ML20033C913
| ML20033C913 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 11/18/1981 |
| From: | Ellis J Citizens Association for Sound Energy |
| To: | Atomic Safety and Licensing Board Panel |
| Shared Package | |
| ML20033C907 | List: |
| References | |
| NUDOCS 8112040488 | |
| Download: ML20033C913 (39) | |
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11/10/01 UNITED STATES OF AMERICA NUCLEAR REGUIATORY COMMISSION BEPGLE THE ATCMIC SAFETY AND LICENSIX; BOARD In the Matter of l
l Docket Bos. 50- M 5 APPLICATICE OF TEKAS IffIUTIES l
and 50-M6 GENERATIBG C(BEPANY, ET AL. FOR AN l
OPEKATIMI LICE EE FOR C(BIANCHE l
PEAK STEAM E12CTRIC STATION l
UNrrs #1 AND #2 (CPsEs) 1 CASE'S ANSWER TO NRC STAFF'S MOTION FOR
SUMMARY
DISPOSITION OF COIrrm r10N 25 (FINANCIAL QUALIFICATIONS)
Pursuant to 10 CFR 2.749 and the Beard's 7/23/81 Scheduling Order, CASE (Citizens Association for Sound Energy), Intervenor herein, files this, its Answer to the NRC Staff's 10/28/81 Motion for Summary Disposition of Contention 25 (Financial Qualifications).
Contrary to the Staff's allegations "that there are no genuine issues as to any fact material to the contention; that there are no factual issues requiring adjudication upon a hearing; cnd that the Staff is entitled to a decision in its favor, granting su:u:ary disposition ;t Contention 25, as a matter of law,"1 CASE expects to prove the following:
1.
That many of the statements contained in Staff's Motion are erroneous, questionable, or no longer valid; 2.
That most of the Applicants are ccupletely dependent upon rate increases NRC Staff's 10/28/81 Motion for Smry Disposition of Contention 25 (Financial Qualifications), pages 1 and 2.
8112040488 811118 PDR ADOCK 05000445 G
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to assure their ability to pay their respective share of the costs associated with the operation of Comanche Peak; 3
ht some of the Applicants have not made even a minimal effort to plan in advance for financing the costs of such vitally important financial considerations as decommissioning and nuclear wa~ste disposal; 4.
h t at least one of the primary Applicants has, in fact, opposed efforts of this Intervenor in rate hearings to. see that such costs are planned
.h for in advance and included as a subject in rate hearings; 5
h t the regulatory authorities have not, and wi$1 not, see that such costs are planned for and included as a subject in rate hearings and decisions of their own volition; 6.
h t at least one of the primar'y Applicants not only has not planned for and included such costs in rate hedirings, they don't even vant to talk about them and have in fact objected when CASE attempted to bring 4
them up in rate hearings; 7
h t for the past several years', the primary Applicants have expressed continui 4 and increasing concern that their financial condition is deteriorating; 8.
ht at least one of the primary Applicants will not plan for and include such costs in rate hearings absent a specific order from the Atmic Safety and Licensing Board in these proceedings that they must do so; and
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9 That there are indeed genuine issues of fact contained in CASE's Contention 25 which should and must be litigated in these proceedings to assure that the requirements of 10 CFR 50 57(a)(4),10 CFR 50, Appendix C, and the Atomic Energy Act, as amended, have been satisfied.
As the bases for these statements, CASE re, lies upon all of the' pleadings and papers previously filed in this proceeding, the attached Statement, affadavits, and attachments, and the facts and arguments set forth herein.
I.
STATEMENT OF CONTENTION Contention 25. The requirements of the Atmic Energy Act, as amended,' 10 CFR 50 57(a)(4) and 10 CFR 50, Appendix C, have not been met in that the Applicant is not financially qualified to operate the proposed facility.
II. APPLICAICS ARE RELYING ON FUTURE RATE INCREASES TO PAY EACE APPLICANT'S SHARE OF THE' COSTS ASSOCIATED WITH THE OPERATION OF COMANCHE PEAK.
j One of the key questions raised by CASE in its Fourth Set of Interrogatories 2
to Applicants was Question 3:
" Answer the following question for each of the Applicants listed below:
Does the Applicant have the ability-to pay its obligations on a timely basi.s, to pay a reasonable return to its investors, to boirow money at a reasonable rate, to maintain a good credit rating, and to maintain flexibility within its dealings in the financial community and in obtain-ing capital?
"(a) Dallas Power & Light Cmpany (DP&L)
"(b) Texas Electric Service Cmpany (TESCO)
"(c) Texas Power & Light Capany (TP&L)
"(d) Brazos Electric Power Cooperative, Inc. (BEPC) l
"(e) Texas Municipal Power Agency (']MPA)
"(f) TEK-LA Electric Cooperative of Texas, Inc. (TEX-LA)"
2 CASE'S 2/17/81 Fourth Set of Interrogateries to Applicants and Requests to Produce. -...._
This would seem to be a fairly simple, s+,raightforward question, one which one would assume the Applicants would find easy to answer if they do, in fact, have the financial qualifications and financial integrity necessary to operate the Comanche Peak plant.
However, Applicants' response was incomplete, unresponsive, and evasive, and (along with other such unsatisfactory answers) led to CASE's 3/17/81 Motion 3
to Ccmpe1. On7/30/81,theBoard'sOrdergrantedCASE'sMotiontoCompel.
However, it was not until the 9/9/81 meeting between Applicants and CASE, followed by Applicants' 9/25/81 Supplemental Response to CASE's Fodrtb Set of Interrogatories and, in response to CASE's request for further clarification, Applicants' 10/15/81 Supplemental Response to Interrogatory 3 of CASE's Fourth Set of Interrogatories, that we finally -- some eight months aft'er our original request -- received the answer to our question:
"The ability of each applicant to pay its share of the costs associated with the operation of Comanche Peak is dependent upon the receipt of adequate revenues derived from the sale of electricity. The rates which may be charged for those sales are established by the Texas Public Utility Commission
("PUC") for DP&L, TESCO, TP&L, Brazos and Tex-La. The PUC is obligated by statute and its own regulations to fix the rates of each regulated utility at levels sufficient to provide revenues to cover its share of operating ea;penses together with a reasonable rate of return, to assure confidence in the financial integrity of the utility, to maintain its credit, and to attract the capital necessary for the proper discharge of its public duty. See Article 1446c of Vernon's Annotated Texas Statutes; 3 CASE'S 3/17/81-Motion to Compel and To aequire Supplementation of Responses to CASE's Fourth Set of Interrogatories to Applicants; see especially pages 5 through 7 4-
see also Rules 052.02.02.033 and 052.02.03 032 of the Texas Public Utility Ceumission's Rules. TMPA has the authority to establish its own rates, independent of any regulatory agency, and its member cities are obligated by contract to establish rates sufficient, inter alia, to pay 1MPA for its share of the Comanche Peak operating costs.
"Accordingly, assuming the continued establishment of rates in conformity with applicable statutes, regulations and contractural requirements, each of the Applicants for Comanche Peak will continue to have the ability to pay its obligations on a timely basis, to pay a reasonable rate of, return to its investors (if investor-owned), to borror money at a reasonable rate, to maintain a good credit rating, and to maintain flexibility in the financial community and in obtaining capital."b Thus, according to the Applicants' own sworn statement, "the ability of each applicant to pay its share of the costs :.speciated v$th the operation of Ccuanche Peak is dependent upon the receipt of adequate revenues derived from the sale of electricity... rates (for which) are established by the Texas Public Utility Ccamission ("PUC") for DP&L, TE$CO, TP&L, Brar.cs and Tex-La."
