ML20003B546
| ML20003B546 | |
| Person / Time | |
|---|---|
| Site: | Three Mile Island  |
| Issue date: | 01/07/1981 |
| From: | PENNSYLVANIA, COMMONWEALTH OF |
| To: | |
| Shared Package | |
| ML20003B456 | List: |
| References | |
| NUDOCS 8102120385 | |
| Download: ML20003B546 (98) | |
Text
a e 1070 COMMONWEALTl! OF PENNSYLVANIA f) a 1
2f PUBLIC UTILITY COMMISSION 3 ------------------------x I
l 4j Pennsylvania Public Utility Commission j versus Metropolitan Edison Company and
- Docket Nos.
5 Pennsylvania Electric Company, Respondents. : I-79030320 6 ------------------------x 7 Operating agreement among Jersey Central :
Power and Light Company, Metropolitan Edison : G-80060098 8 Company, Pennsylvania Electric Company and :
GPU Nuclear Corporation. :
9 :
_ - - - -----------x 10 :
Affiliated interest agreement between :
11 Metropolitan Edison Company and Pennsylvania : G-80070101
' Electric Company, relating to the proposed :
12 combined management of the two companies. :
s :
13 -------------------- ---x 14 Petition of JARI, Incorporated, et al., for :
an injuction to enjoin Pennsylvania Electric : P-80100242 15 Company and Metropolitan Edison Company, and :
for hearings. :
16 :
-------- ----x II Pages 1070 through 1168.
t I8 Hearing Room 3 l
North Office Building f 19 Harrisburg, Pennsylvania 20 Wednesday, January 7, 1981 21 Met, pursuant to adjournment .t 10:00 a.m.
22 BEFORE: ,
1 l
23 EDWARD CASEY, Administrative Law Judge f 24 25 8102120755 j COMMONWEALTH REPORTING COMPANY (717' 761 7150
I 1070-A 1 APPEARANCES: !
2 SAMUEL B. RUSSELL, Esquire ALAN M. SELTZFR, Esquire 3 Ryan, Russell and McConaghy P. O. Box 699 ;
4, Reading, Pennsylvania 19603 j (For Met-Ed and Penelec) ;
DENNIS S. SHILOBOD, Esquire 6 I Strassburger, McKenna, Messer, Shilobod and Gutnick 7 3101 Grant Building Pittsburgh, Pennsylvania 15219 8 (For JARI, Incorporated) l 9 LEE E. MORRISON, Esquire P. O. Box 3265, NOB 10 Harrisburg, Pennsylvania 17120 (For PUC Administrative Staff)
STEVEN A. McCLAREN, Esquire 12 Deputy Chief Counsel i O
13 PUC Trial Staff P. O. Box 3265, NOB (For PCC Trial-Staff).
14 IRA H. JOLLES, Esquire 15 Berlack, Israels and Liberman .
26 Broadway 16 New York, New York 10004 (For GPU Corporation) 18 19 20 21 1 22 ,
23
- 24 25 1 1
I COMMONWEALTH REPORTING COMPANY t7175 761 7150 i
1071
- 1 i
C O _N T _E _N T _S DIRECT CROSS REDIRECT RECROSS 25 WITNESSES
\\
1078 1107 1146 1148 3 !Ii; Frank R. Budetti l (Recalled) 4 l
5' 6i l
I i
8 9 _E _X _H _I _B _I _T _S ;
10 FOR IDENTIFICATION IN EVIDENCE l NUMBER 11 JARI's 12 JARI Sta tement No. A-1 1078 --
I3 1162 1163
,JARI Exhibit No. 6 1
14 l
15 I l
I i 16 ,'
li IS l
l 19 ',l i
20 21 22 ,
23 l,
25 i
l COMMONWE ALTH REPORTING COMP ANY (717 761 7150 l
1072!
o V 1 P E E C.E E E 1 E E E 2 JUDGE CASEY: At this time we will call the hearing 3 to order.
4 This particular hearing and tomorrow's hearing is !
i 1
5 being held pursuant to notice sent by the Commission to all 6
parties of record on December 19, 1980, informingthemthatwej I would be meeting on January 7th and 8th, 1981, at 10:00 a.m. l 8 According to my calculation, thisisthesixthevidenl- !
9 tiary hearing in the series of hearings that we've been hold-10 ing. I 11 Now, at the time of the previous hearing, the last 12 hearing in the case, which was December 19, 1980, I published l_
I l Os 13 a bench decision and order pertaining to the extended schedule i 14 in the case, and it's been called to my attention that there's; i
15 a blaring error in the order.
16 I think some newspaper reporter called in to inform 17 us that February 22, 1981, apparently falls on a Sunday.
18 IntheorderImayhavesaid,whenIwasdictatingit!
i l 19 to the Court Reporter, February 27th, but what I intended to 20 say, on the first page of the December 19th transcript -- and 21 this is down at the very bottom of the page, 995-B, where I was 22 talking about continuing the deadline for completion of the 23 case for approximately 30 days from January 24, 1981, or at
! ( 24 least until the Commission's public meeting to be held on 25 Thursday, February 22, 1981 -- that's in error; that should t
COMMONWEALTH REPORTING COMPANY (7176 761 7150 !
_ _ - . _ _ = _ , . _ _ _ _ _ _ _ _ . __
.- . ~ _ _. - --
t 8 1073 1 have been February 26, 1981. q g 2 So I don't think that's a critical error, but 'm 3 amending it as of this time. I think the Public Information 4 Office of the Comnission has been so notified.
5 That's why I have had no feedback at all from the 6 Commission as to whether our requested extension has in fact 7 been approved.
8 The Commission did not meet during the week preceding 9 Christmas and the week between Christmas and New Years; so I'm 10 just assuming, and we will all proceed under the assumption 11 that extended 30-day period will apply.
12 I really don't see how they could turn us down, i 13 because we have to have the time which would include today's 14 hearing and tomorrow's hearing.
15 Now, at the last hearing, Mr. William Budetti, the 16 expert witness who appears on behalf of JARI, Incorporated, 17 had filed his prepared testimony and testified under preliminary 18 cross-examination by the opposing parties.
19 Since then, Mr. Budetti has filed a few pages of 20 supplemental testimony -- and I think everyone should be in 21 possession df that information.
22 .MR . SHILOBOD: Yes.
23 JUDGE CASEY: I actually two copies. Number 1 was
,5 24 the supplemental testimony which, apparently, Mr. -- I'nsorry;lll 25 I called him "Millian Budetti," ?nd it's Frank R. Budetti --
COMMONWEAL.TH REPCRTING COMPANY (717: 761 7150
1074 l- 1 Mr. Budetti, you apparently made a direct mailing to some of 2 the parties; is that correct?
3 MR. BUDETTI: Yes, sir.
4 Which is your supplenental testimony.
JUDGE CASEY:
5 MR. BUDETTI: Yes, sir.
6 JUDGE CASEY: And I have the date that it was 7
received in my office as date stamped December 29, 1980.
8 I also received the same testimony, with a cover 8
letter and some additional reference and source material 10 attached which Mr. Shilobod sent under date of January 2, 1981,l 11 and copies were actually sent to Mr. Russell, with copies for 12 myself and the various other counsel of record in this proceed-13 ing, and tha t contains the same testimony.
- I4 So do we all have the desired infommation, so that 5
Mr. Budetti can proceed this moring? ,
i 16 Mr. Russell, does this comply with your request, j I7 the reference material that Mr. Shilobod has provided?
I8 I think you asked for information --
I8 I asked him to be a little more MR. RUSSELL:
20 explicit in what he considered in the preparation of his testi-I
! 21 -
l mony.
22 'Now, I have this list and have a number of questions i 23 l with respect to it, which I'll have to direct to the witness.
/ 24 JUDGE CASEY: All right, that's satisfactory. You do 25 have the information?
COMMONWEALTH REPORTING COMPANY (7176 761 7150
Id75 1 MR. RUSSELL: I have a copy of it, yes.
2 JUDGE CASEY: All righ t. Unless there are any pre-3 liminary statements or informational matters to be raised by 4 Counsel at this time, we would recall Mr. Budetti.
6 MR. RUSSELL: I have a matter.
6 JUDGE CASEY: All right.
7 MR. RUSSELL: I don' t see Mr. Morrison here. At the 8 hearing on December 19th, he indicated that he would be here at 9 this session, and at least Mr. Wheaton would be here.
10 I'd like to see what --
11 JUDGE CASEY: Mell, Mr. Morrison was in the building 12 this morning. Apparently, he knows about the hearing and does -
13 not plan to attend.
14 It's my recollection that Wheaton, the Theodore 15 Barry and Associates member of the audit team, indicated that 16 he would be in London or Liverpool --
17 MR. RUSSELL: That was Wicker.
16 JUDGE CASEY: Oh, Micker; I'm sorry.
19 MR. RUSSELL: Harry Wheaton --
20 JUDGE CASEY: Harry Wheaton, Fa's the head of the 21 team.
22 4Hl . RUSSELL: Yes.
23 JUDGE CASEY: Perhaps you're correct. I think we'd 24 better touch base with Mr. Morrison and find out whether he 25 intends to have Wheaton here either today or tomorrow.
COMMONWEALTH REPORTING COMPANY (717 761 7150
1076 1 MR. RUSSELL: We have come here today explicitly with 2 the point of view of finishing the cross-examination of Mr.
3 Budetti and calling Mr. Wheaton as for cross, because it was 4 represen ted that at least he would be here from the TB&A team.
JUDGE CASEY: Was that your understanding, Mr.
5 6 Shilobod?
7 I'll have to go through the records and see what we 8 do have --
9 MR. SHILOBOD: Well, Mr. Russell indicated to me this 10 morning. I was a little surprised because I wasn't aware Mr.
11 Wheaton was supposed to be here.
12 My understanding is that he would have been availablei-13 had anyone wanted him. My perception was that we were supposed .
14 to let someone know if we needed him as of cross. I had no 15 idea that there was going to be cross-examination of Mr.
16 Wheaton and, as a result, I didn't even review his testimony i
17 before coming.
{
18 JUDGE CASEY: And you had no personal inclination to 19 call him, on cross?
20 MR. SHILOBOD: No.
21 l JUDGE CASEY: Well, subject to check -- it may be in i
l 22 the record, but I think we should --
23 Well, I'm not sure whether it was on MR. RUSSELL:
(')/
(,, 24 the record or off the record, but a clear representation was 25 that at least Mr. Wheaton was going to be here.
l 1
COMMONWEALTH REPORTING COMPANY (7171 761 7150 i
1077 JUDGE CASEY: Well, after Mr. Budetti testifies, do G
1 2 you still have additional witnesses for JARI?
3 MR. SHILOBOD: Mr. Russell asked for three people to 4 be called as of cross-examination -- and I've spoken with Mr.
5 Russell about this -- they will be here in the morning.
i 6 JUDGE CASEY: Tomorrow morning.
7 MR. SHILOBOD: Tomorrow morning.
8 JUDGE CASEY: Well, we could either declare a short 9 recess right away, so that we could contact Mr. Morrison.
10 Mr. McClaren, would you do that --
11 MR. McCLAREN: I'll do that.
12 JUDGE CASEY: -- get ahold of Mr. Morrison and have .
13 him come in?
14 MR. McCLAREN: Would you like me to do it at this 15 time?
16 JUDGE CASEY: I think we might as well.
17 MR. RUSSELL: I think we might as well, too.
18 JUDGE CASEY: It would make starting easier; so we'll 19 take a five-minute recess.
20 (Recess.)
21 JUDGE CASEY: Back on the record.
22 " Whereupon ,
23 FRANK R. BUDETTI
, 24 having been previously duly sworn, testified as follows:
25 JUDGE CASEY: Mr. Shilobod.
COMMONWEALTH REPORTING C.oMPANY (7171 761 7150
1078
( 1 MR. SHILODOD: If Your Honor please, I request that 2 there be marked for identification purposes as JARI Statement 3 Number A-1, the Supplementary Testimony of Frank R. Budetti, 4 which is comprised of three pages. May it be so marked?
5 JUDGE CASEY: Yes, it may be so marked for identifi-6 cation.
7 (Whereupon, the document was marked JARI Statement No. A-A 8 for identification.)
9 DIRECT EXAMINATION
,10 BY MR. SHILOBOD:
11 Q Mr. Budetti, do you have a copy of your supplemental l 4 i 12 testimony before you that has been marked as JARI Statement j-(')h b
13 Number A-l?
14 A Yes, I do.'
15 Did you prepare that document? i Q
16 A Yes, I did.
17 Are the sta ements contained therein true and Q
i 18 correct according to your personal knowledge, information and 19
, belief?.
20 A Yes, they are.
21 MR. SHILOBOD: If Your Honor please, my understanding 22 is that when we moved for the introduction of Statement A, 23 there was a request made that we refrain from that until af ter
) 24 cross-examination was completed.
25 JUDGE CASEY: That's correct. l
.I COMMONWEALTH REPORTING COMPANY (717i 761 7150 t
, 1079 i MR. SHILOBOD: In light of that, I will refrain from g 2 so moving with respect to Statement A-1.
3 I'm giving three copies of the statement to the 4 Reporter. Copies have been served on other counsel.
5 Mr. Budetti is available for cross-examination at 6 this time.
7 JUDGE CASEY: Very good.
8 Mr. Russell?
r 9 MR. RUSSELL: If Your Honor please, I have some 10 further information on cross-examination which I might get 11 into, which I would expect to get into in the event that cer-12 tain motions are not sustained, but in the interest of getting -
13 on with matters , I would like at this time to make several 14 motions to strike, with respect to Mr. Budetti's testimony.
15 JUDGE CASEY: All right, we will hear those motions 16 for the record.
17 MR. RUSSELL: All right. The motion is made to 18 strike the testimony of Budetti, in its entirety, as being 19 irrelevant and incompetent testimony.
20 In support of that motion, I point out that the 21 testimony is predicated, in its entirety, upon a legally 22 erroneous-premise which Mr. Budetti describes as a special 23 perspective -- which is not the required public interest
-! 24 standard estab]iahed by Section 2102 of the Public Utility ( )
25 Code, but, rather, a partial f ragmented viewpoint; namely, the COMMONWEALTb REPORTING COMPANY (7171 761 7150
i 1080i
() I viewpoint of Penelec, only, rather than the required standard !
)
2 of what is, in fact, in the public interest, so far as this l
3 af filiated interest contract is concerned.
4 So because of that totally erroneous legal premise, 5 which permiates the entire testimony, we move tc strike it, in j i
6 its entirely, as incompetent and irrelevant. i 7 JUDGE CASEY: Mr. Shilobod, do you want to respond i
8 to that? !
9 MR. SHILOBOD: If Your Honor please, the relevancy l.
10 l of the statement is clear on its face, certainly, dealing with 11 the issue before Your Honor, whether or not it is in the publici l
12 interest, whether or not the affiliated interest agreement x 13 should be approved.
14 With respect to competancy, I submit that Mr.
15 Budetti's statement of his qualifications speaks for itself.
16 We don't need ts ddress that in any further response to Mr.
l .
l 17 I
Russell. i 18 I submit that there is no basis for any conclusion l
19 that the.re is any error in viewing the public interest from the>
l 20 standpoint of the interests of each utility involved -- and 21 this is what we're spea', ting about here.
f 22 The mere fact that someone uses words such as f 23 "special perspective" does not change the facts of the situa-24 tion; the semantics doesn't change the substance of Mr.
l ,
- 5 i Budetti's testimony.
4 COMMoNWCALTH REPORTING COMPANY G 178 '/617150 1.
1081 1 MR. McCLAREN: Judge Casey, if I might add an addi- ggg 2 tional comment with respect to the Trial Staff, it appears to 3 us that the basis for this motion to strike -- that is that 1
4 there's some improper legal standard or premise raised here --
5 simply focuses on one of the issues before Your Honor, and 6 that, in fact, is one of the things being contested among the 7 parties; therefore, it does not constitute a proper basis to 8 strike the tes timony .
9 JUDGE CASEY: I think there's something in my file 10 that may have a direct bearing on the motion.
11 "Special perspectis e," you say, is a term of art used 12 in the statute?
