ML20032B213
| ML20032B213 | |
| Person / Time | |
|---|---|
| Site: | Allens Creek File:Houston Lighting and Power Company icon.png |
| Issue date: | 10/30/1981 |
| From: | Brooks W Office of Nuclear Reactor Regulation |
| To: | |
| Shared Package | |
| ML20032B200 | List: |
| References | |
| NUDOCS 8111050300 | |
| Download: ML20032B213 (20) | |
Text
.
10/30/81 UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of
)
HOUSTON LIGHTING & POWER C0.
Docket No. 50-466 (Allens Creek Nuclear Generating
)
Station, Unit 1)
)
NRC STAFF TESTIMONY OF WALTER L. BROOKS REGARDING 00HERTY CONTENTION 24 Q.
Please state your name and position with the NRC.
A.
My name is Walter L. Brooks.
I am employed by the U.S. Nuclear Regulatory Comnission as a Senior Reactor Physicist in the Core Performance Branch.
I have previously testified in this proceeding.
Q.
What is the purpose of your testimony?
A.
The purpose of this testimony is to respond to Doherty Contention 24 which, as reworded by the Board in an Order dated March 10, 1980, alleges that:
The Applicant has not provided a basis for showing that the reactivity insertion from any dropped control rod will be sufficiently small to prevent the peak energy yield from exceeding 280 cal./gr.
of fuel.
Q.
What is your response to this contention?
A.
My response is that there has been a very solid basis developed for tne Applicant's and Staff's conclusions that the potential worth of a postulated dropped rod is sufficiently small to prevent a peak energy yield of 280 cal./gm.
8111050300 811030 PDR ADOCK 05000 T
~
. Q.
Upon what facts do you rely in making that judgmenkt A.
At the outset, it should be emphasized that the methodology by which the rod drop analysis was performed, as described in NEDO-10527 and its suppleme its, has been reviewed by the NRC Staff and approved for use in such analyses. This methodology has been snown to be conservative by comparisons with results obtained from a higher order calculation by Staff consultants. These results are described in BNL-NUREG-28109, " Thermal Hydraulic Effects On Center Rod Drop Accidents It A Boiling Water Reactor" (July,1980).
Secondly, the proposed rod withdrawal sequence which determines the r,aximum worth of the rod which is postulated to be dropped has been revie'wed by the Staff and has been approved for use in reactors such as Allens Creek.
(See Supplement 2 to the Allens Creek SER, Section 4.3.2).
Thirdly, not only has the Applicant's calculation of rod worths been reviewed and found to be acceptable by the Staff (See Supplement 2 to the Allens Creek SER, Section 4.3.3), but the value of the dropped rod which was used by the Staff's consultant (Brookhaven) in its evaluation of the rod drop event is larger (and thus more conservative) than that actually anticipated to be the case at Allens Creek.
Q.
Does the Rod Pattern Control System to be employed by the Applicant have an effect on potential rod worth in a rod drop accident?
A.
Yes. The Rod Pattern Control System actually exceeds the Staff requirements for reliability and redundancy. Let me explain.
Several years ago, the Core Performance Branch performed a detailed probabilistic assessrent to determine the likelihood that the consequences of a rod drop ever.t would exceed the 280 ctl./ga. criterion in a boiling water reactor. Tha conclusion of that assessment, which is applicable to the
. Allens Creek tacility, was that the probability of exceeding the 280 cal./gm. criterion was negligible (much less than 10-7 per reactor year). This detailed assessment was based upon the following saquence of events, all of which must occur in order for there to be a possibility of exceeding 280 cal./gm.:
I.
Disconnect A.
The rod nust be or become disconnected from the drive either by never being coupled, by becoming unlatched or ty a break in the system such as a broken index tube.
B.
This disconnect must occur with the rod in the upper quarter or less of the core (or it must subsequently be moved there) (see II B) since most of the reactivity worth of the rod occurs during the initial part of the withdrawal.
C.
The disconnect must not be discovered (e.g., by over-travel coupling tests) cnd remedied (see also III. D).
II. Stuck A.
The rod must stick as the drive is moved away.
8.
The rod must stick in the upper quarter or less if the core, as discussed IB.
C.
The drive must be lowered at least a third of the core length away from the stuck rod.
I III. Errors i
A.
The operator must select and withdraw a wrong (n6n-sequence) rod. Sequenced rods do not have sufficient worth to exceed 280.
It
. mignt be noted that in some cases rods are withdrawn in several steps (i.e., not fully withdrawn bank positions for some rod groups).
For some of these rods, the error, sufficient to exceed 1.5% 3, might be with-drawing the rod too far rather than an incorrect selection.
B.
The Rod Pattern Control System must allow the wrong selection to go uncorrected.
C.
The rod must be withdrawn in spite of potential warmings of being uncoupled, which are sometimes available, such as no response on the nuclear instrumentation to rod motion.
IV. High Worth Potential A.
The erroneously pulled rod must have a high potential worth.