Although normally the proceedings regarding applications for rate increases would have no bearing on operating license hearings such as these, because of
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Applicants' statement above it is now obvious that what has transpired in past rate hearings and what will transpire in future rate hearings $e of vital concern
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l in regard to Applicants' financial qualifications and CASE's Contention 25 l
t III. APPLICANTS' AND NRC STAFF'S INTERPRETATION OF STATE OF TEXAS AND THE TEXAS P'JBLIC UTILITY CoteiISSION'S REGUIATIONS IS SKEWED TO SHOW ONLY ONE SIDE OF TE QUESTION.
A review of both the answers to CASE's question by Applicants and the NRC 4 Applicants' 10/15/81 Supplemental Response to Interrogatory 3 of CASE's Fourth Set of Interrogatories, pages 1 and 2; emphases in the original. I
Staff's statements in its 10/28/81 Motion for Summary Disposition on Contention 25 and in the Safety Evaluation Report (SER) and Supplement No.1 thereto (SSER) shows that the Staff's bases and conclusions closely track those of the Applicants.
Further, both Applicants' and Staff's interpretation of the State of Texas and the Texas Public Utility Ccamission regulations is skewed to support their con-clusion that the Applicants are financially gralified to operate and safely decommission the Cmanche Peak facility.
In the analyses 51ven by the Staff in their 10/28/81 Motion for Su= mary DispositionandintheSERandSSER,therearesomeimpofhntconsiderations which have been completely ignored. CASE has been an Intervenor in all the Dallas Power & Light rate hearings since 1974, and as such, has becme acquainted with some specific regulations which both Applicants and Staff have chosen to ignore in their analyses:
" Utility rates shall be based upon the adjusted value of property used by and useful to the public utility in providing service j,acluding where necessary to the financial integrity of the utility construction work in progress at cost as recorded on the books or the utilitt."
--Texas Public Utility Regulatory Act (PURA)
Section 41(a)
(Emphases added.)
"The rate base is the adjusted value of the invested capital used and useful in rendering service to the public. Components to be included in determining the overall utility rate base are as follows:
(1) Adjusted value of utility plant used by and useful to tha public utility in providing service...
(2) Construction work in progress, where necessary to the financial integrity of the utility, at original cost as recorded on the books of the utility."
--Public Utility Commission (PUC) Substantive Rul'e 052.02.03 031 RateEase(Emphasesadded.)
F "In any proceeding involving any proposed change of rates, the burden of proof to show that the proposed change, if proposed by the utility...is just and reasonable shall be on the public utility."
--Texas Public Utility Regulatory Act (PURA)
Section40(b)
(Emphasesadded.)
"The duties of the general counsel (of the Public Utility Commission) include:
... protection and representation of the public interest before the Commission."
--Texas Public Utility Regulatory Act (PURA)
Section8(c)(7)
(Emphasisadded.)
"It shall be the duty of the regulatory authority to insure that every rate made, demanded, or received by any public utility...shall be just and 2
reasonable."
A
--Texas Public Utility Regulatory Act (PURA)
Article VI, Section 38 (Emphasis added.)
The statements of the Applicants and the $RC Staff seem to indicate that the Texas regulations are designed to take care of the utility no matter what
-- regardless of whether the utility's construction program is in the best interests of the customers, or whether the rates generated by the utility's construction and operation of plants are just or reasonabic. As indicated above, and by the following, this is not the case:
"This (Public Utility Regulatory) Act is enacted to protect the public interest inherent in the rates and services of public utilities. The legislature ' finds that public utilities are by definition monopolies in the areas they serve; that therefore the normal forces of competition which operate to regulate prices in a free enterprise society do not operate, and that therefore utility rates, operations and services are regulated by public agencies, with the objectite that such regulation shall operate as a substi-tute for such competition. The purpose of this Act is to establish a com-prehensive regulatory system which is adequate to the task of regulating public utilities as defined by this Act, to assure rates, operations, and services which are just and reasonable to the consumers and to'the utilities."
--Texas Public Utility Regulatory Act (PURA)
Article I, Section 2 (Emphasesadded.).
The Staff's ru soning:
"The Staff has concluded that since the Applicants have demonstrated the ability historically to achieve consistent recovery of capital and operating costs for other facilities, their plan to finance the Comanche Peak facility's operation through revenues derived from rates charged to customers for utility service represents a reasonable financing plan in light of rele-vant circumstances (SER paragraph 20 5)."
...is flawed. To understand why it is flawed, it is necessary to. review briefly some of the history of rate increases since the Applicants bey;an con-struction of Comanche Peak. Since CASE has intervened in a21 bf Dallas Power and Light's rate cases since 1974, we will ref$r primarily to DP&L's rate hearings; however, similar situations also apply for the other two operating companies of Texas Utilities Cmpany (Texas Power and Light Co. and Texas Electric Service Company).
A.
Background:
When Dallas Power & Light Company (DP&L) came before the Dallas City Council.
in 1974, DP&L representatives stated that the power from Cmanche Peak would be absolutely necessary to meet demand in 1980. The fact is that in 1980, with
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l the hottest summer in thirty years, DP&L had a reserve capacity of 42.6%; the Texas Utilities. system had a reserve capacity of 38 3%; in 1979, DP&L had a I
64.0% reserve capacity, Texas Utilities system had 60.2%.5 The utilities had I
missed the estimate in their origital filing (approximately 1974) by 19 5% in 1980 (with the hottest summer in thirty years) and by 42 9) in 1979.0 (CASE is I
5 Comanche Peak Steam Electric Station, Environmental Report, Operating License Stage, Table 1.1-8 (Sheet 4 of 6), Amendment 1, September 1980.
6 Supra, Table 1.1-8a, Amendment 1, Septemb.er 1980.._.
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not attemptin6 to revive at this time our rejected old Contention 3 regarding the need for and alternatives to Ccananche Peak; however, we are pointing out that this type of information is certainly pertinent to,and may be examined in rate hearings. We wish to make this distinction clear before the utility or the NRC Staff misconstrue our intent.)
The other reason given for building the C&nanche Peak plant has been that there is a need to move away frcan the use of natural gas as a boiler fuel, and i
that since the utility is already building lignite plants, further diversification to include a nuclear plant is needed. Over the years, at tfie utility's projections of need have not materialized, this has become the primary justification for
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continuing the utility's construction program.
As probleme.have continued to arise in the construction of Ccmanche Peak and delays have been experienced again and again, the utility's primary justifi-cation for continuing with its construction program (and Comanche Peak) have also failed to materialize. This generated numerous questions and resulted in scme twenty-one pages of transcript in the 1980 DP&L rate hearings in Dallas and Austin, including the following questions and answers from the Attorney for the City of" Dallas to DP&L's Max Tanner, Vice President, testifying on l
the utility's construction program, fuel utilization plans, operations, depreci-ation and related matters:
"Q...Would you agree with me, Mr. Tanner, that the City of Dallas has generally been supportive of the construction program and the move away from gas as a primary fuel?
l "A.
Yes, very definitely.
_g.
d M:
t "Q.
And has Dallas also been, at least generally, somewhat supportive of the inclusion of a part of the CWIP (construction work in progress) in the rate base?
"A.
Yes.
"Q.
Let's look now at your Exhibit No. 4 where you show a projection of the relative fuel mix through 1989 When did we hit the low point on gas, Mr. Tanner, was it in '79?
"A.
That'c the low point we hit so far.
"Q.
And isn't that the low point that we're going to hit for a long time?
"A.
Well, looks like out through this part of the '80's, we're going to be in the 50 percent range or a little under 50 percent.
"Q.
And what was the percentage of gas in your fuel mix in '79?
"A.
Forty-eight percent.
"Q.
And then in '80, it jumps back,up a little bit over 50 percent, does
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it not?
"A.
That's correct.
"Q.
Are vp going the wrong direction?"
(Emphasis added.)
