ML20031B293
| ML20031B293 | |
| Person / Time | |
|---|---|
| Site: | Wolf Creek  |
| Issue date: | 09/24/1981 |
| From: | Grabill J KANSANS FOR SENSIBLE ENERGY |
| To: | KANSAS GAS & ELECTRIC CO. |
| References | |
| NUDOCS 8110010177 | |
| Download: ML20031B293 (23) | |
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UNITED STATES OF AMERICA d
NUCLEAR REGULATORY COMMISSION d
BEFORE THE ATOMIC a AFETY AND LICENSING BOARD 93
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KANSAS GAS AND ELECTRIC COMPANY, )
Docket Nh-M jy et. al.
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C-SEP3 01981~ -
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(Woff Creek Generating Statica,
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ANSWER OF INTERVENOR KANSANS FOR SENSIBLE ENERGY TON;g jy APPLICANTS' FIRST SET OF INTERROGATORIES Jolene Grabill for the intervenor, Kansans for Sensibic Energy, being first duly swern states under oath as follows:
The following are my answers to the Financial Qualification Contention Interrogatories, Nos. FQ-1 to FA-23; the Emergency Planning and Finen-cial Qualificatims Contentions; and the General Interrogatories of the applicants, Nos.1-41 each dated August 19, 1981:
FQ-1. The criteria to determine whether applicants are financially qualified to operate the Wolf Creek facility are as follows:
(a) We consider the applicants' ability to complete construction p o3 of the plan; as an indication of their management abilities in 3
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'8110010177 810924 PDR ADOCK 05000482-O PDR
general.
Likewise, we havi their record in financing the con-struction to review as actual history in this matter. We will use this record to help deterrr,ine their potential ability to finance the opera: ion of the plant.
(b)
We will consider the ability of the applicants to earn re-venues as allowed by the Kansas Corporation Cc,mmission (KCC) and the Missouri Public Service Commission (MPSC) and whether these revenues are sufficient to cover operating costs, debt service, and still provide a reasonable profit to tin company. Significant questions exist about the customers' ability to pay rates at a level high enough to cover costs and provide reasonable profit. If rates go toe high they have incentives to either generate their own power or drastically rMuce con-sumption.
(c) The extent to which the applicants nave exhibited the ability to control costs in the operation of other generating units while operating efficiently and competitively.
(d) During the life of the plant, can each of the applice.nts generate enough earnings and return on investment in order to pay reasonable levels of dividends to retain investor confidence and to gain access to equity and debt capital markets?
(e)
Will the KCC and the MPSC allow revenue rates to meet cash needs of each applicant, and will the applicants exhibit the managerial ability to allow each to earn at those rates?
(f) The ability of each of the applicants to project consumer demand in long range planning, and their ability to construct and operate generating plants without wasteful excess capacity.
FQ-2. The following f actors concerning the applicants' financial conditior, have changed since issuance of the construction permit for the plant:
(a) General changes in the money market conditions, e.g. rismg interest rates which increase the cost of money to applicants.
(b)
Regulatory environment has not provided rate relief in all cases requested by applicants, for example Missouri Public Ser-vice ammission declined to put KCP&L's latan plant into the rate base, and there have been delayed rate increases for the Jeffrey Unit I plant for KG&E by the KCC. This hurts bond ratings and increases interest costs for Wolf Creek construction. -
(c) The history of the nt. clear industry shows that plants oper-ate at lower levels than originally estimated, thereby reducing the pckntial efficiency of plants. Wolf Creek is no exception and this will increase its operating costs. Wolf Creek was es-timated at an m capacity f actor in the WCGS Environmental Report Table 8.e-4 (2-14-75 Revision 3).
The Kansas Corpora-tion Commission heard testamony about the plant capacity factors in their Docket No. 120,783-U regarding purchase of 17% of the plant by the Kansas Electric Power Cooperatives. In their Order dated October 22, 1980, the Commission "is convinced that the most accurate estimate of the capccity factor which the Wolf Creek unit should be expected to perform at would be :n the range midway between the 74 percent predicted by KEPCO and the 65 percent predicted by staff.
