ML19344A279

Response of Intervenors,Other than Dow Chemical Co,To Feld/ Gunderson Rept on Inconsistencies Between Util Rate Case Filing & Testimony in Suspension Hearing.Rept Inaccurate. Related Correspondence

ML19344A279
Person / Time
Site:	Midland
Issue date:	07/15/1977
From:	Cherry M, Flynn P CHERRY, M.M./CHERRY, FLYNN & KANTER
To:	Atomic Safety and Licensing Board Panel
Shared Package
ML19344A280	List: ML19344A279 ML19344A286 ML19344A293 ML19344A298
References
NUDOCS 8008070659
Download: ML19344A279 (14)

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e UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION W tTgo.Co n PO N

E Before the Atomic Safety and Licensing Board g,,s,-

In the Matter of '

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CONSUMERS POWER COMPANY ) Docket Nos. 50-329

) '50-330 .- .

-(Midland Plant, Units 1 and 2) ) -

// q RESPONSE OF INTERVENORS 7 f'.

D@p j, Of OTHER THAN DOW CHEMICAL COMPANY- O TO FELD/GUNDERSEN REPORT ON THE N

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SO.

INCONSISTENCIES BETWEEN CONSUMERS' " 4 RATE CASE FILING AND ITS TESTIMONY # - / F}'/

IN THE SUSPENSION HEARINGS  %

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Intervenors other than Dow Chemical Company, by their attorneys, submit this Response to the May , 1977 Report prepared at the Board'sd'irection by Drs. Sidney.Feld and Walter Gundersen concerning the inconsistencies in data and treatment, pointed out by Intervenors ' witaess Dr. Richard Timm (Midland Intervenors' Exhibits 50-55; see also Tr. 5258-5286, 5989-6005, 6068-69, 6091-6100), between Consumers' filings before the Michigan Public Service Commisston in its pending rate case- (No. U-5331) and its filings before this Board. Dr. Timm has reviewed this Response,,.and the discussion in Parts II, III, and IV- below was prepared by Dr. Timm.

I THE REPORT IS-NEITHER INDEPENDENT NOR IMPARTIAL.

A major, overall difficulty with the Feld/Gundersen -

Report is i that ;it amounts to no more than a brief in support

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Kof- consumers . ' It does not rest, so far :as ' we can tell ._on

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any independent information-gathering analysis whatever; to C ithe contrary,.the1information:it contains waserequested and

[ gotten exclusively =from Consumers'(Report, pp . 2, 22) , . so j .that'its " analysis" merely regurgitates Consumers' self- -

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-serving--and for the most part flimsy'and inaccurate,as we t

l shall see--apologias for the serious inconsistencies noted -

-by Dr. Timm. The Report also consistently seeks to explain-i.

away, rather than impartially examine, those inconsistencies, relying again canc' again on'such hollow ~ excuses. as differing.

" management decisions"~(e_.g., Report, pp. : 2, 5, 6,.18) , or

<" philosophical differences" (Id., pp. 13, 28), or Consumers'

. convenient decision not to present_up-to-date information to this Board. because ~ its /ffects were . " insignificant (Id. , pp.

5 n A3, .'14,016) .* But the Report never raises--any of the obvious- questions, such = as (to take ~only1 two examples) whether the. "mana~gement decisions'? are objectively juscified,L rather  !

than primarilyJintended to help Consumers build a record here, -

or whether independent analysis supports the claims' of "insig-t nificance.'<'- So - zealously does the Report attempt to ' further s

Consumers _' position,-in fact, that it-devotes considerable It 7 space to a completely.!impropery(and:ez.nneous,as.shown below)

re-rebuttal" of Dr . Timm's , testimonyl on th' ' e" forced . purchase"-

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~. It ? is ins tructive ' to compareL Consumers '; repeated state-

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l ments<during the~ hearings::(e;g.,:Tr.. 5336, '5682) that' a ' '

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' Twitness?has_-an " obligation"_;to:present accurate, updated-testimony..

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L . issue, which7not even the Report claims has.anything to do- ,

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with the'. rate case inconsistencies which are its ostensible-

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~ subject. ' The-time spent on that' argument could much more f ' properly.have been devoted to genuine' examination of the h _

numerous unexplained, ipse dixit' conclusions--often erroneous-- '

.with which the Report :(e_.g. , pp. 7, 11', 12, 15, -16, 17) is.