--Dallas Power & LiSht 1980 Rate Hearings, Before the' City of Dallas, 11/24/80,7 Transcript pages 86 and 87, See CASE Attachment I, pages 6 and 7 l
It is clearly indicated by the preceding and the additional nineteen pages of transcript in this regard that the City of Dallas is aware of and concerned about 'the fact that the utility's completion dates for Comanche Peak have been I It should be noted that, in additicn to the fact that the Texas Public Utility Consnission has jurisdiction over electric rates in Texas, cities in Texas which are served by public utilities have the right to establish rates for those utilities at the cities' options (" original jurisdiction"); the City of Dallas has chosen to exercise this right in the case of Dallas Power & Light and the City of Fort Worth has done likewise in the case of Texas Electric Service Co.
See CASE Attachment A hereto for Background Information Regarding Texas Rate Hearings.,
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changed several times in the past. There is no reason to imagine that the City J
of Dallas will ignore the utilities' recently announced construction ccampletion delay with its accaspanying increased costs to the ratepayers (or that the City of Fort Worth will ignore it). The fact that the utility was deliberately less 0
than candid in the last DP8L rate hearings about the delay can only serve to damage its credibility in future rate hearings and increase the possibh.11ty that the cities and the Public Utility Commission will be reluctant to base future rate increases on information provided by the utilities. Thus, by their own actions, the utilities may have already or may in thekfuture damage their own financial integrity and their ability to persuade the regulatory authorities to increase rates which will assure their financial qualifications to operate o
Cceanche Peak.
Dallas Power and Light and the other Texas Utilities companies are in a rather unique situation. It is clearly indicated from the rate hearings that the ratepayers have already been severely penalized for the utilities' large construction program.
If, as plants came on line, they were.needed (used and useful), there would also be increased revenues generated which would help offset the costs of the' plants and help alleviate the utilities' need for further rate increases. However, this is not the present situation, it has not been the situation for scue time, and it will not be the situation for many years in CASE's 11/2/81 Transmittal of Additional Information, page 2 and Attachments A and B.
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2 the future. CASE maintains that we are approaching a situation where it will be impossible for either the ratepayers or the stockholders to continue to finance a construction pro 6 ram which is based o'a. inflated demand figures, which~
will not generate the needed additional revenues when plants come on line because the plants will not be needed in that time frame, which will necessitate more and l
more rate increases, which will'eause more energy conservation because of increased costs of electricity, which will decrease revenues even further, which wiu necessitate more and more rate increases, etc., etc. -- a vicious circle which will lead to financial disaster for ratepayers, stockholders, and utilities.
Dr. Charles E. Olson, an economist and President of Olson & Company, Inc.,
testified for DP&L in the 1980 rate hearings; on cross-examination, he stated:
"A...But for the past five or six years, initially, DP&L and TU (Texas i
Utilities) and other utilities have been penalized as they have added rate base. In other words, the more rate base they have added, the more rates have gone up, and the more tne market-to-book ratio has fallen. So the shareholders haven't come out ahead by these expansions of rate bases and new issues of common shares at prices less than book value.
"Q.
This goes back, to...the large construction pregram, does it not?
"A.
Yes, it does."
--Dallas Power & Light Rate Hearings, Before the Public Utility Commission of Texas, Docket No. 3MO,12/9/80, Austin Transcript, page 307, See CA31i; Attacament J, page 3 The double-barren ed effect of very high construction costs with CWIP in the rate base and high fuel costs due to continued.use of natural gas will mean more l
l and higher rate increases for ratepayers.
In its Motion for Summary Disposition, the NRC Staff stated:
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s "The Staff has concluded that since the Applicants have demonstrated the ability historically to achieve consistent recovery of capital and operating costs for other facilities, their plan to finance the Comanche Peak facility's operation through revenues derived from rates charged to customers for utility
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service represents a reasonable financing blan in light of relevant circum-stances (SER paragraph 20 5).
. "The Applicants have indicated that they believe they will be able to recover deccsuaissioning costs in the rate process, and intend to build' the collection of these funds into depreciation rates of the facility under the ', negative net salvage' approach (SER paragraph 20.6).
"The Staff has reviewed the Applicants' plan to recover decommissioning costs and has concluded that it provides reasonable assurance for financing the decommissioning of the facility upon the end of its serviceable life (SER paragraph 20.6)."9 While the reasons given by the Staff seem perfectly logical on the surface, testimony frcan the DPSsL rate hearings demonstrates clearly that at least this cae applicant for an operatin6 license for Ccananche Peak:
(1) Has not made even a minimal effort to plan in advance for financing i
the costs of such vitally important financial considerations as de-l commissioning and nuclear waste disposal; (2) Has, in fact, opposed efforts of CASE, as an Intervenor in DP8cL rate hearings, to see that such cost's are planned for in, advance and in-cluded as a subject in rate hearings; and (3) Has not only not planned for and included such costs in rate hearings, they don't even want to talk about them and have in fact objected when CASE attempted to bring them up in rate hearings.
9 mc Staff's 10/28/81 Motion for Summary Disposition of Contention 25 (Financial I
Qualifications),page13 l
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s From the 1979 DPE rate hearings, Docket No. 2572:
In CASE's 5/21/79 First Request for Information to DP&L, we asked:
"15 h t will be done with the nuclear waste generated at the Comanche Peak nuclear plant? How long and how much can be stored at the plant site (give specific amount, by number of fuel rods)? h t costs are esti-mated for such storage or disposal? h will pay such costs? Have any of these costs been included in the cost estimates for the plant (if so, wheret)? Include in the answer the speciffe methodology for arriving at such conclusions, who participated in ma*2ing such analyses and reaching such conclusions, and copies of any reports, studies, memoranda, notes, or any other infonation used as the bases for such conclusions. Does such analysis and plan include the storage of the nuclear vaste in the State of Texas?"
"18.
h t are the estimated deccamissioning costs for the Comanche Peak nuclear power plant? Have these costs been included in estimated costs for the plant? ht plans have been made for decocnnissioning the plant (from partial deccumissioning to final deccumissioning)? Include in the answer the specific methodology for arriving at such conclusions, who par-ticipated in making such analyses and reaching such decisiens and conclu-sions, and co' pies of any reports, studies, memoranda, notes, or any other information used as the bases for such conclusions.
h will pay for the cost of deccamissionim? How will such costs be charged?"
"35 ht is the expected life of the lignite plants and the Comanche Peak nuclear power plant? ht is the current depreciation life being used and the current salvage value for the nuclear power plant and for the lignite plants? How does this compare with the depreciation and salvage value previously anticipated in past rate cases? Is it anticipated that the Comanche Peak plant will be used for its entire expected life? Give complete details and explanations. Do the answers take into account the effects of cumulative radiation on the plant and the possibility or like-lihood that the effects of such radiation will sericusly shorten the operating life of the plact?"
In Dallas-Powe:- & Light Company's 5/2h/79 Objections to First Request for Information from Intervenor CASE, DP&L objected to several requests for infor-mation having to do specifically with costs associated with Comanche Peak, including Questiion 15, for the following reasons: (1) all issues relate to matters i
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"of the safety of the operation of Comanche Peak...when it goes into service which is outside the scope of this instant rate proceeding and outside the
.iurisdiction of this Commaission;" (2) CASE has petitioned to intervene in the operating license hearings for Ccuanche Peak and all such safety questions are subject to the review of the NRC; (3) the construction of Comanche Peak has been approved by all applicable regulatory authorities including the NRC "and. portions of construction work in progress relating to said plant have been included in the rate base of this Applicant;a10 (4) "all of the issues in-oyired about do not in any manner relate to the level of rates to be set and.
established by this Ccumission and to be charged by this Applicant;" and (5) such requests are obviously an effort by CASE to "use this forum as another
' bite it the apple' to interfere with or prevent the construction of Comanche Peak which has already been approved and the construction of whick is under strict supervision by goveranental authorities. It is not in the public in-terest nor within the scope of this proceeding to permit such an effort to prevail."
(Baphasesadded.) " Wherefore, Applii: ant says that each of said Requests for Infomation should be stricken."
