ML19329F257

Deposition of LP Crocker (NRC) Re Possibility of Smaller Nuclear Plant Const at Midland.Pp 1-3

ML19329F257
Person / Time
Site:	Midland
Issue date:	11/05/1976
From:	Crocker L Office of Nuclear Reactor Regulation
To:
Shared Package
ML19329F251	List: ML19329F250 ML19329F256 ML19329F257 ML19329F258 ML19329F259
References
NUDOCS 8006230774
Download: ML19329F257 (3)

Text

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UNITED STATES OF AMERICA

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NUCLEAR REGULATORY COPHISSION 10 ' r;

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2 ;* it' - Iri'the Matter of

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'~ CONSUMERS POWER COMPANY Docket:Nas'.

50-329 '.+ e. -:rer.

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50-330

-* *IS: '!(Midland Plant, Units 1 & 2) e.:-.. :ne me..vez

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NRC STAFF TESTIMONY OF LAWRENCE P. CROCKER i: +~

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RELATING TO THE POSSIBILITY OF CONSTRUCTING

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A SMALLER NUCLEAR PLANT AT MIDLAND

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Introduction:==

In this testimony, I discuss the feasibility of constructing 'a smaiie'r "

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nuclear plant at the Midland site as a substitute for th'e' nucl~e'arfpla'n.t ' - '.'.

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now under construction.

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Discussion:

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The Midland Plant is to consist of two pressurized water reactors of 1

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.. Babcock & Wilcox design, each with a rated heat output of 2452 Megawatts, Unit 1 is to have an electrical output of about 460 Megawattsjf ','

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electric, and, in addition, is to supply approximately 4,000,000 pounds..':

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per hour *of process steam to the Dow Chemical Company plant. Unit 2 isierte : -

to have an electrical output of 811 Megawatts, electric.

The design of the nuclear steam supply systems (NSSS) for plants of the Midland type was offered by the reactor vendor during the late-1960's.

More recent NSSS designs offered by Babcock & Wilcox have been on the 8006230

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cost of capital, called the APUDC rate, By the averacJe c6nstructiorf

work-in-progress. Therefore, the longer a project is in the construc -

tion work-in-progress stage and the higher the dollakbilue~of that

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.....,. ~ construction work-in-progress, the more AFUDC will be cipitaltted and ' - '..

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the higher the amount which will eventually go into the iita' base - Thir-...

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"is' ess' ntially the explanation for the increased AFUDC'or'$126 mfil t'oNI"..

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e Consumers Power has already invested aSout $400 millfoh-~(see Exhib~tt 2 to

.,hel'ey Affidavit), and this amount will cumulate for~ an' additionalje~a'r or,..

more at an AFUDC rete of 8.5% Because of a nine-month suspenston n con'-

In addition, increased AFUDC will result' because of~ a larg'e struction.

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amountofmiscellaneousshutdownandstartupexpensesdirectYyre'latedto the suspension. Finally, the inflationary impact of the suspensio'n o'n the remaining construction expenditures will also cause additional AFUDC to be Thesignificantpoin.t'hkeepinmindwithrespecttoAFUDC, recorded.

however, is the the incremental amount resulting froir a constructtod sus; pension will not necessarily involve an out-of-pocket expense boine by-Consumers Power.

Its economic impact will be felt p'rimaril'y by the Company's ratepayers in the form of a higher price per kWh once the plant goes into Up untti that time, the incremental AFUDC'is'ltttle more.....than -

operation.

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'an accounting procedure. This contrasts sharply with most of the other-incremental costs resulting from a suspenston, whicit wili'requNe the' '

Company to actually expend more dollars over tha baiance of the construction' period. This analysts does not consider the possthfif ty that' additional

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securities util have to 5e issued to help finance ths' larger ~donstruction '

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program or the somewhat more subtle point that financing costs mai increase ~

somewhat over the period of construction because of the presence of mor~e

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non-cash AFUDC in reported earnings.