13 MR. RUSSELL: No, no. That's Mr. Budetti's charac-14 terization --
15 JUDGE CASEY: Oh, you're characterizing --
16 MR. RUSSELL: -- his own testimony.
17 JUDGE CASEY: -- his own testimony?
18 MR. RUSSELL: Yes.
19 JUDGE CASEY: Well, Mr. Budetti, you .must remember, 20 is a so-called expert witness. He is not a party with an 21 interest of 'his own to protect in this matter. He has been 22 called by'the JARI interests and the industrial concerns to give 1
23 an expert opinion as a management consultant -- at this time 24 a former employee of Touche Ross, which we all know performs lh 25 similar work as Theodore Barry & Associates -- to give another COMMONWEALTH REPORTING COMPANY 1717: 761 7150
1082 i
1 opinion of the proposed management combination and the nuclear i
2 corporaticn, and how it might impact adversely on not only the 3 customers, the ratepayers, of Pennsylvania Electric Company, 4 but on the futurs conduct of business and operations at that 5 utility itself. j i
6 Now, I don't see how you can say that because Penelecj l
7 is simply one company in the GPU system, along with Jersey 1 6
8 CentralandMetropolitanEdisonCompanyandtheparentholdingf 9 corporation, General Public Utilities Corporation, that a ,
t 10 change in operations and management direction of a single com-
! 11 pany is not either for or against the 'public interest, that its I
<- 12 no splintered or remote that it would not have an impact on the N,,)g 13 public interest.
14 As I recalI -- and I should have an excerpt from an 15 opinion -- the test with respect to management combinations and' 16 mergers, and so forth, has changed substantially under the law 17 since, I think, the Northern Gas Decision, where at one time 18 the party proposing the change or the merger simply had to 19 prove that there would not be any adverse impact on the public l
20 in terest , either ratepayers, stockholders or the company.
21 That test has changed substantially. I think the ,
t 22 burden of proof on the party proposing the agreement is to l
23 show that the changes will result in a positive benefit to.the .
bli ss 24 . .
public interest.
25 I think the testimony from the corporate of ficers, COMMONWEALTH REPORTING COMPANY (717 761 7150 ,
l .
1083 i i
I ;
I 1 who may in fact be experts in this area, both the corporate i
2 officers of GPU, Mr. Verrochi and others who may qualify as t l
3 experts by virtue of their experience, but I think they are i 4 identi fied with the case as a party. :
5 The other side could challenge their so-called i I
l 6 expert testimony about the potential benefits as being biased 7 or self-serving declarations.
t 8 I think, in order to serve the public interest in {'
9 connection with this investigation in this proceeding, we'd {
t to have to have another opinion. ,
11 Your side of the case did not call Theodore Barry & ;
i 12 Associates. The Commission Administrative Staff did present 13 their testimony.
~
14 So we have their opinion, in report form, and that l 15 report was ordered by the Commission; however, the report was 16 done with the cooperation of the officials of the various com ,
17 panies and, with very few quaJ iiications, it supports almost ,
18 the entire proposed move, Fath the affiliated interest agree-19 ment, as well as the reorganization provisions within the two 20 utilities.
l 21 S6, at this time, unless you wish to take an _ppeal,,
l 22 I would deny that motion. {
i 23 Now, you apparently have a right to an interlocutory l
24 appeal, but I -- gg
~~
MR. RUSSELL: He have no desire to get into that, l
COMMONWEALTH REPORTING COMPANY (7171 761 7150
1 . .
! I 1084
( 1 Your Honor. {
i 2 JUDGE CASEY: All right.-
l 3 MR. RUSSELL: We just want to note this for the i
4 record, t 5 JUDGE CASEY: All right.
6 MR. RUSSELL: In light of the ruling with respect to 7 the testimony in its entirety, we have some specific motions 8 !
with respect to specific portions of the testimony. i 9 I refer to Page 7 of Mr. Budetti's testimony which is' 10 JARI Sta tement A, and move to strike the first numbered conclu '
11 sien appearing on Lines 8 through 12 on that page.
t 12 The motion to strike, Your Honor, is on the proposi-g).
13 tion that that conclusion represents a conclusion of law which 14 this witness is incompetent to address. l 15 JUDGE CASEY: Mr. Shilobod?
16 MR. S!fILOBOD: If Your Honor please, the contract 17 for Theodore Barry to perform the management audit -- which 18 we're going to move for introduction into evidence later on --
19 specifically requires them to perform this management audit 20 according to the standards in the trade with respect to similar{ ,
21
- audits. fr 22 .Now, this is an issue in and of itself with which l i
Mr. Budetti has dealt with to some degree. It is an issue
('Y' A/
24 before Your Honor, whether or not that standard and that con-i
- 5 tractual obligation was met.
COMMONWEALTH REPORTING COMPANY 47171 761 7150
1085 l l
i JUDGE CASEY: Well, I think what Point Number One 1
ll I
2 says -- a nd I think it's emphasized more in JARI Statement 3 A-1, that is the supplemental testimony of Mr. Budetti -- is 4 that in his analysis of the Theodore Barry & Associates report,. I l 5 it appears to be devoid of any findings or conclusions as to 6 how the proposed management combination would benefit Penelec, 7 in particular, as a company.
8 Now, that perhaps is a conclusion of law stated in 9 its final form, but I believe something I saw in his supple-10 mental testimony -- and maybe it's on a dif ferent point -- it'd i 11 in the 'first answer starting on Line 7 of Statement A "The 12 majority of the TB&A analysis and report in the areas called ..
13 nuclear, financial and energy appear to be supported by O
14 independent analysis'. However, the financial analysis in the ,
15 management organizc. tion area is non-existent " -- that's based r IG on his review. l 17 Now, that's a slightly different observation than 18 that contained in Paragraph A, Sub 1, which says there's no 1
19 reference as to whether the combination will be in the best I
20 interest of the public of Penelec. !
l 21 Now, I don't know what the public of Penelec is, 22 unless he's using the "public of Penelec" in a broad generic ;
f 23 sense, meaning the ratepayers or the customers of Penelec; tha e 24 you would have to ask him. llh 25 Perhaps the management audit of Theodore Barry &
i COMMONWEALTH REPORTING COMPANY (7171 761 7150 :
1086
() I Associates did not intend to point out what benefits would 2 accrue to any single company within the GPU system; maybe that 3 was not the intent of the report. It is an overview of how 4 the management combination would benefit the entire system --
5 I'm just speculating, but I think there's enough of a connec-6 tion.
7 It may be a legal conclusion, but he's stating what 8 he perceives to be a fact, that that TB&A report does not con-9 tain any specific language or discorrse about how this manage-10 ment combination would benefit the public of Penelec.
11 What did you intend to say,14r. Bugetti, in that?
l 12 Who is the "public of Penelec?"
(_-
13 THE WITNESS: It's the ratepayers, the customers in 14 the area.
15 MR. RUSSELL: Well, if it will simplify matters, I ,
16 have several objections or motions to strike, and I have the same motion to make, then, with respect to the first sentence l t
17 18 in Paragraph 2 on Page 7 of Statement A, that it, likewise, i l
i 19 !
represents a conclusion of law.
20 Perhaps you could rule on both of them together.
21 They involve the same basic concept.
22 JUDGE CASEY: That I find a great deal more confus- l 23 ing, in Number 2, "The plans submitted by Penelec."
/ 24 7.m not aware that any plans prepared or offered by 25 Penelec, as an individual member company, are in evidence.
I L
COMMONWEALTH REPORTING COMPANY 1717 761 7150
1087 1
Who are the proponents of the affiliated interest 2 agreements, either both utilities or the parent, or all three, 3 in combination?
4 So I can' t really understand what you mean by "The 5 plans submitted by Penelec."
6 THE WITNESS: Your Honor, the material I received 7 from the company, the majority of it was written by Penelec 8 executives; se my assumption was that they were the ones who 9 did that.
10 There was a emo from Mr. Verrochi. I assumed ~that i
11 he was the President of Penelec and, therefore, it was Penelec 12 material. _
13 It seemed to emanate out of the Penelec group of 14 management, if you will. It may be more than that; I don't 15 know.
16 JUDGE CASEY: Mr. Verrochi is the cur.ent President 17 of Penelec, as we all know, and perhaps his reports were so 18 identified. He is, in fact, the proposed President of the new 19 management combination team, and perhaps this information was 20 submitted either in that potential capacity or a member of the 21 GPU management structure.
22 .MR. SHILOBOD: If Your Honor please, this comes back 23 to the issue we raised at the very outset about confusion as to 24 who is who in these proceedings, and our raising of issues of 25 , conflicts of interest.
COMMONWEALTH REPORTING COMPANY 17175 761 7150
1088 i i
s i
/~T 1 I indicated that I wasn't maxing a grer.c deal of 4
(_j 2 fuss over that, however it was a problem that was going to i
3 follow us throughout this case, as to where does the respon- ]
4 sibility of an officer from Penelec lie; does it lie with that ; '
i 5 particular company or does it lie with an affiliated interest.
I 6 JUDGE CASEY: Right. I don't see any great harm in l
7 those statements. They are summary statements.
8 I'll deny the motion as to Subparagraphs 1 and 2. I, 9 do think that these are appropriate matters for legal argument,;
10 where you can certainly attack Mr. Budetti's statements as 11 being conclusory and groundless or confusing because they are 12 focusing on Penelec improperly when we're dealing with the two '.,
l 13 companies who have entered into affiliated interest a.greementsi 14 and the parent.
15 Beyond that, I will permit it to stay, E.nd to the .
16 extent that he may have supported them in the remaining narra-i 17 tive portions of his prepared testimony.
18 MR. RUSSELL: All ri_-c. I turn to Page 9 of State-l 19 ment A, and I move to strike numbered Paragraph 9 as consti- ;
20 tuting sheer speculati6n, totally unsupported by any evidence 21 in this case submitted by any party in this case. It'sspeculaf-I 22 tion anc it's also totally irrelevant to this proceeding, Your j 23 Honor. ;
(p 24 MR. SHILOBOD: If Your Honor please, this goes to the'.
25 heart of the issue.
, i COMMONWEALTH REPORTING COMPANY (7176 761-7150 f
1089 i
1 This man is a management consultant. He's done a !
2 considerable number of similar studies for other companies.
3 This is the issue that the whole management combina-4 tion agreement revolves around.
5 MR. RUSSELL: Mr. Budetti is in no position to I
6 speculate as to what Penelee would do as an alleged stand-7 alone conpany.
8 JUDGE CASEY: Well, I agree, that's true; he doesn't 9 know exactly. I i
10 He's saying, though, as a management consultant, thay 11 if he were advising a company, or in his experience of company 12 management were to act in that fashion, it would be contrary i-I 13 to their best interest. lh 14 There is an element of speculation, I agree, but it 15 goes to the basic issue as to whether if this was an indepen- t 16 dent company -- which is not; I mean, we can't read things 17 into the record that aren't there, but we know that they are i
18 controlled to a large extent by the holding company, and l l
19 absent the initiative supplied by GPU, would they embark on l 6
20 j this course of action.
i 21 7thinkthat'sthebasicissuebeforetheCommission,l 22 really. -
23 It also applies to Met-Ed, except Met-Ed, as we i 24 k now , is in a dif ferent posture and in dif ferent financial j
O 25 scrapes than Penelec.
COMMONWEALTH REPORTING COMPANY (717e 761-7150
1090 1 So I'll deny that. I realize this is opinion testi-2 mony. That might be said of practically all the evidence in 3 the record to this point.
4 We are not dealing with a large mass of hard factual 5 information which has already occurred, except the accident at 6 Three Mile Island -- which is beneath the surface.
7 3R. RUSSELL: All right. I turn to Page 13, the t
a bottom ,f Page 13, and the top of Page 14, and move to strike i
9 numbered Paragraph 5, on the basis that this is sheer specula-10 tion.
11 Mr. Budetti is no expert in bankkruptcy; he is in 12 no position to predict what's going to happen in the event of O. 13 bankkruptcy, about bankkruptcy constraints, or otherwise.
14 Plus the statement is absolutely unsupported by any j l
C 15 evidence in this rccord that Penelec will become a S1.3 billioni 16 division of Met-Ed.
17 It's speculation and it's totally inproper testimony.
18 JUDGE CASEY: I'll agree to have that stricken.
19 ,
MR. SHILOBOD: All of it, Your Honor, or which --
20 I'm not sure, because as I read this, there's a number of 21 things there -- it says, "In the event of bankkrupcty, which 22 act may be outside the control of either the PUC or the com-23 pany."
24
()) Now, that's certainly a fact that has been established i
25 in some degree on the record, where there was inquiries with l
. 1 COMMONWEALTH REPORTING COMPANY (7176 761 7150 l l
._ _ _ _ _______ J
i e 1091 1 respect to those issues with Mr. Diekamp. .
2 JUDGE CASEY: Right.
3 MR. SHILOBOD: GPU will lead a consolidated manage-4 ment with Met-Ed.
5 The whole plan now is to put into effect this con-6 solidated management now, and no plans to back off of that at 7 some later date.
8 So that certainly is factually established under the 9 record. ]
10 JUDGE CASEY: But there are some inaccuracies in 11 those characterizations. I l
12 MR. RUSSELL: Yes.
13 JUDGE CASEY: The consolidated management with 14 Me t-Ed , you know, it ' presumes that Met-Ed is going to be a 15 surviving company if these affiliated interest agreements are, ,
l 16 in fact, going to be approved.
17 The company's position -- and when I say " company,"
18 I'm talking about GPU -- is that there will be a single com-l 19 bined management group; there will be a single board of direc-20 tors running both companies; there will not, in fact, be a ,
i 21 financial mdrger, because no assets will be combined or !
22 exchanged.
23 The impact or the thrust of the statement, there may !
24 be some merit or some truth in it, but the way it's presented, i
25 that Penclec is not going to be a division, we'll have two I
COMMONWEALTH REPORTING COMPANY s717' 761 7100 l
1092
/"T 1 companies, apparently, Penelec East and Penelec West, and V
2 whether that is practicable and feasible is the basic issue 3 before the Commission.
4 I think.the way it's presented, it might be deceiv-
--, 5 ing to --
6 MR. SHILOBOD: Well, the issue has been whether or 7 not there's a de facto merger. If there is a de facto merger, 8 then I submit that the argument that Met-Ed and Penelec as 9 divisions of the same company certainly would have some factual 10 basis.
11 There's been considerable testimony that if there is 12 a bankkruptcy, that management is going to have to handle 13 problemsinboth--wedon'twanttousetheword" divisions"-l 14 compa nies .
15 The choice of the 'mrd " division" goes toward Mr. '
I i
16 Budetti's view that this is opening a Pandora box when you i
)
17 create this management combination, because that may very well !
i 18 be exactly what it is.
l l 19 I submit that that is a fr.cLual issue that is based j 20 upon his view of the situation, not as an attorney but as a !
21 management consultant in the field. ,
22 -He is goalified to --
23 JUDGE CASEY: I see your point there.
, 24 I have difficulty with the language. Perhaps if it 25 was rephrased -- he's not a bankkruptcy expert, I know. Nut COMMONWEALTH REPORTING COMPANY (717 761 7150
1093 testimony has indicated that all of the common stock of the 1
l9 2 three companies are pledged as collateral security in the 3 Revolving -- what's the title?
4 MR. RUSSELL: Credit Agreement. l 5 MR. SHILOBOD: Revolving Credit Agreement. ,
JUDGE CASEY: -- Credit Agreement, and without being l 6 ,
i l 7 experts in the bankkruptcy field, I think we can all envision >
8 what the consequences would be if there was a general default i
9 in the -- ;
10 MR. SHILOBOD: Well, the --
l 11 JUDGE CASEY: Go ahead. ,
1 12 MR. SHILOBOD: The problem that you have is with the '
13 management merger, it goes beyond that. h I
14 It's one thing to lose Ehe ownership of stock in I
15 penelec. It's quite another to expose the assets of Penelec l 16 through the claims of creditors. That's part of the problem ,
17 that has been brought up in this issue of potential for the 18 piercing of the corporate veil. This is part of the danger !
19 involved.