(See page 21 of that Order.)
In that same Order, page 20, James I. Sturgeon, President of Mid-American Economic Ref e:.Q Associates, testified:
" California Er.ergy Commission and Sturgeon and Lundy both have determined that a 60 percent capacity factor is the most reasonable figure to utilize for planning purposes. Sturgeca also did a study of the utilizatio:: factor for plants. The study estimated a utilization factor of 50 percent..
(d) The peak load and load growth for the applicants is less than previously estimated.
At the time of the construction permit hearings, the applicants estimated growth at 7% annually.
KG&E's Report to Sharehold rs 1980 states on page 6: "we ex-pect growth in the next few years to be about 3.5% annually."
According to Wayne A. Weber, Chief Eng!..eer for the Kansans Corporation Commission staff, testifying in the KEPCO hearir;;s before the KCC, page 24, KCC Order, October 22, 1980: "The actual load growth experienced by such utilities as KG&E has recently ranged as low as 2.02 percent,.... that load growth could well range below the 4 percent used by Nd"CO." This 4 percent amount ei E.*ad growth for KEPCO had been a revision from earlier estimates for KEPCD of 7% as recent as 1976.
(see same KCC Order, page 23) This. lower load growth in demand for electric power requires increases in rates, which may not be allWed. It indicates future revenues will not be as great as required.
(e) The bond ratings for KG&E and KCP&L have been lowered.
K G & E's 1980 annual report states: " Citing inadequate earnings, restricted cash flow, heavy construction requirements, limited financial flexibility and lack of timely end adequate rate relief, rating agencies reduced company bonds from A to Bas and f rom A-to BBB, commercial paper from P2 to F3 and preferred stock from BBB to BBBB-and from A to Ba."
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"The downgrading of KC&E's cond rating reflects investment community pessimism regarding KG&E's ability to earn a rate of return commensurate with its level of risk. A company's bond rating reflects the investment community's judgment of the balance between the company's financial risk and expected rate of return."
l Cresap, McCormick and Paget, Inc., report, November,1980, page IV-33.
(The report is hereaf ter referred to as " CMP.")
The applicants have extremely large external financing needs before the plant can be completed.
The e 2 favorable bond rating increases interest ch:?ges to the plant and the cost of operation is increased.
(f) KEPCO has had difficulty in completing the purchase of 17% of the plant and in securing the needed REA financing needed to complete the purchase.
if the KLPCO sate is not made the ability of KG&E and KCP&L to finance the plant is questionable. See the KG&E 1980 annual report (page 8-9).
Also, a memorandum prepared
- y Brian J. Moline, general counsel o
- o the KCC, dated July 16, 1981 and concerning a KEPCO-REC Meeting, Washington, D. C.
July 15,1981 states: " Frank Bennet then announced that RCA would not be able to make any commitment guarantee to KEPCO in FY 81
(which expires September 30) (page 2); on page 4, C.'._clie Ross said that the reason the July 31 deadline was so im.nrt-ant was that the CFC line of credit expired then and so 1
did the extension that KG&E and KCP&L had granted to KEPCO; Frank Bennett then inquired about the possibility of continuing short term financing through the balance of the year (page 5);
Mr. Doyle of KCP&L responded that the partners would reluctantly consider another short term extension but he wanted to know if even af ter October I there might still be difficulty in closing the KEPCO deal.
He said that KCP&L had ~ financial problems of its own with 50-75 million dollars in short term indebtedness coming due in December. The potential of having to refund KEPCO's money was a continuing cloud on KCP&L's financial position.
He said that the "KEPCO problem" was becoming notorious throughout the industry and that the money market and rating groups were getting nervous (page 5)."
(g) The cost of the plant has been underestimated. If this i
problem has existed during construction, there is no guarantee the utility will not face the same difficulties in estimating and dealing with operational costs and securing revenues to cover those costs. This is supported by the following:
Underestimates of direct and indirect project costs and escala-tion have added more than $113 million to the Wolf Creek Project budget. CMP, page IV-29.
