ML19344A570

Safety Evaluation Supporting Amend 2 to CPPR-97 & CPPR-98

ML19344A570
Person / Time
Site:	San Onofre
Issue date:	08/05/1980
From:	Schwencer A Office of Nuclear Reactor Regulation
To:
Shared Package
ML19344A557	List: ML19344A556 ML19344A559 ML19344A561 ML19344A562 ML19344A567 ML19344A569 ML19344A570 ML19344A577 ML19344A581
References
NUDOCS 8008210165
Download: ML19344A570 (9)

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SAFETY EVALUATION SUPPORTING AMENDMENT NO. 2 TO CPPR-97 AND CPPR-98

'A.

INTRODUCTION On October 18, 1973, Construction Permits CPPR-97 and CPPR-98 were issued to Southern California Edison Company and San Diego Gas and llectric Company (the permitees) for the San Onofre Nuclear Generating Station, Units 2 and 3 (the facility). Amendment 1 to these constructica permits was issued on August 15, 1974 to add antitrust conditions to the permits.

By letter dated July 17 1974, the permitees and the City of Anaheim, 3

California and the City of h ierside, California,(the cities) submitted an " Application for Permission to Transfer an Ownership Interest to the Cities of Anaheim and Riverside, California, and for Amendment to Con-struction Permits Nos. CPPR-97 and CPPR-98".

The application requested the following:

1.

That Southern California Ediso, Company (Edison) be granted peraission to transfer to the City of Anaheim an undivided 1.66 per-cent co-tenancy ownership interest in San Onofre Nuclear Generating Station, Units 2 and 3 including the easement appurtenant thereto and-an undivided 1.39 percent' co-tenancy ownership interest in San Onofre Nuclear Generating Station Common Facilities including the easement appurtenant thereto.

2.

That Scuthern California Edison Company be granted permission to transfer to.the City of Riverside an undivided 1.79 percent' co-tenancy ownership interest in San Onofre Nuclear Generating Station, Units 2 and 3, including the easement appurtenant thereto and an undivided 1.49 percent co-tenancy ownership interest in the San Onofre Nuclear

~ Generating Station Common Facilities including the easement appur-tenant thereto.

3.

' That upon transfer of said ownership interest in San Onofre Nuclear Generating-Station to the City of Anaheim and/or the City of River-side and upon written notification to the Director of the Office of Nuclear Reactor Regulation by Southern California Edison Company that such a transfer of ownership interests to the City of Anaheim and/or the City of Riverside has been consummated, Paragraph 1.B

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2-of Construction Permit No. CPPR-97 and Paragraph 1.8 of Construct-tion Permit No. CPPR-98 shall be amended to provide that the City -

of Anaheim and/or the City of Riverside be named as " Applicants" therein, in addition to Southern California Edison Company and San Diego Gas and Electric Company.

After reviewing the application for permission to transfer cwnership and amend the construction permits, the NRC staff requested, by letter dated December 21, 1979, that additional information be sub-mitted relating to the financial status of the cities. By letter dated June 16,1980, the requested inf.ormation was provided.

At this time the NRC staff has completed its review of all safety-significant matters related to the issuance of construction permit amendments as requested in the July 1979 application. This Safety Evaluation is therefore issued in support of Amendment No. 2 to Construction Permits CPPR-97 and CPPR-98, admitting the City of Ana-heim, California and the City of Riverside, California as co-cwners of the San Onofre Nuclear Generating Station, Units 2 and 3.

The purpose of this Safety Evaluation is to examine the impact of the proposed change in ownership shares as described above on the conclu-sions presented in Section 9.0 of the Safety Evaluation of the San

' Onofre Nuclear Generating Station, Units 2 and 3, issued October 20, 1972. Specifically, the evaluation will address the resultant changes or lack of changes:

1.

In the design of the facility or requirements for safety-related information (Items 1 through 4).

i 2.

