ML19330B567
| ML19330B567 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 07/22/1980 |
| From: | Dircks W NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | Walker R HOUSE OF REP. |
| References | |
| NUDOCS 8008050045 | |
| Download: ML19330B567 (53) | |
Text
._
DISTRIBUTION:
Docket N:. 50-320 HRD:nton GErtt:r (ED0#90 NRC PDR w/ incoming EGCasa AFgrguson o : p LocaLPDR w/inccming PPAS Mouncan JUL 2 21300 g w/f/ incoming BGrimes HThompson NRR r DEisenhut RReid EDO r/f' RHVollmer SECY (3)80-106 THI:P0 r/f w/ incoming Dross TMI Site r/f w/ incoming SHanauer D:cket No. 50-320 BJSnyder RMattson JCollins Attorney, ELD W0liu w/ incoming OCA 1
The Honorable Robert S. Walker United States House of Representatives Washington, D. C.
20515
Dear Congressman Walker:
I am writing in response to your letter of April 22, 1980, to Mr. Frank Moore, Assistant to the President for Congressional Liaison, regarding a letter from three Lebanon (Pa.) County Consissioners of April 8,1980. These officials propose that purchased-power and cleanup costs associated with Three Mile Island be shared by power conpanies throughout the United States.
The Pennsylvania Public Utility Connission (PUC), in a Decision and Order of June 15,1979, and reaffirmed in an Order of May 23, 1980, ruled on the alloca-tion of the financial burden resulting from the March 28, 1979, accident. A copy of each of these decisions is enclosed for your information.
While we are, of course, concerned about financial impacts on consumers, the NRC's primary responsibility is the assurance of public health and safety.
State public utility coninissions and the Federal Energy Regulatory Commission have sole responsibility regarding the rates that consumers pay for electricity.
A national cost-sharing proposal affecting one or more utilities would require action by and cooperation among these organizations.
Sincerely, i
t iiIlgned)T. A.Rehm j
William *J. Dircks, Acting Executive Director for Operations
Enclosures:
1.
PUC Order-dated June 15, 1979 2.
PUC Order dated May 23, 1980 bec: _ Mary Martha Seal, Director THIS DOCUMENT CONTAINS I Correspondence Agency Liaison POOR QUALITY PAGES 0CA-t White House 80080500Ys
- NOTE:
SEE PREVIOUS YELLOW FOR CONCURRENCE 7/ /80 OrriCc)..TM..P0..
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PUBLIC UTILITY CO.P.ISSION Harrisburg, PA 17120 Public Meeting held June 15, 1979 Coumissioners Present:
W. Wilson Coode, Chairman Louis J. Carter, ccoolrring in part arrl disamtin; in part Michael Johnson Pennsylvania Public Utility Commission, e,t,al.
v.
!!ctropolitan Edison Company Docket No. I-79040308 and Pennsylvania Electric'Cobpanf, Respondents ORDER BY THE COMMISSION:
In the early hours of the corning of March 28, 1979 an incident h
began at the Three Mile Island Power Station operated by Metropolitan Ediscn 1
Company.
A major consequence of that incident has been the loss of core than 1600 megawatts of generating capacity and the required purchase of tens of millions of dollars of poweE. This proceeding requires an answer to the question: Who shall'Vay for the costs of"tliit Tiidi3ent?
The issues before the Cocmission ara.far more cceplex chan the
' question implies; and even now the costs and the causes of the incident are 7.__ not fully known. Nevertheless, most reasonab,,le and. knowledge.ible persons '
would_sup; port,the_ccntral determination of the Cormission that the rat'epayers.of-Metropolitan Edison Ccepany (" Met Ed") and Pennsylvania Electric Company.("Penelec") should be no worso off - and no better offC"lisc.huse -of the incident. The ratepayers should not pay for :.he c os t;s, of_,the, incident ; nor should they benefit from it.
They should not pay the costs of a plant rendered useless through no fault of their cun; nor'should,they receive needed. electric power without psycent.
.J The level of service pros ided by Met Ed and penclec is unchanged.
The net result of the Commisnion's findings in this order is that the O
4
~.
total rates of Met Ed and Penelec will be no higher than if the incident at,Thrce'$11{ (I;s,1Tn'd[ hjul,never occurred. l_/
On April 19,-1979, the Commission responded to the incident at the Three Mile Island Power Staticia('S$'l') 'by..taking the following i
-- al actionso The increased. rates of Met Ed which were recently determined 4'
at R-78060626 were,made.. final and effective on -April 19, 1979.
Temporary
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rates were.,then. set,for _Me,t Ed, ef fective ic=ediately pursuant to Section 1310@
4E of'the Public Utility Code, based upon the determinations at R-78060626 and the rc= oval from base rates of costs associated with Unit No. 2 at Three Mile Island ("TMI-2").
Also, Commission complaints were issued against the base rates and energy cost rates of Met Ed and Penelec alleging excessive, unjust and unreasonable rates as a result of the incident at TMI.
On April 25, 1979, the Commission-set-temporary rat'er-for.
Penelec, effective immediately pursuant to Section 1310(d) of the Public f
Utility Code, based upon the recent determinations at R-78040599 (Penelec's A4 '4 ##
Inst rate case) and the rc= oval from base rates of costs associated with THI-2.
An onnibus investigation docket was opened at I-79040308 at which were consolidated the Ccamission complaints and the te=porary rate orders, as.well as the co= plaints of the Consu=er Advocate against the base rates and energy cost rates of Penelec and the energy cost rates of Met Ed. 2/ Subsequently, the Respondents, Met Ed and Penelec, filed complaints against the temporary rates as set by the Commission.
)
A prehearing conference on the consolidated proceedings was h
held on April 24, 1979, at which the parties stipulated to the use of the test periods in the last rate cases of Met Ed and Penelee.
The Commission proceeded expeditiously and held hearings sitting 391 bane. A total of' ten days of hearings were held between May 2 and June 1, 1979 in Harrisburg, Johnstown and Reading.
Evidence was prescuted by Met Ed and Penelee, the Staff, the Consumer Advocate, Senior Power Action Group, Charles M. Brosenne, and Holly S. Keck. More than 1800 pages of testimony were transcribed.
1/
This statenent is based upon a comparison of the average revenues to be derived from the rates set in this order with the average revenues which would have been derived from base rates including the costs of TMI-2 and the energy rates charged prior to the incident a t TMI-2.
2/
Several other complaints and petitions to intervene were consolidated at I-79040308.
The parties to the proceeding at the close of the record include Staf f; Consumer Advocate; Respondents, Met Ed and Penclec; St. Regis Paper Cenpany, et al.; Bethlehen Steel Corporation; Senior Power Action Crcup of York, et al.; Holly S. Keck; Titanium Metals Corp.; Birdsboro Corp.; Martin G. & Rose Ann Hacberger;
. Charles M. Brosenne; Deep Run Farns, Inc.; Philip L. Nester, Jr.;
and various other industrial custouers of Respondents..
- - - - - - ~ -
f Petitions were filed on May 8, 1979 by Met Ed and Penelec
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requesting..that the energy cost ~ rates of the two utilities be ebdified
~
to inmediately reflect the current costs of purchased power and 'that Met Ed bs'alI6Ued 't'E~8ccelerate the recovery of certain. deferred energy costs. The Commission acted at its Public Meeting on May 10, 1979 to defer action on the petitions until the close of these proceedings.
The petitions will be addressed in this order.
The parties filed briefs on June 11, 1979; oral argument was heard on June 13, 1979.
From the outset :he Commissio'n has believed it to be in the public_ interest to proceed expeditiously consistent with the development of an adequate record and a reasonable opportunity for all interested parties to be heard. The Commission has met that public obligation, and by this order renders a decision on all matters properly before it.
The compla^ints of the Conmission, the Consumer Advocate and other parties against Respondents' rates and of the Respondents against the temporary rates set by the Coemission ccmpel a redetermination of the rates of Met Ed and Penelec in light of the changes vrought by the incident at TMI.
The Co= mission will, in this order, reassess the used and useful status of the TMI facilities and vill dercraine any associated changes in operating expenses, depreciation and taxes which should be reflected in base rates.
O.
As required by lav, the Commission will set rates,for Het Ed and Penelec which will provide a reasonabic opportunity for those utilities to earn a fair return on the fair value of their used and useful property.
However, the separate dete;ainations of " fair rate of return" and " fair value" will be greatly simplified.
The parties have stipulated to the use of the test years in the Respondents' last rate cases (R-78060626, Het Ed; R-78040599, Penelec).
In addition, the records in those cases have been incorporated by reference into the present record.
In the absence of any atte=pt by any of the parties to introduce specific evidence of changes in fair value or fair rate of return, the Cocaission is warranted in setting rates by adjusting the rate determinations so recently nade.
Consistent with the presentations of the parties and for case of ccmputation, the adjust =ents are calculated using original cost data.
However, this should in no way be interpreted as an attempt to circumvent the required statutory findings.
Finally, and conclusively, the Respondents have valved a re-determination of their capital structure and rate of return for purposes of this proceeding. Witness John Graham, the Treasurer of the parent corporation, Cencral Public Utilitics Corporation (" CPU") stated:
~3-O e
"For purposes of this proceeding, the cocpany is willing to accept as the way of looking at our earnings the allowed capital structure and rate of return in the last rate order."
TR 1690.
The Staff and the Consumer Advocate agreed to this concession.
The coun.terpart to the ba~se~ rite"cFsts associated with the m I
~
facilities are the increased energy costs of necting the service deman~ds of Rc'syEndents' ratepayers.
The energy costs will be segregated for purposes of analysis.
However, only the net effect of such changes will be reflected in the actual raies of Met Ed and Penelec so as to minimize disruptive rate and tariff changes.
The Commission's view of the proper rate treat =ent of the cican up costs of the incident will be addressed in spite of the fact that no claim has been =ade for these costs.
The substantial public concern and uncertainty with respect to these costs warrants a Co= mission declaration.
This order will'not address the issues involving the c'auses of the incident or whether the design or operation of the plant was faulty.
The Conmission does not have the primary r.-sponsibility to deter =ine those matt _rs and has not developed a record adequate to take those determinations. However, the Coc=ission will" continue iEs investigation of the financing, construction and operation 6f"TM1,3nd will'.Ipprise
~
i_tself of the findings of the agencie's'ind~cbanissians which are presently
(.3 investigating the causes of the -incident.
U1rQtely, the causes -and
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c.ssig,nments-of-f ault =ay inpact. upe a whethermet-Ed and-PenelFc-have-acted-reasonably.ind pruddntly -as-regulafc2.publi' -utilities. - -
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,----.s-Another-area-of -concern in this proceeding wQchylll'-not.be addressed in this order are the questions concerning thd~'inmErdncy -of-gespond en t's *--insolvency"or-bankrup tcy, the-probable consequences of--in-solvency or-bankruptcy r nd-the determination-of--whether-the public a
interest-inheres ~ih tlid~avoidihite 'of-bankruptty.
In spite of the genera'l-M pleas of Respondents for financial aid through rate increases, which were plaintively repeated throughout these proceedings, the Cc=nission is unpersuaded-that ther.e_is.any.,inminent th rea t..o f. bankrup t cy--pa r t icu larly in light-of--the alacrity with which the Coc=ission has acted and. the.
determinations-cade.hcrcin.
U A major obstacle to the Cor sission throughout this proceeding has been the inability and/or unwillingness of Respondents to directly and effectively address the issues.
GPU and-i ts companies.have-demonstrat-ed obtuseness,_ inability to focus, and-a.-lack of. direction.
If the Commission
,crrs in -its assess =ent thatTnsolt ency'or -bankruptcy is'ti7it'TE.Eideid',
J
_ the cause' will be-the-f ailurc~of"RI~spiddE6Es~ to cicarlyTrid' cEcisel'y~~ Y describe.its finaneial.p.os_i. tion,. alternative courses of action,. and the Q
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o-point at whf e.h rate rrlici 'i:. n.u id.i t o ry.
The perferrance of 1:n WU '
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' ecepanies before this Cc= tit. : ion calls into question the capabiM:
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- its canagement and lends urr.ency to the investigation and n ana:;ers ut a'udit which we will require.in this order.
!The rate d' terminations announced in this order are the required e
actions in this proceeding, but they do not en= prise a ccuplete rer.uiat.ory response' to the in61 dent at 'Dil.
Therefore, at the end of this c,rd.:r, 4
the Con:nission will set forth additional natters in response to this troubling event.
l-Three liile Island, Unit No. 2 (TMI-2),
2 A public utility is entitled to earn a return on only that property and investment which is required or used in order to provide
- utility service.
In. terns of the Public Utility Code, a public utility must be allowed to charge rates which will permit it to earn a fair return on the fair value of its property which is "used and useful in the public service".
A public utility is entitled to neither a return 4
on, nor the recovery of expenses associated with, property which is not used and useful in providing utility service.
At issue before the Con.aission is whether, in light of the incident a t TMI-2, the unit. ir, presently used and useful in the,vablic service.
Upon this question hin;.es the recovery of milliens of dol;ars annually in the base rates of Met Ed and Fenclec.
Te porary rates were
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set for Met Ed and Penclec based upon the initial conclusion of the j
Comission that TML--2 is not presently used and aseful in the public i
- service.