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Wage and benefit escalations have been underestimated. See C\\1P Exhibit IV-7 and IV-9.
See CMP page X-16 and 17 about need to upgrade personnel policies including compensation levels even further and CMP Appendix B-2 and B-3 re KG&E salaries.
FQ-3. They will not be able to generate revenues to pay operating costs and debt service and yield a reascnable return on investment.
Peak load and total sales will be less than estimated by applicants.
Interest rates and inflation will be higher than estimated by appli-can. Future rate increasc4 will diminish demand and revenues w.a aecline. Mar.agement practices by applicants have been will be inadequate.
FQ-4. The applicants have not supplied current estimates of operating costs.
Presently the only sources for this information available are the previous estimate of operational costs given in the Wolf Creek Generating Station Environmental Report, (4 volumes) held in the Business and Technical Division of the Wichita Public Library. Operational costs estimates can be found in that docu-ment on the following pages:
8.2-6 ( 2/14/75 Revision 3); Table 8.2-1 ( 2/14/75 Revision 3); Table 8.2-2, Estimated Anr.ual Oper-3:Mg Costs (Millions of Dollars) ( 2/14/75 Revision 3); 11.3-1 (2/14/75 Revision 3); 11.3-2 (
2/14/75 Revision 3); page 3.2-4
(?/14/75 Revision 3).,
FQ-5. CMP illustrates how construction costs have increased during the life of this project. Many of the same factors contributing to this increase in construction costs can be applied to the applicants' estimates of operating costs for the plant and their systems. General inflation and interest rate escalation have been higher than predicted; underestimation and omission of costs by applicants; increased wage and benefit costs; additional costs required by regulatory changes; and future sales of electricity are over estimated so plant will not operate at rnost efficient capacity and costs per KW of electricity will increase. Specific identification of the type and amount of increased costs cannot j
be made until applicants provide current estimates of operating Costs.
FQ-6. Specific amounu of increases in the operating costs over the applicants' projected costs cannot be made until applicants provide information regarding their current estimate of the plant's operating costs.
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l FQ-7. We consider the problerns of we k stoppages and construction problems as one related issue.
The CMP report ( Appendixes A-1 FQ-8. through A-5) details Work Stoppage on Safety Related Concrete.
Appendix A-5 indicates: "In total, !!6 workdays were lost during the concrete hold;" and, also: "An accelerated work schedule, which alternated between 60 and 40 hour4.62963e-4 days <br />0.0111 hours <br />6.613757e-5 weeks <br />1.522e-5 months <br /> workweeks, was insti-tuted f rom August, 1979 through mid-January,1980." These hours and stoppage increased the cost of construction of the plant. Delays in completion add interest costs which increases operating costs. The CMP report (page IV-31 & 32) states:
" Increased direct and indirect costs due to construction problen particularly the base mat incident, were incurred." Also, these increases due to constiuction problems and work stoppages are indicators of added maintenance costs during the operation of the plant.
FQ-9. Numerous regulatory changes have occurred as a result of the TMI accident that increase the construction costs and will increase the costs of operation.
At page 15, the KG&E 1980 Stockholder's Report states: " Changes in the scope of the Wolf Creek project including safety features resulting from the Three Mile Island accident, added federal requirements and delays in meeting construction milestones have caused two one-year delays in the in-service date. They also have contributed to the approxi-mate 60% increase in the project's estimated cost since the first definitive estimate in 1976." -.
The CMP report, Chapter IV on Cost Performance, deals with several of the regulatory changes.
Page IV-15 indicates addi-tional regulations resulting from the TMI accident at a cost of
$5 million.
Page IV-17 of the report reveals increases in the operations salaries budget because of three causes; one of which iss " regulatory requirements, including staffing increases to com-ply with regulatory requirements." Specifically, Appendix B-5 and B-6 of the report reveal additional operator training costs due to NUREG 0578 which ircrer.sc required numbers of operators at the plant.
FQ-10. We cannot adequately respond to zhis interrogatory until appli-caats provide requested data on estimated costs (including transportation) of permanent waste storage offsite, estimated costs of the waste storage onsite for the allowed 20-year dura-tion, and copies of contracts a..; other documents relating to waste storage.