It should be pointed out that historically the Texas Public Utility Commission has held that costs which occurred outside of the " test year" (the rate filing package filed by the utility in rate cas'es covers the year ending with the latest quarter for which complete data is available) are not to be considered. In the 1979 hearin s, CASE was prevented frca pursuing the utility's service during o
the worst ice stom in thirty years in which there were blackouts for several days because it was outside the test year. In its 5/24/79 Objections, the utility argued: "All of such Requests for Information relate to an ice stom which occurred in Applicant's service area outside of the test year. None of the expenses relating to said storm occurred in the test year and this applica-tien for rate increase is not made for the purpose of recovering costs incurred r
10 As stated in the Texas Public Utility Regulatory Act (P'JRA), construction work in progress may be included in rate base only where necessary to the financial integrity of the utility. See page 6 of this pleading.
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by reason of such storm. Said inqpiries, therefore, do not relate to any matter vnich is at issue in this instant rate proceeding." (Emphasisadded.) Applicant's objection was sustained, and since Applicant did not file for a rate increase for a test year which included the time of the ice storm, CASE was never able to pursue its qpestions re$arding the service during the ice storm.' (Thisis included only as a demonstration of the rationale used by DP&L and the Public Utility Commission regarding what is or is not admitted into evidence in rate j
i hearingshistorically.)
In the Public Utility Cannission's (PUC's) Second Prehearing Order of 5/2k/79, DP&L's objection was sustained and DP&L was not required to answer our Question 15; DP&L was, however, ordered to answer Questions 18 and 35 In its 6/1/79 Response of Applicant to Reqpests for Information Submitted by Citizens Association for Sound Energy, the following answers were given:
" Question No. 18. Please refer to the attached Section 5.8 of the Comanche Peak Environmental Report filed with the Nuclear Regulatory Commission."
A copy of the then current Section 5 8 of the CPSES ER was attached, in which the utility was then projecting $14.6 million in 1978 dollars or
$18.4 million in 1981 dollars.
" Question No. 35 The current depreciation life being used for lignite units is 30, years and the not salvage value is negative 5% of depreciable plant. No depreciation life or salvage value is currently established for nuclear plants since no nuclear units are in service. No depreciation or salvage values for nuclear units have been included in any past rate appli-cations. No lignite depreciation or salvage value was included in any rate application prior to 1975 In the 1975 rate application, a lignite depreciation rate of 3 5% was reqpested by the Company. The 3 5% rate was based on a 35 year life and a negative 10% net salvage. In the 1977 rate application (PUC Docket 1526) a lignite depreciation rate of 3 36 was reqpested and approved by the City of Dallas (and) the Texas Public Utility Canaission.
"The Comanche Peak plant is designed for a h0 year life, as are all, _ _ _, _ _._,_____.__,_
recent designs of which we are aware. However, the economic life of a nuclear unit, or any similar utility property can, and usually does, differ fra its design life. As we move into the future, the level of routine re-placements and other maintenance procedures till change, as will the associated costs. At the same time, the external situation with respect to new technology, fuel ccet, alternative energy sources, and other factors will also change.
As the picture becues clearer, it can be determined at what point it be-caes more expensive to co'ntinue operating a unit than to use an alternative.
This establishes the end of the unit's economic life. The design life.does take into account the effect of radiation on the plant."
(Emphases added.)
Since DPE's answer to Question 18 was incmplete, in our 6/11/79 Motion to Compel DPE to Supply Complete Answers to First Request for Information from Intervenor CASE, we sought the information reques'.ed regarding the costa for the plant and plans for final dec m missioning, how and by whom the decisions and analyses were made, and"who will pay for the cost of decommissioning and how will such costs be charged?"
~4e also sought additional information regarding Question 35:
"This question was only partially answered. In the 1975-76 DPE rate hearings, DPE's expert witness Julius Breitling, Director of the Valuation and Appraisal Department of Ebasco Services Inc., New York City, testified that
'In recent cases Ebasco has recommended a life of 25 years for nuclear plants...and a 10 percent negative salvage. Now, we. feel honestly that l
this might even be inadequate on the negative salvage side, because l
of the cost of deemmissioning the plants.'
--Page 199, transcript, cross-examination by Mr. Sparks,1/14/76"
...as well as further information regarding the current recommended life and salvage value for nuclear power plants and whether or not it was anticipated that l
l the Comanche Peak plant will be used for its entire expected life.
i In the PUC Hearings Examiner's 6/19/79 Order Ccapelling Further Answers by Dallas Power & Light Cmpany to First Request for Information by Intervenor CASE, l
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the Examiner did not compel DP&L to supply more complete answers to Question 35; however, DP&L was ordered to file more complete answers to CASE Question 18:
"DP&L shall answer as completely as possible the CASE question concerning source of payment and charging of costs for final decontr.issioning of the
- Comanche Peak plant or shall explain why this information is unavailable."
Only after all of the preceding pre-hearing conferences, motions, objections and rulings was CASE finally able to obtain an answer from DP&L in answer to our Question 18:
"As outlined in Section 5.8 of the CPSES/ER(OLS) previously furnished the cust for decarmissioning Comanche Peak is currently estimated to be $18.4 million (in 1981 dollars). This cost is not included in the current esti-mates for the construction cost of the Ccmanche Peak Steam Electric Station.
The cost of deconmissioning will be recovered through the depreciation charges which, when approved, will commence when the unit is placed in service and as with any other facility dedicated to public service, deprecia-tion charges will be paid for by the ratepayers who receive the benefit from such facilities. The general plans for deccamissioning Ccuanche Peak Steam Electric Station are as outlined in Section 5 8.
Since decanmissioning will not occur until after the year 2020, specific plans are not presently avail-able. It is, however, expected that decommissioning plans will follow the best available and accepted technology and methods at the time of decom-missioning. The CPSES/ER(OLS) was prepared under the direction of Texas Utilities Generating Company (TUGCO), acting;as agent for the owners of the plant. Inquiries concerning the Atomic Industrial Forum study entitled
'An Engineering Evaluation of Nuclear Power Reactor Decommissioning Alterna-i tives' may be directed to the Atomic Industrial Forum, 7101 Wisconsin Avenue, Washington, D. C. 2001k."11 4
l It has been very difficult, given the volume of pleadings, transcripts, and other information generated in the past several years of DP&L rate hearings, to decide on what to include as Attachments to this pleading; the problem is DP&L's 6/22/79 Supplemental Response of Applicant to Requests for Infonnation Submitted by Parties, Additional Response to CASE First Request for Information, question No. 18 (Additional Response). See CASE Attachment B, page k.
e not that we don't have the infomation, but rather that we have so much that it would be a disservice to all parties and the Board to burden the record with copies of much of it. We have therefore tried to take a few specific cxamples to illustrate and support our contention. Rather than relying on these examples alone, we expect to call witnesses from DP&L and the other two Texas Utilities companies' rate hearings and to prove our case by cross-examination of those witnesses, based on our belief that such sworn cross-examination testimony would be the best proof we could offer. See attached CASE's Motion for Issuance of Subpoenas, dated today.
From the 1980 (the most recent) DP&L rate hearings, Docket No. 3h60:
After Applicants had changed their choice of deemissioning to immediate dismantlement, with its increased stated costs, CASE again attempted to raise the question of the costs and plans for deemmissioning and nuclear waste. In our cross-examination of Max Tanner, DP&L's Vice Presi.ient, who testified on the utility's construction program, fuel utilization plans, operations, depre-ciation and related matters:
"Q...Is the economic life for Comanche Peak still consi'ered to be 30 years?
"A.
Yes, ma'am.
"Q.
All right. When is it expected that the first unit of Comanche Peak will be deemmissioned?
"A. Thirty years frcn... June 1982...
"Q.
All right. When do you expect the second unit, to be decommissioned?. - -
Will it be just two years after that?