20 MR. RUSSELL: There's not a scap of evidence in the i
21 case which would support any su;n proposition.
22 , MR. SHILOBOD: Well, that is in legal issue --
t 23 MR. RUSSELL: Well, it --
24 MR. SHILOBOD: -- whether or not it would achieve a 25 l piercing of the corporate veil; however, the factual issue is COMMONWEALTH REPORTING COMPANY 1717+ 7617150
1094!
() I whether or not, in someone's opinion, at least from a manage-f 1
2 ment consultant's viewpoint, that there was a merger into one 3 entity as a result of this action that is proposed to be taken. ,
t 4 I think that's something that the Commission, if it ,
. 5 closes its eyes to it, is going to be burying its head in the j i
i 6 sand.
7 MR. RUSSELL: Well, a management consultant doesn't 8 have a license to ignore the rules of evidence.
9 JUDGE CASEY: Well, we do have some evidentiary 10 problems, I think. You can make a blanket statement to the 11 ef fect that you have a de facto merger, but just to leave it at 12 that, without presenting testimony or court decisions to that _
O 13 effect, where similar things have happened in the past with j 14 creditors and others ~have been able to pierce the corporate i 15 veil, and you treat the combined as all a single entity, or !
16 single company, I think you haveto go a little further.
+
17 You can raise that in your legal argument in your 18 briefs, if you will, but I --
i 19
, MR. SHILOBOD: Well, that's further clarified in l
20 Mr. Budetti's supplemental testimony on Page 2 -- !
21 1 get to that in due time, MR. RUSSELL: We i
I on MR. SHILOBOD: -- the question and answer beginning l.
93 on Line 24 on Page 2. ,
I (y 24 The issue --
25 All right. I would like to hear the JUDGE CASEY:
COMMONWEALTH REPORTING COMPANY (717' 761 7150 f 1
10'95 testimony in cross-examination.
1, O
2 Ilow many more motions to strike do you have with 3 reference to specific --
4 MR. RUSSELL: I have about a half-dozen more.
- 5 JUDGE CASEY: All right. I have ruled on all exceptI 6 the last one which was under discussion, which appears to be i 7 Subparagraph 5 on -- is that Page 13? ;
i Bottom of Page 13, top of Page 14. !
8 MR. RUSSELL:
9 JUDGE CASEY: -- bottom of Page 13. We will reserve 10 the ruling on that until one of the rests, so that I can check 11 it.
12 MR. RUSSELL: All right. At Page 38 -- _
13 JUDGE CASEY: That's the next one after Page 13 -- h 14 MR. RUSSELL: Yes.
15 JUDGE CASEY: -- Page 30?
16 MR. RUSSELL: Right, Lines 10 through 16, inclusite.
17 Sheer and absolute speculation. It's improper testimony.
18 JUDGE CASEY: Lines -- what is it?
19 MR. RUSSELL: Starting with the question on Line 10, 20 running through the answer on Line 16.
21 JUDGE CASEY: That's his view.
22 I think we're getting into a dangerous area here.
23 As an attorney representing the other side, through cross- .
' 24 examination, you can discredit the testimony of this witness; 25 you can attack his credibility, within the realm of propriety, COMMONWEALTH REPORTING COMPANY 1717e 7617150 t
1096
() I but to strike all of his opinion testimony, or substantial 2 portions of it -- and that's what it is, opinion testimony, a based not only on his past experience and advice to cli.ents, 4 based on his observations of what's happening in this case, the 5 testinony already presented -- I think there's an element of 6 unfairness. ,
i 7 The testimony stands on its own merits; it's either 8 weak or it's strong. Through cross-examination, it can be 9 attacked in wholesale fashion.
10 I think to say it's conclusory -- well, what is 11 opinion evidence except a number of conclusions based on i .
l 12 imperical da ta of some kind.
O 13 I'll be very frank. I don't like where we're headed 14 here.
15 Now, I may quarrel with that statement as a finder 16 of fact just as much as you do, Mr. Russell, but I think,
! 17 having been qualified as an expert in this area, he has a right 18 to make these statements, whether improvident, unwise, ill-19 founded,.or what-have-you.
20 MR. SHILOBOD: If Your Honor please, there's another 21 issue of circumstantial evidence that surrounds this whole cor.-
l 22 cept of why they are doing this management combination now, 23 that has to be taken into consideration, also.
() 24 JUDGE CASEY: For instance?
25 Well, this question and answer is just MR. SHILOBOD:
i COMMONWEALTH REPORTING COMPANY 47176 761 7150
1097 I part of that.
2 JUDGE CASEY: Well, we have testimony in the 3 record -- and I recall distinctly -- I think I may have asked 4 a question or two myself along those lines when, perhaps Mr.
5 Diekamp -- or maybe it was Mr. Verocchi -- as to what were the G underlying considerations when the two Jersey companies l
7 embarked on a management company and then, some13yearslater,!
8 entered into a true merger.
9 And I think we had some early testimony from Mr.
10 Budetti that there may be some distinctions.
11 I made a statement and you corrected me, where 'I said:
12 something about Penelec's service territory being comparable .
13 to Met-Ed's, or closer in size, Met-Ed and Penelec, than Jerse 14 Central and Jersey Power and Light were.
15 I understand one company in Jersey was a relatively 16 small operation at the time of the management combination, and 17 it may not have made sense to GPU officials to continue that is company in existence, so they started out gradually with the 19 manageme,nt combination and then moved to the merger 13 years 20 later.
21 You corrected me and you said Penelec's service i
22 territory is three times as large as that of Met-Ed's, or a .
23 remark to that effect. ,
24 So I think we have a basic strain or background of 25 this type of testimony which, in Mr. Budetti's mind, apparently COMMONWEALTH REPORTING COMPANY (717' 761 7150
1098 '
() : supports a statement of that nature.
2 MR. McCLAREN: Judge Casey, I might add, as well, 3 that I think both of these motions to strike illustrates
! 4 expert testimony of this type requires some judgment and inter-d pretation in weighing it.
- 6 In the first instance, Mr. Budetti may mention l i
7 bankkruptcy law, but he's obviously not holding himself out as ;
1 !
l 8 an expert in bankkruptcy law or in making a legal judgment.
i 9 Now, here we are expressing an opinion why it's not to clea r why the ' merger wasn' t undertaken previously.
11 From my perspective, I don't think that's, of course, 12 an implication of any wrongdoing or any questioning of motives,
( 13 but simply that this man is unable to state why. -
14 In each case it requires some interpretation of what 15 it is he is in fact reporting.
16 MR. RUSSELL: Well, if he's unable to state why, 17 why is it proper for him to have testinony as to why the events la may or may not have happened?
19 That's the point of'the whole motion to strike; it is' 20 totally speculative.
21 MR. SHILOBOD: Well, it's not speculative in the
' i 22 sense that he said they had experience in merging at that time I i
23 and the didn't merge the Pennsylvania corporations. That's not 24
( speculative.
25 JUDGE CASEY: Well, you'know, you could take it -- -
COMMONWEALTH REPORTING COMPANY (717i 761 7150
1099 i
1, '.
I /l' from your point o f view -- that they may have had good and lll That's left up in the 2l compelling reasons not to at the time.
I i
I 3j air, as well. ;
4 You can't necessarily read in a deroggatory connota-5, tion -- well, an unfavorable, I should say, not deroggatory - g l 6 !' an unfavorable connotation, "Why didn't they merge?" i i
t 7 He's not attempting to say why. They may have had i l '
8' an excellent reason for not merging the two Pennsylvania com-9 panies, i
10 MR. SHILOBOD : Your Honor, more importantly, you have I
li ' to read that question and answer together with the following.
I, 12 ' What it shows is over that period of time when con-13 cepts of management consolidation may have been considered 0
i 14 whenever Met-Ed wasn' t having their problems, that neither the ,
15 company, who had experience in the field, try to merge these i
16 j companies, nor did Booz Allen suggest that it should be done, -
i j II l cs recently as 1978.
18 What it really does is introduces a little bit of I
i 19 historical background that -- you know, here we are now, with 20 Met-Ed in this condition, and we're trying to consolidate 21 management, 'and why? Is it a good idea. ,
22 .The third question then is the follow-up, if anything
'3 happened since 1978 which would have caused management to 24 change. That's the third question. llh
'5 You can' t just take one of these things and pretend CovMoNWEALTH REPORTING COMPANY (717' 761 7150
1100
) 1 like the rest of the testimony doesn't exist.
) 2 JUDGE CASEY: What may be very difficult for myself i
3 and the Commission to discern - .and I think I've asked a J
4 question along those lines -- removing TMI-2 from the whole 5 picture, would this proposed management combination in the 6 formation of the nuclear corporation be beneficial to the com-7 panies, individually and collectively. I think we received 8 some kind of answer along those lines.
9 It may well be that the company feels that with the 10 TMI-2 circumstances and the problems that they're faced with, T
11 it just might be a good move that, for one reason or another, 12 which they would hesitate to have considered to TMI, with TMI -
13 out of the picture.
14 I think yod have to look at it from several different 15 angles. There's a lot of theoretical speculation and judgmental 16 considerations involved.
17 That's his opinion, and whether it's well supported 18 or not I think is up to Counsel to argue and for me to decide.
19 MR. RUSSELL: All right. Well, I have one other --
20 well, I'll make two separate motions, but I'll give the same 21 reason in support of the two of them.
22 Page 48 of Statement A, Lines 6 through 9, the ques-23 tion and answer, I'd move to strike tha t, and I would also 24 move to' strike the portion of the testimony appearing on the 25 supplemental testimony at. Page 3, Lines 5 .through 8, which COMMONWEALTH REPORTING COMPANY (7175 761 7150
1 1
1101 i 'i I
i 1 relate also to the alleged piercing of the corporate veil.
2 The piercing of the corporate veil has nothing to j 3 do with management consultation expertise. It's purely and i
4 simply a legal issue, and this witness has absolutely no quali-j 5l fications to indulge in legal conclusions as to what would 6 happen in the event of the alleged piercing of any corporate 7 veil.
8 MR. SHILOBOD: If Your Honor please, this was an l
9 issue that we brought up in cross-examination of TB&A witnes- ,
10 ses and, if I'n not mistaken, some of the company witnesses, t
11 about this concept of piercing the corporate veil, where the 12 subsidiary might become exposed to be responsible for debt, .-
13 and every individual indicated some understanding of that, all i
14 indicating that they 'were not attorneys. ;
l 15 Mr. Budetti here has expressed his understanding of {
f IG l what the piercing of the corporate veil would be. l 1
17 This is an issue that we raised questions as to I
18 It is a
!whether or not TB&A took this into consi6eration.
19 factual , issue that somewhere this Commission is going to have 20 to consider.
I Mr. Budetti has never made a conclusion as to the 1
22 success of a company that pierces the corporate veil. What he 23 has done is he has elaborated on the concept and the danger --
, 24 and whenever you do that you' re putting some wood on the fire. g That's what the testimony is.
COMMONWEALTH REPORTING COMPANY e717 761-7150
1102 !
i I i i
O 1 MR. RUSSELL: Well, to point out --
t
. 2 MR. SHILOBOD: In some respects --
r 3 MR. RUSSELL: I'm sorry. 8 4 MR. SHILOBOD: -- I would agree with you that on Page 5 48, you can argue that is a legal cohclusion, but "to their 6 obvious detriment" is not just a legal conclusion. .It's a {
7 factual financial decision as to whether or not there's a i 8 financial detriment to Penelec customers, if potentially they ,
9 c ould be exposed to the debts of the parent.
10 . MR. RUSSELL: Are you finished?
11 MR. SHILOBOD: Yes.
.l j 12 MR. RUSSELL: To point out the further outrage of 13 this portion of the testimony, there's talk about an undesigned 14 piercing of the corporate veil, and then a conclusion that 15 Penelec 's customers would bear the debts of both GPU and 16 Met-Ed, to their obvious detriment.
17 This witness, who has no legal background, is pur-18 porting to tell you and this Commission that this alleged 19 piercing. of the corporate veil would not be a piercing of a 20 veil, but would go through Penelec's veil, Met-Ed's veil, 21 GPU's veil, *and that all those debts would be socked on t
22 Penelec's customers.
i 23 It's such an obvious speculative legal conclusion
\- 24 and I think, really, it shouldn't be permitted to stand in 25 this record. ,
CoAIMoNWEALTH REPORTING COMPANY 4717' 761 7150
1103 1
1
- MR. McCLAREN : Judge Casey, if I ma* ,
7 '. n k , from l l
2 my perspective once again, Mr. Budetti has had to use words of 1
3 art, legal words, because those are some of the constraints 4 that management must deal with.
5 I think Mr. Budetti, in his testimony beginning at 6 the bottom of Page 47, recognizes and qualifies his statement 7 there, and in following statements and answers, where he states 8 on Line 25 of Page 47, the following:
9 "From my understanding of the law, as a lay person, 10 this process construed a first attempt..." and so on.
11 In discussing the corporate veil, he himself recog-12 nizes, in the testimony, he's a lay person. He's taking what l_
13 understanding he has of the law, and one would have to inter- h i'
14 pret his statements in that light.
15 MR. JOLLES: I'n not sure that Mr. Budetti's recoa-l 16 nition o f his limitations increases his compentency to testify ll 17 on such matters.
18 MR. RUSSELL: And you look at what he says on the i
19 bottom of Page 47 and the top of Page 48 - "This alleged l I
20 activity may allow creditors of Met-Ed and GPU to attempt to i
21 pierce the veil." l 22 .Then the next question, he gives his conclusion as 23 to what would happen in there.
l . .
l
- 24 It's spet'lative and it's a legal conclusion and I
25 totally improper testimony.
I COMMONWEALTH REFoRTING COMPANY t717' 7617150
i 1104{
4 i
() 1 MR. SHILOBOD: What you're quarreling with is the 2 choice of words,- that really should be more properly clarified l
3 through cross-examination.
l 4 Pe:; haps we should be -- .
1
. 5 MR. RUSSELL: I'm under no obligation to clarify the l l*
6 Witness' verbal language.
7 MR. SHILOBOD: Well, I --
8 MR. RUSSELL: It's improper testimony. ,
9 MR. SHILOBOD: I don't think that's necessarily true.
)
i 10 It's a question of whether or not the Witness properly indi-i 11 cates the factors that he thinks are important in arriving at {
12 a decision, from a management standpoint, on whetheror not he ..
13 should proceed.
14 Necessarily, at any time you're speaking, ycu don' t 15 say everything that you're taking into consideration with every 16 sentence that you make. ,
i 17 You have to read the entire testimony in its i
18 entirety, and take the testimony in that light.
18 He's made it clear that there's a danger and talks l
20 of exposure. That doesn't mean liability; we're talking about ,
21 exposure, risk. ,
22 JUDGE CASEY: Yes. That's the point that I was going
?
23 to make. The language on Page 48, as you've already have
' 24 said, says "In the event of the successful piercing of the corpora te veil . . . "
i
' COMMONWEALTH REPORTING COMPANY 4717 761-7150
1105l
\ l
. I 1' MR. SHILOBOD: Yes.
2 JUDGE CASEY: You're assuming a set of circumstances !
I 3 that goes beyond more exposure.
4 MR. SHILOBOD: If that were to happen --
5 JUDGE CASEY: I think the exposure to vexatious liti-:
6 gation which -- I'll be very frank. If I was an attorney i I
7 representing a general or a secured creditor, after this t 8
i management combination took place -- and I'm using the old i,
9 negligence lawyers ploy, in looking for -- it's the "Shotgsn 10 Approach," lookingforpotentialtargetdefendants--ofcoursel 11 you would argue thattheassetsofall'thecompaniesshouldbef 12 subject to claims of credit; it's just something that flows ,
13 naturally from a holding company situation, and a holding com- i 14 pany situation by itself is further extended by a single manage-I 15 ment team over the Pennsylvania utilities.