FQ-l l. Spring and Summer rains have for the time being eliminated water shortages, so there have been no increased operating costs.
FQ-12. Air and water emissions have not occurred during construction.
Our concern is with the operation of the plant and potential unplanned emissions of radioactive nuclides in the event of un-. --
I planned releases into either the air or water supply in the event of an accident at the plant. The accident at TMI is the most revealing example of unplanned releases of radioactive materials into both air and water supplies.
Intervenors do not have access to cost breakdowns on the actual procedure for releasing the contaminated water into the Susquehana or the radon gas into the air and the corresponding safety pre-cautions taken.
Therefore it is difficult to estimate such poten-tial expenses for TMI.
The applicants must make some allow-ance for such costs and problems in the event of such an accident as at TMI so that the funds are available and the public safety can be maintained.
FQ-13.
The increased costs listed above add to the revenues the appli-cants must receive in order to earn a profit for shareholders, pay dividends, and repay debts. These added costs along with all other costs will require higher rates than consumers are willing to pay. Consumption of electricity will not increase enough to offset revenue losses and may even decrease. Faced with these financial concerns, the applicants will cut costs or become bank-rupt.
Because of their poor financial position, maintenance and safety will be neglected. Therefore, accidents are more likely i
to occur. If accidents occur, the applicants will not have the financial ability to deal with them. Therefore, the plant will not be operated at a safe level.
If the applicants are not finan-. _ _ _
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cially able t^ maintain their respective systems, it is not possible for them to decommission the plant and safely dispose of wastes.
FQ-14.
The cummulative knowledge I have about operating costs has I
been developed by study during the past few years. At this time I cannot recall specific information that I rely upon.
I will re-view my materials and furnish details about information I rely on.
1 FQ-15. We shall consider at least the following: ability to adequately finance construction; ability to receive adequate rate relief to cover costs of operation; ability to pay debts; ability to borrow money; ability to generate the revenues to cover costs the ability of the applicants to generate reasonable profits, to pay dividends and attract capital. We shall consider the following factors regarding decommissioning: the potential cost of safely decommis-l sioning the plant as compared to applicants' estimates of that cost; the method of funding decornmissioning proposed by appli-cants; and the proposed method of decommissioning; and the effect on safety of the proposed method of decommissioning and the effect on safety of the method of funding decommissioning.
FQ-16. The financial condition of each applicant is worse now than when the construction permit was granted. Interest and infla-tion rates are higher. This makes costs of decommissioning.
higher. Major changes in the money market conditions have unfavorably affected the applicants' ability to generate external financing. See the CMP report which states:
"The large amount of financing requ: red by the owner utilities to complete the Wolf Creek plant will be difficutt, though not impossible, to raise within the 1980-1984 time trame," page VI-il; and "The potential financing problen.s faced by the owner utilities such as the sufficiency of rate relief, downgrading of credit ratings, dilution of common equity arid so forth, are, in fact, widespread throughout the utility 'ndustry," page VI-il.
The continued increases in the total cost of the plant construc-tion from $500,000,000 to $2,000,000,000 reveals the possibility of corresponding increases in the estimated decom-missioning costs. Some of these increases will be due to market conditions while others may be due to underestimations by the applicants or misjudgment about the appropriate method of decommissioning. Further study on decommissionir.g since the construction permit hearings reveals estimates of decommissioning costs that greatly exceed applicants' original estimates. The accident at TMI has brought the issue of premature shutdown into reality and raised concerns about funding of pre-mature decommissioning. T his factor adds to decommission-ing costs. ---..-
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FQ-17. The cost of decommissioning will be such that the applicants will not have the cash available to them to pay such costs.