While it varies somewhat with the reactor and time in cycle, as well as the drop velocity and scram time, a RDA must have a reactivity worth greater than about 1.5% & to exceed 280. Many of the possible erroneous-ly pulled rods would not have that worth, e.g., many core edge rods (see also V.C).
V.
Drop-Timing A.
The stuck rod must drop.
B.
The rod must drop when the reactor is nearly critical (if it is far subcritical, the reactivity worth potential of the rod would not be sufficient) and less than the order of 10% power. Above this power, 280 cal./gm. cannot be attained.
C.
The rod must drop (w. thin that critical to 10% power time frame) when the withdrawn rod pattern enhances the rod worth so that it approaches its maximum worth.
Generally, only error rods near (next to) the first
(
. rods pulled in a group, or some of the first of the black (beyond 50% rod density) rods have sufficiently high worth, and they lose that high worth as the pattern withdrawal progresses.
It should be noted that in the above-described probabilistic assessment, no credit is taken for the Rod Pattern Control % stem. Therefore, even without that system, the probability of exceeding 280 cal./gm. is negligible.
Nevertheless, the Applicant's design incorporates this sophisticated system, which further insures that prescribed rod insertion / withdrawal patterns are maintained, such that control rod worths are minimized. The 1
detailed probabilistic assessment by the Core Performance Branch, coupled with the Applicant's Rod Pattern Control System, make it virtually incon-ceivable to me that a rod drop event at Allens Creek would result in a peak energy yield of 280 cal./gm.
Q.
Mr. Brooks, would you please comment upon the effect which scram speed and the Doppler coefficient would have on the consequinces of d Tod drop event at the Allens Creek facility?
l A.
Yes. The generic studies which have been done by the Staff (or l
its consultants) and G.E. analyze the rod drop event with the assumption that 7x7 fuel is used and with the scram speeds associated with BWR 3's, j
4's and 5's.
In contrast, Allens Creek uses 8x8 fuel, which has a larger Doppler coefficient and thus results in a smaller fuel pellet temperature rise in the event of a rod drop.
In addition, Allens Creek incorporates a faster scram system than previous designs which further reduces the temperature rise in the fuel pellets as a result of the rod drop.
j Q.
Finally, Mr. Brooks, in the Licensing Board's "Second Order Ruling Upon Motions For Sucinary Disposition," dated September 1,1981, l
l l
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-g--
,n.,
. the Board granted the Staff's summary disposition motion regardina Doherty Contention 46, but requested clarification regarding "whether there is an inconsistency between the value of rod worth limitation (0.01dK/K) expressed herein by the Staff and that stated by.the Applicant (0.0086K/K) in its motion for summary disposition of Doherty 24."
Would you please respond?
A.
The two different values of maximuu potential dropped rod worth that have appeared in Staff submittals on Doherty Contention 46 arose because tne ACNGS PSAR has been in review for a long time, During this time, the f:el loading design has changed as has the rod withdrawal sequence.
In particular, the rod withdrawal sequence was changed from the group notch mode' en which a maximum dropped rod werth of about 1.0 percent reactivity change is expected to the banked pos1 tion aode for which the generic value (used in our review) of maximum worth 1; 0.83 percent reactivity change.
15.0 ACCIDENT ANALYSES 15.2 Abnormal Operational Transients In SER Supplement 2 the staff stated that the applicant had committed to incorporate any design modifications that may be required by the staff to resolve the anticipated transients without scram (ATWS) issue, and that such resolution may require implementing some or all of the plant mcdifications discussed in Volume 3 of NUREG-0460, dated December 1978.
Subsequently, the plant modifications that may be required were modified as discussed in Volume 4 of NUREG-0460, dated March 1980. That report identified basic plant layout, diesel capacity, and seismically qualified structures in constructed plants as constraints to implementation.
By letter of September 15, 1981, the staff asked the applicant (1) to demonstrate that the preliminary design of the Allens Creek plant does not contain any such constraints or (2) to modify the preliminary design to eliminate such constraints that might now exist.
By letter dated October 28, 1901, the applicant stated that no such constraints exist in the preliminary design of the Allens Creek plant. On this basis, the staff concludes that potential plant modifications identified in Volume 4 of NUREG-0460 (including Alternative 4A) can be fully incorporated into the Allens Creek plant even if construction is completed. The staff finds this lack of constraint acceptable at the construction permit stage of review and concludes that there is reasonable assurance that future requirements of the Commission for ATWS will be fully implemented in the Allens Creek plant.
Allens Creek SSER #4 15-1
20.0 FINANCIAL QUALIFICATIONS 20.1 Introduction An evaluation of Houston Lighting & Power Company's (HL&P) financial qualifi-cations to design and construct Allens Creek Nuclear Generating Station Unit 1 appeared in SER Supplement 2, dated March 1979.