16 I find the material on Page 48, beginning with Line II 6 and ending on Line 9, to be what a criminal lawyer would 4
18 call inflamatory or too provocative to permit in the record, ,
I9 but the previous question, beginning on the bottom of Page 47, 20 which deals with possible exposure, conjectural though it may I
'I be, I will permit that to stand; that's an opinion of a manage '
ment consultant. ;
'3 So at this point, without further discussion, I i r
would permit Lines 6, 7, 8 and 9 to be deleted, or stricken. gg 25 MR. RUSSELL: You would what? I COMMONWEALTH REPORTING COMPANY (717i 761 7150
l 1106 l
i
( : JUDGE CASEY: I would grant the motion to strike 2 "In the event of the successful piercing of the corporate 3 veil..."
4 MR. RUSSELL: All right. Having made these oations, 5 we would, without prejudice to the motions that were made and s the positions taken in connection with them, proceed with the 7 substantive cross-examination of Mr. Budetti.
8 JUDGE CASEY: All right. I will make my final ruling 9 now. j 10 The motion to strike the testimony in its entirety ,
f 11 is denied, and all specific motions to strike certain questions; 12 and answers in the testimony, with the exception of the ques- !
13 tion beginning on Line 6 of page 48 and the answer beginning !
f i
i 14 on Line 8 and ending~on Line 9, that motion to strike is 15 granted. All others are denied.
I 16 MR. MORRISON: Your Honor, if you would excuse me, 17 I think perhaps I should attempt to contact Mr. Wheaton before i
18 lunch. j 19 MR. RUSSELL: Should we take a short break?
l 20 JUDGE CASEY: We'll take a brief recess. ,
t 21 (Recess.)
22 JUDGE CASEY: On the record. ,
l 23 It appears as though we've disposed of the prelim- i 4 24 inary material and, Mr. Russell, you were about to begin your i
25 questioning of Mr. Budetti, COMMONWEALTH REPORTING COMPANY (717 761 7150
1107 1 MR. RUSSELL: Yes, Your Honor, h 2 JUDGE CASEY: You may proceed.
3 MR. RUSSELL: Thank you, Your Honor.
4 CROSS-EXAMINATION 5 BY MR. RUSSELL:
I .
6 Q Mr. Budetti, you have distributed a seven-page list 7 of various documentary materials; is that correct? .
8 A Yes, I have.
9 Q Is this a list of documents which you have read in 10 preparation for the giving of your testimony in this proceed-11 ing?
12 A I have looked at all of them. Some sections I've 13 read, some I haven't. I haven't read every one of those, 9
14 really.
15 Do you have those documents with you?
Q 16 A No, I do not.
I 17 Do yo. any of them?
Q 18 I have some.
A 19 Among the items on the list is the Statement of Q .
20 George A. Avery; what was the subject of Mr. Avery's testimor.y?
21 7 .do no t recall wha t the subj ec t wa s .
3 22 As a matter of information, you have on the list a Q
23 presentation by Jersey Central Power and Light Company to the
24 New Jersey Board of Public Utilities. Do you recall what the 25 subject matter of that presentation was?
COMMONWEALTH REPORTING COMPANY (717s 761 7150
I 1108 3 A My recollection is it was an annual report or review 2 to the Commission, but I don't remember the details. .
3 0 You list the testimony of E. Newton, Jr.; do you 4 recall what the subject matter of that testimony was?
5 A No, I do not. ,
6 Q You also list the testimony of Eugene F. Carter; do i I
7 you recall what the subject of that testimony was?
i 8 A No. ;
9 Q At the bottom of Page 3 you list something, at the 10 bottom, entitled " Observations about Theodore Barry & Associates 11 managenent and operations study, September 6, 1980;" do you 12 have that eith you?
13 A :: 3, I do not.
14 Q Who sponsored or produced that document?
15 A I believe that was a letter from the JARI people to 16 Mr. Shilobod.
17 Q WOll, it's nothing that originated with Met-Ed, 18 Penelec, GPU?
19 A Not that I'm aware of.
l 20 Q And did not originate from Theodore Barry?
21 '
A Not that I'm aware of.
22 Q You also indicate that you read a statement by 23 William G. Kuhns -- is that correct -- on Page 2 of your state-
, l' 24 ment, or of your list of documents?
25 (Witness perusing documents.)
( COMMONWEALTH REPORTING COMPANY (7171 761 7150 i
1109 1 THE WITNESS: Yes, sir.
2 BY MR. RUSSELL:
3 Q Do you recall, from Mr. Kuhns' statement, what the 4 rather significant finding was that was made by the SEC in 5 1951 with respect to the GPU system?
6 A No, I do not.
7 MR. SHILOBOD: Excuse me, Mr. Russell; what year 8 was that? 1951?
9 MR. RUSSELL: Yes.
10 BY MR. RUSSELL:
11 Q You include in your list also the 1980 annual review 12 by Met-Ed and Penelec before this Commission, do you not?
13 A Yes, I do.
14 Q Do you recall the major milestones in load manage-15 I ment ef forts that were described in that review?
16 A Do I recall it?
17 0 Yes?
18 A Not really.
19 Q ,
You indicate on Page 1 of the list that you have 20 included the statement by Met-Ed/Penelec Witness Harvey R.
21 Miller; is that correct?
22 A .Yes, sir.
23 Q And is it correct that Mr. Miller was an expert in 24 the field of bankkruptcy?
25 A I don' t know if he's an expert.
COMMONWEALTH REPORTING COMPANY (717 761 7150
, . .= _ .- _.- _ . . - . _ . _ -
1110 4
i i'
1 JUDGE CASEY: Are these people who testified during i 2 the course of the I-308 proceeding, in front of the Commis-I 3 sion? i 4 MR. RUSSELL: That is certainly part of it, and it's 5 then a listing which includes, .ansiderably, a number of other
- 6 documents apart from those. ;
7 The testimony we have referred to so far, I think, l l
1 8
has been -- well, I'm fairly certain, has been with respect to j R 9 308 testimony. ,
10 JUDGE CASEY: And you, of course, would have obtained; 11 that material from Mr. Shilobod, who was an active counsel i.. i 12 that proceeding; is that correct?
13 MR. SHILOBOD: I believe that was obtained from the .
I 14 Georgetown Group, who was an active consultant, through the [
l 15 Of fice of the Consumer Advocate, in that proceeding. Some of '
16 the information came from them, whenever we made a request for l
17 all the relevant information with respect to the management 19 combination, and what we got, we sent on to Mr. Budetti, also; 19 so there, were two different sources of information available 20 to him.
21 Well, to interrupt for a moment, this JUDGE CASEY:
22 all ' temss from the request made by Mr. Russell at the Dececher I f
23 19th hearing and, in the interim, you compiled this list of 24 source information that you had reviewod at one time or 25 another; is that correct?
f ,
i .
CoMMoNWEAt.TH REPORTING COMPANY 1717 761 7150
} 1111 i
I i
1+ THE WITNESS: That's correct, sir.
2 JUDGE CASEY: Did you have all of those individual O
3 llitems, ces timony, a rticles , wha t-have-you , in front you as you l
4 made up your check list?
I 5 l THE MITNESS : The way I do it to proceed through and 6 if it looks like it's going to be relevant, then I note some-7 thing from there and put it on a piece of paper for inclusion 8 in the testimony.
9i of course, the majority of this material was really 10 background for ne in terms of the status of the utility, 1: l financial status, what people were arguing, what were some of 12 the major issues in some of the past cases that were being 13 l raised, what really was at the crux of the Three Mile Island h 1
14 in-or-out-of-the-rate-base kind of thing, just so you can ge:
i
, 15 a flavor and understand how TB&A uses the words, beginning with 16 their process as the consultants uses that process also.
II JUDGE CASEY: Did you have to meet with Counsel to 18pl 1 prepare this list, or did you have sufficient material at your h
19l!own office in the St. Louis area of Missouri, to put together 0
20 l the information that Mr. Russell requested?
21 I did all this myself, at ny THE WITNESS: No.
22 All this naterial sits stacked in my office.
office.
23 Stacked in the office.
JUDGE CASEY:
24 It's fairly voluminous.
THE WITNESS :
25 i
O JUDGE CASEY: Okay. I just wanted an understanding coMVONWEALTH REPORTING COMPANY (717 761-7150
(
1112.,
1 i
l 1 on it.
. 2 THE WITNESS: Yes, sir.
3 MR. SHILOBOD: If Your, Honor please, a lot of these !
l 4 things were identified because some of ti:e 3G8 proceeding --
1 5 most of the documentation and exhibits and statements were '
I 6 introduced before we '.>ere ever a party to that proceeding; so i
7 that I don' t have those.
J 8 JUDGE CASEY: Does it include the internal memoranda i l
9 and correspondence between the officials, that Mr. Shilobod 1 10 was able to obtain through discovery, with Mr. Russell's l
' 11 insistence' 12 THE WITNESS: Yes, it does.
13 JUDGE CASEY: All right.
i
! 14 THE WITNESS: When I was hired, I asked Mr. Shilobcd 1
15 to make sure that he requested all relevant and pertinent infor-i 16 mation, and he then went and collected it and, if I remember i 17 :Orrectly, he went to the office and he picked some of that
! , 18 material up and then sent copies of every bit of that material 19 back to me for my review.
20 -JUDGE CASEY: Continue, Mr.' Russell.
21 BY MR. RUSSELL:
l 22 Q In the testimony of Mr. Miller, what conclusion did 23 he reach regarding the ability of a . reorganized company to-I
() 24 obtain credit during and af ter reorganization?
l 25 MR. SHILOBOD: If Your Honor please, unless we are l
COMMONWEAL.TH REPORTING COMPANY ' 4717e 7617150 l
L
1113 l l
I 1 just testing the Witness' memory with respect to these individ-2 ual things, I submit that if there's going to be cross-l 3 examination about these statements by other people, that he !
i i
4 snould be presented with a copy of them, since he doesn't have 1
5 them here. j G JUDGE CASEY: Well, the question -- he reviewed it.
7 Does he remember what the conclusion was? Was Mr. Miller's 8 conclusion an important consideration in formulating your 9 opinion testimony? j 10 THE WITNESS : I do --
11 JUDGE CASEY: Do you remember anything about his l
12 ultimate conclusion? ,.
13 THE WITNESS: I remember Mr. Miller. I do not know 14 whether he was an expert -- which was the first question he 15 asked. i 16 I do not know what his conclusions were. It was not 17 relevant to the overall conclusion I've reached in my testi-18 mony, i
19 JUDGE CASEY: That's the answer. j 20 MR. SIIILOBOD: And I must note, Your .Ilonor, that when!
21 this Witness uses the term " relevant," he's using it in terms i l
22 of his own perspective.
23 '
Tile WITNESS : Right.
24 All right. (lg JUDGE CASEY:
i 25 MR. RUSSELL: I'm just testing the Witness' knowledge l .
I COMMONWEALTH REPORTING COMPANY (717 761 7150 }
r 1114 3, 1 of the subject matter he says he reviewed.
2 JUDGE CASEY: You have a right to do that. l 3 MR. RUSSELL: Thank you, Your Honor.
4 JUDGE CASEY: Let me interrupt for one second.
I 5 Mr. Morrison has rejoined us.
l 6 Did you have any success in reaching Mr. Wheaton?
7 MR. MORRISON: I spoke with Mr. Wheaton, and he is a attempting to make arrangements, Your Honor, but I'll speak 9 with him again this afternoon to see if any problems occurred.j .
10 JUDGE CASEY: All right. Just keep us posted.
11 MR. MORRISON: Yes. {
t 12 JUDGE CASEY: Thank you. .
i O*
13 Continue.
14 BY MR. RUSSELL: j IO Let's see -- was there an' answer to the last ques-Q 16 tion? I don't remember?
I7 A Yes, there was. ,
1 18 0 Instead of going back for it, would you repeat it I9 for me?
20 A My answer was that I did not recall specifically i 21 what Mr. Miller said, and I don't think that it was relevant 22 to the overall conclusion I reached in my testimony. l i
'3 I do not have my notes on his testimony, to know j I
)
~/
'4
~
whether or not it was an issue area that I addressed out of !
~5 !
Miller's context. .
CoMMoNWEAt.TH REPORTING COMPANY (7176 761 7150 .
i
1115 1 Q Do you recall what opinion Mr. Miller may have 2 expressed as to the likelihood of a Met-Ed bankkruptcy and 3' its relationship to the other companies in the GPU system?
4 A Not specifically, no.
5 Q You've also indicated, I believe, that you had 6 reviewed the testimony of Thomas E. Dewey, Jr., in the pro-7 ceeding at 3 08 ; is that right?
8 (Witness perusing documents.)
9 MR. SHILOBOD: Is that referred to specifically?
10 BY MR. RUSSELL:
11 Q I think I'm in error, tir. Dudetti. I thought that 12 was in the sequence of 308.
13 MR. SHILOBOD: The problem, Mr. Russell -- a nd I 14 don' t mean to interrupt -- is whether he's identified here as 15 a TB&A witness or whether he's specifically identified.
16 MR. RUSSELL: I'm sorry.
17 BY MR. RUSSELL:
18 It appears on Page 6 of your testimony, Statement A, Q
19 the test.imony of TB&A Witnesses Wheaton and Dewey.
20 A Yes, sir.
21 Q What is your understanding was the relationship 22 between Mr. Dewey and TB&A at the time he testified?
23 A He 's a subcontractor.
24 Q And what if any conclusions did Mr. Dewey reach in g 25 his testimony with respect to Penelec's earnings and cash flow COMMONWEALTH REPORTING COMPANY (7171 761-7150
1116 O 1 for the 1980 and the future near-term picture? l 2 (Witness perusing documents.) i 1
3 BY MR. RUSSELL:
4 0 I'm asking you from your recollection, Mr. Budetti.
5 A I have it in front of me.
6 Q Well, I'm asking you from your recollection, what 7 statement was made? Instead of looking at the testinony, I'm 8 asking you what your recollection is?
9 MR. SHILOBOD: If Your Honor please, I object. I 10 submit that the Witness has a right to refresh his recollec-
. 11 tion. There's no basis in the law that t.e must memorize a l
a
- ^
12 witness' testimony. -
13 MR. RUSSELL: Well, I'm --
i 14 MR. SHILOBOD: And it's irrelevant whether or not 15 he recalls specifically what anyone said on such a general l
16 question.
17 I think he has a right to refresh his recollection.
18 JUDGE CASEY: Well --
18 MR. RUSSELL: It goes to the Witness' credibility.
l ,
20 JUDGE CASEY: -- yes.
21 MR. SHILOBOD: He's indicated that he's looking for 22 it. -
23 JUDGE CASEY: Mr. Budetti, you definitely read that 24 inf o rma tion; is that correct?
25 I reviewed the testimony.
THE WITNESS:
COMMONWEALTH REPORTING COMPANY (717* 761 7150
f 1117 i
1 JUDGE CASEY: You reviewed this testimony?
'O 2 THE WITNESS: Yes, sir.
i 3 JUDGE CASEY: Approximately how long ago did you -
review the testimony?
4l l
5j THE WITNESS : Months ago. ,
6 JUDGE CASEY : Do you recall -- !
i 7 THE WITTIESS : September, possibly October, somewhere !
8 in there. I did not memorize it.
2 9 JUDGE CASEY: Well, I'm sure you did not, i
10 THE WITNESS : Okay.
11 JUDGE CASEY: Did you make any notes or did you 12 pick out any specific portions of that testimony to comment 13 upon --
l 14 THE WITNESS: That's what I'm looking at right now.
15 JUDGE CASEY: I'll permit him to just thumb through 16 it, generally, to help refresh his recollection.
17 (Witness perusing documents.)
18 JUDGE CASEY : I think you said the gentlenan was a l
19 s ubcontrac tor .
l 20 THE WITNESS: Yes.
21 JUDGE CASEY: To Theodore Barry & Associates? f 22 THE WITNESS: He's President of his own firm, if 23 I remember correctly. ,
24 JUDGE CASEY: What's his field of expertise? Is he 25 the Wall Street type, or -- f l
I COMMONWEALTH REPORTING COMPANY 1717' 761 7150 [
1
4! . . .
1118l J
1 THE WITNESS: Providing financial advisory services 2 to client corpora tions.
I !
3 JUDGE CASEY: All right. l t
4 TH E WITN ESS : He was retained by Theodore Barry to !
I 1
j 5 inquire into a study reporting the perspective of'the financial!