In the technical qualifications of the permitees to' design and j

construct the proposed facility (Item 5).

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.3.

In the financial qualifications of the permitees; i.e., the J

qualifications of the proposed new co-owners to share in the design and construction of the facility (Item 6).

4.

In the conclusions concerning the common defense and security (Item 7)...

5.

In the conclusions concerning the health and safety of the public (Item 7).

In accordance' with ALAB-459 (Marble Hill), February 16,1978 which

. held that-co-owners will be deemed to be co-applicants, this

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3-application for amendments is construed to include the City of Anaheim, California and the City of Riverside, California, each as a co-cpplicant as well as'a co-owner.

B.

EVALUATION We have reviewed the application for amendment submitted on July 17, 1979, and supplemented by letter of June 16, 1980. Our review of' safety-related matters and our conclusions concerning each item are described in the following subsections of this evaluation report.

Desion of the Facility We have reviewed the application for amendments submitted by the letter of July 17, 1979, and find no information which leads us to conclude that the requested amendments to the construction permits will result in design changes to the facility. We note the application states "... such transfer

[of partial ownership interest] does not involve any design or other physical changes to Units 2 and 3..."

We interpret that quote to be a statement of the permitees' intent regarding the requested action. We have also reviewed the various agreements between the permitees and the cities that are included in the application, and find no information which leads us to conclude that the requested' amendments to the construction permits will result in design changes to the facility.

On the basis of our review of the application for amendments including the above statement of the permitees intent, we conclude that the participation of either or both of the two proposed new co-owners in the manner described will not result in safety-significant design changes to the facility.

Further, we find that our conclusions (1) through (4) in Section 9.0 of w

the Safety Evaluation of the San Onofre Nuclear Generating Station, Units 2 and 3, will not be altered by tne issuance of the requested amendments to the construction permits.

Technical Qualifications of the Acolicants In Section 5.1 of the Safety Evaluation of the San Onofre Nuclear Generating

-Station,, Units 2 and 3, we noted "SCE [the Southern California Edison f,

- Company] will act in the capacity of project manager and will have respon-sibility for the technical adequacy of the design and construction of both units".

In Section 5.2 of the Safety Evaluation Report we stated "We have concluded that the program being developed for the selection and training

of station personnel is adequate to ensure that a qualified capable staff

will be trained for the S0-2/3 station". The application for amendments d y '

.4 states "the(contemplated transfer of partial ownership to the cities does not involve any change whatsoever in the exclusive responsibility and con-trol. to be exercised, by Edison over the physical construction, operation, s

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4-and maintenance of Units 2 and 3".

On the basis of this, we conclude that the responsible corporate body with its organizational structure and staff previously found acceptable remain unchan either or both the two proposed new co-owners. ged upon the addition of Further, we find that the technical qualifications of the applicants as a collective body remain undiminished and that our conclusion (5) in Section 9.0 of the Safety Evaluation of the San Onofre Nuclear Generation Station, Units 2 and 3, will not-be altered by the issuance of the requested amendments to the construction permits.

Financial Oualifications of the Apolicants, Introduction The financial qualifications of Southern California Edison Company and San Diego Gas and Electric Company were evaluated as described in Section 7.0 of the Safety Evaluation Report of the San Onofre Nuclear Generating Station, Units 2 and 3.

Based on our review of the application for trans-fer of ownership and amendments, we find that conclusion (6) of Section 9.0 of the above report is still valid for the above companies. The analysis below presents an evaluation of the financial qualificati.on of the cities of Anaheim and Riverside to be co-owners of the facility.

The NRC regulations relating to the determination of an applicant's financial qualifications are Section 50.33(f) and Appendix C to 10 CFR Part 50.

These regulations state that there must be reasonable assurance that an applicant can obtain the necessary funds to ' cover the estimated construction cost of a proposed nuclear power plant and its related fuel cycle costs.