Because of the time elapsed since the preparation of that report, a complete update of HL&P's financial qualifications is presented here. By letter of Auc6 t 12, 1981, HL&P updated the financial information that had been provided in Amendment 2 to the license application, dated June 21, 1978.
The Commission regulations relating to the determination of the financial qualifications of an applicant for a facility construction permit are given in Section 50.33(f) of 10 CFR Part 50 and Appendix C to 10 CFR Part 50.
In accordance with these requirements, the staff evaluates whether there is reasonable assurance that an applicant can obtain the necessary funds to cover its portion of the estimated construction and related fuel-cycle costs ftr the proposed facility.
In the case of Allens Creek, the staff's evaluation of the financial qualifications of the applicant included consideration of the Commis-sion's decision Public Service Company of New Hampshire, et al., 7 NRC 1, at 18 (1978) (Seabrook Station, Units 1 and 2) which states:
... the applicant must have a reasonable financing plan in light of relevant circumstances."
The Commission indicated that an applicant possessing such a financing plan satisfies the reasonable assurance requirement of the regulations.
20.2 Construc' ion Cost Estimates The most recent estimate of Aillens Creek construction costs provided by the applicant in its letter of August 12, 1981 are i
($ Millions)
Nuclear production plant 2707 l
Transmission, distribution, and general plant 41 Nuclear fuel for first core 122 These cost estimates are based on an estimated start of cor.struction date of l
April 1982 and an expected start of commercial operation in March 1991.
The estimated cost of the nuclear production plant has been reviewed in compar-ison with the cost projected by DOE's CONCEPT capital cost model, as performed by the Oak Ridge National Laboratory. This model projected the cost of the nuclear production plant for Allens Creek Unit 1 to be $2402 million compared with the applicant's estimate of 112707 anillion.
Because the CONCEPT estimate is used a only a rough check on an applicant's estimate and is not intended I
as a subst.itute for detailed engineering cost estimates, the staff has determined that it is reasonable to use the -pplicant's estimate for this analysis.
Moreover, because of its higher caoital cost projection, the applicant's i
estimate is inherently more conser mtivt.
l Allens Creek SSER #4 20-1
20.3 Bases for Analysis Consistent with the regulations discussed above, the staff requires that investor-owned utility applicants submit pro forma statements of sources and l
use of funds with underlying assumptions.
In general terms, these statements are best described as financial plans.
From the viewpoint of use of funds, a fineat tal plan shows year-to year funds requirements for systemwide construction pnjet.ted throughout the period of construction for a subject nuclear facility.
At the same time, a financial plan also shows sources of funds or, stated simply, where the required capital is coming from. Generally, sources of funds for a public utility consist of short-term borrowings, internal cash generation, and proceeds from additional sales of long-term-debt, preferred-stock, and common equity securities.
From this perspective, and in considera-tion of important underlying assumptions to the financing plan, the staff determines the impact of this financing on significarit financial parameters.
In this respect, the reasonableness of an applicant's financial projections is determined.
This reasonable assurance standard, however, must be viewed in light of the extended period of time from the start of construction to full commercial operation.
It is presently estimated that Allens Creek Unit I will commence commercial operation in approximately 9 to 10 years.
Consequently, one must necessarily make certain assumptions about future conditions. Two fundamental assumptions that have been incorporated in the analysis of the applicant's projected financing are (1) that there will be a rational regulatory environment in the setting of rates for utility service and (2) that viable capital markets will exist.
The former assumption implies that rates will be set to at least cover the cost of service, including the cost of capital; the latter assumption implies that capital will be available at some cost.
The staff also utilized the following element of conservatism from the perspective of source of funds. Because other construction is generally planned by an applicant during the period of construction of a subject nuclear facility, expenditures required by the other construction increase the applicant'i, requirements for capital. Moreover, redemptions required by maturity of an applicant's outstandiag debt over the period of construction further increase the applicant's rear.f rements for capital. Because total capital requirements for any given year are higher than the expenditures needed to construct the subject facility, use of total capital requirements as a basis of analysis is a more conservative approach.
Tables 20.1 and 20.2 show HL&P's finencing plan and underlying assumptions, respectively. The staff's evaluation, which follows, is an analysis of the central aspects of the plan and the assumptions.
20.4 Rate of Return on Common Equity Of all the factors considered during the review of an investor-owned utility applicant's financial projections i-determination of finarcial qualifications, the assumptions of projected ratet oi return on common equity during the period of construction are most significant.