L rife.

l These points are glaringly obvic us from even a-  ;

l cursory reading-o'f the Report; we will not discuss them ,

further, except to note that in addition to calling the

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Report's overall' conclusions'into question, they underscore '

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, the' alarming tendency .of ' the: Staffi previously pointed out -

by the Board (se's paragraphs ' 36-37 of our Proposed Findings) ;

to accept without question anything Consumers says and to. '

substitute' unexplained--and frequently unsupportable, see, .l e,.g. , Tr. - 4231-32--pronouncements. for reasoned analysis .

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II. .

THE . REPORT IS ' INCOMPLETE e

AND INACCURATE IN ITS

. DISCUSSION OF " FORCED PURCHASES."

i f The Report announcies L(at p.. 38) that :it "does not f

.I Jconcur with Dr. Timm'sJconclusio'n that Consumers Power Company. _

.was forcing n'Phrchase 40' power. 'Rather,fConsumers-assignedi  !

L. p. reasonableivaluec^Ito the bulk' power. capacity required asLwell  ;

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!as..the; capacity! factor assigned, and thus the delay costs were- ~

t , iproperly3 calculated."' That concitision, however, rests 'on -four -

lL^ g bas'es, none'of which is adequatei a .

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1. The Report says (at p. 33) that computer run C4-043 "and others would have been used to determine the appro-priate level of ' Purchase 10' for use in the Midland delar cases." - But it is_ at best doubtful that Run C4-043 in fact was used in such a sensitivity study. Its demand inputs--

which on the. Report's " iterative runs" theory (pp. 34-35) should not vary between different runs, since the only differ-ence should be in assumed. capacity factors (Id., p. 35)--are ,

significantly different from those used in the cost production runs Consumers.provided as backup. See Timm Testimony, pp.

p 73-74. Furthermore, Dr. Timm has located no indication of any such " sensitivity runs" as the Report hypothesizes,in any of Consumers ' listings of backup documents.

2. The Report (at pp. 34-35) bases much of its reasoning on the asserted use of an " iterative run" technique '

to establish the appropriate Purchase 10 capacity factor.

But such a procedure is both unnecessary and pointless. It is both simpler and more sensible to determine the most cost-effective capacity _ factor for purchases by letting the program logic itself demonstrate-(as is its primary pur; se) when it is most cost-effective to purchase through economic dispatch.

See 11 18-22l of Dr. Timm's' Re,buttal Affidavit and Attach - ~ ~

.B2,;B3, and C thereto. The crux of the -Purchase 10 problet is precisely that,by definition Purchase 10 is not factored into the cost production runs in 'a way which takes account of economic 1 dispatch. It makes no technical sense to begin with.

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b such a-definition and then engage in " iterative runs" in order to counteract the definition's unde'rlying assumption.

The Report says -(at p. l34) that the iteration method is used "to tailor the computer outputs of specific parameters."

But Purchase 10 is an input, not an' output. Use of. the iteration-technique appears singularly inappropriate unless the object is to determine what capacity factor will yield a predetermined cost output; if that is what Consumers did, however, then .its ~ cost production runs would not yield any-thing approaching true delay costs. They would be no more than meaningless rationalizations of an arbitrarily pre-

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determined cost figure. In short, if the " proper capacity j

factor for the purchased firm capacity" (Report, p. 34) is '

l to be determined on an economic dispatch basis, using Purchase 10 and iterative runs is not the way to go about it; but if the capaci.ty factor is not determined on an economic dispatch basis, the cost production runs are worthless as guides to the true delay costs.

3. The Report -(at pp. 36-37) then prese~nts a

! tabulation. of 'the impact of Purchase 10 forg one year (1982) infone delay case (the 5-month suspension), in an attempt to show that Purchase 10 has a negligible effect on the forced L backing-off of lower costigenerating units . But the chosen case is one in which comparatively small Purchase 10 purchases

' are made-(see Attachment D to Dr..Timm's Rebuttal Affidavit);

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p in1other __words , the Report has - adopted' Consumers ' . bad habit -

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i ' (s'ee , e_'. g. ,f Tr. - 6121-23)fof.using unrepresentative. cases to ,

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. mask' the ~ serious. defects in its analysis caused by Purchase- 1

,< 10. :What is:even more.significant;is:the fact that even so, l- .

the ReportJ-c,oncedes (at p.:37) dhat some 12.37,of_the total <

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[-: Purchase 10 amount in'the chosen case, or 110,000 ' Whr . ,

l' could. have been generat'ed instead by Consumers ' "relatively low cost units ." That is not a " negligible" amount, and'is increased substantially if more representative ca'ses are y c'onsidered. - See Attachments B1-3, - C, and D - to Dr. Timm's.