"A.
Two years after that.
" Q.
All right. When are the costs for that decommissioning going to be passed along to the ratepayers?
"A.
When the plant goes in service, there will be a provision for depre-ciation of that plant which will cover the removal of these (de)comissioning costs that will be collected over the life of those plants in our, rates.
"Q...is the same true in regard to the vaste disposal of the plant?
"A.
That will be a cost of removing the plant, yes.
"Q.
So that will be included as well. All right.
So when that plant comes on line, these costs will immediately start showing up?
"A.
They will show up as a depreciation expense, yes.
"Q...If'it were true that during the demolition stage of decommissioning, the taking down of the buildings, structures, and so forth, the Nucleer Regulatory Commission doesn't have responsibility of the station because all the radioactive materials will have been removed at that time, if that's true, and they don't have control over that at that point--
"A.
Once there is not radioactive material on site, they could care less.
That's their only responsibility, as I understand it.
I "Q.
All right. Ar, that point, duiing the demolition stage of deccanmission(ing),
l do you anticipate that the Texas Public Utility Commission will have any responsibilities during that stage?
"A.
We will have collected the' costs to decommission it, tear it down.
Once we have collected those costs, I don't think the NRC or this Commission
'would care.
"Q.
So, no one will be looking at how it's done or anything like that other than the Ccmpany? Is tW. ccrrect?
"A.
NRC win be locking at it (until) after all radioactive material is removed from the site.
"Q.
Right. But after that. I
~
"A.
After that, as soon as we have collected--which I'm sure we will--
through our rates the costs to deemmission the plant, the Camission, here and the city, I don't know that they would have any concern over that...
"Q.
All right. So at that point, the full respor.sibility would rest with the Capany (DP&L) or the affiliated cmpanies, or whatever--of Texas
. Utilities companies or the owners of the plant.
"A.
It's our responsibility anyway.
"Q.
Regarding these deen =mf saioning costs which will be coming into the rates very soon from what you said, hasn't the Company changed its method of decommissioning from later dismantling to immediate dismantling. And if so, what effect will that have? Hasn't that increased the cost frcm about, oh,18 or so mfilion dollars to about $100 million?
"Mr.Engelland(DP&L'sattorney): Mr. Examiner, I'm going to object to the rest of this line of questioning. It has absolutely no relevance to this rate case. These are costs that will not be collected until at least two years on out into the future. And what she is now discussing is sme-thing that's going to happen 32 years from now. They have absolutely no relevance in set (ting) rates in this particular proceeding. I object."
--1980 DP&L rate hearing, Docket No. 3460, Before the Texas Public Utility C m mission, Austin Transcript,12/8/80, pages 129-132.
(Emphasesadded.) See CASE Attachment F, pages 19 through 22.
The preceding testimony frcm DP&L l'9'7? and 1980 rate hearings clearly showsthat DP&L has not made even a minimal effort to plan in advance for financing the costs of such vitally important financial considerations as deccumissioning and nuclear waste disposal, has in fact opposed this Intervenor's efforts to see that such costs are planned for in advance and included as a subject in rate hearings, and doesn't even vant to talk about them and has in fact objected when CASE attempted to bring them up in rate hearings. It is apparent that DP&L simply plans to try to include such costs in depreciation without ever.
.-.--___..-.,o
._,,y c.e.-
.e even having to advise the regulatory authorities or the ratepayers of the true costs involved.
Further, because of the PUC's historically allowing only costs within the
" test year" (see page 15) tc be included in rate cases (although the wording a
of the Texas laws and PUC regulations in this regard could be interpreted otherwise), it is obvious that the regulatory authorities have not, and will not, see that such costs are planned for and included as a sub, ject in rate hearings and rate decisions of their own volition; but that they will instead consider such costs only at the time such costs become due and are to be passed on to the ratepayer. Further, under State and,PUC law and regulations, there is no guarantee that such costs will be included in rates at that time, especially given the utility's lack of candor in ttie past regarding such costs.
Thus, it is also obvious that DP&L (and probably at least the other two Texas Utilities ccampanies, TP&L and TESCO) will not plan for and include such costs in rate hearings absent a specific order from the Atomic Safety and Licensing Board in these proceedings thnt they mus't do so.
Only such specific order will assure that the funds are available when needed for decommissioning and nuclear waste disposal, and only then can open discuMion between the regulatory authorities and the utility and the public take place regarding such costs.
IV. FOR THE PAST SEVERAL YEARS, THE TEXAS UTILITIES APPLICANTS HAVE EXPRESSED CON 1'INUING AND INCREASING CONCERN THAT THEIR FINANCIAL CONDITION IS DETERIORATINd.
This was one of the most difficult parts to limit as regards which testimony to include and how much to include; almost every DP&L witness in every DP&L rate,.
r case has at some point in his testimony made it a point to mention that the utility's financial integrity is in jeopardy and that its financial condition is deteriorating, often accmpenied by dire predictions if the ccanpany isn't allowed to include 100% of CWIP (construction work in progress) in the rate base.
(Usually the PUC allows some CWIP in rate base, but not 100%; in the last,1980, rate case the PUC allowed 80% of CWIP in rate base. Generally, the ccupany gets about 50% to 55% of the total amount of rate increase they request.
TESCO and TF&L get similar increases usually.)
We vill try to limit the ed,tachments hereto to a few which will give a general idea of statements which have been made in.recent rate hearings with which we are particularly concerned. We are quoting from some others of which we have transcripts or copies (see sworn stiatementi~at end of this pleading).
In the 1979 DP&L rate hearings, Docket 2572, DF&L Vice President Erle Nye stated on cross-examination:
"...You made the point that we haven't lost our Triple A.
We've asked for it three times. Vc haven't sold any bonds during that period of time. Now, we're going to cell bonds. We have' put it off as long ps,ve can. We sold SAMA bonds, we sold equity, we've sold plant, but we're going to sell bonds.
There is no way to get around it.
"Q.
But during this time, DP&L has raised the capital it needed to meet its needs and to meet its construction program?
"A.
I believe I described that we sold (S)AMA bonds which do not require a rating. We sold equity which was from the holding company that thus far has been patient and provided us the capital. We've sold plant which I don't think is the best way to raise capital in a general sense. I don't believe most people would suggest, most experts vould suggest, that's appropriate."
--Austin Transcript, 7/10/79, pages 364-365, See CASE Attachment K, pages 1 and 2 __.
r
" Frankly, Mr. Bell, Houston at this point, has substantially better financial indicators than Dallas Power, either on a current basis, on a five year average, almost any way you want to look at it.
I believe they do look at your fi-nancials. I believe they do judge your record, and while Houston is a AA, I think they are a strong AA. And while Dallas Power is a AAA presumably, I am confident that we are a weak AAA. You know, you don't press the issue.
If we haven't asked for a rating, it seems to me it's sort of problematical.
'I'd have to say that with respect to their construction prodram that 648 million in '79 is not nearly as substantial to a company the size of Houston as 168 million was for our '78."
--Austin Transcript, 7/10/79, pag'e 377, See CASE Attachment K, page 3 "Q.
Is it your testimony that your Triple-A bend rating is less difficult to maintain today than it may have been last year in Docket 15267 "A.
I would say that if we had filed -- if we had sold bonds since 1526, we would have been derated. In that respect, the results that me got were cimply not adequate. It's difficult for me to go back to relate to that case. I don't think that case provided sufficient coverage to take care of the bond rating and accordingly, I did not finance."
--AustinTranscript,7/10/79,page392, See CASE Attachment K, Page 4 "Q...in response to Mr. Bell you used a term that I'm not familiar with and I think scue of the other folks here, perhaps, the Excminer may not be familiar with when you were talking about private placed bonds. And I believe I heard you make reference to SAMA bonds?
....Could you define that term for us?
"A...SAMA, is the Saudi Arabian Monetary Agency, that was the purchaser.