Rate of return on common equity is best described as earnings stated as a percentage of all the stockholders' Allens Creek SSER #4 20-2
3 lable 20.1 Pro fosma sources of fututs for systemwide constrantion espemfitures aint caplial structures during constn.clion of Allens Creek Unit I
($ Hillions) a 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 p$
s laternal fin.sacing:
Comann s[Elli-~
214 116 217 221 242 247 249 230 128 226
!?8 v>
Pselersed stock 50 110 110 90 110 110 90 lo 110 100 long-tese debt 300 300 300 525 650 600 450 450 450 275 450 m
Notes payable (97) 11 43 30 54 151 161 (37)
(17) 67 121 Contribution f rom paresit 10t41 eateinal funls 467 537 670 866 1656 1168 956 713 671 568 799 -
Internally generated f usuls:
"Nel~Idiome 244 336 363 448 500 641 633 109 770 738 847 less:
Pseferred dividends 25 34 48 56 61 16 86 94 103 109 114 Common dividemis 143 181 217 166 306 360 413 454 492 529 566 Retained easnisgs 16 121 98 126 127 205 134 161 175 100 167 Deferred taxes 46 48 55 59 66 65 72 13 84 99 114 investment tan credit Def erred set
$2 51 69 73 99 107 105 83 67 10 82 Depreciation asid amortiration 117 125 144 158 184 199 250 198 351 448 m
Chanue in wus kinu capital 41 10 19 27 32 45 37 57 26 15 18 o
less AfDC (10) 109 (91)
(140) 1149)
(197)
(130)
(40)
(596) 113 (50)
(124)
/3 letal internal funds 262 246 294 16) 159 424 468 612 642 795 4
lotal fusuis 129 783 964 1169 1415 1532 1418 1345 1261 1250 1594 1
Constnaction e9enditus es:
Niclear power pH6fF 151 198 260 295 327 334 255 212 148 109 39 Other 558 585 104 814 1018 1168 1123 1133 10i8 1148 1430 lotal consteuttlen espemiltus es 109 783 964 II69 1345 1502 1378 1345 1206 1250 M69 subject power plant
~65 117 186 218 259 241 249 212 148 7 09 19 Other capital se ulrements:
J "ke.Teapt issi o1 maturing bonds 20 70 30 40 55 125 A(quisition of bunds for sinking funds Miscellaneous requirements total capital requi s ement s 12 3 183
%4 1169 1415 1532 1418 1345 1261 1250 1594 i
Capital structure (%)
long-term debt 1867[43] 2167 [47) 24o, 147] 2992 {48] 3572 [49] 4142 [49) /*> [49) 5002 [49] 5397 [49] 5672[49] 5997 [48) 9, ? 10) 984 [10] 1094 [10] 1094 [ 9] 1894 [10]
Preferrett stock 294 [ 1) 404 [ 91 514 [10] 604 [10] 714 [10) 824 [10]
3851 (141]
4241 [411 4543[41] 4869 [42] 5164 [42]
Common equity 1750 [451 1987 [44] 2302 [43] 2649 [42] 3017[41) 3469[41) lotal 191l[ 1001 4558[1001 5283[100) 6245[100) 1303[100] 8435[100) 9117[100] 10227[100] !!034[100] 18635[100] 12355[ VJ0)
equity accounts, such as capital stock, premiums, and retained earnings in a corporation. This is derived by first deducting from gross operating revenues the company's operation and maintenance expenses, depreciation, interest charges, taxes, and preferred dividends. This computation results in net income available to the common stockholder, the " bottom line" of a company's operations. Dividing this by the total of investment dollars provided by the company's common stockholders and accumulated retained earnings results in per-unit return on common equity.
Restated on a percentage basis, this translates into the rate of return on common equity.
Table 20.2 Assumptions upon which the source of funds statement is based 1.
Rate of return on average common equity:
Targeted return on common equity of 15.8% (return allowed by Public Utility Commission in Docket 3320, September 1980).
2.
Preferred stock dividend rate:
1981-12.5%; 1982-11.7%; 1983-10.8%;
1984-91-10%.
3.
Long-and short-term interest rates:
First mortgage bonds:
1981-13.5%; 1982-12.7%; 1983-11.8%; 1984-91-11%
Pollution control bonds: 1981-10%; 1982-9.5%; 1983-91-9%
Short-term debt:
1981-14.8%; 1982-13.2%; 1983-11.6%; 1984-91-10%.
4.
Market / book ratio of projected common stock offerings:
1981-85%;
1982-90%; 1983-95%; 1984-91-105%.
5.
Common stock dividend payout ratio:
10% of prior year book value by 1984.
6.
Target and year-by year capital structure:
Debt not over 50%;
preferred not over 10%; common not over 45%.
7.
Resultant SEC coverages over the period of construction 1981 3.63 1987 3.45 l
1982 3.99 1988 3.59 1983 3.79 1989 3.50 i
1984 3.80 1990 3.29 l
1985 3.57 1991 3.44 1986 3.72 8.
Annual growth rate in kWh sales'and price per kWh:
i kWh growth rate = 3.23% compounded Price growth rate = 13.88% compounded Of all investors providing capital (proceeds of long-and short-term debt, preferred stock, and common stock) to a company, shareholders of common stock Dear the highest risk. Although capital costs attributable to a company by debt and preferred stock are fixed by contract, and must be paid at the agreed Allens Creek SSER #4 20-4
-m-,
rate, those dollars earned on common equity represent whatever remains after payment of all other charges and expenses. By reason of its inherent risk, because holders of a company's common stock bear the lowest priority of payment to all other obligations of that company, rate of ret"en en common equity represents the best indicator of a company's profitautiity.