L " Rebuttal Affidavit.

4.- To be sure, the' Report then attempts to e r

minimize its own 12.37. figure by asserting .(at p. - 37) that

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' "other el'ements"mus t be factored into ' the ult imate conclu-

.sion." 'Butiit gives us only one such " element"--involving P

pumpes storage capacity--which is'both meaningless and

-inaccurate. It is meaningless because the: Report fails to-recognize thatLits stated conditions regarding pumped storage (i.e., on-peak availability of' purchased power; lessening-the need;.for' off-peak pumping power) are exactly- the~ same whether the purchased ~ power :ist " forced"- through a fixed capacity Jfactor,JasJhappens with Purchase 10,'or.e'cono'mically dispatched.

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-Both Purchase;10_powerfand economic dispatch power are available L :on-peakifsee 11 18 of Dr. Tinn's - Rebuttal Affidavit and 2 Attachments;B1-3,-)C, and'D thereto. LAccordingly, theientire

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"humpedistorage'.' i.disctissioniis Lbe' side - the point in _ terms' of -

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what the. Report attempts to prove. In addition, the hypo-thetical pumped storage example given at pages 37-38 cf the Report is erroneous. It assumes that Purchase 10 power is available at . 20 mills /1"E, 'when in fact Consumers ' own work-paper -(Midland Intervenors ' Exhibit 37) shows that the 20-mill .

L price'is in 1976 dollars and~ cust be escalated 107. annually.

See Attachment C to Dr. Timm's Rebuttal Affidavit. Use of the proper price results in significantly higher Purchase.10 costs--higher, in fact, than the generation costs from any ~

l of Consumers' coal-fired units. Id.

If the Report had undertaken a proper analysis, using actual Purchase ~ 10 costs and actual generating unit costs and covering mora than one isolated and unrepresenta-efve case, a more informative discussion of the added delay l costs due to Purchase 10 might have resulted. As it stands ,

.however, the errors and ' omissions described above negate

l. - any usefulness the Report might otherwise have had on the -

. Purchase 10 question.

.III THE REPORT'S ANALYSIS OF (

PLANT CAPACITY FACTORS IS OF LITTLE ' VALUE .

At pages 29-32, the Feld/Gundersen Report discusses the~ inconsistent plant capacity factors used by Consumers in the~ Michigan rate case an'd in this proceeding, concluding'that the inconsistencies-result mainly.from "the use of two different c ~7-

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, computer models" . and '"have [a] negligible- impact on delay

costs."- Three consents must be made..

First, .the assertion Lthat only " negligible"

' differences.lin computer input are found (Report, - p. 30) is belied by the : Report 'itself. Among those differences, for i

example, are a 26%. drop in~1981-84.Karn 1 and 2 coal prices, from the . cost production runs in this proceeding to the rate' case-filings (Report, p. 21); a 10% drop in 1984 Campbell 3 coal costs from this proceeding .to the rate case' (I_d. .- p. 21) ;

i and a-30% difference ~in 1982 Weadock.1-6 and Karn 3 and 4 coal costs (Id., p. 22). These are not " negligible;" rather,

l. they can have a .significant impact on calculated results. Nor is the: 2% drop .in delay coses resulting' from input correction's

" negligible." Overall, it amounts to-a' savings of from

'$6,718,700-to $11,576,620 in the delay costs estimated by Consumers for the . 5-month ' and 9-month suspension' cases respec-tively (see paragraph 75 of Intervenors' Proposed Findings) .