4 The term "used and useful" has two principal connotatiens:
first, with respect to whether the investnent is related to the provision
- of utility service; and second, with re pect to whether a related inve:.:
..e n t is or will be useful during period in which the rates are to be in ef fect.
It is the' latter sense of the phrase with wh'ich we are concerned here.
Courts.and co:: sis.: ions have dealt with the problem of plant vhich is out of service for a substantial langth of time.
Evanati110 v.
Southern Indiana Gas i Electric ca., Ind. App. Ct.,
339 N.E.
2d - b o.'
( 1 te.':e l ;
Pa. P.U.C. v. ' Jest Penn Pcwer CO.,
25 P.r.R. 4th 492 (197S); Re New Jer.e-11c11 Telenhone Co., Docket No.
d9-494 (d.:nua ry 13, 1972).
llevever, we
- find that ncne of the cases are totally apt to the facts in this case.
The decisions appear t o reflect a rational principle which we find appropriate in thir, case. - The length of tine which utility pl. int nay be out of-service and not be rcnoved frca rate base depends open the na ture of the plant, the der,ree ta which the Outage can be expecte.i to U
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w eccur during normal operation of the plant, and the certainty with which resumption of service can be predicted.
An example of an outage
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which will not require a rate base adjust =ent would be the outage of a
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generating plant for several weeks for unscheduled maintenance.
Generating plant by its nature cannot be operated continuously without periodic maintenance.
Outages of several days to several conths duration, whether scheduled or forced, are typical of the nor=al operation of such plant; and the resumption of service is reasonably certain.
The incide.t in the nuclear reactor of TMI-2 is in sharp contrast to the example. Nuclear generating plants by their nature are not-expected to experience outages of two to four years (as has been estimated by Met Ed, the plant's operator).
Nor, we hope, will anyone attempt to argue that near-disasters such as began on March 28, 1979 at TMI-2, are routine events in the life of a nuclear plant.
- Finally, there is great' uncertainty with respect to when, and in fact if ever, TMI-2 will resume operation.
Respondents estinate that TMI-2 vill be out of service for two to four years.
However, no one has been able to determine the extent of damage to the fuel core.
Design and operation changes may be ordered by the Nuclear Regulatory Commission, but these are as yet unknown.
Public sentiment has been expressed against the renewed ope. ration of TMI-2; and the cost of repair, cican up and vaste removal may be so high as to t 2ke restoration of the plant uneconoaic.
The, Commission-finds th'at~ Three Mile Island-Power: Station, I,
Unit No. 2 is.no.t.used and useful property in the ublic service.
All,'
of the costs _associateIdith7)ig' d, nit"nWE"b(')%p'Td3,cm the 'ba'se ]
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rates oE Met-Ed'and Penelee.
Three Mile Island, Unit No. 1 (TMI-1)
The parties have raised the issue of the used and useful status of TMI; however, the Commission need not reach that issue at this time. Consistent with the principles discussed with respect to TMI-2, TMI-1 is at present only experiencing an outage.
TMI-l was out of service for a scheduled refueling when the incident at TMI-2 occurred.
Its resumption has been delayed, and it is now experiencing an unscheduled outage.
At this time it appears reasonably certain that TMI-l will return to service. Witness Her=an Dicekamp, President of GPU, testified that resumption of generation at TMI-l could occur as early as August, 1979, and certainly no later than January 1, 1980. 3/
However, the Cocmission will conitor the status of TMI-1.
We will require Met Ed to report to the Commission conthly on the progress in returning TMr-1 to service.
If that start-up is delayed beyond January 1,1980, the Commission vill issue an order to show cause why TMI-l should be considered used and useful in the public service.
-~g 3/
TR. 1551-1553.
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Base Rates of Metropolitan Edison Company On April 19, 1979, the Commission set temporary base rates for Het Ed based upon the determinations at' R-78060626 and the removal of the costs associated with TMI-2.
The calculation of these te=porary rates, representing a reduction in Met Ed's rates calculated to reduce annual revenues $6,17BA00 pas necessarily approximate.
In light of our determination af ter hearing that TMI-2 is not used and useful, and therefore must be removed from rate base, a more rigorous determination must be made of the. required reduction in Met Ed's rates.
Detailed testimony on the calculation of the costs associated with TMI-2 was presented by GPU's treasurer, John Graham and by Staff witness, Charles.Smetak. Only relatively minor differences separate the testimony of these two witnesses. We find the calculations of Staff witness Smetak to reflect the appropriate adjustment of Met Ed's base rates to remove costs associated with 'DiI-2.
Mc_tJd 's base, rates shall.-.
be furth1TYeduced by..an. a=ount calc.u..la,.ted to pro. duce 12,982;000 Nntually.
- 44qw,,,,.--
This determination of Het Ed's base rates incorporates the Commission'.s previous findings with respect to the fair value of Met Ed's* property and Respondent's fair rate of return. With the adjustment to remove the costs associated with TMI-2, we find that the resulting rates will provide Met Ed a reasonable opportunity to earn a fair return on the fair value of its used and useful property.
O-
Although the Cocaission elsewhere in this order will offset the just-determined reduction in Met Ed's base rates through an accelerated recovery of deferred energy costs, the essential finding is that Met Ed may not recover any costs a'ssociated with TMI-2.
Base Rates of Pennsylvania Electric Compang on April 25, 1979, the Commission set temporary base rates for Penelec based upon the determinations at R-7SO40599 and the removal of the_ costs associated with TMI-2.
As with.
M. calculation of these _te=porary_ra tes,-Nthe te:=poragy..ra t
~
Y r$d'uctfo*Q n""'
ra t eTc'a'lTu'lTt e a"To ~ Ed u E.En'u~.i 1"fr'e s'TnTi n grnet$uES the 1ec's necessarily approximate.
In light of our determination af ter hearing that TMI-2 is not used and useful, and therefore must be re=oved from rate base, a more rigorous determination must be made of the required reduction in Penelec's rates.
Again, as with Met Ed's rates, we find the calculation of Staff witness Smetak to reflect the appropriate adjustment of Penclec's base ' rates to remove the costs associated with TMI-2.
Pene1Ec's'baso ra tes_.shaJ1-bcHS)fMTr7elfCc'iid'Y 71n-amount-calculated.to_produco $1.Q5. 000_
'annugfly.
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Thic deternination of Penelec's base rates incor; orates ths Commission's previous findings with respect to the fair value of Penelec's
.( )
property and Respondent's fair rate of return.
With the adjustment to remove the costs associated with TMI-2, we find that the resulting rates will provide Penelec a reasonable opportunity to earn a fair return on the fair value of its used and useful property.
Although_the Commission elsewhere in this order will offset the just-determined reduction in Penelec's base rates through an accelerated recovery of deferred energy costs, the essential finding is that Penelec may not recover any costs associated with TMI-2.
Ener_gy Costs - Ceneral The Cocsission has determined that TMI-2 is not used and useful in the public service.
As a consequence, none of the costs associated with TMI-2 =ay be recove' red from the Respondents' ratepayers.
As the same time, the Commission recognizes that Met Ed and Penelee have continued to provide adequate, reliable electric service,in spite of the loss of generation at TMI.
Continued service to the customers of Met Ed and Penelec requires large purchases of power.
The Respondents could have reduced the level of service they are providing; or they could have cade esximum use of their existing plants, many of which have higher operating costs than the costs of purchased power. These alternatives, in the opinion of the Co=oission, would not have been in the public interest.
Iastead, Met Ed and Penelec have taken advantage of the benefits of the Pennsylvania-New Jersey-Maryland Interconnection ("PJM") and other power pools and have purchased energy from other utilities on an economy basis. We find this to be in the public interest.
In addition, Respondents have entered into contracts with the Allegheny Power System and Pennsylvania Power & Light Company for the purchase of energy on a cost basis, thereby avoiding the added cost of
" split-savings" pricing which is typical in sales between interconnected utilities. We find these ef forts also to be in the public interest.
,Cf. Order adopted June 7,1979 at Docket No. P-79060lS1 (Petition of Pennsylvania Power & Light Company for Declaratory Order).
Although elsewhere in this order we will recuire Met Ed and Penelec to take additional steps to further reduce its costs, the purchase of energy from interconnected utilities cust be viewed as in the best interests of Respondents' customers when compared to the alternatives of reducing the level of service or utilizing higher cost generation. The purchase of energy is a reasonable and necessary cost of providing service which must be recovered from ratepayers.
Service cannot bc "Me e
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provided withou't cost. (tisyitable-for-the ratepayers of Me... d and
~
tE Penelee to pay thf<osts of'~pu.rcl ashg, power.,since theg are receiving f
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service and will be paying none of_,the costs of TM1-2.
With the Icvelized energy - charge over 18 months which wTv111"o'rder"h'Ere, the total rates for electric service to the customers of Met Ed and Penelec will be no greater than the rates which would have be. n allowed had the incident neveroccurred.4/ We believe this accomplishes a fair and just result for all concerned.
Deferred Eners;y Costs Met Ed and Penelec 'have deferred the recovery of millions of dollars of energy costs for reasons unrelated to the operation or loss of TMI-2.
In response to the nationwide coal strike of 1977-78, the Commission placed a ceiling on the energy clauses of all major electric utilities, including Het Ed and Penelee.
This ceiling or restriction on Respondents'_ energy clauses, imposed from March 1973 through June 1978 required the deferral of Icgiti= ate and necessary fuel costs.
In addition, on March 1,1978, the Commission candated (at Investigation Docket No. 214) a unifons net ener'gy cost rate fo.r all major cicctric utilities.
The transition to the new energy cost rate caused another lag in the recovery of legitimate energy costs incurred by Met Ed and Penelec.
The recovery of these deferred costs by Met Ed was approved at R-78060626 (Met Ed's last general rate increase). The Co= mission allowed Het Ed to amortice $14,021,000 of deferred energy costs over five years.
The annual recoverabic expense of $2,804,000 was included in the calculation O.
of Respondent's rates.
Subsequently, in setting temporary rates for Met Ed, the Cormission did not recove from base rates the annual recovery of
$2,804,000 of deferred energy costs, and therefore those costs are now being recovered.
The recovery of the deferred costs by Penelec was approved at R-78040599 (Penelec's last general rate increase). The Commission allowed Penelec to amortire $19,3SO,000 of deferred energy costs over five years. The annual recoverabic expense of $3,876,000 was included in the calculation of respondent's rates.
Subsequently, in netting temporary rates for Penelec, the Commission did not remove from base rates the annual recovery of $3,376,000 of deferred energy costs, and therefore those costs are now being recovered.
these diffendD conts**is The driiIic with respect to who ther..th c_Commis sion..sbou ld-a c'c el da ee tlie' ipr 3~c'dy'ery.
IhiT6i':Sa~1
-times, thCCoEUIsl'oii~ generally--requi,r,es.an_acort3:seden-of-expenses such ns these uver a period of,f,$ge y,c,ar,s.g However, these are not 0
4/
See footnote 1.
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- 7[.
. nor=al. tines.
The record be.'dre the Commission reficcts that R.,
s i. a :.. ' '
~
N sliort-t er.n cash needu -.have i t.crea:.ed ' d rama t ically.
'Iherefore, the
._ d.
- Commission finds-it a;iprrpriate to accelerate the recovery of the des crr e.d.
- energy coats of Met Ed and Penclec by the amounts which their rm.;metive b~ se rates' have been reduced in this order. to remove the costs ar.:.or jated a
with TMI-2.
The Commission vill order an increase in the annual recovery 1
' of~ deferred energy costs by "et Ed of $2,9S2,000, so that the total annual recovery of these costs through base rates vill be 55,786,000.
Similarly,- the Commission will order an increase in the annual recovery of deferred energy costs by Penelec of $1,635,000, so that the total annual recovery of these costs through base rates will be -$5,511,000.
The~het effiict.of these chadgEs will be - to leave the-. base rates of-Met Ed and Penelec at the icvelfof the existing... temporary rat'es.-_ The'licielciatEl recovery of these deferred energy costs will
- reduce the costs of financing these deferrals, and vill' increase Reupondents' cash flow without an increase in the total costs to be paid by the ratepayers.
Purchased Energy Costs,
~
As stated elsewhere in this order, the Commission finds,.in
' light of the denial of the recovery of all costs assceiated with ^.MI-2, that the recovery f rom ratepayers of the costs of purchased power accou;>J 1shes.
. a f air, just and ' equitable result. Met Ed and Penclec are presently I,_
providing reasonable, adequate, reliable electric service.
The corts of purchasing power are u:1 questionably direct, necessary and reasonable costs of.providing that utili:.y service.
The Ce= mission cannot panish Respondents by"de:iyini;'the reec'very of these 'cests; nor can it creat e a vindfall for the=ratepayers of service without payment.
The Commis.lon is of the opinion that the recovery of these costs is required by Jav.
The remaining question is -- What is to be the level of recovery?
The Staff, Consumer Advocate -and the Respondents all assert that the energy cost rate of Met Ed should be levelined over a period of 18 t:on ths '
Without such a " leveling" of the cost rate, the rate vill
. fluctuate from a low in May ~]979 of 3.1 mills to core than 15 mills during the vinter of 1979-30.