Profitability is important in that it affects both interest coverage and the price of a company's securities, which bear on the company's ability to successfully market its securities and maintain the formation of a reasonable capital structure.
It is important to note that in the case of HL&P, its " common shareholders" 4
i are in the form of its holding company, Houston Industries, Inc. (HI), which i
purchases all of HL&P's common stock.
In turn HI issues common stock to the public and reinvests primarily in its principal subsidiary, HL&P. Thus, the actual, primary financial strength of HI derives from its electric energy operation conducted by HL&P. HL&P accounts for the vast majority of the earnings and assets of HI. Through other subsidiaries, HI is engaged in oil and gas exploration and in the acquisition and delivery of fuels to electric generating plants.
Because the applicant is a public utility afforded monopoly status in its area of service, it is subject to regulation. Accordingly, its rate of return and rates are set by the Public Utility Commission of Texas and by the incorporated municipalities in HL&P's service area. Unlike utility base rates, which are fixed, the rate of return on common equity is only allowed to be earned and is 1
not guaranteed. While the concept of a fair rate af return on property used and useful in public utility service is deeply. ingrained in public utility regulatory law and economics, there still exists no absolute certainty as to a utility's future earnings.
Consequently, one is required to consider its current level of profitability and other relevant circumstances in assessing the reasonableness of a projected return on common equity.
ine staff has reviewed the assumed rates of return of HL&P's financing plan and has cetermined r
them to be reasonable (See laule 20.2 item 1).
In fact, they are the same as the return allowed the company in September 1980 (15.8 percent).
HL&P's actual earned rates of return on average common equity for the years 1978, 1979, and 1980 were 12.7 percent, 13.1 percent, and 13.4 percent, respectively.
It is common for the earned rates of return to be below the allowed rates of return (15.8 percent in this case).
20.5 Internal Cash Generation In the meeting of an applicant's year-by year construction expenditures, the first item considered is the level of internal cash generation. This is because internal cash generation reduces the level of external financing required. By reason of certain noncash expenses (primarily depreciation and deferred income taxes) and the portion of retained earnings not attributable to allowance for ft nds used during construction, a company may generate funds internally.
To shcr an example in a simplified fashion, a company is allowed depreciation of its assets. These amounts are reflected on the company's income statement as an expense. However, because these funds are not dis-bursed, the company may use them for its own needs.
These dollars represent funds that the company can apply to its capital requirements, thereby reducing Allens Creek SSER #4 20-5
its need for externally obtained funds. As another example, when a company earns a profit, it shares that profit with its stockholders in two ways:
first, it takes some of its net income and distributes that portion to 1ts shareholders in the form of dividends; second, after its dividends have been disbursed, the company keeps the balance of its net income and adds this amount to its retained earnings account. Again, this represents adoitional funds available to the company for its capital needs.
As an incidental point, although the allovQnce for funds used during construction portion of earnings is not an immediate source of cash to a company, investors do recognize it as a future source of cash, because when the facility is ultimately placed into rate base (property used and useful in public utility service), it generates funds through both earnings and depreciation. At the same time, retained earnings also benefit the shareholders in that these amounts increase the worth of their investment and further enable the company to grow. The overall level of a company's internal cash generation is likewise significant to shareholders in that it provides cash coverages to dividends.
This is especially important to investors in p'ublic utility common stocks, who generally own such securities because of their income characteristics.
The continuing generation of a sufficient amount of cash flow by a utility instills a higher level of confidence in the payment of future dividends in its common stock shareholders.
This is beneficial to the company as, in part, it continues to maintain the attractiveness of its equity securities.
In calendar years 1978, 1979, and 1980, HL&P generated internally $180 million,
$198 million, and $233 million, respectively. Projected internally generated funds compare reasonably with this historical experience.
For the purpose of this analysis, HL&P assumes internally generated funds in the years 1981, 1982, and 1983 amounting to $262 million, $246 million, and $294 million respectively (see Table 20.1).
The assumed increases are partially justified by planned rate increase requests. HL&P currently has a $248 million request pending before the Public Utility Commission of Texas.
Increases in depreciation also serve to increase internally generated funds.
20.6 Interest Coverage To meet its capitzi requirements during the construction of Allens Creek Unit 1, HL&P will, from time to time, enter the market for the sale of long-term-debt securities. These securities are mortgage bonds that are secured with a lien on the assets of the issuer. To protect the assets mortgaged under a company's debt, a trust indenture agreement is made between the company and the bondholders.
Indentures of such mortgage bonds contain provisions that, in addition to protecting the assets _ mortgaged, also cover tna intsrest due to the bondholders.
At the same time, to provide an adequate level of earnings cushion over and above the company's interest requirements, there generally exists in such mortgage and trust deed indentures an interest coverage test.