! 6 community with respect to the current financial status of f
7 Met-Ed and GPU.
8 If I remember correctly, he was not looking at 9 penelec, specifically, but the Met-Ed/GPU situation. He l l
I 10 reviewed materials.
i 11 JUDGE CASEY: Until you had the opportunity to thumb 12 through that testimony, you didn't have any specific recollec-Or '
13 tion of what Mr. Dewey's conclusions were; is that correct?
14 THE WITNESS: I recall that the whole TB&A testimony, 15 Your Honor, pretty much was fairly pessimistic about the i :
( 1s financial viability of Met-Ed and the cash flow problem. l i
17 ThereasonIrecallthatisbecauseItriedtotracel 18 what they said here back into the Theodore Barry report which l 19 came out a few months later, apparently, but I think his l
20 testbnony was earlier than the September r'eport -- in fact, I 21 know it wa s.
22 .So I saw what Wheaton had to say, and Dewey and the 23 other fellows in there; I don't remember the names that asso-
) 24 ciated with the people.
25 Well, to move along, I'll proceed with MR. RUSSELL:
COMMONWEALTH REPORTING COMPANY 1717 761 7150 ,
i
1119 i
I another question.
JUDGE CASEY: All right. !
2l I 3 BY MR. RUSSELL:
4 0 What methods did Mr. Dewey utilize in obtaining the
. 5 factual information that he utilized in reaching his conclu- 4 6 sions in that testimony?
7 A I don't recall.
8 MR. SHILOBOD: If Your Honor please, 1 think this 9 witness previously indicated that the testimony they gave had i
10 to do with the financial community, and not about --
l 11 MR. RUSSELL: Well, he --
12 MR. SHILOBOD: I've been sitting here quiet. I do i 13 have some concern over the relevancy of this.
O 14 I don' t mean to interrupt cross-examination. I pre !
15 sume that this is preliminary. !
16 I can pick up your thought JUDGE CASEY: Yes.
17 process is if he were testifying about an impending bankkruptcyl i
la or the current financial positions of the companies. !
19 l In the abstract, we're not saying whether the manage-20 ment combination would do anything to alleviate that situation, 21 i improve i t, 'he lp it, harm, so he wouldn't have been focusing 22 in -- I don't think he would -- within the confines of his own
'3 task or analysis, on what the financial situa tion was and did 24 not get into it in-depth.
I
'S Well, the TB&A report is a summary of I MR. SHI LOBOD: ,
I COMMONWEALTH REPORTING COMPANY 1717i 761 7150
l 1120 l l
I i i
() I the other testimony. l 1
2 To cross-examine this witness on his memory of l
t j 3 individual statements of people who may have contributed to I
4 the final report may be useful to Mr. Russell, but I have some-5 problem with relevancy.
G MR. RUSSELL: I can understand your discomfort, Mr.
l 7 Shilobod, but I'm cross-examining th.s witness on some of his 8 background work and the basis for his opinion, and what he 9 !
knows about it.
, 10 MR. SHILOBOD: Well, I think:--
11 AR. RUSSELL: It's a perfectly proper avenue of !
l 12 cross-exami na tion . l-I
(/ [
I 13 MR. SIIILOBOD: I think you're cross-examining him !
l 14 as to his present memory with respect to specific documents -- l i
15 which is something a little dif ferent. i 16 Well, I beg to differ.
MR. RUSSELL: f l
37 Well, I won't foreclose your right to l JUDGE CASEY: !
- i J
I8 do that, to make a record. Youmayproceedalongthoselines.[
19 MR. RUSSELL: Thank you, Your Honor. l t
20 JUDGE CASEY: I think Mr. Shilobod's position also l , i 21 has some merit. Emphasis may not have been placed by this f 22 witness on certain witnesses' testimony, because it was back- t 23 ground information which was later on incorporated into a :
t i
j
() 24 management consultant's report.
f "5
MR. RUSSELL: Okay. :
f COMMONWEAL TH REPORTING COMPANY (717e 7617150
. , _ - . . . - - .._. - . . - . . _ - . . . , - . .. .,-. , - ,. . - , . .~_ - -.-- . - .
1121 1 BY MR. RUSSELL:
2 ! Q Mr. Budetti, you've referred, tire and again, in your, 3 testimony, to a Revolving Credit Agreement, have you not?
4 A Yes, sir.
5 0 Is that one of the documents that you did read?
fl 6 A Did I read that?
7 Q Yes.
8 A In total?
9 Q Yes.
10 A No, I did not read that in total.
11 Q And you think it was unnecessary to read through that 12 document in conection with the preparation of your testimony, 13 which does touch upon it and its consequences?
14 A I read through portions of it that were important.
15 JUDGE CASEY: Is it listed? Was it available to you?
16 THE WITNESS : Yes, sir.
'7 JUDGE CASEY: It's on the list?
18 MR. SHILOBOD: If Your Honor please, I had intended 19 to request later on incorporation by reference of the Revolving 20 Credit Agreement. I think this would be a good time to do it.
21 It had been introduced in the 308 proceedings as 22 Met-Ed/Penelec Exhibit A-1, and if we are permitted to incor-23 porate it by reference, I'll give Your Honor a copy of it.
/ 24 I see no reason to burden the record here with $
25 ano ther duplication --
CoMMoldWEALTH REPORTING COMPANY (717 761 7150
I'
- r 1122 l
I i
() 1 MR. RUSSELL: Unless I'm mistaken, this is cross-f l
i 2 examination, Your Honor.
h 3 !!R. SHILOBOD: Well, I think whenever the issue is I .
1 4 brought up in cross-examination -- !
t i 5 MR. RUSSELL: You can have him on redirect and do l
6 whatever you want.
I 7 JUDGE CASEY: Yes. I think, technically, that's the i
I B way to handle it.
i 9 MR. SHILOBOD: Well , it's not really an issue of i l
! 10 direct / redirect; it's a question of there's been continual 2
l 11 reference to this particular document, and if we're going to l l i !
12 examine on it, let's have it at least in by reference. i--
, /'%
i l(/
I 13 JUDGE CASEY: Well, you can renew that, if you want i
14 to, at the close of cross-examination, and ask the Witness :
i i
- 15 whether he has in fact reviewed it or dealt with the conclu- f 16 sions.
I I
17 Go ahead, please.
18 BY MR. RUSSELL:
IU Mr. Budetti, as you understand it, what is the term Q .
20 of the Revolving Credit Agreement? How long does it run? !
21 -
3 7. don' t recall.
22 g .All right. Do you know whether or not there have 3
23 been any amendments to the Credit Agreement?
l
( 24 A I have.the final execution copy here. I don't know f 25 whether you have any additional amendments to it, and I don't f
~
I COMMONWEALTH REPORTING COMPANY (7171 761 7150 i
1123 1 know whether this was amended relative to the initial copy? 2 Q Well, do you know whether there was any amendments 3 subsequent to the copy to which you refer -- and I'll use the 4 language that you included on your list -- 5 JUDGE CASEY: Would you point out where it is on the 6 list. 7 MR. RUSSELL: All right. 8 JUDGE CASEY: Admittedly, it's not in evidence. I 9 don' t know what it contains, either. I don't know how much 10 o f a -- 11 MR. SHILOBOD: It's the first item, Your Honor, on 12 the supplemental list that was sent to the various parties. I 13 BY MR. RUSSELL: I4 You refer to it as a final execution copy of a Q 15 Revolving Credit Agreement, dated as of June 15, 1979. 16 A Yes. ,
.t 17 0 That's the one you looked at? l l
I8 I A Correct. 1 l ' 39 0 , All right. And we will stipulate, if you will, that 20 that is the Credit Agreement as executed and in final form? 21 Your Honor, rather than having a
, MR. SHILOBOD:
22 This is stipulation, why don't we incorporate it by reference?
'3 my whole point.
' 24 MR. RUSSELL: This is cross-examination. g
'5
~
MR. SHILOBOD: Well, you're asking for a stipulation,l ' l 4 COMMONWEALTH REPORTING COMPANY (717i 761 7150 l <
1124j i (O,) I and that's my point. 2 MR. RUSSELL: I'm just trying to help the Witness. 3 I'm not trying to trap him. I'm trying to identify it for.him, 4 for his own use. 5 We will accept that the Credit Agreement was the 6 document that he inspected. 7 JUDGE CASEY: I think it's neater and preferable, 8 from your point of view, to have it offered as an exhibit, i 9 r ea lly . 10 MR. SHILOBOD: Well, I didn't bring enough copies, 11 but I'll -- 12 JUDGE CASEY: I mean after cross-examination. j 13 MR. SHILOBOD: -- certainly -- 14 JUDGE CASEY: Well, we'll see how many people j 15 already have it available to them. 16 MR. SHILOBOD: Our concept was that the degree of i 4, II relevancy of it would not justify the full document, because 1 ( 18 there's a lot of things here that have nothing that have ,
- i 19 nothing,to do with this case.
~
20 JUDGE CASEY: All right, we will get to it. 21 Proceed, please. ; i 22 .BY MR. RUSSELL: i 23 Mr. Budetti, to get back to the cross-examination, Q i l 24 do you know whether or not there were any amendments in the t 25 Credit Agreement in the form of final excution copy form which COMMONWEALTH REPORTING COMPANY (7171 761 7150 f
1125 1 A In addition to the final execution? l(ll 2 O Yes? 3 A I asked for all relevant data and, up until the time, 4 you submitted that to me, I doubt that -- I don't know whether
. 5 there were some additional amendments.
6 Q We submitted it to you? 7 A We asked for all relevant data dealing with issues , 8 in this case, and I don't have any additional documents or 9 amendments. 10 Q A copy was furnished to you by Mr. Shilobod, was it 11 ' not? 12 A It may have been, either he or the Georgetown Group. l 13 JUDGE CASEY: What he means is that it originally 14 came from the people in -- it's your clients -- 15 MR. RUSSELL: Mr. Shilobod. I" JUDCE CASEY: Well, Mr. Shilobod obtained it, but it 17 was a document that originated -- l I 18 He obtained it some time ago -- MR. RUSSELL: i 19 JUDGE CASEY: -- with your company. 20 MR. RUSSELL: -- in 308. 21 JUDGE CASEY: In 308? 22 Not in this proceeding. MR. RUSSELL: 23 It looks like a Met-Ed/Penelec Exhibit; THE WITNESS: lll 4 that's what it says. I don't know whether it is or not.
,5 I
JUDGE CASEY: Is Mr. Shilobod aware that there may COMMONWEALTH REPORTING COMPANY (717e 761 7150 l
I 1126 i i () I have been amendments subsequent to the 308 proceeding, to the f 2 Master Revolving Credit Agreement? 3 MR. SHILOBOD: Your Honor, I got the document in the 4 deposition of Mr. Kuhns and Mr. Diekamp. 5 JUDGE CASEY: That was in April of last year; isthat; 3 6 correct? 7 MR. SHILOBOD: That is correct. At that time we were. 8 making inquiries as t'o how Penelec's credit arrangement was , 9 affected whenever this incident occurred. This was given to , 10 me. This is one agreement that was given to me. I have no ; t 11 knowledge of any others. l 12 I think, normally in discovery, when there is a . i
) 13 request for documentation, if '-here is any updating, all counse1 ,
14 have an obligation to provide other counsel with any updating; ; 15 and I think that goes with respect to all discovery. IG MR. RUSSELL: Well, I'm not aware of-any such request, 17 ! Mr. Shilobod. I8 MR. SHILOBOD: Well,that is a rule of law, Mr. ( 19 Russell., If I make a request in interrogatories, or by other l 20 mea ns , and you give it to me, and then you have additional 2I information and withhold it or not update it, your answer to , i 22 the interrogatory is improper.
- 23 MR. RUSSELL: I'm not aware of your request that had i
24 anything to do with any amendments to the Revolving Credit , (
*5
~
You made'no such request of me. Agreements. CoMMolJWEALTH REPORTING COMPANY (717* 761 7150
1127 ! 1 MR. SHILOBOD: Well, I didn't know it existed -- 2 and that's the whole purpose of the principle. 9l 3 JUDGE CASEY: Well, the point is, if you're talking I 4 about a document such as a contract and parties are basing ; 5 their case or their position on the contents of a certain ! l 6 document and sometime thereaf ter, before the proceedings are 7 commenced or concluded, there's a material change, by amend-8 ment or some type of change, what he's saying is that under . 9 discovery rules, the o'ther party, that the request has been , i 10 made, has an obligation or duty to provide that new material. t I 11 That's his position. l t 12 Does this Witness know whether there has been any 13 amendmen ts? h l 14 Have there'been any amendments or changes -- l 15 MR. RUSSELL: Yes, sir. 6 16 JUDGE CASEY: -- in the Revolving Credit Agreement? i 17 MR. RUSSELL: Yes. 18 JUDGE CASEY: And who, outside the companies, are 19 aware of this development? 20 MR. RUSSELL: Nothing could b'e done with respect to 2I the Credit Agreement without numerous regulatory authorizations, i 22 including the authorizations of this Commission, and every one ; 23 of the amendments is the subject of public information here 24 before this Commission, as well as the SEC. i 95 Well, it may be public information,
~
MR. SHILOBOD: ,' COMMONWEALTH REPORTING COMPANY 4717' 761 7150
1128f () 1 but it certainly doesn' t require other parties in litigation 2 to maintain a surveillance force in our regulatory bodies to i 3 see whether something is filed. j l 4 It's one thing to call it a public document; it's j 5 another thing to indicate that it's a matter that was available 6 to all the attorneys of record. 7 MR. RUSSELL: It's a matter of public record in the 8 rate cases, which Mr. Shilobod has followed with some care. 9 MR. SHILOBOD: I have not. I'm not a party to that ! l 10 case. ; l 11 MR. RUSSELL: You ' re not a party, but you've followed, I i 12 it with some care. ~ 13 MR. SHILOBOD: I did not. To the best of my 14 knowledge, I don't get statements, I don't get the exhibits. 15 The only thing I get are letters advising me of when the hear I i 16 ing dates occur. ! 17 I have none of the documentation. j i 18 MR. RUSSELL: You're in consultation with the 19 Georgetown Group and have gotten any number of the documents
- i i
t 20 I I that -- i 21 MR. SHILOBOD : I did not -- 1 I 22 . MR. RUSSELL: -- Mr. Budetti has used. 23 MR. SHILOBOD: I did not get anything from the l I I /~N- ,4 The Georgetown Group did not give me that -j l (_) ' Georgetown Group. 25 and Mr . Budetti never said that. I COMMONWEALTH REPORTING COMPANY 8717 761 7150 j
1129 l 1 JUDGE CASEY: Who is the Georgetown Group? g 2 MR. SHILOBOD: Mr. Rothchild, Mr. Matthews, and a 3 , number of people who are in Connecticut who were retained as 4 expert witnesses or as consultants -- I'm not sure -- in the 5 308 proceedings. , 6 JUDGE CASEY: Retained by what party in the case? I I MR. SHILOBOD: The Consuler Advocate. l
?
i 8 MR. RUSSELL: Consumer Advocate. 9 MR. SHILOBOD: That we had any facet at all in the 10 rate proceeding is simply incorrect; my appearance has never l i 11 been entered; I've never been there; Mr. Russell has never 12 served me with any document, never sent me even the initial - 13 request. He's never served me with anything. 34 If he sees me as a party, I'd like to know why he 15 didn' t give that to me. I6 JUDGE CASEY: Well, I think we're getting off on II a bit of a tangent here. la Whatever impressions Mr. Budetti formed with respect IE to the Credit Agreement are based on that earlier document thay 20 Mr. Shilobod obtained in April when he was deposing Mr. Kuhns ; 21 and Mr. Diekamp, and to the extent that his observations may 22 now be inaccurate or obsolete, you know, you may raise that in
'3 your positions, but I think we know what his source of infor-mation was and when he obtained it, and how he obtained it. lll 25 BY MR. RUSSELL:
COMMONWEALTH REPORTING COMPANY (717e 761-7150 .