In orddr~t'o'avaid the hardships such changes could -impose on Met rd's ratepayers, ve wil.l order the i=plementat ion of an cnergy~ tosr' rate levelized over a period of IS conths.
Although the Ca::=iipsion is certain that the recovery of rurchased energy costs :aust be.: allowed. there is less certainty as to the a:.:eunt.
The only figures bef ore us are 'those provided by Respondents.
The calculations are based on pr ojections of costs and esticates of 2 ales.
N
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No effort has been made to anticipate conservation by Met Ed's customers or additional contracts for the purchase of energy.
If the Commission is to err, it will be in the direction of setting a cost rate which encourages Met Ed to further reduce its costs.
Also, we will assume, as
' advocated by the witness for the Consumer Advocate, that, Met Ed will be able to obtain additional savings through contracts for the purchase of energy. Finally, it appears that the use of data for the period -over which the charge is to be collected (18 months, rather than 20 nonths) is most appropriate.
We find a levell:ed-rate of 3.8 mills above bEs'e"Eit7s~is the appr.op.riate-cost-rate-for. Met Ed, derived as follows:
N-Costs Usage Cost Rate
'(millions)
(GWH)
(mills /kwh)
$s228 v 8 ---(a) 13,~514 fa) 17.~ 0
<~
May (14.0)- (b)
(627)_..(b)
June -(13.i) (b)
(6,30).(b)
-$201.1 12,257 16.4 16.4 total energy cost k__(8.0)lessa=ount in base rates 8.4 amount to be recovered through energy cost rate x
1.047 Cross Receipts Tax Multiplier 8.8 levelized energy cost rate Source:
i (a) Consumer Advocate exhibit, Madan Schedule 1 (b) Met Ed and Penelec exhibit A-28 While the energy cost rate of Penalec-is not expected to fluctuate
]
as grea tly as Met Ed 's, ve--find-the duplementa tion of mn~~66cFsy cost ^ rate--
lev.clized.over.13.nonths -to-be'iM' the 'publ~i'c interest r Si:2ilarly, we--find that a. levelized-rate of-05mi-11s-above~basc~ rat'us IItFe appropriate-cost.; rate' for Penelec; -derived r as..follows:
1 11 -
Cost Ra te_
Costs _
Usage
-(millions)
(C'W)
(mills /kwh)
$305.7 (a) 19,032 (a) 16.1 May (13.6) (b)
(904) (b)
June.(12.8) (b).
(872) (b)
$279.3 17,256 16.2 16.2 total ~ energy cost (10.0) less acount in base rates 6.2 amount to be recovered through energy cost rate x
1.047_ Cross Receipts Tax Multiplier 6.5 levelized energy cost rate Source:
-(a)
Consumer Advocate exhibit, Madan Schedule 1 (b) Het Ed and Penelec exhibit A-28 Reserve Capacity (Demand) Charges Normally, the energy cost rates of electric utilities include only the energy costs of purchased power.
Decand or reserve capacity charges for purchased power'are usually r.ecovered through base rates which reflect only ' typical amounts of purchased power.
Because of the unusually, large amounts of power being purchased by Respondents, which include decand or reserve capacity charges, Respondents have requested approval to recover j
these demand costs through the net energy cost rate.
The Consumer Advocate supports this request, while the Staff opposes the inclusion of ddmand j
costs in the energy charge.
- - ~
A s; a.
i nc etgiv e t o R e s p _o._.__.... -ncents to enter into,ju,lk,J.wer-purchase n
c arra,ngements and thereCy' reduce-the-enetT ~c~oTEs T5*Yts ratepayers, the "clir'66 h 'th7 net energ'y3.ofit_'r7t e{ge'.,.c.eA6d23'r,31Ih,rv xecove CorEnission wi.11. alloy Met Ed and Penelec to include in t
d e 7c'a pIc'ity~cTi.irges
)
incurred from July 1,1979 until January 1,1980....No inEruSE~1'n "the -
cost
~
leyelize[Ifowe[v[ ale]Rlbe-allowed. at.-pis CIE~e[i.n order. to - recover thos acounts.
er; those-accounts nay-be-recovered. subsequently.
Clean Uy Costs _
Althougly no claim has been made for these costs, the Respondents
, have made much of the inpact of these costs on the utilitics' short-term financing'needs. Also, the Commission recognizes the substantial public
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.-I concern and uncertainty regarding! the recovery of the:.e ec. s.
Tl.a t public concern and uncertainty' =..ndat zr a declara tion on thi:. f asue.
~
The Commission is_of the viev ~ that.non'e of the co:.t:. of responding to 'the fincident,; including repair. disposal of wasten and decontamination are recoverable f rom ratcpayers.. These costs ' are and should be in.urable.
PURTA Refunds During the -course-of these proceedir.gs, theRespondent$
acknowledged their' receipt of Put lic Utility Realty Tax ("Pt:3TA")
refunds f rom the Cct=onwealth of Pennsylvania.
Specifically, Met-Ed received a $9.2 million refund for the 1972-76 period and a 52.6 taillion refund' for the 1977 peried, -for a total of $11.8 million, while Penelec rec'eived.a $4.6 =illion refund-for the 1972-76 period and a S1.3 million refund for the 1977 period, for a total of $5.9 million. These refunds arose because of a court decision -f avorable to Met Ed and Penelec.
The refunds represent =onies collected from customers for a tax 111 ability which af ter litigation has been eliminated.
Without question, these refunds must be credited back to the custc=ers of Met Ed and Penelec.
The only substantial matter before the Cot =ission is the nethod of repayment.
The Commission Staf f has advanced the proposition, through cross-ex.e ination, that the most appropriate vehicle for repay =ent is a credit applied to the state tax surcharge.
Since the collection of the tax t.onies was made on a dollar surcharge basis, a repay =ent through base rates or on a usage basis through the energy con't rate would necessarily result in custoners receiving refunds in amounts substantially different than the an.ounts previously l~
paid. Although no system of repay =ent or refund to a changing mix of customers is perfect, we find = erit in the Staff's propesal.
The credit j
should be applied in the same canner that the menies were collected.
The Respondents, Met Ed and Penelec, will be ordered to repay-f
.the PURTA tax refunds through a credit to the state tax curcharge.
Consistent with the. determination to levell:e the enerny cost rates of Met Ed and_Penclec for a period of 18 months, this credit of Ihe tax refunds shall be aceemplished over a similar 13 month period. Met Ed and Penelec shall separately account for the refunds so as to permit 'a subsequent Commission audit of the repayment of these a= aunts.
l l
Lov and Fixed Income, and' Elderly Customers The brief submitted by the Central Pennsylvania 1.ec.al Services on behalf of several groups and individual complainants van primarily concerned with the subject of the ability of low and ri. sed inceae and elderly customers to pay utility charges.
Legal Services requests that i
any. increases charged to Icv and fixed ince=c and elderly cunt e=ers be
(-
a 13 -
- 6 maq
%'^;r cither a s=111 percentage ut th:.n;ount:. charged to ~ u t her resident i.1-custo=ers or.in the alternative to exespt'fr6m any increase, the first
- 250 KW11 of their residential..use per =onth.
The brief' raises the very'real problems confronting'the low
~
fixed incocc and elderly utility. customers _and their ability to pay
. increased. utility. costs. fThe Co= mission, moreover, is deeply aware of theJinpact of double digit inflation on not only the utilities themselves but those who have~to pay _ utility bills.
The Co= mission has, through its visits to co== unities throughout the state where it has cet with and discussed these very proble=s with ratepayers in all' economic circumstances, developed its own independent awareness and appreciation of nany of the problems so graphically described by the Pennsylvania Legal Services.
The.11aited 's' cope of these proceedings, confined as they are to the i= mediate conscquences of the TMI incident, coupled with the harsh time restraints i= posed upon us all, are not arenable to the kind Lof discussion, study and response that these grave probic=s warrant.
The Commission therefore concludes that it cannot at this ti=e provide a d'efinitive response to the issues raised by Central ?ennsylvania Legal Services. These issues will be examined in the near future pursu.at to Federal law requiring hearings on " lifeline" rates.
(Sec. 114 of Public Utility Regulatory Policies Act, 1978, Pub. L.95-617).
Other Considerations-
~'
The-ratEdeterminations in tiiis order do no't~ end the catter.
The Cemmission believes.that it has_3 responsibility to undertake a cocplete,regulIEo~ry response to the accident at.TMI-2.
The public interest inheres not just in the oetermination of rates, but also in (a)
Respondents' efforts ' to encourage conrervation of energy, (b) the-determination of-whether Respondents' =anage=ent has acted prudently and wisely, and is efficiently managing its utility operations, (c) Respondents' efforts to reduce the cost of purchased power through the rodification
.of pricing arrange =ents, and (d) the consideration of legislative change which will lessen the i= pact on ratepayers from such accidents.
The balance of this order sets forth our concerns and actions in these areas.
Conservatien of Enerty Met Ed and Penelee have projected that the quantity of cJ ectricity to be used by their customers will steadily increase thrcughout the renainder of 1979 and that there will be a dramatic increase in the cost of-that_ power. Total system sales for the CPU system are projected to increase _ f rom 627 CWil in May 1979 to 717 CWil in December 1979.
1
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's Despite these projections of increascd costs as a result of increased demands for electricity; Respondents' witness Euguene Carter
-()
testified that the management has neither undertaken, nor ~ even cunsidered, specific actions to encourage conservation by the ratepayers. The Commission is dismayed that Respondents have not attempted to implepent conservation measures. - This is particularly alarming since the costs of energy play such a significant role in respondents' financial problemn.
The Commission is of -the opinion that the ratepayers of Met Ed and Penelec must be ' advised of the higher costs of meeting added demands for electricity and that they must be encouraged to take whatever measurca they can to.use electricity wisely.
We vill, order _ Met Ed and.Penelgc..to subpit,.,vithinJi ir.ty...(30) y l
day,s.af ter e'nEr~y 'of' this order for_,C[ocaission approval conservation
~
plans-includi~ng, 'bEnot linited to LEE'lollbwing actions:
t (a) the use of newspaper advertisements and bill stuffers to inform their ratepayers of the need to conserve electricity, (b) the negotiation with ratepayers who have stand-by, emergency or self-generation facilities to take substantial use of such generation, (c) the implementation of voluntary load curtailment pursuant to escrgency fuel conservation tariff procedures filed in compliance with the Commission's
(])
order at Emergency Electric Regulation Docket No. 3, (d) the implementation of a credit billing system which rewards conservation through a credit per kilowatt hour and reduces the bills of ratepayers who achieve at least 5% conservation, determined from past consumption in like periods, and thereby lessens the need for purchases of high cost energy, (c) the proposed implementation of curtailment and conservation procedures for coc=creial and g
industrial ratepayers shall be accompanied by specific proposals to encourage such conservation through the elimination of "rachet" or historic demand charges and minimum bills for those ratc~
payers who do conserve and through the incremental pricing of usage in excess of the targeted conservation consumption fo-those ratepayers who do not conserve, (f) the accelerated promotion of time-of-day and off-peak rates for residential customers.
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.The Commission's intent is for Respondents to' undertake an aggressive, imaginative program of encouraging conservation In order to
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r,cduce its costs of purchasing power.
Pricing of Wholesale Purchases of Power In accordance with' typical agreements between interconnected electric utilities, economy dispatched energy is sold at a price midway between the cost of generation of the selling utility and the alternative generation cost to the buying utility - thereby " splitting" the savings between the buyer and the seller.
Although the price at which electricity is sold at wholesale is subject to the jurisdiction of the Federal
. Energy Regulatory Commission ("FERC"), the cost of purchased power
' impacts directly on retail rates and therefore is of concern to this Commission.
Under conditions approaching an equilibrium where electric utilities each buy and sell roughly equivalent amounts of energy annually, the split-savings method of pricing, economy sales sec=s to result in an equitable distribution of the bene' fits of shared generation.
One utility is not significantly better or worse off than another.
however, when one or two utilities are forced to buy massive amounts of power from other utiJities with large amounts of available generation, such as during the coal strike of 1977-78, an inequitable imbalance occurs. The cost of purchases of power during that emergency by utilities in Western Pennsylvania imposed a considerable burden on those utilitics, while the utilities.in Eastern Pennsylvania received unexpected revenues.
O i
The loss of generation at Three Mile Island has created a similar imbalance. Metropolitan Edison Company and Pennsylvania Electric Company will incur higher purchased power costs, while the selling companies will generate unexpected revenues.
The Commission is of the opinion that the split savings pricing of interchange sales during energency conditions is not in the public interest. We will direct Met Ed and Penelec to petition FERC and to negotiate with the other members of the PJM power pool to climinate pplit savings during emergency conditions and to price such power at cost.
Cf., Order adopted June 7,1979 at Docket No. P-790601S1 (Petition of Pennsylvania Power & Light Company for Declaratory Order).
)
As an incentive to. pursue this clinination of split savings during emergencies, the Commission will consider the ef forts of Respondents in this respect in determining whether to allow the amortization of such l
cnergy costs deferred during the 18 month period in which their energy clauses are leve]ized.