Inextricably related to earnings and interest charges, this provision precludes the company from issuing additional debt should there not be satisfactory earnings coverage over its interest obligations.
Because of its significance, the interest coverage ratio is a major criterion used by the financial community in making credit decisions with respect to a company's debt.
Allens Creek SSER #4 20-6
~ __.
l The staff has reviewed the interest coverage assumptions underlying HLtF s financing plan and finds them to be reasonable (1) when compared to the historical coverages of HL&P and (2) in consideration of the projected debt issuances of the company. The company projects interest coverage above 3.0 through the period of construction.
It has achieved interest coverages above 3.0 for each of the years 1978, 1979, and 1980. This is substantially in excess.of the minimum 2.0 coverage required by the company's indentures. Under such indenture restrictions HL&P could have issued in excess of $700 million in mortgage.
bonds as of May 1981.
20.7 Capital Structure For a company to conduct a viable financing plan and preserve the attractiveness of its securities, it must maintain a reasonably balanced capital structure.
The term " capital structure" refers to the composition of a company's capitaliza-tion, that.is, the proportion of debt equity and preferred stock which constitute capitalization.
Capital structure is an important consideration in corporate financial analysis in that it shows how much equity capital is available to protect the senior obligations, or in other words, to what extent ars the owners using their own capital and to what extent are they. relying on creditors' money.
By maintaining a reasonable and well-balanced capital structure, latitude will exist in a company's options of financing. This will help achieve borrowing i
reserve, allowing flexibility both in the timing and selection of securities to be issued to meet capital requirements. Mos,t important, under thase cir-cumstances, its securities will maintain their attractiveness to investors by virtue of their lower risk, because capital structure affects inter 9st coverage.
Generally speaking, investor-owned electric utilities historically have nad capital structures compcsed of 50 to 55 percent long-term debt, 10 to 15 percent preferred stock, and 35 to 40 percent common equity. These ranges of capital structure are considered reasonable by the financial community in that they maintain a sufficient amount of equity capital protectien to the senior security holders and, from this viewpoint, help protect the attractiveness of the securities.
p The staff has reviewed the projected capital structure assumptions underlying l
HL&P's financing plan (see Tables 20.1 and 2.2) and finds them to be reasonable when compared with historical experience of the company and industry norms.
For the years 1978 through 1980, the company's capital structure was as follows:
long-term debt, 48-53 percent; preferred stock, 8 percent; and common equity, 39 to 44 percent. As indicated in Tables 20.1 and 20.2, HL&P projects capital structures in these approximate ranges which are favorable for an investor-owned electric utility.
~
20.8 Conclusion Based on the preceding analysis, the staff concludes that HL&P has presented a reasonable financing plan in the light of relevant circumstances. Therefore, according to the provisions of 10 CFR Part 50, Section 50.33(f) and Appendix C to 10 CFR Part 50, HL&P is financially qualified to design and constrcct Allens Creek Nuclear Generating Station Unit 1.
This conclusion is based on l
the staff's determination that HL&P has demonstrated reasonable assurance of obtaining the funds to carry out this activity.
Allens Creek SSER #4 20-7 l
In connection with the above, it should be noted that the staff does not consider an applicant's financing plan to be a forecast of what will necessarily occur. The applicant need only demonstrate one possible way by which the planned capital requirements, including those resulting from construction of the subject facility, might reasonably be financed. The staff realistically ~
expects that the financing plans will change to accommodate changing fitancial and economic conditions. The proposed financing is in accord with general industry practices, and the assumptions being used, although not susceptible to precise measurement against absolute criteria, are in line with what one might expect under the postulated conditions.
Because the financing projections can be characterized as reasonable, the staff concludes that the reasonable assurance standard has been satisfied.
Allens Creek SSER #4 20-8
APPENDIX C NUCLEAR REGULATORY COMMIS3 ION STAFF GENERIC ISSUES C.4 Unresolved Safety Issues In SER Supplement 2 the staff stated that all of the task action plans for Category A tasks addressing unresolved safety issues that are applicable to the Allens Creek facility, with the exception of Tasks A-43, Containment Emergency Sump Reliability, and A-44, Station Blackout, were included in " Task Action Plans for Generic Activities, Category A" (NUREG-0371), published in November 1978. With the exception of Tasks A-9, A-43, and A-44, Task Action Plans for those tasks are now included in NUREG-0649, " Task Action Plans for Unresolved Safety Issues Related to Nuclear Power Plants," February 1980.
A technical resolution for Task A-9 has been proposed by the NRC staff in Volume 4 of NUREG-0460, issued for comment. This served as a basis for the staff's proposal for rulemaking on this issue. The Task Action Plan for Task A-43 was issued in January 1981, and the Task Action Plan for A-44 was issued in July 1980.
