ML19351F109
| ML19351F109 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 11/10/1980 |
| From: | Curtis C FEDERAL ENERGY REGULATORY COMMISSION |
| To: | Ahearne J NRC COMMISSION (OCM) |
| References | |
| NUDOCS 8012290513 | |
| Download: ML19351F109 (2) | |
Text
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s FECERAL ENERGY REGULArCRY CCMMISSICN WAsMINGTCfd. D. C. 2o42s s'
o88'CE OF TME CH AI Ahe AN NOV 10 190 h
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Honorable John Ahearne C '."..
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Dear Mr. Chair =an:
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In response to your request, the FERC staff has evaluated the current and near-ter:n, financial condition of Metropolitan Edison Co=pany (Met Ed) as it relates to Met Ed's ability to fund the clean up costs resulting from the nuclear accident at Three Mile Island (TMI).
A staff group has met twice with officials of General Public Utilities Corporation (GPU), the parent holding company, and once with the staff of the Pennsylvania Public Utilities Co= mission (PaPUC) in Harrisburg.
After reviewing a consider-I able amount of material, including financial statements, rata d
opinions, and management ecusultant studies, the staff has A
concluded that Met Ed is not now in a position to meet the TMI-2 clean up' costs.
Furthermore, it is questionable whether the e
Co=pany will be able to meet those costs in the foreseeable future.
The basic facts and findings supporting this position 9
are discussed below.
As things stand now, Met Ed is losing money (this is a rather unique situation for a regulated public utility).
The
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Company is unable to issue bonds or preferred stock (because of legal prohibitions in its indenture and corporate charter) and l
CPU is, f or all practical purposes, unable to sell cot:=en stock, l
thereby precluding any meaningful capital contributions.
In j
addition, the Company's short term borrowings are at or near the l
li=1ts of its available line of credit.
Met Ed's most recent projections (unaudited) show the Company moving into a negative H
cash flow position (technical insolvency) by May 1981.
These d
projections assume, among other things, the continued unavail-
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ability of IMI-1, the absence of any further rate relf.ef, and t
some additional. cost cutting measures.
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Met Ed is now before the PaPUC requesting a $76.5 million rate increase.
A decision is no:. expected until next spring.
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The FERC staff believes that it is reasonable to expect that sOf V5 fly C
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enough rate relief will be granted to enable the Co=pany to E
escape insolvency, at least over the short-term, although this is by no means certain.
Other possible cost cutting and
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cash raising measures still available to the Company could also
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postpone its financial crisis.
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Going beyond the short-term, the restoration to service f5 of TMI-1 seems to be a critical variable affecting the long run b;.
sustainability of Met Ed's financial position.
However, even
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- a. restart of TMI-1 does not necessarily resolve the issue of 4
clean up costs.
An important reason for this is that the PaPUC f
appears adamant that Pennsylvania ratepayers should not be i
required to shoulder the burden of any clean-up costs.
This 3
attitude has been clearly evident in its several rate orders H
since the TMI accident.
If this stance is maintained, it 5
4 is hard to see how Met Ed could possibly meet the clean up M
costs associated with TMI-2 over any reasonabis timetable.
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- 27 If we can be of further help to you in assessing the
[5 financial condition of Metropolitan Edison Company, please let me know.
Sincerely, G(a /f.
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?5 Charles 3. Curtis, Chairman E
Federal Energy. Regulatory Commission If w
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