L. . 1130 i t () 1 Q Mr. Budetti, do you know when any of the first mort-2 gage bonds issued by any of the GPU companies under the Revolv-; f 3 ing Credit Agreement matures? ' i I 4 A No, I do not. j 5 Q Have you reviewed the terms of either the Met-Ed or 6 Penelec first mortgage bond indentures? 7 A No. They were not important to my analysis. 8 O Have you reviewed the terms of either one of those 9 debenture indentures? They were not important to my analysis. 1 10 A No. 11 Q Have you reviewed the terms of the capital stock of 12 either one of those two companies? I
) 13 They were not important to my analysis.
A No. 14 Q Have you reviewed any of the Penelec or Met-Ed 15 monthly or quarterly reports issued by them a..d filed with this, i j 16 Commission during the year 1980? s 17 A No. They were not relevant to my analysis. l 18 Q Have you reviewed any of the GPU quarterly reports j 19 issued during 1980? j 20 (Witness perusing documents.) 21 THE WITNESS: Not that I'm aware of, not relevant to 22 my analysis. l 23 BY MR. RUSSELL: (}) 24 Q Have you reviewed the Penelec or Met-Ed 1979 annual I 25 repo rt? j l COMMONWEALTH REPORTING COMPANY (7171 761 7150
~
1131 1 I i
! (Witness perusing documents.)
2 THE WITNESS: Not tha t I ' m a wa re o f . j 9 3 JUDGE CASEY: If it's on the list, then I think we ' 4 entitled to proceed under the assumption that he reviewed, at I i
- s. 5 some time or another, all the documents, even if it was just !
I e 6 light reading for background. ! 7 MR. RUSSELL: Well, these are not on the list. I'm 8 asking him whether there's any other things that he has done. , 9 JUDGE CASEY: Well, you know, I don't see the point i i 10 in the questioning. He's told you what he has reviewed. 11 Now, whether that's adequate for him to make a judg-i I? ment is the ultimate question, but I don't think you can ask , 13 him whether he has reviewed the company's reports -- you can lll 14 ask him, but I don't know what the point of your questioning . i 15 is. Ic BY MR. RUSSELL: ; I? Q During the questioning on December 19th, Mr. Budetti l 18 I asked you what dates were the most recent balance sheet and , 19 income statement you had reviewed with respect to Met-Ed, 20 Penelec and GPU; have you determined what the most recent dates' 21 of daose tables may have been? 22 A .No, I did not -- whatever was filed in the I-308, 23 whatever that hearing number was, was the last information,
'4 ' l unless there was some existing in your reports and analyses for this Commission. l 5
COMMONWEALTH REPORTING COMPANY q717 761 7150 - l
I 1132 I 1 Q And the I-308 record closed in approximately April i 2 i of 19807 3 A Subject to check. I don't know when it closed, , i i 4 really. f 5 Q Are you aware of what Penelec's interest coverage l 6 ratio was as of a recent date in 19807 7 A I have no reason to be aware. It's irrelevant to 8 my analysis. And would the Met-Ed recent interest coverage ratio 8 Q i 10 be, likewise , of no interest to you? ! l 11 A It's of no interest to the management combination. O( j 12 Q Would the Met-Ed or Penelec recent preferred stock ,
' i 13 coverage ratio be of any interest to you in your analysis?
I4 A Coverage ratio, or ability to pay? Ireadmaterial,l 15 I at least in the TB&A report and in some of the cross-i i examination in this proceeding, wherein there are indications 16 II of potential inability to pay -- ; l 18 Q I ' m no t -- 18 A- -- the dividends. ! l 20 g 7.m not referring to ability to pay preferred i i 21 dividends; I'm preferring to'the preferred stock coverage ratio l i 22 under the charters of the two companies. Areyoufamiliarwit{ 23 j
" tho se , or --
I ~ i 24 The charter information -- no, I'm not; it's A ,
'5
~ .
I irrelevant to my analysis. i COMMONWEALTH REPORTING COMPANY '4717 761 7150
j ' 11.i3 i 1 Q Would you agree, Mr. Budetti, an electric utility's 2 interest coverage ratio is the most important single test , 3 utilized in judging the financial condition of that f acility? 4 A Would I agree to that? . 5 0 Yes, sir? 6 A You want my opinion as a financial expert? 7 Q I'm interested in whether or not you would agree with 8 that statement? 9 A As a utility regulatory expert, no.
- 0 As a bonding expert -- which I am not, but you asked 11 the question -- it would have a significant bearing, yes, sir.
12 Q But you did not consider interest coverage in either 13 of these companies in your analysis; is that correct? 14 A As to whether I would put the management together, 15 how much the interest was? 16 Q What the interest coverage of the two companies was? 17 No, I did not. A 18 Would the ability of either of the companies to Q 19 issue permanent securities interest you in your analysis? 20 A Ability to finance -- I considered whether or not 21 this merger; for instance, would have an impact or potentially 22 save Met-Ed from bankkruptcy. 23 It's my opinion, it's not going to save Met-Ed from 24 bankkruptcy. To the extent ability to finance is required to keep COMMONWEALTH REPORTING COMPANY E717 7617150
! 1134 (3
s/ 1 Met-Ed from bankkruptcy, then I considered it. 2 Q Did you make any investigation, Mr. Budetti, a s to 3 what additional long-term debt financing capability Penelec 4 has at the present time? 5 A I made no independent investigation. 6 Q Did you make any investigation as to the additional , 7 preferred stock financial capability which Penelee has at the i i 8 present time? { 9 A Independently, no. I understand that from a pre-10 ferred stock or debt point of view, Penelec still has capa-11 bilities, as they do within the RCA, to go out and get . 12 ' additional funds. 13 Q And have you any idea as to the quantification of l 14 those financing capabilities either with respect to long-term 15 debt or preferred stock issuance? 16 A No. It was not relevant to this analysis. 17 Q Did you make any investigation as to the ability of 18 Met-Ed to issue any additional long-term debt or preferred . 19 Stock? . 20 A I made no separate investigation. 21 Q 11 ave you ever served as an officer or-an employee ! 22 of an electric utility? 23 A No, sir. 24 Q Neither in a management or a non-management capacity? 25 A If I haven't been employed, how can I be in either COMMONWEALTH REPORTING COMPANY (717' 768-7150
1135 1 one of them? 0 2 , Q Is your answer, no? . 3 A Yes, sir. 4 Q , You made reference in your testimony to, roughly, 5 $2 billion of savings that might be achievable the so-called 6 master plan of the GPU system, that master plan covering load I 7 management and conservation; is that correct? 8 A That's correct. 9 Q Could you give us your understanding as to the time 10 frame within which such savings would be achievable? 11 A Ten to 20 years. 12 Q And can you give us any breakout among specific items 13 of such savings within that time frame? 14 A It's contained in the report that I have, but I don't 15 have it specifically in my head. 16 Q As you understand it, Mr. Budetti, what is the 17 approximate size of the largest service territory of any 18 electric utility in this country? 19 A The largest service area? 20 Q Yes? 21 g 1. don't know. 22 g . pa rdo n? 23 A I do not know. J 24 Q Would you have any idea as to what the average size g 25 of the service territory of a large electric utility might be? COMMONWEALTH REPORTING COMPANY (717' 761 7150 [
1136 ,t f~)
'# 1 MR. SHILOBOD: If Your Honor please, I really don't 2 mean to interrupt cross-examination, but I must object on the 3 ground of relevancy. We're going far beyond the field of the 4 man's direct testimony.
- 5 JUDGE CASEY: Well, that sails over my nead, Mr.
6 Russell. Are you talking about geographically, square miles i 7 o f -- l 8 MR. RUSSELL: Geographically -- 9 JUDGE CASEY: -- service territory? 10 MR. RUSSELL: -- the number of square miles, what 11 is an average sized electric utility's service territory. 12 JUDGE CASEY: Well, I think the basic inquiry is 13 is it important for hbn to know that in order to come up with 14 ,any of the so.-called ~ expert witness conclusions he's made in l 15 his testimony. 16 MR. RUSSELL: To the best of his knowledge and infor-II mation. 18 Well, you've already tested mine; I'm JUDGE CASEY: 19 sitting.here mentally trying to answer some of these questions, 20 and I can' t, either. 21 7.could show you the map we have in the office of 22 Pennsylvania, and I could tell you that-Penelec has probably 93 > the biggest.
' 4 That was my next question.
l MR. RUSSELL: 25 It's contiguous -- go ahead and ask JUDGE CASEY: COMMONWEALTH REPORTING COMPANY (7171 761-7150
1 1137; i l! n 1 !' him, but I think, within the United States, I don't know where g 0 W l 2 that's going to take us. , 3 BY MR. RUSSELL: 4 Q Could you give us your concept of the size, in terms 5 i of square miles, of Penelec's service territory? I 6 (Witness perusing documents.) , 7 THE WITNESS: I have that information available. l 8 BY MR. RUSSELL: 9 Q All right. 10 (Witness perusing documents.) 11 i MR. SHILOBOD: Mr. Russell, as I recall, that infor-12 mation is somewhere here in the record, tha t I ca n ' t find, 13 ! either. 14 Unless you're testing this man's recollection as to 15 the specific, maybe you'd want to refer him to the record? 16 MR. RUSSELL: Well, I am doing that. 17 JUDGE CASEY: The testimony, his and others, I think 18 'contains references, specific references, to the number of 19 service customers, comparing Met-Ed with Penelec. 20 I think Penelec has 500-some odd thousand, or 600 -- 21 well, we 're ~ talking about geography now. P 22 MR. RUSSELL: Well, I was asking -- 23 JUDGE CASEY: I've also seen it referred to as a 24
$1.3 billion asset --
5 THE WITNESS: Division. CoMMoNWE ALTH REPORTING COMPANY 4717' 761 7150
r 1138.
/7 \# -- division -- well, asset corporation,'
1 JUDGE CASEY: 2 I was going to say, which -- 3 THE WITNESS: 17,600 square miles of Western, 4 Northern and South-Central Pennsylvania, as of '78. 5 JUDGE CASEY : And what are you reading from? Where s 6 did you get that? . i 7 THE WITNESS : Booz Allen report. , [ 8 JUDGE CASEY: Booz Allen report. , 9 THE WITNESS: Yes, sir. I 10 BY MR. RUSSELL: 11 Q All right. Now, directing our attention to -- MR. RUSSELL: I'm sorry; did you want to break at {} 12 , 13 this point? i i 14 JUDGE CASEY: At your pleasure -- you know, if you 15 feel a need for sustenance, we can break, or if you want to go ' 16 to 12:30. 17 MR. RUSSELL: Must the record be limited to suste-18 nance? ' 19 Off the record. ! JUDGE CASEY: 20 (Discussion off the record.) , 21 JUDGE CASEY: On the record. 22 . Continue until an even time, like 12:30. 23 MR. RUSSELL: All right. 24 BY MR. RUSSELL: 25 Q Having landed in Penelec's' service territory, COMMONWEALTH REPORTING COMPANY #717e 761 7150
1139 I suppose we stay there for a little while, Mr. Budetti. 2 I direct your attention to Page 16 of your Statement i i 3 A, and in that context, -you make the statment of management I 4 being an integral part of the communities they serve; is that l 5 correct? l 6 A There is a line for that. I talk about planning 7 for a company is best accomplished by top management, as it has 8 now and always have, detailed operating analysis. 9 That means from being in the service area, from being' i 10 an integral part of the communities that serve; that's the l 11 context of this statement. , 12 Q All right. That is in connection with planning; is 13 that correct? I I4 Planning and operations of the company, yes. i A i 15 Q In connection with execution, you refer to the con- i 16 cept of on-site top management; is that correct? 17 A That's corrrect. 9 18 Q As being desirable. I 39 Yes, sir. A !, i 20 And from the planning point of view, it's desirable Q 21 that top management be an integral part of the community they j 22 i serve; is that correct? n3
~
A Without reading the thing again, they should be on- l' 4 I 1 24 site and an integral part, that's true. gg 25 Q Now, as you view the present Penelec situation, is , COMMONWEALTH REPORTING COMPANY (717 761 7150 i
1140 J 0 1 the Penelec top management an integral part of the community 2 at Johnstown? 3 A I hope so. 4 Q Pardon? 5 A I would hope so, but I do not know. 6 Q Well, as you considered it in formulating your testi-l 7 many, in your particular t.estimony starting on Page 16, how far' i 8 out from Johnstown is the Penelec service territory would this ' 9 concept of Penelec's top management being an integral part of 10 the community extend? 11 A I didn't consider that. 12 g pardon? 13 A How many miles? 14 Q Yes? 15 That was not important. A 16 Q Well, in your judgment, top management of Penelec, II would it -- 18 MR. RUSSELL: I'm sorry; strike that. 19 fl . BY MR. RUSSELL: 20 0 In your opinion, should top management of Penelec 21 be an integral part of the community of Altoona, in its ser-22 vice territory? 23 To the extent there are important aspects of grcwth A
} 24 5 and opportunities and/or problems associated in Altcona, then 25
' I would expect that the Penelec people would be spending some COMMONWEALTH REPORTING COMPANY (717 761 7150
l 1141 1 time in Al toona visiting, talking with civic leaders, chamber lll 2 of commerce, tryirg to get the feel for the pulse of the indus-3 trial growth.or deterioration, depending on what Altoona is 4 doing, and they should put their time and attention to doing 5 that out of, I a ssume, the Johnstown office, wherever they 6 happened to be located. . 7 Q Well, is it your thesis that that visitation of the 8 community of Altoona should be accomplished by top management 9 in Johnstown, but should not be accomplished by top management 10 in Reading? 11 A No, that's not my thesis. 12 O Well, let's go a little further afield, geographi- . 13 cally. O 14 Take the City of Erie. 15 A Well -- 16 Is it your view that top management of Penelec should Q , 17 be an integral part of the City of Erie? 18 -- you're confused in " integral part," and -- A 19 Well, I'll be glad to have you clarify the matter for' Q 20 me. . 21 Well, I'll read it one more time. A 22 ." Planning for a company is best accomplished by top l 23 management, as it has now and will always have detailed oper-24
.a ting knowledge gained from being in the service area and from I 25 being an integral part of the communities they serve.
COMMONWEALTH REPORTING COMPANY 4717 761-7150
I 1142 i O 1 \,J Execution of top management level decision is more 1 2 efficiently accomplished by on-site top management." ; 3 Now, you're talking about planning for Altoona or j 4 Erie, or are you talking about execution? . 5 You can plan and execute from New York City. Ifyoul i 6 want to commute full time; if you want to be on the road; if l l 7 you want your executives to be. wasting their time on traveling, 8 train and motels, it's not necessarily a good lifestyle, but I i 9 assume you can impose that on people. ; 10 Is that an efficient way of management? No. 1 11 That's my point here. ~ l s 12 o Well, I believe you have indicated, have you not, .
)
13 that Penelec's organizational' structure has worked reasonably i 14 well for Penelec, as of the present time? 15 A I have conclusions from TB&A and Booz Allen that the ; [ 16 type of organization Penelec has is sufficient throughout its 17 region, in its service area, and has been effective in running I 18 the company. 19 , It, obviously, is in better financial condition and l ! l 20 operating condition than the other companies; so I'd have to 21 agree that that's probably is a fair conclusion. , t 22 0 As you understand it, Mr. Budetti, how far is it i i 23 from Johnstown to the furthest reach of Penelec's service (
-- ,4 territory?
"5
- I'd guess, 150 to 200 miles.
A I have no idea. CoMMoNWE ALTH REPORTING COMPANY (717' 761-7150
O 1143 t 1 O On the issue of planning, Mr. Budetti, what is your 2 und,erstanding as to where planning on behalf of Penelee is done 3 with respect to generating facilities -- and when I sa y 4 "pla nning , " I'm referring to such matters as determination of 5 fuel types, sighting, et cetera. 6 A For that one specific area? ! l I 7 Q Yes? I 8 A There may be a centralized -- I think that there's i 9 a service company, but I'm not positive. 10 Q And where, as you would understand it, would the , 11 planning take place for Penelec's bulk power transmission i 12 facilities? l 13 A I don't know. i 14 0 Uhere would you understand the planning on behalf ! 15 of Penelec with respect to interconnections with other GPU i 16 companies would take place? l 17 A I assume by a meeting -- where would it take place? 18 It would take place in a meeting of people who are parts of f D each of .the companies, wherever they may physically want to l 20 locate and talk about it. 21 An'd at what corporate level, as you understand it, l Q 22 would planning for Penelec with respect to interconnections , 23 with companies outside the GPU system be made? ! 24 A I assume that's at the GPU level -- I don't know. g 25 In the present Penelec table of organization, there Q , COMMoNWE ALTH REPORTING COMPANY 17171 761-7150
1144 i
\l 1 is a Vice President of Technical; is that correct?
l 2 I think you made reference to it somewhere in your 3 testimony. i 4 (Witness perusing documents.) !