This standard of reasonable assurance, however, must be viewed in light of the extended period of time from the start of construc-tion to the date of comercial operation. The dates for comercial operation of the Facility are estimated to be October 1981 for Unit 2 and January 1983 for Unit 3.

Consequently, we must make certain basic assump-tions in our financial analysis about future conditions. Our analysis of the cities' financial qualifications assumes that there will be rational regulatory policies with respect to the setting of rates and that viable capital markets will exist.

The former assumption implies that rates will be set by the appropriate regulatory agencies to at least cover the cost of service, including the cost of capital. The latter assumption implies that capital will be available at some price. Given these fundamental assumptions, our evaluation is then focused on the reasonableness of the cities' financial' plans.

Estimated Capital Cost The astimated capital cost of the Project is $48,140,000 for Anaheim and

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$51,910,000..for Riverside, excluding any nuclear fuel costs.

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5-The nuclear fuel inventory costs are tabulated below for the first cores of Units 2 and 3... Future inventory costs were calculated using an annual interest rate of 8 percent.

Anaheim Riverside Inventory Cost of January 1,1980

$177,387

$191,279 Estimated Inventory Cost to Sale 68,904 74,299 Total Estimated Inventory Cost

$246,291

$265,578 Assuming a closing of the sale of June 30, 1980, the following estimated amounts will be paid:

Anaheim Riverside

($000)

($000)

Plant Construction Costs

$31,261

$33,706 Nuclear Fuel Under Lease 2,971 3,203 Interest 4,979 5,368 Total ($000)

$39,211

$42,277 The remaining construction and nuclear fuel costs to be paid by the cities, excluding any associated interest, are $9,929,000 by Anaheim and $10,706,000 by Riverside.

Financial Ana? isis Founded in 1857, the City of Anaheim is a Municipal Corporation, incorporated pursuant to the Constitution and laws of the State of California.

It renders general municipal services, including, among others, the furnishing of electricity to all customers in the area within its geographical limits.

At the present time, except for economy energy purchases from the Nevada Power Company, the City of Anaheim purchases its entire bulk power supply from the Southern California Edison Company. Accordingly, the electric

. system operated by Anaheim is fundamentally a subtransmission and distribu-tion system.

Anaheim intends to finance its proposed 1.66 percent undivided ownership interest in the San Onofre Nuclear Generating Station, Units 2 and 3, through proceeds derived from the issuance of its Electric Revenue Bonds. Payment for interest charges-and principal associated with these bonds will be reserved through the Electric Revenue Fund of the city.

In 1975, the voters in Anaheim authorized the issuance of $150 million of Electric Revenue Bonds. At present, $1P 5 million of such bonds ' nave issued, thereby allow,~

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ing $131.5 million of. Electric Revenue Bonds to be presently issuable.

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. These bonds are presently rated AA by Standard and Poor's Corporation and Aa by Moody's Investors Services, Inc.

These signify high quality obligations by.all standards.

The city's debt restrictions based upon its coverage covenant do not restrict the issuability of the $131.5 million of authorized'but unissued Electric Revenue Bonds. This amount is well in excess of the previcusly stated costs required for Anaheim's purchase of its proposed 1.66 percent undivided ownership interest in the facility.

Section 1221 of the Charter of the City of Anaheim provides that the City Council shall establish rates, rules and regulations for the water and electric utilities. This Section further provides that the rates shall be based upon cost of service and shall be sufficient to pay:

(a) for opera-tions and maintenance of the system; (b) for payment of principal and interest on debt; (c) for creation and maintenance of financial reserves adequate to assure debt service on bonds outstanding; (d) for capital construction for new facilities and improvement of existing facilities, or maintenance of a reserve fund for that purpose. The Charter of the City of Anaheim requires rates to be established in amounts adequate to pay for both capital and operating costs of any facilities which are part of Anaheim's electric utility.. Anaheim's ownership share in the facility would be a part of the Anaheim electrical utility.