Each Task Action Plan provides a description of the problem; the staff's approaches to its resolution; a general discussion of the bases on which continued plant licensing or operation can proceed pending completion of the task; the technical organizations involved in the task and estimates of the manpower required; a descriptinn of the interactions with other NRC offices, the Advisory Committee on Reactor Safeguards and outside organizations; esti-mates of funding required for contractor-supplied technical a: tistance; pro-spective dates for completing the tasks; and a description of potential problems that could alter the planned approach or schedule.
In Appendix C to SER Supplement 2, the staff identified 15 generic tasks, including Tasks A-9, A-43, and A-44, addressing unresolved safety issues that were applicable to the Allens Creek facility. The staff reviewed each of these tasks as they relate to the Allens Creek facility and set forth reasons based on its review of each of these items for its conclusion that Allens Creek Nuclear Generating Station Unit 1 may be constructed and operated before the ultimate resolution of these issues without endangering the health and safety of the public.
In addition to the task action plans, the staff issues the " Aqua Book" (NUREG-0606) on a quarterly basis. This book, entitled " Office of Nuclear Reactor Regulation Unresolved Safety Issues Summary, Aqua Book," provides current schedule information for each of the unresolved safety issues.
It also includes information relative to the implementation status of each unresolved safety issue for which technical resolution is complete.
The current issue of NUREG-0606, Volume 3, Number 3, dated August 21, 1981, includes information elative to the implementation status of the following unresolved safety issues that are applicable to Allens Creek and for which technical resolution is complete.
A-2 Asymmetric Blowdown Loads on Reactor Primary Coolant Systems A-9 Anticipated Transients Without Scram (ATWS)
Allens Creek SSER #4 C-1
A-10 BWR Feedwater Nozzle Cracking A-24 Qualification of Class 1E Safety Related Equipment A-31 Residual Heat Removal Requirements A-36 Control of Heavy Loads Near Spent Fuel A-42 Pipe Cracks in Boiling Water Reactors In SER Supplement 2, the staff had discussed each of these issues and provided bases for a conclusion that there is reasonable assurance that Allens Cree Nuclear Generating Station Unit 1 may be constructed and operated before t ie ultimate resolution of each of these generic issues without endangering tra health and safety of the public. At the staff's request and as discussed in Section 15.2 of this supplement, the applicant, by letter dated October 28, 1981, stated that construction of the Allens Creek facility as now designed would not result in constraints to full implementation of the technical resolution of the ATWS issue (Task A-9) as described in Volume 4 of NUREG-0460.
In response to the staff's request, the applicant, by letter dated August 21, 1981, provided information describing the status of plant-specific implementation of the technical resolutions of Tasks A-10, A-31, A-36, and A-42.
The staff has not yet requested information from the applicant describing the status of the plant-specific implementation of the technical resolution of Task A-24.
Ultimate resolution of these seven issues for the Allens Creek facility will include implementation in the final design, which tha staff will review during the operating license stage. For this construction parmit stage, the staff reaffirms its conclusion, stated in SER Supplement 2, that there is reasonable assurance that Allens Creek Nuclear Generating Station Unit 1 may be constructed and operated before the ultimate resolution of each of these seven generic issues without endangering the health and safety of the public. An update of the discussion in SER Supplement 2 on the bases for this conclusion for these seven issues follows.
A-2 Asymmetric Blowdown Loads on Reactor Primary Coolant Systems l
l Technical resolution of this issue includes criteria developed as a part of Task Action Plan A-2 fer evaluating PWR plant assessments for asymmetric loads. This technical resolution does not change the staff's previous con-clusion for the Allens Creek facility as stated in SER Supplement 2, that is, "Since the applicant has committed to design the reactor primary coolant system for these loads, we conclude there is reasonable assurance that the Allens Creek Nuclear Generating Station, Unit 1, may be constructed ad operated prior to the ultimate resolution of this generic issue without endangering the l
health and safety of the public."
A-9 Anticioated Transients Without Scram (ATWS)
The proposed staff resolution was published as Volume 4 of NUREG-0460,
" Anticipated Transients Without Scram for Light Water Reactors," dated l
Allens Creek SSER #4 C-2
March 1980. Normally, technical resolution of this unresolved safety issue would have been documented by issuance of a final version of Volume 4 of NUREG-0460 that incorporated the staff's responses to the comments or the report as issued for comment.
However, in this instance, comments have been conside' red in formulating a proposed rule.
Normally when the technical resolution of an unresolved safety issue is described in a final NUREG report the staff begins implementing that resolu-tion in accordance with the implementation schedule specified in the report.
In this instance, the staff considers that the implementation will be as specified in the proposed rule (as modified during rulemaking) with implementation of the techn; cal resolution to begin after the rule is promulgated.
In SER Supplement 2, the staff reported that the applicant had provided a commitment that Allens Creek Unit 1 will be designed so that implementation of the potential requirements described in Volume 3 ef NUREG-0460 would not be compromised by construction.