As we hE.ve stated before, the applicants will not be able to gerierate sufficient revenues to pay dividends, generate substantial retained earnings, internally generate cash, and pay their debts. The applicants have substantially underestimated the cost of borrowing money,
the inflation rate, consumer resistance to higher electric rates, the complexities of decommissioning, and the cost of decommissioning. The applicants have not given consideration to the cost of a premature decommissioning such as Three Mile Island or the possibility of any other decommissioning required much earlier than had been anticipated. There is no indication that in the event of such a premature deccmmissioning for either reason the applicants will be able to fund such a de-commissioning. They are not able to deal with a Three Mile Island type of situation. There is no assurance that the appli-cants will be able to rcmain in business; if so, they will not be able to provide fer the decommissioning.
FQ-18. The latest source of estimated decommissioning costs by the applicants is the Order of the Kansas Corporation Commission, in the Docket No. 120,783-U. They estimate this at $400,000,000.
(page 35)..
FQ-19. We cannot provide our estimates of underest;mation because applicants have not made available their current estimates of decommissioning costs. Also, we need to know what method of decommissioning is to be used or what possible methods are be-ing considered by the applicants before we can answer this question.
FQ-20.
At this time we do not have a firm estimate of the cost; however we feel the amount mentioned in FQ-18 may even be low. We will provide this when we have calculated it and will then furnish the other information requested in this interrogatory.
FQ-21.
Intervenor's am-nded petition described not a reserve, but in fact a prepaid deposit of fur.ds with an agency external to the applicants; for example, the state treasurer. Another potentially acceptable method of faading would be a funded re-serve (externally managed) accumulated over the life of the plant.
Both types are described in " Assuring the Availability of c..
Funds for Decommissioning Nuclear Facilities," by Robert S.
Wood Antitrust & Indemnity Group, Office of Nuclear Reactor Regulation, U.S. NRC, July 1979.
(page 7-8)
The method of funding the costs is set forth in that paper.
FQ-22.
Informatio. scurces relied upon to date regarding costs of de-commissioning a nuclear power plant are as iollows:
i (a) " Assuring the Availability of Funds for Decommissioning Nuclear Facilities," Robert S. Wood, Antitrust & Indemnity Group, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, July 1979, NUREG-0584.
(b) NUREG/CR-0139 Volumes 1 & 2 and Addendum. " Tech-nology, Safety and Costs of Decommissioning a Reference Pres-surized Water Reactor Power Station," R.
- 1. Smith, G. 3. Konzek, W. E. Kennedy, Jr., Battelle Pacific Northwest Laboratory; prepared for the U. S. Nuclear Regulatory Commission.
(c) " Radioactive Materials in California - A Survey of Regulatory Issues in Industrial, Research, Power Generation, and other uses; Environmental Monitoring; Facility Decontamination and Decommission-ing; Transportation. A report of the Secretary for Resources State Task Force on Nuclear Energy and Radioactive Materials, April 1979. Prepared for the Honorable Edmund G. Brown Jr.,
members of the Legislature and People of the State of California.
l (d) " Costs and Financing of Reactor Decommissioning: Some Consider ations," by Vincent L. Schwent, Staff, California Energy Commission.
Presented to a meeting of-the National Association of Regulatory Utility Commissioners. Seattle, September 12, 1978.
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(e) " Cleaning Up the Remains of Nuclear Facilities--A Multi-billion Dollar Problem." Report to the Congress by the Comptroller General of the United States. Energy Research and Development Administration, NRC. June 16, 1977 EMD.77.46
(!) " Decommissioning Commercial Nuclear Reactors," by Joseph A. Sefcik.
Technology Review, June / July,1979, pp. 56-71.
(g)
Brief of the Public Interest Research Group in Michigan, In the Matter of the establishment and treatment of Nuclear Plant Decommissioning Funds. Case No. U-6150 before the Michigan Public Service Commission, State of Michigan. June 15, 1981.
Brief prepared by Richard P. Duranczyk, Legal Director. Public Interest Research Group in Michigan, June 15, 1981.
FQ-23.
Please see my answer to General Interrogatories, Nos.1-4, for my answer to FQ-23.
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EMERGENCY PLANNING AND, FINANCIAL QUALIFICATIONS CONTENTIONS At this time, we have not decided upon who will be called as a witness.