This allows for payment of the capital costs of the facility and provides a reasonable assurance that those financial obligations will be met. These provisions are consis-tent with our assumption of a rational regulatory environment. Most important, however, is that no restrictions exist on Anaheim's rate-setting authority which might interfere with its ability to satisfy these obliga-tions to pay its costs associated with San Onofre Nuclear Generating Station, Units 2 and 3.

The City 'of Riverside was founded in 1870 and incorporated in 1883 pursuant Lto the Constitution and laws of the State of California. It also renders

~ general municipal services, including, among' others, the furnishing of electricity to all customers in the area within its geographical limits.

At the present time, the City of Riverside purchases its entire bulk power supply from the Southern California Edison Company. Accordingly, the electric system operated by Riverside is also fundamentally a subtrans-n..,)

mission and distribution system.

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Riverside intends to finance its 1.79 percent proposed undivided' ownership interest in the Facility with its Electric Revenue Bonds. The source of 1

payment for interest charges and principal will be the Electric Revenue

, Fund of the city. ' There are three restrictions to its total financing v

J;$,., ; ability. Section 1306 'of the Charter of Riverside provides that after the City. Council has adapted *a Resolution authorizing the issuance of bonds,'

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such Resolution is subject to a referendum by the qualified electors of the q'

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7-city,' if a petition requesting submission of the Resolution to a vote is filed within 30 days after adoption of the Resolution. Section 1306 also provides that no bonds may be issued unless the amount of the equity of 3

' the electric utility as of the end of the fiscal year, derived from opera-

. tion of.the electric utility, equals at least 12 percent of the aggregate j

of the bonds to be issued and the amount of bonds outstanding. The third

-restriction to Riverside's. total financing ability is contained in its

' Bond Convenants on Electric Revenue Bonds heretofore issued by Riverside.

In order for Riverside to issue parity bonds (i.e., those additional bonds which are on a parity with respect to revenues as outstanding bonds), the net operating revenues of the electric utility for the last 12 months prior i

to the issuance of such additional bonds shall amount to at least 1.50 times the maximum annual debt service in any fiscal year thereafter on all i~

indebtedness to be outstanding, immediately subsequent tc the incurring of such additional indebtedness. For the purpose of calculating the net revenues of the electic utility, the net revenues of the electric utility may be increased for earnings arising from any increase in charges made for service which have become effective prior to the incurring of the additional indebtedness in an amount equal to 90 percent of the amount by which the gross revenues would have been increased if such increase in charges had been in effect during all of the 12-month period.

The net operating revenues may also be increased from revenue-producing additions and improve-ments to the electric system equal to 90 percent of the amount estimated to i

be produced by such additions and improvements for the first 36-month period in which such addition or improvement was in service. The effect of this coverage covenant upon the ability of Riverside to issue additional Electric Revenue Bonds is to prohibit Riverside from issuing Electric Revenue-Bonds.in excess of the sum of $130,0C0,000, if such Electric

. Revenue Bonds were to be issued as of February 1,1980. This amount is well in excess of the previously stated costs required for Riverside's purchase of its proposed 1.79 percent undivided ownership interest in the facility.3 The outstanding Electric Revenue Bonds of the City of Riverside are presently rated AA by Standard and Poor's Corporation and Aa by Moody's Investors Services, Inc. These signify high quality obligations by all standards.

Section 1302(e) of the Charter of the City of Riverside provides that the Public Utilities Board of the City of Riverside has the power to establish rates for the electric utility owned and operated by the city subject to approval of the City Council. Section 1304 of the Charter of the City of Riverside provides that the revenues of the electrical utility shall be kept separate and apart from all other monies of the city in the appropriate revenue fund and shall be used for the purposes of paying operating and maintenance expenses of the utility, for the payment of principal and interest on. revenue bonds issued by the City of Riverside to finance e

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8-additions to its electric utility and for capital expenditures of the electric utility. The Public Utilities Board thus is empowered to set electric rates to recover capital and operating costs in its electric rates sufficient to pay for its obligations incurred in acquisition of its ownership interest in the facility. These provisions are consistent with our assumption of a rational regulatory environment. Most important, however, is that no restriction exists on Riverside's ability to obtain sufficient funds to acquire its proposed 1.79 percent ownership interest in the facility.