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Ta xa_t io n o f. R e_c e_ iy_L_:.__f r_c__:s_ a_nd.Sa l e_: __.o_f '._P_.u. r c__! _a.s e._d_ _Po__we r -
l Consistent with our :c6ncern that the pricing of whole.41e sales of electkicity 'during emernencies -increases the burdens et
- 4te-payers, is.a = concern that ' the taxing of utility gross receipts : s t :a and sales of ' purchased power during cmergencies also works an unf air and unnecessary burden on utility ratepayers.
The Co==onucalth of Pennsyl-l vania,1= poses a 4.3% tax on -the: gross receipts of Pennsylvania ut iiities and a' 6% ' tax on-the sale's of such utilities to cornercial and industrial custoacrs.
f.
During c=crgency condit. ions when the dollar arount of utility sales and receipts may-rise unexpectedly, the sta t.e receives unexpect ed t ax i
.The elinination of such unexpected tax receipts should not revenues.
l adversely affect the budgeting ef forts of the state and would.eane the burden of utility ratepayers.
Therefore, the Co raission' vill petition l-the Legislature to enact legislation rc=oving sales and gross receipts taxes from increased utility revenues during e=crgencies.
Management Investigation l
Finally, t.here are questions unansvered which deserve the attention.of the Cc:2.31s s i o n.
Did Respondents act reasonably and prudently in t.he construction and placing into service of T>il-2? Did '!et Dl,as the operater of TM1-2, act reasonably and prudently in the operation of the plant prior to and during the accident?
'.?h e n, if ever, vill r:11-2 1bc returned to setvice? tihat will be the costs?
Is the present ra nagemen t-
-of Met Ed, Penelec and CPU reasonably effici.:nt? Can their efficiency be improved?- These and other related catters directly or indirectly affect the cost and qualit? of service previded to respondent's ratepayers.
Met Ed and Penelec have incurred capital costs which they will un.!eubtedly l
sock to recover in future rate cases.
The Cc=2issica's kneule ine.ind understanding of the cause:, of these costs cannot avait those future rate cases.
I t
Therefore, the Cc=:ain rion vill by separate order inst i t ute an l
I investigation of the past and present canage=ent practices of Met 1:d,
benelec and CPU.
This investigation vill specifically focus on the l
construction.ind operation ot T;ti-2, and vill incorpora te the public f
report.s of the President.'s Co::mi:. ; ion, the Nuclear Regulatory Ce:.nisnjon.
l and others concerning the accident at TM1-2.
- -:cuev er, the inve:.: ina t.J on will include broader que:.tiens concerning the canagement of the::e companies,
.and will incorporate the findings of a canagement audit which t he Cer.:mi: sion L
vill authoriac; TilEREFCRE, i
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IT-IS' ORDERED:
1.
That the-temp.orary_ta.tes presently-in~ef fect..for.f.etro-
. politan.Ediso.n, Coppany and Pennsylvania Electric' Co=pany. arc,herMaad.e periEanent, consistent with the findings,of; e,he Cor=sisslon.,
2.
That Metropolitan Edison Cocpany and Pennsylvania Electric Company shall specifically account for the accelerated anortization of
-deferred' energy. costs through base rates, consistent with the findings of ~ the Conmission.
-3.
That Metrop'olitan Edison Company and Pennsylvania Electric
- Coupany sha11 for't'}i71th'Til~e~Erif fs, i=p1eseniin~gnetcnE5I["c'o'it"
~
~
~~
rate's,. effective July 1,1979 and levelized for a period of-18 months at 8.8_ mills /KWil and 6.5 nills /KWil respectively, consistent with the findings o f,,,,t;h.'c','(c'd.Eis s'i'o'n
'~
~ ~ ~ ' '
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4.
That Metropolitan Edison.,Co_=pany and Pennsylvania,El,cc,tric Company. may..acend ethein larif fs to includ.e in. costs recoverable througli the net-energy-cost-rate ~the cost of-de=Nnd"or reserve.xapacity._gharges ass 6ciated'with'p6i cliarc'd" power-incurred-from-July-1i 1939 through Ja,nuary,lm l980,~ consistent with the findings of the Cor:sission.
5.
The Metropolitan Edison Company and Pennsylvania Electric Coupany shall calculate the state tax adjust =ent surcharge so as to credit the Public Utility Realty Tax refunds over a period of 18 ::onths beginning July 1,1979, consistent with findings of the Cot:sission.
- 6. - That Metropolitan Edison Company and Pennsylvania Electric Company shall within thirty (30) days af ter entry of this order submit for Commission approval conservation plans, consistent with the findings of the Commission.
7.
That Metroplitan Edison Co=pany and Pennsylvania Electric Company shall undertake in good faith to petition the Federal Energy Regulatory Commission, and to negotiate with other ne=bers of the' Pennsyls,sia-New Jersey-Maryland Interconnection, for the pricing of purchases of energy during emergency conditions at cost, consistent with the findings of the Commission, and shall report conthly on its efforts.
/
That Ihg cocplaints f.t,he Cocaission and the parties 8.
the extent consistent wi(ropolitan Edison Company ~are hereby sustained to against the rates of Me th,_this order, and are hereby otherwise denied.
Y
- 9. sThat< the co= plaints of Metropolitan Edison Company and y
Pennsyl;rania Electric Company agains,t the tecporary rates' set by the Conunission are hbreby denied.
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5 10,, That th; petitions filed on May 8,1979, by Metropolitan Edison Company and Pennsylvania Electric Company are hereby granted to the extent consistent with this order, and are hereby otherwise denied.
11.
That Metropolitan Edison Company and Penn*;ylvania Electric Company shall sub: sit iconthly reports to the Commission on the progress of returning Three Mile Island Unit No. 1 to service.
12.
That Metropolitan Edison Company and Pennsylvania Electric Company shall submit taonthly reports to the Commission showing the operation of the levelized energy cost rate, !neluding sales, revenues, expenses and deferrals.
13.
That Metropolitan Edison Conpany and Pennsylvania Electric Company shall submit a report to the Consission within twenty (20) days after entry of this order describing in detail the steps which will be taken to imple:nent this order.
14.
That a copy of this order shall be served on all parties.
BYTHbCOFMISSION, i
m?Lf.)W* l'.'e jf e 7,... -~ := '~~ "
x Williaa P. Thierfelder Acting Secretary (SEAL)
~
ORDER ADOPTED: June 15, 1979 ORDER ENTERED:
June 19, 1979 Y
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.1v ' 9.. f0; PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg, PA' 17120
'Public Meeting Held May 23, 1980 Commissioners Present:
Susan'M. Shansman, Chairman Michael Johnson James H. Cawley Linda C..Taliaferro Pennsylvania Public Utility Commission, et al.
Docket No.
~
v.
I-79040308 Metropolitan Edison Company and Pennsylvania Electric Company' ORDER BY TEE CO:! MISSION:
The current proceedings are a continuation of an investigation at'this docket which began shortly after the accident at Three Mile Island on March 28, 1979. This order is a sequel to the Commission's order entered June 19, 1979. At issue here are three matters:
First, on September 20, 1979 the Commission ordered Metro-politan Edison Company (" Met Ed") and the Pennsylvania Electric Company
("Penelec") to show cause why the Three Mile Island Power Station, Unit No. 1 ("TMI-1") should be considered-used and useful in the public i
service and why all of the costs associated with TMI-1 should not be removed from their respective base rates. The second matter at issue'in these proceedi.rgs' arises from an order to show cause adopted on November 1, 1979, directed only to Met Ed.
After taking notice of recent financial, operational and regulatory difficulties facing Met Ed, the Commission ordeyyd Met Ed to show cause why its certificate of public convenience - should not be revoked. Third, on November 1, 1979 Met Ed filed a petition for modification of the order entered June 19, 1979, seeking a 6.9 mill per kilowatt hour' increase in its energy cost j
rate and an extension of time within which to include as recoverable costs under the energy cost rate the demand or reserve capacity costs
- associated with purchased power.
1/.
For economy of expression, all of the pertinent certificates
-granting Met Ed its present rights to operate as a public utility are-referred to as its " certificate of cenvenience."
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The three matters were consolidated for hearing at this docket.
The Commission, sitting en banc, presided at the taking of evidence and rendered this. decision without the interjection of a recommended decision of an administrative law judge. After twenty-seven (27) days of hearings, which produced more than 4,000 pages of transcript, the parties were permitted 'to file briefs and present oral arguments before the Commission.2/
~
Consolidated with the current proceedings are complaints docketed at C-79101682, C-79121754, and C-79121803. This order disposes of these complaints. There are also three complaints which were filed during our initial proceedings which culminated in the order entered June 19, 1979. Those complaints are C-79040S31, C-79050907, and C-79050909. The order of June 19, 1979 effectively disposed of all 2/
The parties to these proceedings are: Respondents, Met Ed and Penelec; Staff; Consumer Advocate; St. Regis Paper Company of York, Airco Speer Carbon Graphite of St. Marys, Autex Corporation of Meadville, Avtex Fibers, Inc. of Lewistown, and P.H. Glatfelter Company of Spring Grove, jointly ("St. Regis, et al."); Patricia Street, Dr. Timothy Percarpio, and Three Mile Island Alert, Inc.,
jointly ("TMIA, et al."); Senior Power Action Group of York and Louise Riley, jointly (" Senior Power Action Group, et al."); Holly Keck and Deep Run Farm, Inc., jointly (" Holly Keck, et al.");
Bethlehem Steel; Standard Steel Division, Titanium Metals Corpor-ation of America (" Standard Steel"); Citibank, N. A. Agent and Chemical Bank N.A. Co-Agent ("Citibank, et al."); Mrs. Patricia Smith; Pennsylvania Foundrymen's Association and Lebanon Steel Foundry of Lebanon, jointly (" Pennsylvania Foundrymen's Association, et al.");
Universal Cyclops Corporation, Electralloy Corporation, Erie Malleable Iron Company, Franklin Steel Company, National Forge Company, Prect,or & Gamble Paper Products Company, Talon Textron and Welch Foods, Inc., jointly (" Universal
- Cyclops Corporation, et al.");
Lehigh Pocono Committee of Concern; Louise Dufour and Limerick Ecology Action (Cemplaint Docket No. C-79101682); Representative Harold Brown (Complaint Docket No. C-79121754); Joyce Wendler (Complaint Docket No. C-79121S08); and the City of Lancaster.
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mattersraisedtherein;'tg7refore,weherebydirectthatthese' complaint dockets be marked' closed E
,. An initial decision of the presiding' commissioners was issued on May 9,'1980.
Exceptions were_ filed by: Respondents;' Staff; Consumer Advocate; TMIA, et al.;. Senior Power Action Group, et al.; Holly Keck,
- etfal.; Standard Steel; Citibank et al.;.Mrs. Patricia Smith; Lehigh Pocono Committee of-Conce'n;-Louise Dufour-and Limerick Ecology Action; r
2nd, by permission, the Pennsylvania Electric Association. The Com-
~
mission has reviewed and considered each exception. For the most part mthe exceptions are denied - for the reasons already given for the initial decision. A seriatim discussion of each exception would serve only to reiterste the original text, other than where a specific departure is noted. Therefore, this order, in its entirety, should be treated as the Commission's response to.the exceptions.
I-The current proceedings have presented exceedingly difficult
= issues for this Commission'to resolve. The Commission has had to balance the need to explore and carefully examine Met Ed's continuing, long-term I
- viability against-the. urgency to act promptly' to avoid being overtaken i
4 by events.
In addition, the Commission has had to resolve the competing concerns of creditors who want assurance of earnings and ratepayers who E
-want equity in-allocating the costs associated with the Three Mile Island accident (and who see an inequitable duplication in paying the costs of TMI-l and the~ costs.of THI-l replacement power); and of Respon-dents who would emphasize their financial needs and other parties seeking a determination based on other economic, social and political principles.
c The responsibility presented to the Commission by these concerns is indeed a grave one, and whereas each of the parties may propose
[
solutions, this' Commission recognizes one' factor which applies solely to:
(
3/
A request to intervene in the nature of a complaint was received on March 24, 1980 from' David D.. Trout.
Mr. Trout complains of the
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application of the increase granted to Met Ed on February 8,1980 to his service.
It appears that Mr. Trout was unaware of the Com-
)
- mission's' intent to make the~ increase effective-for bills rendered on and:after. March 1, 1980. Met Ed's energy cost rate was previous-ly changed effective for bills rendered on and after a date certain.
The February 8,1980 action of the Commission was consistent with that practice. Also, it was the" Commission's intent to increase
, Met Ed's rate so'as to generate revenues in March and April, 1980 L
sufficient to obviate increasing the short-term. debt limit under 4
_the Revolving CreditLAgreement until a final order is issued. If the tariff was' made effective for. service rendered on and af ter March 1,-1980 there would have been'a lag in the collection of
[,
revenues'in March and April, 1930. Thus, Met Ed was allowed to increase its energy. cost rate effective for bills rendered on and
.afterfMarch 1,.1980.
In~ light of the above discussion, we do not perceive a basis for a U
complaint;by Mr. Trout. The request to intervene filed by David D.
gTrout on, March 24, 1930 is hereby. denied without prejudice to n
-Mr. Trout to file a formal complaint.
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it -- namely, it-does not have the luxury of avoiding responsibility for
'being wrong.