The staff then stated its conclusion "A satis-factory solution to the generic task will be obtained before Allens Creek Unit 1 is put in operation. Therefore, since the applicant has committed not to preclude implementation of design modifications there is reasonable assurance that the proposed Allens Creek facility can be constructed and operated at the proposed location without undue risk to the health and safety of the public."
The staff anticipates that the provisions that will be required by the rule will approximate the hardware modifications identified by the staff in Volume 4 of NUREG-0460. Therefore, the staff requested that the applicant reassess the impacts of construction on implementation of the provisions of Volume 4 of NUREG-0460, particularly with respect to constraints to implementa-tion that had been identified for plants already constructed.
As discussed in Section 15.2 of this supplement, the applicant has completed that assessment and has concluded that no constraints now exist in the preliminary design that preclude implementation of the provisions of Volume 4 of NUREG-0460.
Therefore, the staff concludes that construction of the Allens Creek facility will not result in constraints to the implementation of the applicable provisions of Volume 4 of NUREG-0460.
If a rule has not been promulgated by the operating license stage of review, the staff will have to consider whether to implement some of the provisions of its proposed position before operation. Such provisions are net expected to exceed the provisions of Volume 4 of NUREG-0460.
Therefore, the staff con-cludes with respect to this issue that construction of the proposed Allens Creek facility can proceed without undue risk to the health and safety of the public by subsequent operation of the facility because (1) the facility will be designed and operated in accordance with an ATdS regulation or (2) on the basis of the applicant's assurances, provisions of the staff's proposed posi-l tion could be implemented before operation.
A-10 BWR Feedwater Nozzle Cracking Technical resolution of this issue is described in "BWR Feedwater Nozzle and Control Rod Drive Return Line Nozzle Cracking," NUREG-0619, November 1980.
In SER Supplement 2, the staff noted that the nuclear steam supply system (NSSS) vendor is developing design modifications to avoid the nezzle cracking problem.
Allens Creek SSER #4 C-3 i
l
JIM C. PETERSEN PROFESSIONAL QUALIFICATIONS OFFICE OF STATE PROGRAMS I am the Senior Financial Analyst in the Office of State Programs, U.S. Nuclear Regulatory Commission.
I am responsible for the review and evaluation of the financial quelifications of nuclear facility license applicants to pursue proposed activities under a license, primarily the construction and operation of nuclear power plants.
In this regard, I have prepared financial qualifications analyses for inclusion in the Staff's Safety Evaluations and for presentation as evidence on the record of the Atomic Safety and Licensing Board's safety hearings.
I have served as a Staff witness before the Atomic Safety and Licensing Board in a number of proceedings. My work also involves keeping abreast of developments in the money and capital markets and in the electric utility industry.
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I received a Bachelor of Science in Business Administration degree (awarded cum laude) with a major in Accounting from the University of Denver in 1968.
I have continued my fomal education through college and university courses in finance, math, economics and computer science and through several intensive short courses. I am a member of Beta Gamma Sigma, the national business administration honorary, and Beta Alpha Psi, the national accounting honorary. The latter organization presented me with its award for outstanding service.
From 1968 through 1973, I was employed in a number of assignments on the staff of the Controller of the Atomic Energy Commission. These assignments included reviewing, designing and implementing accounting systems and procedures for AEC offices and AEC contracters.
I also assisted in the financial review of nuclear facility license applicants during the period when that function was perfomed by independent staff members of the AEC Office of the Controller. That function was sub-sequently transferred in its entirety to the *!RC.
In January of 1974, I joined the regulatory staff and assumed responsibilities in the financial qualifications review of nuclear facility license applicants.
I have worked in NRC financial analysis since that time, except for a one-year assignment at the U.S. Department of Energy where I worked on the financing of emerging energy technologies.
.o o
i Professional Qualifications Warren Minners i
I am the Acting Chief of the Safety Prcgram Evaluation Branch, Division of Sa^ety Technology, Office of Nuclear Reactor Regulation, U.S. Nuclear Reg-ulatory Commission.
I am also the Actirg Task fianager for USI-9 Anticipated Transients Without Scram.
I have received degrees of Bachelor of Mechanical Engineer from Cornell Uni-versity in 1955 and Masters of Mechanical Engincering from Stanford Univer-sity in 1962.
I have been employed as a manufacturing process engineer for naval reactors and a thermal-hydraulic design engineer for pressurized water reactors at the Nuclear Division of Cotbustion Engineering Inc.; I have also been em-played as a thermal-hydraulic design engineer for the NERVA nuclear rocket at the Astro 9uclear Laboratory of Westinghouse Electric Corp., and for ad-vuoced research and small power reactors at the Nuclear Division of the American Machine and Foundry Co.
At the AEC, and later the NRC, I have been a project manager, reactor sys-tems reviewer, Section Leader in the Reactor Systems Branch, and Technical Assistant to the Directors of the Division of Systems Safety and the Division of Safety Technology.
In these positions I have participated in the review i
of reactor systens accidents and transients, and in the development of reg-ulatory requirements policies and programs.
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