Second, the Report attempts to' minimize the incon-sistencies . in capacity' factors -by claiming . (at p . 30) that

~ "the ~ prime reason for . the . . . . differences 'is a difference in computer modeling," because . "the~ rate case model dispatches Consumers'iownl generating units against only1the Consumers' load." ' But. here as .with the asserted " iterative . run" technique .

discussed ;in Part I, .no reas'on; appears for the .use of two

-different models'. . DIf the cost production ruits used in this 3 ._. .

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l proceeding do in fact produce true _ cos t figures , then the same model could be used in the rate case by simply .substi-tuting zero load and capacity figures for Detroit Edison's' part of the MECS system. One must ask--and the Report does not tell us--why two different models should be used to estimate the performance of individual plants , when for both the rate case and this proceeding- a single cost production model would cuffice. Given the significant difference.in results, one must also ask which model is the more correct.

Third, the Report assez s that because the l

computer model used in this proceeding covers the combined MECS system-_(Report, p. 30) , "the capacity factors for the Consumers facilities should decrease as low cost generation available.from other MECS members would displace the higher cost generation of those units." But that ignores the countervailing fact. that the increased loads represented by providing make-up power to the cooperatives and municipalitics--

l j not taken into account in the rate case *--will tend to increase

l. capacity factors. Without actually- performing the cost pro-1 duction runs, using the same assumptions other than the exclusion of Detroit: Edison from the rate case runs, it is not

• At'page 4, the Report makes the highly misleading statement that the 272 MR Midland sale and the 60 MW Campbell 3 sale "are Lidentical" as between. this proceeding and the rate case.

While the assumptions remainLthe same, their treatment differs

-radically. . In dealing with calculation of reserves and _ plant

-slippages, the rate case filings exclude'.the 272 MN and 60 MW sales, while in this proceeding Consumers includes them. See 1_28 of 'Dr. Timm's Rebuttal Affidavit, and Tr. 5995-97.

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.possible'to' determine whether the capacity factors will. decrease-or: increase.

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. 37 _ w THE' REPORT IS INCORRECT IN' OTHER RESPECTS .

As Dr.-Timm testified, many of the discrepancies between the rate ' case filings and ' Consumers ' filings in this-proceeding are minor and not particularly significant. The Report spends considerable. time on those--in effect, building L

-up= straw: men and knocking them down with great fanfare, L . evidently in order to obscure the serious matters concerning Purchase 10 and the differing plant capacity factors, which

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notably are buried' toward the end of the Report. Some brief- -

l comments on other errors in the Report, however, are required.

For example, the Report states .(at p. 28) that Dr.  ;

Timm " questions the correctness of CP's position that if Midland isJdelayed, the effect should be judged in terms of

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i the total 2 capacity _ of .these units ihdependent. of sales to I third parties ~." That misstates Dr. Timm's position. What.

Dr. Timm--questions fis.sthe propriety of . cons 3.dering .the " total i .effect": without any examination of the third carties ' fore-l casts,.their' resources, or their available alternatives, and 1without'considering the cost-impact-on other systems from-

-which purchases.would be made1(which would tend to reduce the overalli. cost of delay) . In the absence of that information,.

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which isfessential'if a balanced view of the " total effect."

beyond . consumers ' system is to be achieved, the analysis must be limited'.to Consumers ' own service area (including Dow) ..

Otherwise,on1ha:partialandfatallyincompleteanalysiscan be made. See Timm Testimony,-pp.- 26-29, 70-73; Timm Rebuttal

~ Affidavit, 11'17, 29. _

The problem, then, is not one of a

" philosophical' difference" ~ (Report, pp.13, 28) , but rather one of achieving aLcorrect analysis on the basis of the available information. Not differing viewpoints , b~ut rather

, a basic error in Consumers' one-sided cethodology, is involved.

, Similarly, the Report's claim (at p.13) that " total output" of Midland must be considered "because the effects,' [of delay]

will extend beyond (Consumers '] system" forgets that, to be vali'd, such'an analysis must be done properly--not on the basis of _ cost' production runs which force Consumers to supply capacity to third parties when it is-highly likely (Tima '

- Rebuttal Affidavit, _1 17) that they can obtain the capacity elsewhere at a lower cost.