The basic conclusion of the Commission in this order is that Met Ed s'hould continue to operate as a public utility. The Commission will provide Met Ed the means of financial rehabilitation. However, we will write, no blank checks on its ratepayers. We find that TMI-1 is no longer used and useful and that the base rates of both Met Ed and Penelec
.should be reduced. This order, with its provisions. for a fully current recovery of energy costs and an accelerated amortization of deferred energy costs provides an adequate framework for Met Ed's recovery.
Respondent must convince its bank creditors that it has the will and the ability to rehabilitate itself.
Above all, Met Ed must demonstrate candor and a willingness to address its problems and-the initiative and ability to find solutions to those problems. The very real fears and concerns of its customers and neighbors must be allayed. Met Ed's costs must be reduced through load management and conservation-inducing rate structure change. Met Ed must aggressively pursue the return to service of TMI-l or an early decision cn1_its conversion to the use-of an alternative fuel.
If these things are done, the Commission is confident that Met Ed will not only survive but will regain its financial health.
Finally, we emphasize that this order does not end our regulatory concern. The management investigation of the GPU Companies at Docket No. I-79080320 continues. Further, we will continue to closely monitor the operations of Met.Ed, Penelee and the GPU Companies to assure the continued provision of safe, adequate and reliable service te Pennsylvania ratepayers at reasonable rates.
Order to Show Cause on Revocation of Met Ed's Certificate of Public Convenience In the order to show cause adopted November 1, 1979, the Commission concluded, after taking notice of recent financial, operational and regulatory difficulties facing Met Ed:
" Recognition of [these] matters raises serious questions about the continued ability of Met Ed to provide safe, adequate and reliable electric service et just and reasonable rates. The Commission therefore finds it in the public inte' rest to put at issue in
-these proceedings the continued viability of Met Ed as a public utility.
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Therefore, the Commission hereby orders Metro-politan Edison Company to show cause why its certificate of public convenience should not be revoked."
The order to show cause manifests the Commission's concern for the continuing adequacy and reliability of Met Ed's service and for the 4-s h
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1 continuing abilit'y of Met Ed to provide that service at reasonable rates. The accident at Three Mile Island and subsequent event: have placed severe strains on the utility. This Commission would be remiss
- if it ~did not formally examine Met Ed's overall condition.to ensure that service to Met Ed's customers will continue. That purpose is served by making Met Ed's continuing viability an issue in these pro-V ceedings.
We need not here' decide the limits of the Commission's authority to revoke the certificete of an electric ;2blic utility. But we note in general that although there is no express provision in the Public Utility Code dealing with the subject, the Commission has the same power t,o revoke a certificate as it has to issue it, upon due cause being shown, and that a utility holding a certificate of public con-venience accepts it subject to the statutory provision which permits the certificate to be modified or rescinded for legal cause.
We disagree with Respondents' statement of the law, not finding it relevant to draw distinctions between past and future actions, or
. between service and rate functions, or that in a proceeding upon motion of the Commission.the burden lies with any party other than the respondent-utility.
There is no. vested or property right in a certificate of public :envenience. Common sense and due process require that a certi-ficated public utility be given notice of its deficiencies and a reason-able opportunity to correct those deficiencies. Ecwever, what is pars-mount to this Commission is the continued provision of safe, adequate and reliable electric service.
If the welfare of the public hould
- require an immediate transfer of the right to serve the publi, either temporarily or permanently, we would not hesitate to order such action.
On the other hand, if the question posed is whether another provider could make the required service' available at a lower cost, then the certain benefit of such a change must be clearly and unequivocally established.
We must conclude that based upon this record no modification or revocation of Met Ed's' certificate is required at this time because
- we find ru) imminent and foreseeable threat to continued provision of adequate and reliable service at reasonable rates. Nor do we find that the record Jupports'the issuance of a complaint. However, in all cases
. this Commission has continuing ^ jurisdiction over the services, rates, and certificates of public utilities."
The Commission;is acutely aware of the substantial, continuing public. debate overfwhether or not radiological dangers exist at Three i
Mile Island. This record contains many allegations concerning Met Ed's responsibility for the construction, maintenance, operation and clean up of the Three Mile Island nuclear. units. To the extent that these allegations relate to the safety of the people of Pennsylvania, this
-Commission is required to recognize that the Federal government has completely pre-e=pted the States in the licensing-and regulation of the
.cccmercial use of nuclear reac ors.and in the protection of.the public from radiological hazards. Northern States Power Comeany v.
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4 State of Minnesota, 447 F.2d 1143 (8th Cir.1971), aff'd mem. 405 U.S.
1035 (1972). These allegations also present difficult questions of whether they constitute a sufficient basis for the revocation of the certificate of an electric utility which owns and operates nuclear facilities.
If the courts and/or the NRC ultimately conclude that Met Ed has been imprudent or negligent or is incompetent, then this Com-mission will take notice of such determination and will respond appropriately. For the present, the Commission believes it to be most appropriate to monitor any proceedings before the NRC and the courts.
The Commission will follow the proceedings before the NRC on the restart of TMI-l and with respect to the clean up of TMI-2.
The management consultants engaged to audit the management of the GPU Companies will consider carefully those proceedings. Any finding by the NRC of incompetence or inability by the management cf Met Ed to operate the TMI units would be a matter of grave concern to this Commission.
Our management consultants auditing the management of the GPU Companies will carefully and thoroughly examine any proposed management changes. To the extent that other issues relating to the reasonableness or prudence of the management of the GPU Companies remain or arise, they can and should be explored in our investigation at Docket No. I-79080320.
Regretably, the Commission must again decry the failure of the Federal government to respond to the accident at Three Mile Island with financial assistance that is commensurate with its responsibility for the development of nuclear energy. The Federal government has been a keystone in the development of commercial uses of nuclear power.
It has insured, promoted and exclusively regulated its development.
Duke Power Concany v.
Carolina Environmental Study Group. Inc., 438 U.S.
59 (1975). The people of Pennsylvania should not have to bear the entire burden--emotionally or financially -- where that burden properly belongs to all those who have benefited from the development of nuclear energy.
The enactment of the Price-Anderson Act in 1957 reflected Congress's acceptance of the idea that the Federal government should intervene in the event of a major nuclear incident.
In discussing the basic approach and underlying principles of the new legislation, the Joint Committee of Atomic Energy commented as follows:
"The chance that a reactor will run away is too small and the foreseeable possible damages of the reactor are too great to allow the accumulation of a fund wnich would be adequate.
If this unlikely event were to occur, the contributions of the companies protected are likely to be too small by far to protect the public, so Federal action is going to be required anyway."
S. Rep. No. 296, 85th Cong., 1st Sess. reprinted in (1957) U.S. Code Cong. & Ad. News 1810-11. --
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Moreover in extending the Price-Anderson Act for the second time in 1975, Congress expressly included the concept in the statute itself:
"Provided, that in the event of a nuclear incident involving damages in excess of the amount of aggregate liability, the Congress will thoroughly review the
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particular incident and will take whatever action is deemed necessary and appropriate to protect the public from the consequences of a disaster of such magnitude."
.42 U.S.C. $2210(e)(Supp. 1979).
Nevertheless, what is painfully clear is that an economic catastrophe has befallen the GPU Companies, and their ratepayers and investors as well. We believe that Congress has a parallel responsi-bility to act in this situation, noting that when the prospect of a nuclear " incident" seemed remote, Federal willingness to render assistance to.the nuclear. industry was freeflowing. Now that such a tragedy has become more than a remote possibility, that willingness has dissipated.
Never has it been more true that victory has a thousand followers, but that defeat is an orphan.
The only action of the Federal government reflected on this record is contained in the statement of the Respondents at ME/PN Exhibit A-74, that:
"The DOE has agreed to fund up to $500,000 for certain work relating to radioactive decontamina-tion used at TMI-2.
Moreover, a contract is being negotiated with a DOE contractor in which it is anticipated that the DOE will fund up to S1,000,000 of engineering services and health physics work in support of a research program which should be of assistance in the TMI re-covery program."
We find the Federal response described in Exhibit A-74 to be woefully inadequate at a time when the owners of the plant, the utility rate-payers, and a consortium of bankers are acting as surrogate insurers of a nuclear accident which may yet threaten to bankrupt three major electric utilities.
The Commission notes with disappointment the failure of Presi-dent Carter to respond to our letter of March 19.
We again urge President i
Carter and the-United States Congress to recognize their responsibility
.and use their power to miniatze the financial burden of this unfortthate accident.
Order to Show Cause on Used and Useful Status of IMI-l The genesis of this order to show cause was the statement of t.6e ' Commission, in the order entered June 19, 1979 a t this docket that: na -
.. c "At this time it appears reasonably certain that TMI-l will return to service. Witness Herman Diecksmp, President of CPU, testified that resumption of generation at TMI-l could occur as early as August, 1979, and certainly no later than January 1, 1980.
However, the Commission will monitor the status of TMI-1. We will require Met Ed to report to the Commission monthly on the progress in returning TMI-l to service.
If that start-up is delayed beyond January 1, 1980, the Commission will issue an order to show cause why TMI-1 should be considered used and useful in the public service."
TMI-l did not return to service by January 1, 1980. By September 29, 1979 (when the order to show cause was adopted) it was clear that the resumption of generation at TMI-l would be delayed substantially, and, at this time, remains uncertain.
The Commission has narrowed the issues somewhat with respect to this matter.
In a prehearing order adopted December 21, 1979, the Commission declined to fix a test period for adjusting Respondents' base rates, stating:
"The Commission does not yet have before it the issue of finding just and reasonable rates for Respondents."
The Commission further stated:
"With respect to the motica [of Respondents] for an initial decision on the used and useful status of TMI-1, prior to the presentation of the base rate adjustments associatec with the removal of TMI-l from rate base, the motion is granted. The Commission has no desire to undertake a re-determination of Respondents' base rates as a hypothetical exercise. If this Commission finds TMI-1 no longer used and useful in the public service, then the determination of just and reasonable rates for Respondents will be an issue before us."
As a resul,t of that ruling, the present record was not developed with respect to a current test period determination of Respondents' revenue requirements.
Subsequently, in a prehearing order adopted January 18,19S0, the Commission deferred the intervention of certain customers of Penelec (who wished to address Penelec's rate structure), stating:
"In light of the Commission's decision in its December 21, 1979 prehearing order to grant Respondents' motion for an initial decision on the status of TMI-1 prior to developing the record with respect to any associated changes in Respondents' base rates, it appears that the.
concerns of the hospitals will not be addressed until a decision is reached on the matters n">w being developed on the record."
Thus, th'e Commission finds that it cannot now determine and fix the just and reasonable base rates to be charged by Respondents. However, the Commission has the authority and discretion, upon the notice given in this-proceeding and the record as developed, to determine (a) whether TMI-l is used and useful in the public service, and whether Respondents' base rates should be adjusted to eliminate the costs associated with TMI-l', and (b) whether to fix temporary rates pending further investigation.
(a) Used and Useful Status of TMI-1
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In the order entered June 19, 1979, the Commission concluded with respect to TMI-l that:
"The parties have raised the issue of the used and-useful status of TMI-1; however, the Com-mission need not reach that issue at this time.
Consistent with the principles discussed with respect to TMI-2, TMI-l is at present only experiencing an outage."
r-We now have before us the issue of whether TMI-1 is used and useful in the public service.
The-decisional principle used to determine that TMI-2 was not used and useful in the public service was succinctly stated in our prior order:
"The length of time which utility plant may be out of service and not be removed from rate base depends upon the nature of the plant, the degree to which the outage can be expected to occur during j
normal operation of the plant, and the certainty with which resumption of service can be predicted."
The parties were provided ample opportunity to put before us the legal and factual bases _ that they advocate the Commission adopt in determining the status of TMI-1.
In addition to the usual briefs and reply briefs, memoranda tf law were requested by the Commission in its prehearing
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order adopted December 14, 1979.
Before discussing the evidence of record, the Commission should clarify one aspect of the law which appears to trouble the Respondents. In the Respondents' memorandum of law dated January 14, 1980 and their main brief, uncertainty is expressed concerning the Commission's use of the phrase "used and useful" rather than "used or useful," and the possible intent of the Legislature in employing both phrases in the Public Utility Code, 6e Pa.C.S. s101, et seq.
The answer to these concerns is'quite simple and straightforward.
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i In our opinion, the Legislature anticipated and intended a difference in these phrases. "Used or useful"' has a broader, more inclusive-connatation and is employed to define the types of property which are subject to the reporting, accounting and certification re-quirements. See 66 Pa. C.S. $51102(a) (3), 1702, and 1703(a). Whereas, "used and useful" has a narrower, less inclusive connotation and is employed to define and describe the types of property which are in-ciudable in the utility's rate base for purpose of fixing rates. See 66 Pa. C.S. $$1102(a)(3)(iii), 1307(a), 1310(a), 1310(d) and 1311. Since our present focus is on the s'tatus of TMI-l for racemaking purposes, the phrase "used and useful" is appropriate. However, our view af the Legislative intent in employing these dif ferent phrases is independent of the determination of the substantive content of the phrase "used and useful." The point here is that the scope of the reporting, accounting and certification provisions, with respect to utility property, is broader and more inclusive than the class or classes of property which are includable in the utility's rate base.