However, as soon as witnesses are decided upon, the applicants will be notified and furnished with the information requested in items a - e of this interrogatory.
GENERAL INTERROGATORIES 1.
The documents described in FQ-1 to FQ-22 have been used, but not exclusively, as a basis for the answers to those interrogatories.
The information relied upon in each document is set forth in the answer and that information helped me reach the conclusions stated in the an-swer. There are probably other documents which have been the basis for the answers. If these are discovered or recalled, I will furnish the infor-mation about them as an amendment or supplement to this answer.
2.
The answers to FQ-1 to FQ-22 are to some extent based upon the studies and analysis set forth in the documents described in those answers.
Such studies and analysis support the conclusions stated in each of the answers. There may be other studies or analysis which have been the f
basis for the answers. If these are discovered or recalled, I will furnish the information abcut them as an amendment or supplement to this answer, f
i.
3.
The answers to FQ-1 to FQ-22 are based on my informal research.
Such research included a study of the documents referred to in my an-swers and is a basis f or the statements I have made.
4.
To the best of my knowledge my answers to FQ-1 to FQ-22 are not based on specific communications with any individual. My communi-cations have been on a broad general basis and not on the specifics of these interrogatories.
If I recall communications which are relevant to this General Interrogatory, I will amend or supplement my answer. ~
m The answers set forth above on pages
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to 20 are based on the information available to me at this tinne.
If further information becomes available to me, I reserve the right to supplement or amend these answers and to the extent reqOed to do so will supplement or amend these answers.
Signed this o7 N4 day of September,1981.
Kansans for Sensible Energy By:
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1 ne Grabill
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STATE OF KANSAS, COUNTY OF
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On this
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day of
.V <'d (( e n I/ i, 1981, db-4(i V i<t /. l'/' appeared before me and being first duly
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sworn made and signed the abc,ve answer under oath.
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bjd (b a a[
- h Notary Public
-%. M NUNEZ. r x e~
(Seal)
UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD in the Matter of
)
)
KANSAS GAS AND ELECTP'C COMPANY, )
Docket No. 50-482 et. al.
)
)
(Wolf Creek Generating Station,
)
Unit No.1)
)
CERTIFICATE OF SERVICE I hereby certify that copies of Answer of Kansans for S-asible Energy to Applicants' First Set of Interrogatories in the above-captioned proceeding have been served on the following by deposit in the United States mail, first class, on September 24, 1981.
James P. Gleason, Esq., Chairman Atomic Safety and Licensing 513 Gilmoure Drive Board Panel Silver Spring, MD 20901 U.S. Nuclear Regulatory Commission Washington, D.C.
20555 Dr. George C. Anderson Department of Oceanography Docketing and Service Section University of Washington Office of the Secretary Seattle, Washington 98195 U.S. Nuclear Regulatory Commission Washington, D. C.
20555 Dr. J. Venn Leeds 10807 Atwell Eric A. Eisen, Esq.
Houston, Texas 77096 Birch, Horton, Bittner & Monroe 1140 Connecticut Avenue, N.W.
Treva 3. Hearne, Esq.
Washington, D.C.
20036 Assistant General Counsel P. O. Box 360 Kansans for Sensible Energy Jefferson City, Mo.
65102 P. O. Box 3192 Wichita, Kansas 67201 Jay Silberg, Esq.
Shaw, Pittman,Potts & Trowbridge Mary Ellen Salava 1800 M Street, N.W.
Route 1, Box 56 Washington, D.C.
20006 Burlington, Kansas 66839
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I Wanda Chri:ty Myron Karman 515 N. Ist Street Deputy Assistant Chief Hearing Counsel Burlington, Kansar 66839 Office of the Executive I.egal Director Nuclear Regulatory Commission Atomic Safety and Licensing Washington, D.C.
20555 Appeal Board U.S. Nuclear Regulatory Commission C. Edward Peterson, Esq.
Washington, D.C.
20555 Assistant General Counsel Kansas Corporation Commission State Office Bldg.
Topeka, KS 66612 N. b = - 'w Jerin M. Simpson~
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