Financial Conclusion Based upon the above analysis, we conclude that the Cities of the Anaheim and Riverside, California, have demonstrated a reasonable assurance that the necessary funds can be obtained to finance their respective 1.66 and 1.79 percent preposed ownership interests in the San Onofre Nuclear Generat-ing Station, Units 2 and 3.

In making this conclusion, we have determined that Anaheim and Riverside are financially qualified to participate in the design, construction, and ownership of the facility to the extent of their percentage of participation, as set forth abo"e. This conclusion is based upon our finding that the two cities' propose. issuance of Electric Revenue Bonds represent a reasonable method of financing their proposed partial ownership of the facility. Furthermore, Anaheim and Riverside have the authority to charge rates for electricity to fulfill the terms of the agreement for the proposed transfer of ownership interest.

As a condition to this amendment, the permitees are required to submit copies of the purchase and ownership agrcement for the San Onofre Nuclear Generating Station, Units 2 and 3, when it is executed.

Insummary,ourconclusion(6)inSection9.0oftheSafety"Evaluationof the San Onofre Nuclear Generating Station, Units 2 and 3 will not be l

.a tered by the issuance of the requested amendments to Construction Permits CPPR-97 and CPPR-98..

e.

Comon Defense and Security The application for amendments states that neither the City of Anaheim.

California nor the City of Riverside, California, is owned, controlled or dominated by an alien, a foreign corporation or a foreign government.

In the application' for amendments the cities each agree that it will not permit any individual to have access to Restricted Data until the NRC has determined that such access will not. endanger the common defense and security. ' On the basis of the above statement 'and agreement, we conclude

that the issuance of thy requested amendments to the construction permits m

adding either~or both of the above utilities as co-applicants will not be

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inimical,to the comon defense and security.

Furth' r, we fitnd that our e

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conclusion (7) regarding common defense and security in Section 9.0 of the Safety Evaluation of the San Onofre Nuclear Generating Station, Units 2 and 3 will not be altered by the issuance of the requested amendments to the construction permits.

C.

SUMMARY

OF THE SAFETY EVALUATION, We have examined the impact on safety considerations of amending Construction Permits CPPR-97 and CPPR-98 to add the City of Anaheim, California and the City of Riverside, California as co-applicants and co-owners of undivided shares in the San Onofre Nuclear Generating Station, Units 2 and 3.

We have concluded that, in accordance with Section 50.35 of 10 CFR Part 50 and Section 2.104 of 10 CFR Part 2:

1.

The requested amendments will not result in safety significant design changes to the facility, 2.

The technical qualifications of the permitees will not be oiminished, 3.

The two new proposed co-permitees are financially qualified to participate as described in the design and construction of the facility; and 4.

The requested amendments will not endanger the common defense and security.

On the basis of ~the above conclusions, we find that the issuance of the requested amendments adding the City of Anaheim, California and the City of Riverside, California as co-permitees will not be inimical to the health and safety of the' public, and that our conclusion (7) regarding this matter in Section 9.0 of the Safety Evaluation of the San Onofre Nuclear Generating Station, Units 2 and 3 will remain unaltered. Further, we find that the requested amendments do not involve a significant hazards consideration because this action will not involve a significant increase in the probability or consequences of an accident, and this action will not involve a significant decrease in safety margin.

'a jf/4 WJ Q A. Schwencer, Acting Chief Licensing Branch No. 3 t

Division of Licensing Dated: August 5,1980

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