It is appropriate at this time to bring into focus the concept of "used and useful" property for rate making purposes. The Commission is in agreement that "used and useful" is a flexible rate making tool whose definition to some extent is shaped by the individual circum-stances of each case. Whether property is used and useful in providing service to the customers of a utility is a question which of necessity must be resolved on the basis of a case-by-case analysis. The status of plant cannot be determined *b nugh the application of any set fo rmula but should be ascertain t of all the circumstances.
The Respandents distinguish the present circumstances of TMI-l and the circumstances of TMI-2 at the time it was determined not to be used and useful in the public service. TMI-l has been in service for a substantial period of time.
Its operating record from September, 1974 until March, 1979 has been excellent.
TMI-l's experienced annual capacity factor through 1978 was about seventy-eight percent (78'4), well above the national average for nuclear generating units. TMI-1 was not extensively damaged, as was TMI-2, by the accident on March 23, 1979.
Respondents maintain it is presently operable, if permitted by the NRC, and that all modifications which it is anticipated the NRC will require should be completed by June, 1980. Finally, Respondents claim that even with the required NRC approval pursuant to the restart hearings at NRC Docket No.,50-2S9 the plant will return to service by January 1, 1981.
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We recognize the plant's past operat ng history and the fact i
that TMI-l's unusually high level of operation has inured to the benefit of Respondents' customers. Similarly, the Commission notes that TMI-1, according to Respondents, is physically ready to commence commercial operation, but that the delay of its in-service date is presently due to ongoing Federal investigations. These circumstances materially distin-guish the-concition of TMI-l from plant that might have otherwise been excluded from base rates due to obsolesence and operational or structural defects. Although we recognize these apparent distinctions, the Cocaission is not convinced that these facts should result in ratepayer contribution toward returns on the investments associatec with TMI-1.
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e Notwithstanding the Respondents' contentions, for rate making purposes for classes of property which are to be included or excluded from rate base, we are compelled to draw the line between the operating history and present condition of the plant and the timing and certainty of the return to service. The reasonableness of Respondents' actions in operating and maintaining the plant is not being measured here. Nor will the reasonableness of Federal regulatory action enter into our determination.O' For ratemaking purposes our primary issue is the weight
,that is to be accorded TMI-l's present circumstances and when the plant will return to service.
The Pennsylvania Public Utility Code and various Comnission orders that. refer to property valuations for ratemaking purposes in-l corporate the generally accepted principle that a utility is not l
entitled to include, in the valuation of its rate base, property not actually used and useful in providing its public service. Whether !MI-l was related to the provision of utility service is not at issue here.
The focus with regard to TMI-l's treatment here relates to the lenath of the plant's present and ongoing outage.
A plant's timely return to public service, so as to be pr:perly included in utility base rates, is an established principle enunciated by-the courts. See Schuylkill Vallev Lines v. Pennsylvania Public Utility Commission, 105 Pa. Super. Ct. 393, o8 A.2d 44d (1949);
Glenwood Licht & Water Comoany v. Glenwood Springs. 98 Colo. 340, 55 l
P.2d 399 (193o); Office of Consumer's Counsel v. Public Utility
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Commission, et al., 580 Ohio St. 2d 449, 391 N.E. 2d 311 (1979). The standard by which courts and this Commission have measured a plant's timely return to service has been the plant's incinent or certain use in providing service to the public. Schuylkill Vallev Lines, supra.
The Commission's treatment of TMI-l and TMI-2 in our June 19th order expressed our intent to continue applying . tminence and certainty" as a standard for the determination of a plant's used and useful status.,
There our decision not to exclude THI-l from the Responde: ts' base rates was due primarily to the plant's expected return that appeared to be both imminent and certain.
' "At:this time it appears reasonably certain that IMI-1 will return to service. Witness Herman Dieckamp, President of GPU, testified that resumption of gener-l ation at TMI-l could occur *as early as August, 1979 l
and certainly no later than January 1, 1980."
l Frea the evidence we have before us, TMI-l is out of service and, based on Respondents'. testimony of an in-service date of approx-imately _ January 1,1981, the unit will have been out of service far nearly two (2) years.
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Although the Respondents have contended throughout these proceedings that the Unit No. 1 in-service date is due to l,
unjustified or discriminatory Federal action, the Commission l.-
will not' attempt to look behind these-investigations to determine the reasonableness of those-acts.
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T Also, there exists substantial uncertainty with respect to the return of service of TMI-1. On the last day of hearings, Mr. Robert C.
Arnold, GPU Vice President for Generation testified:
Question: "How would you assess.
. or how would you characterize the track record of the respondent in making representations to the Commission with respect to the restart of TMI-l?"
Answer: ".
. I would have to judge that our forecasts have not been accurate in terms of what has actually worked out."
Tr. 3998-4000 Dr. Robert B. Parente, a power production and operaticas planning consultant with Theodore Barry & Associates, testified:
"We believe that there is a strong probability that significant delays will occur in the restart of TMI-1, currently scheduled for January 1,1981 for the Company's financial forecasting purposes, and furthermore, the distinct possibility exists that the unit may never be permitted to restart."
(TB&A Statement No. 2, p. 11-14)
On crosa-examination, Dr. Parente testified that mid-1983 was, in his view, a realistic start-up date for TMI-1.
Tr. 3443.
Finally, we take notice of an order adopted on March 6,1980 by the NRC, docketed at CLI-80-5 (In the Matter of Metropolitan Edison Company, Docket No. 50-289), wherein the NRC directed its Atomic Safety.
and Licensing Board to consider the following issues in the TM1-1 restart proceedings.
"(1) whether Metropolitan Edison's management is sufficiently staffed, has sufficient resources and is appropriately organi:ed to operate Unit 1 safely; g(2) whether facts revealed by the accident at Three Mile Island Unit 2 present questions concerning management competence which must' be resolved before Metropolitan Edison can be found competent to operate Unit 1 safely; and (3) whether Metropolitan Edison is captble of operating Unit 1 safely while simultaneously conducting the_ clean-up operation at Unit 2."
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The scope of.those issues and the obvious concern of the NRC with the restart of 'TMI-1 while the clean-up continues at TMI-2 convince the Commission that a substantial uncertainty presently exists with respect,
to the resumption of generation at TMI-1.5/- The implicaticas of an NRC decision to1 delay the restart of TMI-1 until the clean up of TMI-2 is completed are even more serious in light cf the fact that Mr. Robert C.
Arnold..GPU Vice President for Generation, has testified that it is now unlikely that the clean up and restoration of TMI-2 vill be completed by June, 1983 and that considerably more time will be required.
Tr. 741.
Considering the above, the Commission hereby finds that the Three Mile Island Power Station, Unit 1 is not used and useful in the
'public service.
In the case of' Philadelphia Electric Company (PECO) at R-79060S65, we disallowed approximately $25 million of PECO's claimed original cost based upon a finding of 748 megawatts of excess generating capacity. There are certain similarities between the issue of excess capacity in the PECO case and the matter of TMI-1 in this investigation; however, there are a number of features which distinguish the issue in the PECO case from the problem of THI-I in this proceeding.
The issue in the PECO case was one of excess capacity. The problem which confrents us in this case is one of unusable capacity caused by the outage of a particular generating facility, complicated by
-- ~ ~the ~need~ to parchase energy to replace that capacity. The matter of replacement energy was not at issue in the PECO case and we concluded that a proper method of allocating the risk relating to the excessive generating capacity would be to require the stockholders to forego a return on their investment in that capacity while allowing the company to recover the associated expenses and depreciation from the ratepayers.
In.this proceeding, while we have not specifically allocated the 5/
Notwithstanding the Commission's concern with and recognition of the probable effects of NRC proceedings on the restart of TMI-1, in the context of determining the used and useful status of TMI-1, the implications of that specific decision shovld not be misunderstood by the NRC or the Atomic Safety and Eicensing Board which presides over the TMI-1 restart hearings. We understand that Met Ed's financial ability to operate the unit is an issue to be resolved in the restart hearings. No specific implication should be drawn from our determination that TMI-1 is no longer used and useful that Met Ed is therefore financially unable to operate the unit. To do so would be to create a regulatory "self-fulfilling prophecy of unfortunate consequences.
The financial capability of Met Ed as the operator of TMI-1 is more appropriately reflected in our overall determination in this order that Met Ed should continue to operate as a public utility and should recover financially.
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responsibility for the risk related to the outage of TMI-1,
.>e note that with this, order the Respondents' will be permitted full recovery of the reasonable costs of energy needed to replace that unit's capacity.
In our opinion'it would be inequitable to also permit the Respondents to recover the maintenance and depreciation costs on a plant which should j
i be, but which-is not, providing their customers with economical energy.
We further note that our treatment of TMI-1 in this decision does not represent the permanent disposition of this issue. When that facility is permitted to resume commercial operation, the Respondents
- right to again earn a return on the investment in that plant and to resume recovery of the costs associated with its operation will be given i
full consideration by this Cemmisston.
i With respect to the recovery of clean up costs through rates, l
nothing in this order negates the statements of the Commission in the June 19, 1979 order.
(b) Adjustment of Esse Rates - Temoorary Rates Inasmuch as the Cammission has determined that TMI-l is not used and useful in the public service the adjustment of the respective base rates of Met Ed and Penelec, as a matter of ratemaking, is ccm-pelled. However, the Commission will not fix new permanent rates.
The issue to be resolved with respect to TMI-l is whether the Commissi:n should exercise its discretion to set temporary rates for Respondents. The Commission has the authority pursuant to Section 1310(d) of the Public Utility Code to p.rescribe temporary rates for a period of six (6) months. This Commission has examined the financial data presented on th s record, Respondents recent financial reports to the Commission and to their shareholders, and the orders of the Commission at Docket Nos. R-73060626 and R-78040599. Based on this information, and on its finding that TMI-l is not used and useful in the public service, the Commission is of the opinica that Respondents' rates are producing a return in excess of a fair return upon the fair value of the utilities' property.
The ' determination that I:!I-1 is not "used and useful" gives rise to an unquestionable need to adjust Respondents' base rates. Based upon recent determinations of the Commission, the annual revenues associa-ted with TMI-l are approximately S26l? millica for Met Ed CiE/PN Ex.
A-16) and 511.7 million for Penelee (ME/?N Ex. A-32).
Whatever the proper level if-determined today, these are not insignificant or de minimus amounts. The substantial nature of the revenues'and return associated with TMI-l is a consideration in the Commission's exercise of discretion in setting temporary rates.
Also relevant is the determination that Respondents should be granted full recovery of current energy costs. The Commission affirms
.its conclusion in the June 19th order that ratepayers should not pay
- both the c9st of a generating station which is out of service and the
' costs of replacement generation where the outage is beyond normal expec-tations and.of uncertain duration..Our allowance of a full recovery 14 -
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lof replacement power, including power purchased and generated to replace TMI-l generation, necessitates the setting of temporary rates.
. Finally, the Commission notes that the return associated with TMI-l for Met Ed is approximately $15.2 million (ME/PN Ex. A-16) and for Penelec.is'approximately $7.0 million (ME/PN Ex. A-32).
These amounts create excessive returns, in our opinion, on the remaining rate base, given the determination that TMI-1 is not used and useful.
For these reasons, de hereby prescribe temporary base rates at an annual level of $26.9 million less than existing rates for Met Ed and
$11.7 million less than existing rites for Penelec. We find that these base rate rpvenue reductions should be allocated to Respondents' customer classifications according to the contribution of those custcmer classes to Respondents' total base rate revenue requirement as de.termined in their most recent rate investigations (R-78060626 and R-7SO40599 respectively).
If Respondents file a complaint against the temporary rates set by this order and subsequently the Commissicn determines that the temporary rates were set unreasonably low, an adjustment can be granted through restatement of Respondents' balances of deferred energy costs.
However, the' inclusion of TMI-1 in Respondents' base rates will not be retroactively restated, even if TMI-1 returns to service as expected by -
Respondents and is determined by the Commission once again to be used and useful in the public service.
Petition of Met Ed for Modification of Order Entered June 19. 1979 The third matter at issue in these proceedings arises from a petition filed by Met Ed on November 1, 1979 for modification of the order entered June 19, 1979. Met Ed's prayer for-relief was a ~ 6.9 mill increase in its-levelized energy cost charge, effective January 1, 19S0, and an extension of the time within which to include demand or reserve capacity charges associated with purchased pcwer as recoverable costs through the energy cost charge. On February 8, 1980, the Commission granted Met Ed a 6.9 mill increase in its energy cost charge, effective March 1, 1980 and until a final order is issued, subject to the comple-tion of our investigation.
Nespondents' request for energy cost relief was broadly stated in their main brief, as follows:
. Met-Ed requests that this Commission:
-(l) effective June 1, 1980, grant a levelized energy clause. increase of 3 mills /kuh; (2)~ permit the energy clause in effect prior to this Commission's June 19, 1979 order to resume normal operation, effective January 1, 19S1;
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(3) J extend the permitted inclusion of demand or reserve capacity costs associated with purchased power from January 1, 1980 until TMI-l returns to service; and (4) ' permit the amortization of Met Ed's and Penelec's unrecovered balance of energy costs incurred since TMI-2's accident through a surcharge which will recover such costs over a 14 month period, beginning Ju'ne 1, 1980."
