precedent in this proceeding for the Comission to take special j
steps, short of rule waiver, to deal with potentially significant safety i
j issues.
Specifically, we refer to the decomissioning requirement i
imposed at low power. Typically, parties should expect that where appropriate the Comission will attempt to find practical solutions to alleged safety issues associated with petitions to waive its rules.
The Comission expects here that the Staff shall apply the necessary resources to monitor Seabrcok's compliance with safety regulations. The Staff shall be particularly sensitive to any signs that cost-cutting is impinging on safety.
The Comissicn has consistently preferred to place l
its reliance on the ability of its inspectors to discern the indicia of i
corner-cutting that could lead to a lack of safety rather than on its ability t'., make financial predictions.
See e.g., 49 Fed. Reg. 13044, 13046(1984),
in addition, other financial protections will be in place before a full power license is granted as a result of our requirement that Applicants be in compliance with property insurance and decomissioning plan requirements relevant to full power before such a license is issued.
In consideration of the foregoing, we find that no financial matter need be expected to disturb a finding of reasonable assurance that l
21
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Seabrook's operations will be consistent with public health and safety it is allowed to operate at full power.
It is so ORDERED.
For the Comistion27 i
.c e
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SAMUEL J( CHILK hg Secretary of 3he Comission.
Dated at Reckville. Maryland this O day of October, 1989 i
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i 27Comissioner Rogers was unavailable to participate in the formal vote on this orcer; if he had been present he would have appreved it.
22
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UNITE 3 STATES y,x, NUCLEAR REGULATORY COMMISSION s
nAsMiwc Tow, p.c. rosos g
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EDO Princioni Correspondence Control FROM:
DUE: 11/09/89 EDO CONTROL: 0004863 DOC DT: 10/21/89 FINAL REPLY:
'H:nry S. Fox TO:
Chairman FOR SIGNATURE OF
- GRN CRC NO: 89-1166 Murley DECC:
ROUTING:
CONCERNING SEABROOK NUCLEAR PLANT Russell, RI Scinto,-OGC DATE: 10/27/897 ASSIGNE'D TO:
CONTACT:
NRR Murley SPECIAL INSTRUCTIONS OR REMARKSt NRR RECEIVED: OCTOBER 27, 1989 ACTION:
(DRPRiVARGA';' J
_NRR ROUTING:
MURLEY/SNIEZEK-PARTLOW CRUTCHFIELD MIRAGLIA GILLESPIE M0SSBURG JA4 O Q gg n
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_-________________________j
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OFFICE OF THE SECRETARY CORRESPONDENCE CONTROL TICKET i
PAPER NUMBER:
CRC-89-1166 LOGGING DATE: Oct 26 89 ACTION OPFICE:
EDO i
Henry S. Fox i
AUTHOR:
MA (MASSACHUSETTS) i RFFILIATION:
l LETTER DATE:
Oct 21 89 FILE CODE: ID&R-5 Seabrook I
SUBJECT:
Financial status of Public Service Company of New Hampshire ACTION:
Direct Reply DISTRIBUTION:
DSB
'SPECIAL HANDLING: None NOTES:.
DATE DUE:
Nov 9 89 i
SIGNATURE:
DATE SIGNED:
AFFILIATION:
i P.ec'd Ofl. EDD Dete --
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