"Q: And that was a private nonrated placement of how much?
"A.
Total of 75 million dollars.
....I mi5ht say that that whole transaction was discussed both with the PUC Staff and the Dallas Staff."
--AustinTranscript,7/10/79,pages397-398, See CASE Attachment K, pages 5 and 6 In the 1980 DP&L rate hearings, Docket 3460, Joe D. Karney, DP&L's Treasurer l
& Assistant Secretary with responsibility for the financial, accounting, and internal' audit activities of DP&L, testified regarding:
(a) the importance of the Company's (DP&L's) ability to attract capital; (b) the Company's current financial condition, _ _ _ _
.e including fixed charge coverages, internal generation of cash, return on common stock equity, and quality of earnings; (c) the basis for the Company's request to include construction work in progress (CWIP) in the rate base; (d) the adjusted value rate base for the Company; (e) the capital structure of the Company; and (f) the Company's ccanposite cost of capital." His direct testimony'in those.
)
hearings is attached hereto in its entirety (see CASE Attachment E, pages 6 thru 37).
a l
His direct testimony contains phrases such as:
"In recent years, however, the Company has had to resort to a higher level of short-term debt and the sale, through private placement, of intermediate-tem debt...It should be noted that a construction program of this size represents annual expeditures equal to approxi-mately 19 percent of the net cost of all the plant currently in service...They (the Company's fixed charge coverages anii supplemental fixed charge coverages in recent years) have declined substantially...Althou6h recent rate orders of the Company's regulatory authorities' have addressed the need to restore the I
Company's financial in'.egrity, the amount of rate increase granted in each case has been inadequate to accomplish this objective...JDK Exhibit.No. k further illustrates that the rate increases granted in the Company's last two rate orders have been insufficient to provide the level of internal cash generation recommended by the PUC staff for the maintenance of financial integrity. Also, from 1%8 to the end of 1979, construction expenditures have increased more than four times...
The level of earnings for the Company has simply been inadequate for several years...In addition to obtaining an adequate return on common equity, the inclu-sion of all Construction Work in Progress (CWIP) in rate base is necessary (to d
i improve the Capany's financial integrity)...To the extent that CWIP is excluded from rate base, completion of a major project 1/ill cause revenue requirements to increase dramatically at the time the project is included in rate base...
As shown in JDK Exhibit No. 7, the construction program to convert to alternative fuels has caused CWIP to increase rapidly in relation to electric plant. CWIP has increased from approximately 9 percent of electric plant in 1969 to almost 24 percent at the end of the test year...JDK Exhibit No. 9 shows that the Staff's recommendation for AFDC as a percent of earnings has never been attained during the periods of time following the implementation of rates resulting frm the Capany's last two rate proceedings. The amounts of CWIP allowed in rate base in those proceedings have been inadequate...As can be seen in MRT Exhibit No. 2, m
construction expenditures have increased dramatically in the past ten years...
A pollution control revenue bond issue is scheduled to take place in October of 1980 in which the Capany will be obligated for $6,334,000 of the issue...
An analysis of the Cephuy's projected results of operations based upon rate increases resulting from various levels'of return on equity,and CWIP in rate base clearly indicates that the Capany has virtually no chance of earning the 17 percent return on equity requested, unless all of the CWIP requested is included in rate base...JDK h hibit No. 10 clearly illustrates that the C apany has not earned the rate of return allowed."
Mr. Karney defined financial integrity as it applies to Dallas Power &
l l
Light in his cross-examination testimony:
"...my personal definition of financial integrity is the ability of a
- 26*-
mow
ccanpany to pay its obligations on a timely basis and to pay a reasonable return to the investors for risking the capital in that company. Certainly it's also the ability to borrow money at a reasonable rate, to have a good credit rating, to maintain flexibility within your dealings in the financial ccanmunity and in obtaining capital."
--1980 DPE Rate Hearings, 11/25/80 Dallas Transcript, pages 285-286, See CASE Attachment D, pages.5 and 6 Dr. Charles E. Olson, DPE's only outside witness (other than DPE-employed personnel) in the 1980 DPE rate hearings (see page 12 of this pleading), stated in his cross-examination testimony:
"Q...What I'm getting at is the nr.ed for rate relief now...Hasn't this alleviated part of the problem already? In other words, DP&L needs a rate increase based on this test year, but there have been factors which have come into play since the test year which have alleviated part of that problem, have they not?
"A.
No. They h2ren't alleviated it.
In spite of this record summer, in spite of'the fact that Staff is recommending a higher return on equity than has probably ever been reccamended for any Triple A public utility ever in the United States, we still see the ccamon shares of Texas Utilities (trading) at less than 75 Tercent of book value. It's a long ways from 110.
"Q.
And in spite of the fact that.. Texas Utilities revenues for the first eight months of 1980 increased by 23 percent and DP&L's increased by 25 l
percent?
"A.
In spite of all that, inflation is at record levels, interest rates are at record levels...
"Q.
So you don't think that...this has alleviated the problem at all?
"A.
It really hasn't. Interest rates are at high levels, and if the Ccapany is going to have a capital attracting a rate of return that's going to be such that the shares will sell at a price equal to or, let's say,110 percent of book value, they have to have more than they do right now. They just have to have more; otherwise, it's just going to be a continued situation of selling at less than book."
(Emphasis added.)
--1980 DP&L rate hearings, Docket 3h60 Austin Transcript, 12/9/80, pages 270-271, See CASE Attachment L, pages 3 and 4..
In addition to the testimony of DP&L's Treasurer, Joe D. Karney, we are attaching in their entirety the. sworn Direct Testimony of Mr. Karney's counter-parts at TP&L and TESCO in the most recent TP&L and TESCO rate hearin6s. See Attachments G and C hereto for testimony of Gary L. Price, Treasurer and Assistant Secretary of TP&L, in Docket 3780, filed 3/6/81 and David E. Kelch, Vice President and Treasurer of TESCO, in Docket 3250, filed 5/15/80, respectively. We will not take the space to quote fram them, but include them herewith as a part of our Answer.
The testimony of Messrs. Karney, Prico and Kelch reveals many similarities and demonstrates emphatically that these three men, who are the Treasurers of the three Texas Utilities empanies, the. primary owners of Cmanche Peak, believe that their companies' financial integrity has been detericrating for the past few years, is continuing to deteriorate even now, and will continue to deteriorate still more in the future.
CASE believes that cross-examination. of these three Texas Utilities witnesses and other witnesses which may be called regarding this contention will prove CASE's contention.
As stated previously, we are not yet certain whether or not Applicants will make these witnesses available voluntarily or if it will be necessary for the Board to subpoera them.
~,. - - - -
V.
MANY OF THE STATEMENTS CONTAINED IN STAFF'S MOTION FOR SINMARY DISPOSITION ARE ERRONEOUS, QUE6'2IONABLE, OR 110 LONGER VALID.
In the Staff's Statement of Material Facts As to Which There Is No Genuine Issue To Be Heard, attached to its Motion for Summary Disposition, there are several statements which are erroneous, questionable, or no longer valid; specifically the following Staff items:
/
2.
Both Applicants and NRC Staff have ignored some key phrases contained in the Texas State Law and the regulations of the Texas Public Utility Commission (PUC), such as " reasonable; adequate; under efficient and economical management; used and useful; burden of proof; just and reasonable; protection and representa-tion of the public interest; protect the public interest." See discusaico under Item III, pages 5 through 22 of this pleading.
If it were as simple as Staff's item 2 makes it sound, there would be no need at all to even have rate hearings or a Texas Public Utility Commission.
However, this is not the caae. These tems are subject to interpretation, discussion and decision in each and every rate hearing. In addition to the other information contained herein, we are also attaching portions of the trans-scripts from DP&L rate hearings in the 1980 DP&L rate esse which includes a discussion on cross-examination of Mr. Karney regarding the duty of the regu-latory authority in setting rates which may be helpful (see CASE Attach =ent D, p.19-24, transcript pages 325 beginning with line 10 through transcript page 330 line 22).