Respondents' request for a 6.9 mill increase for Met Ed-was predicated upon meeting short-term cash needs. However, Met Ed's and Penelec's past, present and projected energy costs, as well as short-
- term cash and credit needs, have been fully developed on this record.
We ' consider all issues with respect to the proper energy charges for Met Ed and Penelee to have been fully developed and to be properly before us nck' for decision.
The Ccmmission again finds that Met Ed and penelec are* pro-viding adequate, reliable service in spite of the loss of generation at
!MI. We a f firm our determination --in the order of-June-1-i,1979, that:
" Met Ed and Penelec.are presently providing reasonable, adequate, reliable electric service. The costs of purchasing power are unquestionably direct, necessary and reasonable costs of providing that. utility service.
The Ccamission cannot punish Respondents by denying the recovery of these costs; nor can it create a windfall The
~for the ratepayers of service without payment. ~
C:mmission is of the opinion that the recovery of these costs is required by-law."
However, the'last-quoted sentence requires qualification. The use of that Commission language by some of the parties indicates a misunder-standing of the Commission's intent.
The _ statement that the recovery of purchased power costs is
" required by law" was obviously not intended ta mean that some specific-element of statutory or case law generally required the recovery of
-purc ased, power costs from ratepayers -- regardless of how or why thcJe h
' costs were incurred.
In our view, there is no such legal requirement.
-Sather, the statement must be viewed *in its context.
The Commission h:d removed the costs associated with TMI-2 from Respondents
- base rates, determined that T"1-1 was only experiet;ing a normal outage, and deter-mined that the current pur:hases of power by Respondents were direct and-immediate costs of providing service.
In that context, those costs were recoverable from ratepayers.-
In the current proceedings,.the C:mmission finds that Met Ed and Penelee have similar:.y incurred additional purchased power costs.
This is not, however, a Jeterminatien that every dollar of pur:hased power costs recorded on Respondents
- books is recoverable from their
.ratepayers. Those'amcunts are subject tofaudit and review by the Com-
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s mission and to a l'ater determination that specific amounts of energy costs were imprudently or unreasonably incurred.
If the. courts and/or the NRC should ultimately conclude that Met Ed was imprudent or negli-gent in its operation or management of Three Mile Island, then this Commission will take notice of such determinations and tijeir relevance to any portion of the replacement power costs.for which current recovery is permitted today.
fAny subsequent examination of these issues would have to be
'made with the public's interest in the continued provision of adequate, reliable electric service cle'arly in mind. This Commission recognizes the close relationship between that public interest and Met Ed's financial
. viability, and, if necessary, would balance the public's interest in adequate, reliable service against its interest in refunds. We point out that the Pennsylvania Commonwealth Court has affirmed our discretion with respect to the extent of refunds to be made to public utility patrons if good reason is shown for the contrary. Community
- Central Energy Corcoration v. Pennsylvania Public Utility Commission, No. 451 C.D. 1979 (Pa. Cmwlth. Ct., May o, 1980).
The basic determination in this order is that neither TMI-l nor TMI-2 is used and useful, that Respondents are providing adequate, relistle service without those generating units, and that the costs of power prudently and reasonably incurred to replace generation lost at TMI-l are direct costs to serve Respondents' ratepayers. Furthermore, for the reasons stated below, the Commi;sion finds that Respondents should be allowed a full recovery of current energy costs.
First, by this order, the Commission is denying Respondents' recovery of the revenues associated with Three Mile Island. Since the Respondents are providing service through greatly increased costs of purchased power, those energy costs should be promptly recovered frca their ratepayers. The determinations that TMI-l is not "used and useful,"
and that the revenues associated with TMI-l should not be recovered through Respondents' base rates, are inseparably interwined with our determination to allow a full and current energy cost recovery. If our determination on TMI-l were reversed, the recovery of energy costs would have to be modified.
Second, the extreme dependence of Respondents on short-term debt creates an_ unstable financial condition which potentially threatens the continued provision.of utility serrice tc Respondents' customers.
The-costs of purchasing energy are a inajor reason for short-term borrowing.
A full recovery of current energy costs should lessen the need for short-term debt and -facilitate the obtaining of permanent financing by Respondents.
Finally, the continued! accrual of deferred energy costs may ultimately prove to be burdensome to Respondents' ratepayers.
If not collected now, those-amounts will have to be collected later in the fera of additional charges.
In addition, there is greater equity in requiring the_ratepayers of today.to pay the costs of service today, rather than requiring - tomorrow's ratepayers to pay today's costs.
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The' Commission therefore finds that a fully current energy cost recovery for the balance of 1980.for Met Ed requires an energy charge of 19.1 mills per kilowatt hour, calculated as follows:
~ Met Ed Energy Charge Full Cost Recovery for' ?eriod June 1, 1980 through December 31, 1980*
l Total Sysiem Energy Cost (3 millions) 120.7 Total System Sales (GWH) 4614 Average Mills per KWH of Sales 26.2
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Les's :
energy cost recovery allowed by June 19, 1979 Order, exclusive
- of. gross receipts tax 16.4
. (S.0 mills - base rates)
(S.a mills - energy cost rate)
Required Increas.e in Energy Charge exclusive of gross receipts tax 9.S**
Plus: Energy Charge allowed by June 19, 1979 Order, exclusive of gross receipts tax S.i Required Energy Charge for full cost recovery, exclusive of gross receipts tax 13.2
-Required Energy Cha6'e for full cost recovery, including gross receipts tax 19.1
- Source: 'ME/PN Exhibit A-39 Includes recovery of deman'd or reserve capacity char;es associated with purchased power.
- ' Required increase determ: nation essentially affirms interim relief cf. 6.9 mills granted on yebruary 3,1980.
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f-The Commission also finds that' a fully current
- energy cost recovery for the -balance of.1980 for Penelee requires an energy charge of 3.5 mills per kilowatt hcur, calculated as follows:
Penelec Ener2y Charge Full Cost Recovery for Per od June 1.1980 through December 31. 1980*
Total System Energy Costs ($ millions) 115.9 Total System Sales (GWH) 6395 Average.'! ills per KWH of Sales 18.1 Less: energy' cost recovery allowed by June 19, 1979 Order, exclusive of gross receipts tax 16.2 (10.0 mills - base rates)
( 6.2 mills - energy cost rate)
Required Increase in Energy Charge exclusive of gross receipts tax 1.9 Plus: Energy Charge allowed by June 19, 1979 Order, exclusive of gross receipts tax 6.2 Required Energy Charge for full cost recovery, exclusive of gross receipts tax 8.1 Required Energy-Charge for full cost recovery, including gross receipts tax 8.5 l
l
- Source: ME/PN Exh'ibit A-95
. Includes recovery of demand or reserve capacity charges associated with purchased power.
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En'ergy Cost Rate We will further direct Met Ed and Penelec to' file and c:mment upon propo'ed tariff revisions, to become effective January 1, 1981, s
unich will replace their energy cost adjustment clause with an energy cost rate. The energy cost rate shall be applicable to customers' brils
.forLone-year periods during the billing ' period from January through December; provided, however, that such rate may be revised on an interim basis upon approval of the Commission.
Upon determination that the effective rate will result in over or under collection, such interim change snall become effective 30 days from the date of filing, unless otherwise ardered by the Commission.
Interes shall be computed monthly, at.the acprepriate rate as provided in Sectica 130S(d) of the Public LU:ility Code. Computation of interes: shall begin in the month an over,
collecti:n or under c:llection occurs, and end in the effecti-te month any over collection is refunded or any under collection is recouped.
Customers shall aot be liable for interest on net under collections.
The in:ent af the Commission is'that this energy cost rate would replace
.the levelized energy charges presently approved thr: ugh December 31, 1980.
Recovery of Deferred Energy Balance 1
the record indicates that by the end of February, 1930 Met Ed's deferred energy balance was 584.6 million.
Penelec's deferred
. energy balance totaled $7.S million at the same point in time. We hereby find _: hat both c:mpanies are entitled to collect the total amount of outstanding deferred energy. costs over :ne nex: IS months.
The col-lection will be in :he form of a surcharge, co be applied an a KWH i
. (usage) basis.
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s Yearly Surcharge /
Met Ed Penelec
($ millions)
Deferred Energy Blance ME/PN Ex. A-91 & A-96 84.6 7.8 Twelve Month Recovery 56.4 5.2 Retail Sales ME/PN Ex. A-39 & A-95 7904 G'aB 10461 G'a3 Mills per KkB 7.1
.5 Energy charge.for full cost recovery, including gross receiots tax (1.047) 7.4
.5
- / Exact a=ounts are dependent upon total deferred energy costs at the time temporary rates go into effect as well as the final Ccemission adjustment to-Met Ed's deferred energy balance pursuant to its complaint and investigation at C.21597.
Demand or Reserve Capacity Charees In the order entered June 19, 1979, the Commission stated, with respect to demand or reserve capacity charges associated with purchased power:
"As an incentive to Respondents to enter into bulk power purchase arrangements and thereby reduce u.e energy costs to its ratepayers, the Commission will allow Met Ed and Penelee to include in recoverable costs through the net energy cost rate, the demand
,or reserve capacity charges incurred from July 1, 1979 until' January 1, 1980.'
The Respondents and the Consumer Advocate request that the Commission extend the recoverability of these costs to continue to encourage Respon-
. dents to keep their energy costs as lou as-possible.
1 Lk'e find on this record that Respondents' committed purchases of power, which entail demand or reserve capacity charges, have reduced-the costs of' purchasing power from what would be otherwise incurred.
Therefore,= the Commission hereby extends the time within which demand or reserve capacity charges associated with purchased power may be included-as recoverable costs through Respondents' energy cost charges from Janausry 1,519S0 until'TMI-l returns to service or until further order c
of the-Commission..
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. e Rate Structure The changes caused by the Three Mile Island accident have drastically altered Met Ed's costs to serve.
Purchased power new re-places large amounts of energyiwhich were previously generated inter-nally. Met Ed's rate base has been' reduced significantly, and there is a 4
real need to conserve and thereby reduce current expenditures.
These changes compe.1 a re-examination of. Met Ed's rate structure.
As noted previously in'this order, rate s:ructure.is an issue which has been excluded from the current proceedings. -However, it is a matter
. nich cannot-be ignored.
If ' appropriate, a rate investigation will be w
consolidated with-the hearings on temporary rates for Met Ed or with hearings on 'any general rate increase filing.
Ener2v Conservation Our' June 19.-1979 Order expressed dismay at Respondents' failure to even consider specific ac tons that would encourage rate-payers to conserve energy during this crisis. Our s:stement of intent on this matter was to be a clarification to the Respondents.that they
_ vere ta ac: immediately:to propose rate structure changes as well as to secure low cost sources of generatien.
The Respondents have responded by filing tariffs which expand.
l the av2ilability of time of day pricing, reduce stand-by charges for 3-solar pcwer custcmers'and-increase incentives to use power on an inter-ruptible service tariff. The Respondents have developed a~ thirty year Master P1,an. designed to foster conservation and load management so that 4
new construction :an be deferred and reduced. Respondents have also proposed several. tariff rule changes designed to encaurage conservation i
of ener;y by.providing for minimum insulation standards as a prerequisite for cocaceting new service -and.by permitting under certain conditions 4
.the use of renewable energy sources in conjunction with residential
'rStes.
j We encourage the Respondents to continue to bring their preposals.
to the Commission for promp consideration; however, the proposals so far will have a' de minimus effect on ratepayers
- bills today. We'are
-extremely concerned about the energy emergency which has followed the IMT-2 accident.
The CPU Companies have had to pur:hase substantial quantities of energy from 3:00 AM to 3:00 PM daily, except weekends, at greatly increased rates. This'high priced, on peak expense has exacerba:ed the
. financial: condition of the ' companies, and is causing the bills of rate-payers to' increase. The Ccemission urges ratepayers in the stronges:
terms to-sttempt to reduce their energy consumpton during,those hours,
-and toL:ry to schedule'use of electricity during off-peak hours and on weekends.' In' addition', the~ Company mu's redouble its effer:s to reduce its Costs.
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In' particular, we point out that in the June 19, 1979 Order we
. directed the Respondents to file a plan to implement a credit billing system which would reward conservation through a credit per kilowatt hour. saved. The Respondents' reply indicated various reasons why the plan outlined would neither be equitable nor reduce purchased power
- cos ts. Respondents _ chose to evaluate our directive without of fering an alternative proposal. We renew our directive to the Respondents to
, develop a proposal that will reduce today's costs of purchased power as a result of the actions of its customers.
Met Ed has indicated in response to our June 19, 1979 Order that there.are many uncertainties associated with a credit billing system. However, during cross-examination Respondents' witness in-dicated that any reduction in energy consumption would reduce purchases:
Q:
Mr. Carter, if, in fact, Metropolitan Edison were able to reduce by whatever means its total sales to customers, you were able to reduce it by say 10 million KKH. does it necessarily follow that you are going to reduce purchased power?
A:
Presently, yes.