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4he suspension in construction for ntna nionths wi11 caugSachtel"s_m.3 e 2 -- -

:... -balance of plant costs to increase fy almost $47 million due.to. escalationm-alone.,The escalation rate being used by Bechtel is 7J for.the period be ginning January 1, 1977. Even assuming a more favorable inflationary envi..

ronment in the future than expertenced in the recent.past, such a rate ap-pears reasonable when compared with the average annual _ increase of.approxt-mately 11% over the five years ended 1975 in the Handy-Whitman Construction' Cost Index for the electric,1tght, and power industry.. Astda from the $8 million increase in Bechtel's contingency allowances..the remaining incre-

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mental costs, as shown on Exhibit 3, constst of various miscellaneous. items.

most of which can probably be attributed, either directly or indirectly..

to shutdown and startup activities.

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At the request of the NRC staff, Consumers Power Company submitted data

- presenting, estimated annual expenditures under the p5 set budget ~an'd m.

with a nine-month suspension, both including and excTudin'g~ AFUDC, a~s ~ ~ ~~

follow *,.

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(Annual Expenditures tn Millions)

Present Budget Present Budget 9-Month Suspen-9-Month suspen Date With AFUDC Without AFUDC sfon With AFUDC sfon Without AFUDC

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Thru 1976

$ 430

$ 368

$ 430

$ 368

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1977 245 202 175 138 s es rs.r :-

1978 310 248 278.u srt w r:7 226c m '::

u:il979-299 219 34ta a :

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1980-220 127 268:

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1981 126 72 238.

134 1982 40 32 147-67-1983 42 -

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1984 1

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$1,670

$1.268

$1,920

$1.398

- Since the dollars being expended by the Company occur over a number of-years, one can get an improved perspective on the incremental costs of delay if the estimated annual expenditures under the present. budget.and

_...with a nine-month suspension are discounted to present worth. In this way, future dollars can be converted into equivalent 1976 dollars. As

- preytously mentioned, the incremental amount of AFUDC occasioned by a

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suspension will not necessarily result in more dollars being expended by the Company over the balance of the construction period.' Consequently, I chose to discount the estimated annual expenditures excluding AFUDC D

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to isolate the impact a suspension will have on the Company's cash outflow.,The Company's present plan shows total expenditures after tf-'

....1976.of $900 million, excluding AFUDC, and with a nine-month suspeftsion.-

- - r the total increases to $1,030 million, or a differencir of $130 mill.fonr.:

If these projected annual expenditures are discounted to p'res'ent worthN-at 5.10% rate, reflecting an assumed opportunity cost of chifftal, ther expenditures come to $703 million under the present plan a'nd' $765 millfon with a nine-month suspension, or a difference of $62 million. One shou.1d also consider that a portion of these projected expenditures represent contingency allowances and will therefore not necessarfly result in cash

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expenditures.

_However one might view the incremental costs of delay, it is apparent that they will be substantial. Although the increased financial burden

_wil-1 fall most directly on the Company over the period of construction, th' Company's ratepayers will feel the impact for many years after the.

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~ plant.goes into comercial operation.

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r ARNOLD H. MELTZ PROFESSIONAL QUALIFICATIONS

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I'S+nI>am: currently the Senior Financial Analyst at the U. S.3deleaF'*; N Regulatory Commission and am responsible for coordinating all....

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7' 27'i fiH&ncial qualifications reytew activities during th&'ltcensing "'

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process.

In this regard, I plan and direct the staft, financial _

% evaluation of specific facility applications. These ~ evaluations -

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include a review of estimated construction costs or operating.ex.,_

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penses, projected financing methods and underlying assumptions.-~

regulatory trends, and money and capital market developments...I

-~ have also served as an expert witness in certain safety hearings before the Atomic Safety and Licensing Board when financial.qualt-tications was a contested issue.

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I was graduated from Boston University in 1965 with d B.S.B.A. in Finance and received an M.B.A. in Finance in 1966 and a J.D. in Law in 1969 from the University of California at Berkeley.

I am a member of Beta Gamma Sigma, the national business administration honorary society, the New York Bar, and.the American Bar Association and its Section of Public Utility Law.

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~ Prior to joining the Nuclear Regulatory Commission in December 1974, I spent over two years with the New York Public Service Commission '

as a financial analyst in the Utility Finance Section of the Office of Accounting and Utility Finance. My responsibilities in this position included preparing testimony and exhibits in the cost of capital and rate of return areas and serving as an expert witness on these subjects in rate proceedings.

I have testified in cases dealing with electric, gas, telephone,-and water compantes. My duties also involved making recommendations to the Commission on the suitability of utilities' financing petitions after an analysis of their financial condition, construction program, and ability to raise short and long-term capital.

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