, 5 THE WITNESS: I made reference to a Vice President 6 of Technical?
7 BY MR. RUSSELL: 8 Q Yes. I i 9 (Witness perusing documents.) 10 BY MR. RUSSELL: 11 Q If you have no recollection of it, all right; I'm I 12 not pressing. I'm just asking as a matter of information, have!-
}
13 you observed that office in Penelec's present structure? l 14 A Yes, sir. 15 ^ Well, what, at least, -would be your understanding Q 16 as to the areas of responsibility of that office? 4 17 Well, I -- A 18 If you know? Q l 19 A I don' t know. 20 MR. RUSSELL: That's all the cross-examination we 1 21 have for Mr.' Budetti. 22 JUDGE CASEY: All right. Perhaps this would be a 23 good ti'me to recess for lunch. 24 Mr. McClaren, will you have any questions'after the 25 recess? l I l l COMMONWEALTH REPORTING COMPANY a717. 7617150 l
1145 1 MR. McCLAREN: Doesthatcompleteallquestionsaskedl 2 by Respondent? 3 MR. RUSSELL: Of Mr. Budetti? 4 MR. McCLAREN: Yes? 5 MR. RUSSELL: Yes. 6 JUDGE CASEY: Is an hour enough time, an hour and 7 15 minutes, an hour and a half, whatever you need to take 8 care of -- f 9 MR. SHILOBOD: Well, Your Honor, I might have one or 10 two redirect questions. 11 JUDGE CASEY: Oh, you have something on redirect 12 before we recess? 13 14 R. SHILOBOD: Yes. 14 JUDGE CASEY: All right. 15 MR. SHILOBOD: I could take it after recess; I think 16 that would be easier. 17 JUDGE CASEY: Okay. l l 18 MR. RUSSELL: Well, may.we go off the record? 19 , JUDGE CASEY; Off the record. 20 (Recess.) 7 1 ! 21 JUDGE CASEY: Back on the record. 22 14r . Shilobod, you may question Mr . Budetti on 23 redirect' examination. 24 MR. SHILODOD: Mr. Russell, do you have any addi- lh 25 tional cross, before I do the redirect? COMMONWEALTH REPORTING COMPANY (717' 761-7150
1146
/^'s \/ 1 MR. RUSSELL: No.
2 REDIRECT EXAMINATION 3 BY MR. SHILOBOD: 4 Q Mr. Budetti, in response to cross-examination, you ; 5 indicated that the time frame of the $2 billion savings which i 6 you referred to was around 10 to 20 years. 7 A Yes. 8 Q Do you have any information about the proposed time 9 frame of savings from the management combination? 10 A Well, my readings show that they would happen within 11 between teo and three years, and up to five years, depending
)
12 on the combination of additional costs, such as systems costs, ! (~'/ x_ 13 that were not put in in that time frame. 14 Q When you made statements concerning the relevant 15 financial conditions of Met-Ed -- and I'm saying particularly 16 with respect to your statements a major bankkruptcy -- upon 17 what did you rely? l 18 A' We ll , I relied on the TB&A reports. I relied on 19 indications in the testimonies that I read, not specifically 20 about what the interest coverage was or what the balance sheet 21 looked like, et cetera. 22 .I certainly relied on general knowledge, if your I 23 will, about the financial condition of the company's invest- i 24 ments, publicized in the press, in some of those that are , i 25 ili sted . l COMMONWEALTH REPORTING COMPANY i717 761 7150 ; I
1147 '; 1 And, finally, in the cross-examination, if you will, 2 of some of the witnesses during this hearing, it was sta ted 3 again the precarious, if you will, financial position that 4 Met-Ed was in. i 5 Q When you indicated that you did not particularly l 1 6 rely upon Mr. Miller's testimony, who was identified -- when 7 you were questioned as to whether or not he was a bankkruptcy 8 expert, and you mentioned that you had his testimony from the 9 308 investigatory proceedings, why did you not rely upon Mr. 10 Miller's testimony? , 11 A Well, his conclusion was not unlike, and probably. 12 was the founding for Theodore Barry's, the one that said 13 we really don' t know what happens in a bankkruptcy situation i 14 because the law is changed -- and I allude to that in my 15 testimony, where I say, "Given the fact that there is no real 16 knowledge about bankkruptcy and what conditions exist under r 17 the new law, that it's not something you want to test with a 18 consolidated management as opposed to a separated management. i 19 He didn' t come to any stronger conclusion, if you 20 will, than Theodore Barry did. 21 And there was also inquiry as to your memory about Q 22 the contents of the Revolving Credit Agreement; was there any-23 thing significant about the Revolving Credit Agreement, to you?; 24 A IusedtheRevolvingCreditAgreementinmyanalyseslh
*5 ~
of the financial process, to point out that it was an CoMMoNWE ALTH REPORTING COMPANY 1717 761 7150
1148 t O- 1 initiating start of using Penelea as a mechanism to attempt i 2 to hsip, or ' retrieve, if you will, Met-Ed and GPU get out. ! i 3 I read in cross-examination of one of the company's
]
4 witness' response in this hearing, which simply that the RCA i 5 did, in fact, hurt the financial -- well, not rating, but hert 1 I 6 Penelec. ! 7 Q Are you referring to the borrowing powers of Penelec? 8 A Correct. 9 MR. SHILOBOD: I have no further redirect. i i
. 10 JUDGE CASEY: Mr.McClaren,doyouhaveanyquestionsf 11 Have you reconsidered? I 12 MR. McCLAREN: I have none. }
13 JUDGE CASEY: You have none. i l 14 MR. McCLAREN: No, Your Honor. l t 15 JUDGE CASEY: Any re-cross? . I 16 RECROSS-EXAMINATION ; 17 BY MR. RUSSELL: 18 Q Am I correct, Mr. Budetti, that you said that the , . 19 testimony on behalf of Met-Ed and Penelec is that'the Revolving l I 20 Credit Agreement hurt Penelec? I t 1 4 21 A That's my recollection, yes, sir. I 22 Can you identify what testimony that was? 0 23 Yes, I can. I'll give you the quote out of there -- A O 24 I can't right.now, but I can send it you or give it to the I 5 I Commission, but we have -- i COMMONWEALTH REPORTING COMPANY 4717 761-7150
1149 1 C I think the record is closing tomorrow. 2i MR. SHILOBOD: Perry Whea ton 's cross-examina tion 3 contains that statement. ll 4 MR. RUSSELL: Well, that's not what the Witness said 5 ; the Witness said testimony of Met-Ed and Penelec made this 6 statement. 7 THE WITNESS : I'm sorry. l 8 BY MR. RUSSELL: 9 Q This statement was not by Met-Ed or Penelec witnesses? 10 A You're correct. 11 O Okay. 12 A It was made in this hearing. 13 MR. RUSSELL: That's all we have, Your Honor. 14 , JUDGE CASEY: All right. Mr. Budetti, at the beginn-l 15 l ing of Statement A, when you're describing your general back-16 ; ground -- and I don't want to go into that area too thoroughly, 17 , but you refer to yourself as a Certified Management Consultant; 18 y is there such an official designation? Is there a board that 19 Y certifie,s. management consultants? 20 THE WITNESS: There is a board that was initiated,
^
21 i I. Your Honor, probably six or seven years, under the Institute 22 l of Management Consultants, which has attempted and is continu-23 .ing to attempt to upgrade, if you will, the quality of con-i 24 f sultants, by forcing a test not unlike the CPA examination, 25 ! although that's much more technical and quantitative than would COMMONWEALTH REPORTING COMPANY 4717 761 7150
1150 i i i i 1 be the test for a Certified Management Consultant, but there , i 2 are a set of requirements relative to being in the consulting 3 arena four or five years, a whole series of tests about the 4 basics of consulting that are associated with it, plus in-depth I I j 5 review with clients you are to work with, five, about the ; i 6 quality of the work that has to be written and testimonials, 7 if you will, from five clients, major clients, back to the 8 Institute of Management Consultants, before they are handed 9 Out. l 10 There are probably 2,000 -- { t 11 JUDGE CASEY: Did you have to go through that j 12 process as you've just described? And how many years ago was { 13 that? i 1 I4 THE WITNESS : Probably five years ago. I was one of i 15 the first ones in that. I 16 JUDGE CASEY: This was after the time that you had j-l 2 17 been employed by Touche Ross, or were you still an executive 18 with their organization?- - I I9 - THE WITNESS: I was with' Touche Ross. I was a Part-20 I think I may have.been a Manager when I ner with them. 7 l I 21 finally joihed, when I became a Certified Management Consul- i 22 It was within the first year of IMC, Institute of tant. f 23 Management Consultants, opening up.- 24 JUDGE CASEY: When did you form your own business 25 I in the St. Louis area? COMMONWEALTH REPORTING COMPANY (717- 761 7150 ,
1 1151,
!g i THE WITNESS: In November of 1979. j W 2 JUDGE CASEY: '79. ;
i 3 THE WITNESS : Yes, sir, 4 JUDGE CASEY: Now, with respect to the testimony, 5 the recent cross-examination of Mr. Russell's, about Johnstown, 6 whether that's important to the Penelec operations, in review , 7 ing the company's testimony, was it your understanding that if
- 8 the proposed management combination were to be approved and the 9 management team moved to Reading, Pennsylvania, that they 10 would, at frequent intervals, be commuting back to the City of 11 Johnstown, for some reason or other?
12 Do you recall -- 13 THE WITNESS: That was my impression in Mr. Kuhns' . 14 and Mr. Diekamp's deposition. It may have only related to 15 Verrochi, but I assumed that all management would have to go 16 back to the field at some point in time. 17 With respect to that, Your Honor, it doesn't matter 18 whether you combine them and put them in Met-Ed's area or you 19 combine them leave them in Johnstown. 20 JUDGE CASEY: Well, I was just wondering if they 21 closed corporate headquarters in Johnstown, except for, perhaps', 22 a division operation or something, what would be the need for i 23 the high executives -- the President and the various Vice 24 Presidents -- to travel, periodically, back to Johnstown? I
'S Johnstown wouldn' t be the center of the Penelec CoMMCNWEALTH REPORTING COMPANY 4717' 761 7150
1152 1 operation any longer, would it, af ter the management combina-2 tion? 3 THE WITNESS: I think they'd have to go back to l 4 Johnstown as often as they go back to Altoona and Eric or any 5 of the other towns. 6 It really depends on where the next layer of manage-7 ment is associated. 8 I think the only reason they'd go back to Johnstown 9 is, in my understanding, that there still would be a signifi-10 ll cant amount of lower-level management in the Johnstown are 11 They could not plan to decr ralize all of the com-12 panies out into the service area. That would finally make it {} 13 the division that I've characterized it as. 14 JUDGE CASEY: As a management consultant, in your 15 experience, do you find that utilities, as well as business 16 corporations, are identified with a corporate headquarters at 17 a particular locale, sometimes? 18 THE WITNESS: There is usually a physically location, 19 an attractive building, whatever you have that identify with 20 the company in the location of a utility or a company. 21 Most people can tell you where the majority of the 22 top 500 companies -- well, not top 500, but top 100 cons, 'es 23 are probably located. 24 That's sort of a psychological thing, JUDGE CASEY: 25 is it not? COMMONWCALTH RCPoRTING COMPANY e717 7617150 1
1153 I i l 1h In this case, we know that GPU is a Parsippany, New 2 Jersey, compa ny , the ccrporate headquarters is there, and we've i 3 heard that Met-Ed is Reading and Penelec is Johnstown -- and 4 ,that is in the past. l 5 Is there any detrimental impact by changing corporate l 6 headquarters to a different community? l 7 THE WITNESS: My impression is that there were, 8 relative particularly to the regulatory process. I think the 9 people in the Penelec area lose a voice, from a regulatory 10 point o f view -- they lose their identity, because you then 11 start trying to make decisions that are uniform for everybody. 12 I That's the reason to combine management; you want to take and 13 standardize, if you will, everythir.3 that you do, which is 14 much easier to manage i f you standardize it. 15 So there will be something lost. 16 From a financial point of view, I don't know what 17 the banks, if you will, or financial lending institutions in 18 Pennsylvania would view as the Johnstown company called 19 Penelec,.or the Reading company called Met-Ed. l 20 Now, there may be some identification, I would 21
- assume.
22 ' JUDGE CASEY : Mr. Russell also asked a question con-23 cerning the distance between the furthermost regions of the i 24 service territory from the corporate headquarters of Penelec g
~5 in Johnstown; and you said, "Well, I would estimate perhaps COMMONWEALTH RCPORTING COMPANY 4717 761-7150
1154 O 1 150 to 200 miles. 2 Now, that may have been a fairly accurate guess, 3 but my question is would a person living way up in the north-4 eastern corner of Pennsylvania, say, in Pike or Susquehanna or ' 5 Maynetown, really identify or relate to the Johnstown head-6 quarters of his electric company? - 7 Ti!E WITNESS: Probably not. My comment was that it i a doesn't -- and that was the one I made earlier -- it doesn't i 9 matter whether you're in Johnstown or whether you're in Met-Ed. to There's a presence required at some point in time, somewhere, 11 to glean and pick'up information, from a management point of (} 12 view, that he uses to make decisions. 13 To the extent you have. people up there and you want . 14 to go up there, then it's important that the management get , 15 ther9. 16 I would think the people in that town do understand 17 who their electric company is. It may be at a lower level. 18 They may say, in Altoona, wherever that happens to 19 be, they.know where Penelec is. They know who is there. They 20 know who the division manager is, if he happens to be located 21 there. - l 22 .He sits on a chamber and they usually put him into 23 some kind of public sphere -- which makes an awful lot of 1 n4 sense, because you need to get the pulse of the community that l 25 you're in, to be able tv set the pace of the particular or i COMMONWEALTH REPORTING COMPANY (7171 761 7150
115'5 1 peculiar requirements of that area, from an industrial point 2 of view, or the kinds of customers you have. O 3 There's a whole series of important things to under-4 stand. 5 JUDGE CASEY: All right, one final question on my 6 part, and then we'll wind up and excuse you. 7 Mr. Russell asked you a number of questions dealing ' 8 with the financial condition, the bond interest coverage, and 9 so forth; would your overall view of the proposed management 10 combination differ if Penelec and Met-Ed were in a presently 11 favorable financial position, as opposed to Met-Ed's current 12 financial crisis? 13 THE WITNESS: If Me t-Ed -- f 14 JUDGE CASEY: Would that -- go ahead. 15 THE WITNESS : If Met-Ed was in much better financial 16 condition? 17 JUDGE C AS EY : Yes. If, for some reason or other, 18 they were -- you know, even though Three Mile Island has l 19 happened, that by some fortuitous set of circumstances, they 20 were rather healthy financially at the present time, would that 21 change your cpinion of the proposed management combination, 22 whether it would be beneficial or whether the company should 23 preserve its status quo, so to speak? 24 THE WITNESS : Your Honor, my position would be if thev O 25 were financially in a better position, they wouldn't even be in 9 COMMONWEALTH REPORTING COMPANY e717 761 7150
1156 ( 1 here asking to do that.