A related point arises from the Report's statement (at p. 29) that Dr. Timm agrees with "the fundamental distinc -

1 tion" between the' rate case (Consumers' system only)-and this y proceedingz (" total energy output" of N1dland) . What Dr. Timm-L actually_ said (Tr. -6007)L is :

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, "My testimony is that. if-we are to look at the region,.then we ought'to do_-it properly; 'and 'the approach that :has been used in this proceeding,-cs I stated.in my. cestimony, has not done that _ properly.

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. -..; For exampic, you don.'t in my~ opinion,

' include: sales to an: entity withouts looking ats.that ; entity 's ; forecas t . YouLdon't-include

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just:the' increase of power cost::to you when .

oyou purchase.-from, for-~ example, Detroit Edison.

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--chases. duce-their .

system cost'.through It's;the; conceptual your-pur-

~ approach-whichi was used by. Consumers.that'I'm concerned about.-

and not-sho~ ult ~ospecifically-rishould not it-be the concept done. or: the approach, My testimony

-relates,to how it was done." [ Emphasis 'added.-]:

In~ addition, th'e.Raport incorrectly asserts.(at

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p.14) that "since the.'same random outage rates were used in (bc th' the :"as' scheduled" and thei " suspension"] case, the effect .of' using a- different set of outage rates in -calculating'-

delay costs would" essentially cancel out." That betrays at

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best a limited understanding of Consumers ' cost production. -

an'alysi's . :For example *, if Consumers ' coal plarits were t'o have a 507. availability instead of '(for ' illustrative purposes) a

-1007, availability, then many of the coal plants would be' loade'd-to capacity 'fahether; Midland is delayed or not, . so that they_

LwouldEoperate the'same:in.bothL the "as scheduled" and:the

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"su'spension" cases. iBut if theisame' plants had a 1007. availa-bility,,then manylof-them would:be backed off if Midland'came:

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.on.lineias. scheduled but:would be' run (at a significantly (higher? c~apacityf factor) )if Midland .were delayed . . Thus a l difference ~in? forced outage rates can significantly affect

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fdelay] costs,ieven/though the'same rates are us'ed in,the "as 1

. scheduled";and?" suspension",casesc

. Similar / difficulties ; appear tin ; the Report 's mini- '

- mizingfof ' discrepancies jin --~other ' areas . For example,.the s

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' Report's tabulation ~ of rate case coal costs (at p . 9) reveals the. interesting' fact that four of the seven 1981 figures.given are either lower than or within 3% of'the $2.11 figure use'd.

by Dr. Timm in . calculating Midland Intervenors Exhibit 46R, and that iall!of the ' figures are well within the 30%' range.of Dr. - Timm's -figure . for which Exhibit 46R results in the conclu-sion that Intervenors' suggested alternatives to Midland are:

cheaper than(Midland. TSee Timm Rebuttal Affidavit, 11 32,<35.

And .the Report's treatment' of the significant differences in Consumers scheduled maintenance projections between the rate-case and this' proceeding (Report, pp. 15-16) overlooks the

. fact that in every instance, the filings in this proceeding either' shift increased maintenance from'1984 to the 1981~-83 period or increase the maintenance'. outright during that perio'd.

That, of course,; increases delay. costs by adding to Consumers '

'1981-83 load.. The Report admits that those load additions, used by Consumers .in this ' proceeding, are incorrect.

. CONCLUSION Given the multiple and serious errors in tlie Feld/

Gundersen Report,- its failure to . conduct an ' independent analysis (as opposed to uncritical. acceptance of Consumers' explanations and 'e::cuses) , and the' large number of significant questions it

- leavesi unanswered /(e_.g,. , f why--and indeed. whether- , Consumers claboriously used multiple computer runs: and . programs when only t one wouldisufficelif ' accurately handled), th'e' Report is in no way anladequate discussion'of:the serious discrepancies between q e .

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. .- a Consumers' filings in the rate case and this proceeding.

Rather, the' Report serves to' underscore the' unexplainable nature of those 'iscrepancies, d the weakness. of Consumers '

data-generating processes,.and the unfortunate extent'to which the Staff has acted as an' advocate for Consumers

- rather than an impartial.and independent investigative .

-crm of the - Commission.

Respectfully submitted, One of the Attorneys for Intervenors other: than Dow Chemical Company i

- Myron M. Cherry Peter A. Flynn One' IBM' Plaza Suite 4501 '

Chicago , -' Illinois '60611

.(312).565-1177- ,

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