We're also attaching other portions of transcripts in DP&L rate hearings which should be helpful in supplying background infor=ation and further documentation. -
O r-3 CASE has not made a thorough study of TMPA at this time; however, we note that Staff makes no mention of whether or not the member cities of TMPA have the authority and ability to pull out of Comanche Peak altogether, as the City of Austin voted to do recently in the case of the South Texas Nuclear Project (STNP) and as the City of San Antonio may do regarding STNP. This certainly raises a question in CASE's mind regarding item 3's accuracy.
4.
Information which CASE has from the DP&L rate hearings indicates that the capacity factors of 50, 60 and 70 percent are not accurate. In the 1979 DP&L rate hearings, Max Tanner (see page 9 of this pleading) testified:
"Q.
You also stated earlier this morning that you anticipate Comanche Peak would run at 70 percent capacity after the first three years.
"A.
In the third year.
~
"Q.
Or in the third year. Do you have an analysis of what capacity that Camanche Peak vill be operating in the first two years?
"A.
We are planning for fuel purposes 35 percent the first year, 50 percent the second year, and 70 rercent the third year and thereafter...
...So, to figure it in a conservative mode, we've calculated on 23 percent the first year, 50, and then 70..."
--1979 DP&L rate hearings, Docket 2572 AustinTranscript,7/9/79,pages91and92, See CASE Attachment M hereto, pages 1 and 2 In the 1980 DP&L rate hearings, Mr. Tanner testified:
"Q...In regard to the capacity factor listed here for Unit 1 of Comanche Peak, it's listed as 29 percent for 1982 and for 1984 it's listed as 53 Percent...
Are you talking about on the first one, one unit having ccme on line?
"A.
That's correct.
"Q...And in the second instance, you're talking about 53 percent capacity factor for that first unit. - _ _ _
f' "A.
No. For both units.
"Q.
For both units.
"A.
That's correct.
"Q...If you're talking about having the second unit come on line in 1984, why would the capacity factor for the first unit be 29 percent in its first year and the capacity factor for the second unit be 53 percent in its first year?
"A.
Let me see if I can explain that.
Unit 1 will load fuel, as is our present plan, in late 1981. We would anticipate it will be commercial by mid-year. It would be producing see power during that first six months during the test phase, amall amounts of power. It would produce power in the latter half of 1982.
Now, we know fr m experience of others that you don't get these things up to full capacity and run them. So we have made a very conservative esti-mate ou the output of Unit 1 during 1982, a 29 percent capacity factor.
In 1984, Unit i vill be in its third year of operation. Unit 2 will be startup, just like Unit 1 was in '82.
So that 53 percent is a composite of Unit 1, which will have been in s.ervice for a period of time, and Unit 2, which is just coming in service. We are striving and our goal is to operate these at around a 70 percent capacity factor.
"Q.
I see. Okay. So would you say, then, that for Unit 2 you're still saying that the first year of operation it would be around 29 percent?
"A.
That's correct."
(See CASE Attachment F, pages 16 through 18, transcript pages 70 through 72, for additional discussion not reproduced here.)
--1980 DP&L rate hearings, Docket 3k60, Austin Transcript, 12/8/BO, pages 68-72, See CASE Attachment F, pages lh through 18.
Furthermore, the assumptions "that the first year of comercial operation will be 1983 for Unit 1 and 1985 for Unit 2" is now questionable if not incorrect.
5 See discussion of item 2 on page 29 of this picading.
6.
See discussion of item 2 on page 29 of this pleading, as well as item IV, pages 22 through 28 of this pleading.
31 _
r 8.
See discussion under Item III, pages 5 through 22, and under Item IV, pages 22 through 28 of this pleading.
9 See discussion under Items III and IV, pages 5 through 22 and 22 through 28, respectively, of this pleading.
- 10. See discussion under Items III and IV, pages 5 through 22 and 22 through 28, respectively, of this pleading.
11.
See discussion under Items III and IV, pages 5 through 22 and 22 through 28, respectively, of this pleading.
In short, CASE challenges the NRC Staff's underlying assumptions and bases for Items 2,4,5,6,8,9,20 and n, and questions Item 3, based on the information presented herein.
In addition, there is one other item which has not been mentioned yet which may well add further significance to this contention. This summer, Texas Utilities decided to sell 120,000 acre-feet of water from Lake Fork Reservoir to the City of Dallas. The Dallas City Council was under severe and unusual pressure to rush the purchase through. A DALLAS TIMES HERALD editorial comment stated:
" Lake Fork became availabla when Texas Utilities... decided its decreased electricity generating needs made the water surplus.
The utility company is obligated to pay off the $115 million in bonds issued by the Sabine River Authority, and it began to look for someone to take over the debt..."
See CASE Attachment H hereto. CASE bas not at this time made a thorough investigation of this matter. However, there are some unsettling questions which need to be addressed in connection with Contention 25 Water is not so plentiful in the State of Texas that one would normally expect an electric utility to sell its rights to it, even with options. Was the reason that the utility needed the money, or rather that it was having problems raising.the money to continue paying on the debt? If so, this definitely has a bearing -
r on this contention and these proceedings. The possibility indicates that further investigation is needed.
.(In reviewing our files in preparing our responseto Staff's Motion for Simrnary Disposition, we came across an interesting piece of information from.
the Texas Utilities Company Prospectus issued February 11, 1981 for the sale of 5,000,000 shares of ccanmon stock, which raises another question -- can the efforts of one of the owners of Comanche Peak to maintain its financial quali-fications and integrity damage the financial qualifications and integrity of another owner of Ccananche Peak? On page 20, it is stated:
"In July 1980, Tex-Ia filed suit in the 126th Judicial District Court of fravis County, Texas...for review of the April 1980 PUC order granting Texas Power its most recent rate increase.
(The suit) seeks a reversal of the order and a refund of all payments made by the plaintiff thereunder.
l "In July 1978, Tex-Ia filed suit in the 53rd Judicial District Court of Travis County, Texas, for review of the PUC order of May 1978 granting Texas Power an increase in rates. This suit seeks a reversal of the order and a refund of all payments made by Tex-La thereunder...the rate appeal suit is currently pending in the District Court wherein the Court has l
announced its intention to affirm the rate increase."
If the financial qualifications of either or both of the owners of CP which are involved in these suits are dependent in any way on reve-ues involved in such suits, would not a decision in the suit affect the loser adversely? As far as we can ascertain at this time, this aspect has never been addressed by anyone in these proceedings; we suggest that it should be investigated by the NRC Staff and a report made to the Board in these proceedings.). - - -
r VI.
IT'S TIME FOR ANOTHER RATE HEARING.
During the past several years, DPE, TPE and TESCO have more or less alternated rate hearings before the PUC. DPE had rate hearings in 1975-76, 1978,1979 and 1980; it will be back before the PUC again shortly. Based on past experience, we fully expect them to file for another rate increase imediately after the 12/2/81 hearings on financial qualifications are completed (although TESCO may file first). We suggest that it would be in the public interest and very enlightening with regards to the Applicants' financial qualifications to operate and deemmission Comanche Peak for the NRC Staff to have a repre-sentative attend the next rate hearings for DPE, TPE and TESCO. We strongly urge that the Board so order. We further request that the Board allow CASE to file supplemental testimony and condu'et cross-examination of DPE, TPE and TESCO witnesses following such rate hearings.
As discussed in Item III of this pleading (pages 5 through 22), the Texas i
Utilities empanies will not plan for such vital financial considerations as deemmissioning and waste disposal or in'clude them in rate hearings absent a specific order from the Board to do so. CASE therefore asks that the Board so order; we furt.her request that the Board set forth specific questions to l
be considered by each Applicant in its next rate case, since only in this var can it be assured that the funds will be available when needed for decommissioning and nuclear waste disposal.