Q:
Because you are buying so much at all times --
A:
I suspect Met Ed is buying around the clock either short-tcrm purchases from an associated company or from the pool. So any reduction in kilowatt hours at this point would be a reduction in purcisses at any time, re:ardless of the time at shich the reduction occurred.
(N.T. 4112-4113) (emphasis added).
Therefore, we will again order Met Ed and Penelee to propose a plan, within 90 days after entry of this order, for the implementation of a test program which will measure the effects of conservation-inducing rates on customer kilowatt-hour consumption and on reve.:ues.
The objective of the test program is to determine whether or not the offer of s discount or credit to residential, commercial, and industrial ratepayers who achieve a significant reduction in their electric consump-tion over s ' comparable period in the " preceding year would enccurage those customers to-further conserve electricity.
All parties should be aware that if cooperation is not forth-coming Ein this regard, the Commission will be forced to consider imposing on its own motion such conservation. measures at curtailments of various
' kinds, prohibition of new custcmer connections, ceilings on consumption with. penalties for overruns. pricing of consumption above a targeted level at the average. cost of purchased power, and/or other similar measures. __
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Ef fectivity of Tariffs Notwithstanding our. previous determinations, all rate changes permitted by this order shall be put into.effect,for service rendered on and'after the'date spectfied. The departure from this normal practice in the June: 19, 1979 and February 8, 1980 orders was.for the Respondents *
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energy charges only and for the purpose of insuring an immediate' increase in cash flow. Here, Respondents' base rates are also being changed, and we do not find at present such urgency to increase Respondents' cash flow as.would warrant granting an increase for bills rendered on and siter a date specified. The substantial increases granted by this order will..in our opinion, be adequate when recovered for service rendered on and after the date specified.
Inasmuch as all matters properly before the Commission at this time at this docket have been determtned; THERITORE,
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-1.
That the order to show cause why the certificates of puolic convenience of Metropolitan Edison Company should not be revoked.
which was adopted on November 1,1979, is hereby discharged.
2.
That the order to show cause why Three Mile Island Power Station, Unit No. 1. should be considered used and useful in the public service and why all of the costs associated with the unit should not be removed frem the base rates of Metropolitan Edison Company and Pennsyl-vinia Electric Campany, wnich.was adopted September 20, 1979, is hereby 4
2 made absolute, consistent with this order.
3.
That temporary base rates are hereby prescribed for Metro-politan Edison Company and Pennsylvania Electric Company, effective for service rendered on and after June 1,1980, at the level of rates Lprescribed herein, to remata in effect until Dec:mber 1,1980.
- 4. 'That Metropolitan Edison Company and Pennsylvania Electric-
~
C:mpany are hereby directed to file appropriate tariffs or tariff supple-ments in compliance with this. order prescrtbtng temporary rates.
5.
That Metropolitan Edison Ccmpany and Pennsylvania Electric
.Cempany are hereby permitted. to accelerate the amorti:stton of their deferred' er*ergy costs through a surcharge, effective for service rendered on and af ter June.l.1980',- consistent with' this order.
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That-the petition' for modification of the-order entered
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JJune 19, 1979'which was filed by Metropolitan Edison Campany on Ncrember 1, 1979, is hereby granted,: consistent with this order.
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t L7. Th'at Metr:politan-Edison Ccmpany and Pennsylvania Electric -
-C:mpany-are hereby permitted to file tartifs implementing energy cost charges, effective 1for. service rendered on and 'af ter June 1,1930. and levelized at 19.1 mills per KWH and 3.5 mills per KWH respectively,
)
' consistent with this-order.
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That Metropolitan Edison Company and Pennsylvania Electric Company may amend their tariffs to include in costs recoverable through their energy cost charges the costs of demand or reserve capacity charges associated with purchased power incurred from January 1, 1980 until Three Mile Island Power Station, Unit No. I returns to service or until further order of the Commission, consistent with this order.
9.
That Metropolitan Edison Company shall forthwith reduce its deferred energy cost balance in the amount finally determined by the Commission at C.21597, in satisfaction of the refunds ordered by the Commission.
- 10..That the complaints of the parties consolidated at this docket are hereby sustained to the extent consistent with this order, and are hereby otherwise denied.
a 11.
That the request to intervene filed by David D. Trout, filed en March 24, 1980, is hereby denied without prejudice to Mr. Trout to file a formal complaint.
- 12. That the complaint dockets C-79040831, C-79050907,
'C-79050909, C-79101682, C-79121754, and C-79121808 be markcd closed.
13.
That Metropolitan Edison Company and Pennsylvania Electric Company are hereby directed to propose, within 90 days after entry of this order, a plan for the implementation of a test program which will measure the effects of conservation-inducing rates on custcmer kilowatt-hour consumption and on revenues, consistent with this order.
14 That Metropolitan Edison Company and Pe.nnsylvania Electric Company are hereby directed to file and comment upon, within 90 days af ter entry of this order, a proposed energy cost rate tariff to become effective January 1, 1981, consistent with this order.
- 15. That the exceptions of the parties are hereby granted to the extent consistent with this order and are hereby otherwise denied.
- 16. That Respondents are hereby directed to serve all parties with copies of all tariffs filed in compliance with this order.
- 17. That a copy of this order shall be served on all parties.
BY T!IE COMMISSION, William P. Thierfelder Secretary (Seal)
' ORDER ADOPTED: -May 23, 1980 ORDER ENTERED: May 23,_19SO _
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CO CURRING OPINION BY CHAI?iLCl SUSMI M. SFaiMLti RE:
Metropolitan Edison Cc=pany and Pennsylvania Electric Cc=pany Docket No. I-79040303 i
I May 23, 1980 l
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In response to recent news releases and press conferences by the General Public Ceilities Corporation and the Office of Consu=er Advocate concerning the Co==ission's Initial Decision in this case, I 4
' think it only proper at this.c1=e to exp&@ y extre=e displeasure at ress_=
(. : ' a L: *.
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. J $tf the 7sa:samahbr f'the Co==ission'p ad=inistrative process in both t
par:ies.
I would note that the recent public s:ste=ents =ade by Mr.
Cohen in par:1cular are no: only obj ectionable to =yself and the entire Co==issien, bu: also hi;hly unprofessional.
Such ac: ions are especially disconcerning in view of the fact tha: the Consu=er Advocate holds a position of public trust and responsibility. As a party in these pro-caedings the Consu=er Advocate is expected to vigorougly and aggressively represen his client. As an officer of the cour: the Consumer Advocate is expec:ed :o abide by the Canons of Ethics and Disciplinary Rules.
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During the pendence of a proceeding a lawyer should not participate in publicity seeking =eans :o influence the outcome of the =erits of such.
proceedings. The failure of this Cc==ission to adopt the particular course of action suggested by the Consu=er Advocate =ust, of course, be personally. disappointing.
It should not be utilized as an excuse for de=ogoguery.
1 It is also clear tha: the ses:e=en:s released by G?U, thcugh no: as deroga:or/ as those by the Consu=er Advocate, can also be considered highly unprofessional. The =ere fac: that Mr. Kuhns expressed an opinien 1
l
)
I which questions both the fairness and the legality of the Cc==ission's I
j proposal to re=ove TMI Unit #1 from the base rate pending the adoption 1
of our final order today leaves one wi:h an i=pression of somewhat i
dubious =otives.
I.can only hope that in future proceedings before this Cc=-
=issica, both the Office of Consu=er Advocate and the General Public Utili:ies Corporation will restrain from such unprofessional and apparently unethical ac:icas as they have recently displayed at the conclusion of this proceedin;.
I: is :he timing and the highly opi:nated tone of the releases :ha: is of concern. Had : hey been issued :oday I would have no proble=.
I c= concerned that the testimony and the questions concerning
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t the assessmen: of alternatives with respect :o TMI do not becc=e cere dic:u= in an o:herwise leng:hy decision. This Co==1ssion has stated
- hat
" Met Ed =us: aggressively pursue Obe return to service of TMI 11 or an early decision on its conversien and use of al:ernative fuel."
That stata=ent is insufficient standing alone. The i= pac upon :he ratepayer.of wai:ing for sc=e si;n can be =casured in the dollars spent for. replacement pcwer. The Co==ission =us: deter =ine whe:.'er Respondents :ruly wish to explore the alternatives and : heir
-cost or whether chere is a =indse: to condue: " business as usual."
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This Co==1ssion, this Co==onwealth and indeed this Nation are struggling to gain independence fro = OPEC and to develop our own resources to the grestest extent possible. One such exs=ple within Pennsylvania iis'the study by Penn State regarding the feasibility of =ine mouth electric generation fr:= anthracite through utilitation of large open pit =ining technology.
Clearly a* facility of this nature deserves care-ful censideration.
The viability of the return to service of TMI, its conversion, or the decision to build anew are options that cust be critically assessed.
I would therefore direct the Bureau of Conservation, Econc=ics and Energy Planning to recc==end to this Cc==ission appropriate reporting rec.uirements, studies, or actions which should be undertaken to ensure the appropriate assessment of the option visbility.
I would ask the Company to sub=it its decision-=aking ti=e schedule to the Cc==1ssion.
And thus with =y concurring state =ent we reach the denoue=ent --
the final revelation of occurrence which clarifies the nature and outco=e of a complex sequence of events. There are no clear-cut victories, nor outright defeats for any of che parties who participsted in this de=ocratic
-process. There is' hopefully an indicacica that the syste= of de=ocracy in which we are engaged does work.
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To quote from a statement by one resident of this area:
"The /=e=bers/ of the Public Utility Commission of Pennsylvania have y profound e= pathy. They have before them a cost unenviable :ask.
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It has been : heir job to hear rea=3 of testi=cny, to coce :o a decision on what is the right thing to do.
The u:ili:7 Me: Ed on the one hand de= ands co=pensa:1on for a tragedy, albei: a self-inflicted tragedy. The people of the ce=nuni:y serriced by :he utility de=and morality frs= a sys:4m devised :vo hundred years ago':o dispense justice :o its citi: ens.
The decision, one way or the other, will bear the na:es of those who effected ~1:.
The names of :he Legisla:ive body of the Cc==onweal:h of Pennsylvania will not appear even though : hey are the ones who make the laus wherein :he ?UC =ust work. The names of the u:111:y /indus:ry/
and its varied in:erests will not appear; neir.her will the na:es of thousands of-the utili:y's adversaries who pro:es:ed its ac:fons.
The ' choice will be a difficult and lastin; one.."
This Co mission is charged by law to balance the compe:ing in:eres:s of the ra:epayer..:he Company and 1:s investors.
It is sincerely hoped that.our collec:ive visdom will serve tha: public interes:
wi:h equi:7 for-all concerned.
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ROB,ERT 5. WALKER svara em enanos, sru D stmicT. Pennsv6vam 2 Taiw As R. ELAN K wasumaron errecs CondedITTEES:
GEORGE W. JACMSON GOVERN M ENT OPER ATIONS g
SCIENCE AND TECHNOLOGY Mouse of Representatibes Elasfjington, D.C. 20515 April 22, 1980 AcAFM /5 h CONGREssioNALMM i
LIAlson Mr. Frank Moore Apg ~o4 1330 Assistant to tue President for Congressional Liaison The White House
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1600 Pennsylvania Avenue
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20500
Dear Mr. Moore:
Attached is a copy of a letter to the President from the Lebanon County (PA) Commissioners who are my constituents.
They focus on a very serious irony of the af termath of the Three Mile Island accident on many of my constituents.
I commend this letter to your attention and would hope that the views it contains could play a role in future policy deliberations on nuclear issues as well as issues pertaining to my region of our country.
- brdially, hl Robe t+S.*c/
Walker ts Attachment
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- g.., ; g-r.9 April 8, 1980 The Honorable James E. Carter President of the United States White House 1600 Pennsylvania Avenua N washington, D.C. 20500 Dear President Carter; It is ironic that on the first anniversary of the Three Mile Island incident, we, the customers of the Metropolitan Edison Company, living within the twenty-five eils radius, received electric power bills reflecting a fifty percent (50%) increase in cost over and abovo prior conthly and previous yearly bills even though our consumption of kilowatt hours decreased substantially.
When we questioned Mot-Ed officials concerning this increase, they explained the rise in costs were due to Met-Ed's having to purchase energy frem other power utility companies because of the shut down of Three Mile Island Unit I and Unit II.
Thus, it appears our citizens are paying other power companies for premium energy and thereby reducing the power companies' cost of energy, but drastically increasing the cost to the victims of Three Milo Island.
In this circuitous fashion, the victins are forced to pay for the damages which resulted from T.M.I.
Lebanon countians have been affected psychologically,
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physically and financially. We believe that our cost of energy as well as the cost of clean-up, should be shared by those who benefited from the T.M.I. accident experienect namely, power companies throughout the United States.
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After neating jointly with Lebanon City officials, we found that they too are concorned about the safety and wall being of City residenta, as well as the dra=atic increase of energy costs and that they concur with this action.
Ua urge you to take our proposal under considsration and trust in you to make the right decision.
Thank you.
Sincerely yours, Thomas A. Lehney, Chairman Harry W. Fisher Edward Arnold Lebanon County Co::::nissioners DJR/as cc: Eenator Schweiker Senator Heinz Congressman Walker Congressman Ertel 9
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