- 2 I, facetiously -- well, not facetiously, but put in ;
3 3 a section in my test,imony that said if it makes sense whe.. they 4 are both financial strong, to merge two, why wouldn't they 5 merge three, why wouldn't they merge four. , 6 There's a whole series of reasons as to why you don't! 7 do that. l 8 You physically, with peoples' intensity and the time 9 they have to spend on problems coming here, can't add companies , 10 forever; you just can't keep adding electric companies to your 11 string, but you're going to continue to manage and manage and 12 manage. . 13 JUDGE CASEY: But since there are rather serious 14 financial problems and the company has seen fit to merge at 15 least the higher , level management and the board of directors, - 16 for reasons that they have testified about at length -- but 17 you think that is not the proper thing to do at this point.? 18 THE WITNESS: It is not the proper time to be doing t 6 19 that, no. 20 Now, if you were going to do it in the future, and 21 they both were financially sound companies, I would think that ; 22 you would spend a considerably larger amount of time and have a-23 much more in-depth financial analysis,.for instance, that f 24 showed true benefits of merging those two companies, as opposed 25 to attempting to rush into the thing the way they are doing it COMMONWEALTH REPORTING CCMPANY 1717e 7617150 -
I 1157 , 4 i 'right now. 2 At some point in the future it may make sense, givenl 3; all the organizational system area development kind of problems 4 having been resolved, then it may be an easy thing to merge - ,
+
I 1 l 5 I think we're talking 10 to 20 years until we start thinking j G about things like that. ) I i JUDGE CASEY: Could they proceed with the tentative 8 division reorganization plans, without the management combina- l 9 tion? . 10 THE WITNESS: Yes, I think they can, and they i i i 11 probably should. And it's going to take an awful lot of top l l 12 management time as exists in Penelec and Met-Ed to do that, !- 13 alone. Never mind trying to combine the others -- 14 JUDGE CASEY: Well -- 15 THE WITNESS : -- but I think it's time for somebody ; 16 I to figure out what the Met-Ed organization should look like. 17 Now, if bk. Verrochi is the guy to help that company I i 18 out, then he ought to go over there and see whether he can keep) 19
! that thi,ng from going under; but I think if he does, they've ;
20 ' got to put a new president back in Penelec. i 21 One of the issues that hasn't been addressed here at 22 iall is that in light of not doing thIs, with no management ! 23 consolidation, what are you going to do about the management I l 4 of Met-Ed? 25 There is no president there at the present time; it's; i e COMMONWEALTH REPORTING COMPANY 6717> 7617150
1.158 l 1 the Chairman of the Board, or Mr. Kuh s or Mr. Diekamp, whoever 2 it is. , 3 JUDGE CASEY: If the two separate and distinct 4 Pennsylvania utilities in the GPU system were to proceed with 1 51 a division reorganization plan, could it be done separately ; f i 6 and efficiently, as well, or would they have to share their 7 combined expertise in putting together their division struc-6 ture? 9 THE WITNESS: I think there's some sharin'g of ; 10 . systems and procedures but, given the nature of divisions -- ! 1 11 by that I mean the physical and geographical kind of loca-12 tions -- t..;re's no reason to try to merge the management. , 13 By definition, you don' t merge management; you change 14 the structure and you put it in Altoona or here in Johnstown, 15 ' wherever you're going to do it, and ycu reorganize at mQch 16 lower levels and put in different information reporting li systems, such as schedul'ing systems. l 18 There's a whole series of things that happen that 19 reduce c.osts and, hopefully, increase efficiency over those ! 20 crews in the areas out there, and all that can be done at much ' 21 lower levels without any major -- well, as we've said here, 22 : they're going to have to put together a 12 or 13-man organiza- l
'3
~
tion just to get the divisions together. I 24 When they happen to be under one combined management,; 1 25 we'll have to change that figure slightly. CCMMoNWEALTH REPCftTING COMPANY 4717: 761 7150
1159 l 1 l 1 Again, if you try to deal with what's happening at lll 2 Met-Ed, it may make sense right now to try to isolate Met-Ed 3 and take most of the management out of there; in other words, 4 don't leave any divisional management there. 5 I don't know what you'd do, but there's a whole 6 study that says, "If this doesn't go through, what are you 1 7 going to do with Met-Ed?" Who's the president? 8 JUDGE CASEY: Who's what? 9 THE WITNESS: Who's going to be the president? Who's 10 l. going to spend full time running that company. 11 I assume GPU needs a a full-time president, also, and 12 I thought he was working in both areas. 13 JUDGE CASEY: Well, that's true -- and I nay not O 14 - fully understand the holding company setup, where the presi-15 I dents of the separate utilities take all of their marching 16 orders anyway from the parent, or whether they have a con-17 siderable amount of autonomy that would permit them tc handle i 18 the af fairs of their own individual companies, if that impacts 19 upon the situation. 20 Could you leave Met-Ed without an operating head, 21 with somebody acting doing his -- 22 .THE WITNESS: No, no, you cannot do that. There's 23 a policy -- and you talk about whether they have autonomy; Mr. 24 ! Verrochi has autonomy, within a certain set of constraints, lll 25 that comes out through GPU and the board, and his responsibility i
! COMMONWEALTH REPORTING COMPANY 4717 761 7150
1160 l 1 is to -- well, he gets paid to make things happen, to imple-1 2 ment, to worry about policy levels at the next layers; in other 3 words, those that w'ould affect only Penelec. 4 Now, that's a full-time, I assume, job, to this point 5 in time and will continue to be sufficient will S2 billion ; 6 worth of opportunities, which, I assume, afterwards, would 7 go to Penelec, to be used for them. 8 JUDGE CASEY: Well, I think you need somebody over 9 Met-Ed , also. 10 THE WITNESS: Yes. 11 JUDGE CASEY: That completes my questioning. I 12 ' don't know whether it's raised any other desires. 13 MR. RUSSELL: Could we have just a minute? 14 JUDGE CASEY: Go ahead. 15 (Counsel Russell conferring.) - 16 MR. RUSSELL: I don't believe we do. 17 JUDGE CASEY: All right, fine. 38 Mr. Budetti, Thank you very much for your testimony. l 19 THE WITNESS: Thank you, Your Honor. l , 20 JUDGE CASEY: You're excused at this time. 21 (Whereupon, the Uitness was excused.) 22 .MR. RUSSELL: If Your Honor please, I'might st mention one other thing.
- i
(~N.
'~ JUDGE CASEY: Go ahead.
25 MR. RUSSELL: Assuming that the arrangements can be f i i CoMMONWEAt.TH REPORTING COMPANY (717* 761 7150
1161 I worked out, we're going to endeavor to have Mr. John Graham, 2 Treasurer of GPU, here as a rebuttal witness with respect to 3 credit agreements and certain other financial matters that have' 4 been touched upon in the testimony. , 5 JUDGE CASEY: He's going to be here tomorrow? l i 6 MR. RUSSELL: Yes, Your Honor. , 1 7 JUDGE CASEY: In the morning? 8 MR. RUSSELL: Well, tomorrow sometipe. I'm not sure 9 what his arrangements are, but'it we'll have him here tonorrow., i 10 JUDGE CASEY : Well, we have our work cut out for us i 11 tomorrow, obviously. i 12 While we are all here, what do you think about moving 13 up the time to start the hearing, or would you prefer to leave i! 9 14 it at 10:00? 15 MR. RUSSELL: I'd have no problem with 9:00. 16 JUDGE CASEY: Nine o' clock? i 17 MR. SHILOBOD: All right. 18 JUDGE CASEY: You can pass that information on to , 19 Lee Morrison. ; i 20 MR. McCLAREN: I will. l t t 21 If Your Honor please, I have two MR. SHILOBOD: 22 exhibits that I'd like to have marked and introduced into 23 evidence, if I'm permitted. 4 JUDGE CASEY: Well, wait a minute. You haven't h 25 offered -- I'll have remind you of the fact you haven't COMMONWEALTH REPORTING COMPANY (717' 761 7150
1162 , e 3 1 p/ s- 1 I I offered Statement A or -- l 2 MR. SHILOBOD: I was going to do all of that at the 3 end; that's the way I'd presumed it was done, Your Honor. 4 JUDGE CASEY: At the end of your case you're going to: 5
,l offer all your exhibits at once?
{ l I 6 MR. SHILOBOD: Yes, if -- ; 7 JUDGE CASEY: Well, that's permissable, sure. 8 MR. RUSSELL: I think everybody can make their offers, i 9 at that time. i 10 JUDGE CASEY: Sure, all right. l 11 Now, what was the other matter? - 12 MR. SHILOBOD: If Your Honor please, I'd request that
}
13 there be marked for identification purposes as JARI Exhibit 14 j Number 1, Management Audit Contract Number D-79M00200, which l 15 l is the management audit contract employing TB&A to audit , i 16 i Met-Ed , Penelec and GPU Service Corporation. May it be so l ' 17 marked for identification -- Exhibit Number 6; I'm sorry. i 18 JUDGE CASEY: Exhibit Number 6, right. i h 19 !! . MR. SHILOBOD: May it be so marked? 20 JUDGE CASEY: Yes, it may be so marked. 21 (Whereupon, the document was l marked JARI Exhibit No. 6 l l 22 for identification.) l 23 JUDGE CASEY: And you're offering it at this time? 24 Yes, I am, Your Honor. MR. SHILOBOD: , k i 25 ! JUDGE CASEY: All right. Any objections? t ! COMMONWEALTH REPORTING COMPANY E717 761 7150 ,
1163 1 MR. RUSSELL: To Number 6, no; it's already been 2 substantia lly covered by -- l l 3
- JUDGE CASEY: It's in the testimony; that's correct.
4 MR. SHILOBCD: I would like to point out to Your 5 Honor that the document isn't very clear on the first page, 6 but the handwriting there refers to GPU Service Corporation. 7 GPU itself is stricken out and GPU Service Corpora-8 tion has been inserted. 9 JUDGE CASEY: It may be admitted. 10 (Whereupon, the document here-tofore marked for identifica-11 tion as JARI Exhibit No. 6 was received in evidence.) 12 MR. SHILOBOD: I also request that there be marked gg for identification purposes and introduced into evidence as 14 JARI Exhibit Number 7, the Conemaugh Operating Agreement. This was the agreement that there was cross-examination about with 16 Mr. Verrochi concerning the fact that Penelec does provide ser-- l l vices to operate some generating stations which it does not own. May I have the document marked as JARI ' Exhibit Number 7 for identification purposes and introduced into evidence? MR. RUSSELL: Well, I would say I have great diffi-culty with cluttering up this record with respect to an oper-l ating agreement with respect to a coal-fired station which is i operated by Penelee and which is owned a whole slew of other electric utility companies, of which one is Met-Ed. Met-Ed, 3 CoMMoNWCALTH REPORTING CoMF APJY (717' 761 7150
1164 , i (~, ! s
'Y" 1 it's my recollection, has 16.45 percent interest in the 2 station, but I don't see where that has any relevancy in this 3 case. j 4 JUDGE CASEY: Well, make an offer of proof. !
l 5 Are you using it to -- l I 6 MR. SHILOBOD: It is specifically for the purposes ; I 7 that were discussed with Mr. Verrochi; namely, that there is an! i I e alternative method to achieve or to utilize the skills of l 9 Penelec if that is really required by some other company. j i 10 There is an alternative method, other than the i 11 management combination such as is being proposed. ! l, 12 JUDGE CASEY: Well, maybe I missed a point in the (k-'/ , } 13 beginning, but I thought you said that Mr. Verrochi had testi- l ; l 14 fied that in this situation, Penelec was an operator, but had ; 15 no ownership interest at all; is that correct? l I 16 MR. SHILOBOD: That's correct. 17 JUDGE CASEY: And the agreement, as you see it, is 18 consistent with Mr. Verrochi's testimony?- - 19 . MR. SHILOBOD: Yes, it is, Your Honor, i 20 JUDGE CASEY: But, in fact, Met-Ed, a sister company,I i 21 has a 16 percent interest, along with other utilities? l 22 . MR. SHILOBOD: That's correct. Met-Ed is utilizing f I. 23 that scale now, under this operating agreement, along with the i r i
~' 24 other utilities.
25 And your point was the fact that they JUDGE CASEY: COMMONWEALTH REPORTING COMPANY e717' 7617150
1165 i i could operate a generating station on behalf of these owners lll 2 would, in some way, surplant the proposed managment combina-3l tion a s a -- 4 MR. SHILOBOD: That's correct, if the nanagement 5 combination is being implemented for purposes of providing
- Penelec services with respect to coal generation facilities.
7 There was testimony that with the creation c f GPU 8 Nuclear, if that is appr6ved, that there will be only a few 9 remaining generating stations at Met-Ed that were coal-fired, 10 and that Penelec had particular skills in this area. 11 This is one of the factors that was important for 12 purposes of the management combination. MR. RUSSELL: Well, Your Honor, I have no problem O 13 l 14 with the substance of the agreement.. I have no discomfort 15 with the agreement. It's just one of a number of agreements. 16 There's a Keystone Operating Agreement, which is the 17 same forma t. 18 There's a Homer City Operating Agreement, in which 19 Penelec has a 50 percent interest in the unit. 20 New York State Electric Gas is another. 21 All right. JODGE CASEY: 22 .MR. RUSSELL: There's operating agreements with 23 Three Mile Island - 1, Three' Mile Island - 2. l 24 Just as a matter of principle, I am troubled by h
.'5 l cluttering up the record with another document that I don't COMMONWEALTH REPORTING COMPANY (717 761-7150 l
.-.e 1166, O 3 think is relevant.
2 MR. SHILOBOD: If Your Honor please, I think we've a clarified what is the purpose for which JARI Exhibit Number ll l 4 was being introduced. 5 I would agree with Mr. Russell that the particular ; 6 detail of the agreement really isn' t crucial to this case, j i 7 and I think, in light of Mr. Russell's comments, the record is l l E clear enough that maybe we don't need it as a separate exhibit.l 9 JUDGE CASEY: I don't think it's any problem for 10 either side. 11 If you're offering it to show that Penelee has [ {} 12 demonstrated expertise in operating coal-fired generating 13 stations, that might even support part of their case, which 14 says that the Penelec organization would benefit from the 15 combined' management because they are coal-fired experts and 16 can put more emphasis with Met-Ed on coal. 17 So it doesn't hurt either side; I'll let it in or 18 keep it out. , 19 . What's your pleasure? I 20 MR. SHILOBOD: Well, Your Honor, I think Mr.. 21 Russell's concern about the volume of the record -- I don't 22 care -- is probably correct. I think that the is. sue that we 23 had presented it to establish is now clear on the record; so 24 I don' t have any objections to not offering it. 25 MR. RUSSELL: Perhaps I can fully the record on the j COMMONWEAL.TH REPORTING COMPANY s717 .761 7150
e - e 1167 l 1 point that Penelee also has one operating agreement with gg 2 f respect to a pump storage unit, in addition to coal-fired -- 0 MR. SIIILOBOD: That's all right. 3 {' l 4 MR. RUSSELL: -- so we can put that in the record, i 5 j' a lso . JUDCE CASEY: We will then admit into evidence 6l 7 JARI, Incorporated Exhibit Number 6. 8 Exhibit Number 7 has been offered for purposes of identification, but has not been offered into evidence, so we 9l 10 ljwill keep it out of the record. I 11 ! By consent of all Counsel of record, we will meet I 12 tomorrow a t 9 : 00 a .m. , instead of 10 : 00 a .m. 13 This hearing is now in recess until 10:00 a.m. 14 tomorrow morning. 15 Thank you very much. 16 (Whereupon, at 1:24 p.m., the hearing was adjourned, 17 to reconvene at 9:00 a.m., Thursday, January 8, 1981.) 18 II l 19 ' l 20 , 21 22 23 t. 25 COMMONWEALTH REPORTING COMPANY 4717' 761 7130
e-. e 1168
,0 I stat m aats i 2 I hereby certify, as the Stenographic Reporter, 3
that the foregoing proceedings were taken stenographically by 4 I me, and thereafter reduced to typewriting by me or under my 5 direction; and that this transcript is a true and accurate 6 record to the best of my ability.
- 7 COMMONWEALTH REPORTING COMPANY, INC.
g f'/ By: / /.4wl f /d - 10 ~ / ARTHUR STAFFDf1D , CVR-CM ' 11 12 13 14 15 16 17 18 19 , 20 21 - 22 , 23 Ji 24 25 COMMONWEALTH REPORTING COMPANY 1717 761 7150}}