CASE is certain that on cross-examination, the Texas Utilities witnesses which we wish to call vill confirm the fact that there is no guarantee that the PUC will grant them the rate increasea or the amount of depreciation they request.. _. _
r-VII. IN CO_NCLUSION:
House Report No. 97-27712,copyofwhichwasattachedtoCASE's11/2/81 Transmittal of Additional Infomation, devotes two full pages to Comanche Peak and states:
"A brief look at the Comanche Peak history dtseloses a sadly familiar saga of construction, financial and safety problems."
--House Report page 25 In the proposed rule change regarding Financial Qualifications (FEDERAL REGISTER, Vol.16, No.159, August 18,1981), it is stated:
I
"... landmark court decisions established the principle that public utility ccanmissions are to establish a utility's rates such that all reasonable costs of serving the public may be recovered assuming prudent management of the utility. Therefore, one presumption that underlies this proposed rule is that regulated electric utilities (or those able to set their own rates) will be able to meet the' costs for safe construction and operation of a nuclear production or utilization facility."(Emphases added.)
This premise is basically flawed. First, the NRC's statement ignores completely two vital words:
reasonable and prudent. In the case of Comanche Peak, questions which must be answered by the cities with original jurisdiction and ultimately the Texas Public Utility Commission include:
Is it reasonable to allow a utility to continue to increase capacity by building nuclear plants 1
when they already have a 60% reserve capacity (as Texas Utilities did in 1979)?
Was it prudent management to allow a 60% reserve capacity to develop in the first place? Is it reasonable to force ratepayers of the Texas Utilities ccupanies to continue to pay excessive rates for years du' ring a switch-over from natural 2 October 20, 1981, Ninth Report by the Committee on Government Operations, Based cn a Study by the Environment, Energy, and Natural Resources Subcommittee, House Report No.97-277, " Licensing Speedup, Safety Delay: NRC Oversight." l
I gas to lignite and nuclear fuels, when the years expected for such switch-over cor.tinue to increasef Was it prudent managemeni for the Texas Utilities companies to delay completion or postpone construction of lignite plants in favor of continuing to build the nuclear plant? What are the basic causes for the Texas Utilities companies' current deteriorating financial condition (according to the sworn testimony of the Treasurers of DP&L, TP&L and TESCO)? Did lack of prudent management on the part of the Texas Utilities companies contribute to this financial deterioration? And how can the regulatory authorities best ecc mplish the primary purpose of the Texas Public Utility Regulatory Act:
"The purpose of this Act is to establish a emprehensive regulatory system which is adequate to the task of regulating public utilities as defined by this Act, to assure rates, operations, and services which are.just and reasonabie to the cornumers and to the utilities." (Emphases added.)4 l
--Texas Public Utility Regulatory Act (PURA) l Article.I, Section 2 I
These are questions which must be answered, not by the NRC or the Applicants, but by the duly constituted regulatory bodies of the cities in Texas which have l
clected to retain original jurisdiction over electric rates and, the Texas Public Utility C amission. Obviously, such questions are judgemental in nature and I
the judgement of different people can vary conaiderably. Further, in addition to the'Public Utility Commission and local regul'atory authorities (including l
l City Councils), another element which can drastically alter the regulatory process is the State legislature. Elected officiads such as City Councils l
l 13 See also discussion in Section III, pages 5 through 22 of this pleading..
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e cod State legislators ultimately must respond to the demands (when they become loud enough) of the people who elected them.
In the State of Texas, citizens and legislators are taking a closer look at such questions, as demonstrated by the fact that on November 3,1981, the City of Austin's voters opted to sell the cf ty's share of the South Texas Ifuclear Project. There is no reason to believe that the Dallas City Council, the Fort Worth City Council, the Texas Public Utility Commission, and the ratepayers will view the past and most recent construction delays and cost overruns at Cccanche Peak with blinders on, or to believe that the Texas laws and r'egulations smehow give the utilities a blank check with the ratepayers' signature on it.
The decisions which are made regarding the Applicants' financial qualifi-cations will impact in many ways. In the Draft Enviroranental Statement (DES) for Comanche Peak, the NRC Staff stated:
"... planning for deccumissioning can affect health and safety as well
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as cost.
l In its ccaments on the DES, the EPA stated:15 "The Draft EIS states that planning for deccemissioning can affect health and safety as well as cost, and that financial assurance that funds will be available, when required, is a factor to be considered. We concur in this assessment, but were unable to find in the Draft EIS arrandements for financing deccumissioning costs...The Final EIS should explain what specific arrangements have been made, or are planned, to assure that funds will be available when required.
l 1" NUREG-0775, May 1981, Draft Enviromental Statement related to the operation of Comanche Peak Steam Electric Station, Units 1 and 2, page 5-76.
15 SeeEPA's6/30/81 letter,NUREG-0775, September 1981,FinalEnvironmental Statement related to the operation of Comanche Peak Steam Electric Station, Units 1 and 2, Appendix A, Pages A-7 through A-9 l '
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f' "In this connection, it is not clear at what point the licensee's financial responsibility is to be terminated. Termination of the nuclear license is required at the end of facility life, and this requires decontamf ation of the facility such that unrestricted use can be allowed. Although the appli-cant's present plans call for immediate dismantlement at the end of the station's econanic operating life, one option to achieve such decontami-
. nation is SAFSTOR, which allows deferral of decontamination for up to 100 years. It is not clear, in such a case, whether license temination would occur prior to or at the end of such an extended storage period. If termi-nation occurs at the beginning of the storage period, financial arrangements evidently vill be ne:essary to pay for the deferred decontamination. The
?inal EIS should clarify this point."
Although the Final Environnental Statement for Comanche Peak addresses l
some of the comments of the EPA, it does not " explain what specific arrangements have been made, or are planned, to assure that funds vill be available when required."1 (Emphasis added.) CASE maintains that the Staff could not have explained the' specific arrangements because, as demonstrated in this pleading,17 there are g such specific arrangements.
Since decommissioning costs are inexorably intertwined with financial qualifications under 10 CFR Part 50, Appendix C and 50 33(f), CASE maintains that one of the specific criteria implicit in reaching a decision that Applicants are financially qualified to operate Comanche Peak is that specific arrangements be made in advance for both short-term and long-term decommissioning. We further i
16 NUREG-0775, September 1981, pag 2a 8-17 and 8-18, Section P. 5 9 Decommissioning.
17 See especially pages 13 tbrough 18.
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submit that this will be acc mplished only at the express order of the Board that each of the Applicants initiate consideration of the handling of decem-missioning and nuclear waste disposal costs, including specific information as to exactly what these costs will be, in the next rate hearings for each of the Applicants (other than 1NPA, which sets its own rates) before the Texas Public Utility Commission and, where applicable, before the cities which have retained original jurisdiction over electric rates. Arrangements should be made in some fashion to assure that 1MPA vill have funds available when needed to handle its share of such costs.
The information contained herein and attached is only a small sample of
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the testimony from the rate hearings which supports CASE's Contention 25 Unless this information and the sworn testimony of the Treasurers of DP&L, TP&L and TESCO is ignored completely, it is obvious that the Applicants do not have the financici qualifications to operate and decommission the Cmanche Peak facility. Therefore, the NRC Staff'.s 10/28/81 Motion for Summary Disposition
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of Contention 25 (Financial Qualifications) must be denied. Further, after con-l i
firmation that this is correct by ceoss-examination of Applicants' witnesses, I
l the operating license for Comanche Peak will have to be denied.
Respectfully submitted,
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.rs.) Juanita Ellis, esident CASE (Citizens Association for Sound Energy) l 14a6 S. Polk Dallas, Texas 75224 214/946-9446 214/9hl-1211, work, usually Tues. & Fri. only
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