ML20038A959
| ML20038A959 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 11/20/1981 |
| From: | Petersen J NRC OFFICE OF STATE PROGRAMS (OSP) |
| To: | |
| Shared Package | |
| ML20038A943 | List: |
| References | |
| NUDOCS 8111240523 | |
| Download: ML20038A959 (20) | |
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UNITED STATES OF AMERICA NUCLEAR REGULATORY COM:11SSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of
)
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TEXAS UTILITIES GENERATING COMPANY,)
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50-445
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(Comanche Peak Steam Electric Station, Units 1 and 2) 4 NRC STAFF TESTIMONY OF JIM C. TETERSEN REGARDING FINANCIAL QUALIFICATIONS (CONTENTION 25)
Q.l. State your name and occupation.
A.l. My name is Jim C. Petersen.
I am employed by the Us S. Nuclear Regula-tory Commission as the Senior Financial Analyst in the Office of State Programs.
Q.2. Please describe the nature of the responsibilities you have had with respect to tinancial qualifications of applicants for nuclear facility 1icenses.
i l
A.2. During the past 7 years, I have been responsible for evaluating the -
financial qualifications of nuclear facility license applicants to i
pursue proposed activities under a license, primarily the construction and operation of nuclear power plants.
In this regard, I have per-formed the financial qualifications review in connection with numerous nuclear facility license applications.
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F Q.3. Have you prepared a statement of professional qualifications?
A.3. Yes.
A copy is attached to this testimony.
Q.4. Please describe the nature of the responsibilities you have had with S
respect to the Comanche Peak Steam Electric Station, Units 1 and 2.
A.4. I performed the financial review at the operating license stage for the Comanche Peak Steam Electric Station, Units 1 and 2, and was i
responsible for preparing the NRC Staff's evaluation of the 6pplicants' financial qualifications, as set forth in Section 20 of the Staff's 1
" Safety Evaluation Report Related to the Operation of Comanche Peak Steam Electric Station, Units 1 and 2" (NUREG-0797, July 1981) (SER) and in Section 20 of the Staff's " Safety Evaluation Report Related to the Operation of Comanche Peak Steam Electric Station, Units 1 and 2" (NUREG-0797/ Supplement No.1, October 1981) (SSER). A copy of Section 20 of the SER and Section 20 of the SSER is attached to this testimony.
Q.5. To the best of your knowledge and belief, are the statements set forth in Section 20 of the SER and Section 20 of the SSER true and correct?
A.S. Yes.
f i
Q.6. What is the purpose of this testimony?
A.6. The purpose of this testimony is to respond to Contention 25 related to the financial qualifications of the Applicants in this proceeding.
Contention 25 reads as follows:
L The requirements of the Atomic Energy Act, as amended, 10 C.F.R. Q 50.57(a)(4) and 10 C.F.R. 50 Appendix C have not been met in that the Applicant is not finan-cially qualified to operate the proposed facility.
i
3-Q.7. Contention 25 asserts that the Applicant [s] fail to meet the require-ments of 10 C.F.R. 9 50.57(a)(4) and Appendix C to 10 C.F.R. Part 50, in that they are not financially qualified to operate the Comanche Peak facility.
What are the requirements of 10 C.F.R. 5 50.57(a)(4) and Appendix C to 10 C.F.R. Part 507 A.7.10 C.F.R. @ 50.57(a)(4) provides that an operating license may be issued by the Commission upon finding that "[t]he applicant is technically and financially qualified to engage in the activities authorized by the operating license in accordance with the regula-tions in this chapter...."
Appendix C to 10 C.F.R. Part 50 is entitled "A Guide for the Financial Data and Related Information Required To Establish Financial Qualifications for Facility Construction Permits and Operating Licenses."
Appendix C provides guidance to applicants as to. "the general kinds of financial data and other related information that will demonstrate -
the financial qualifications of the applicant to carry out the acti-vities for which the permit or license is sought." Appendix C expressly states, however, that "[t]he kind and depth of information described in this guide is not intended to be a rigid and absolute requirement."
j Appendix C further refers to 10 C.F.R. G 50.33(f) as to the require-ments for a demonstration of an applicant's financial qualifications.
Q.8. What are the requirements of 10 C.F.R. 9 50.33(f)?
A.8.10 C.F.R. Q 50.33(f) specifies the information required in applica-tions for licenses and permits as to the financial qualifications of the applicant to carry out the activities for which the permit or f
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' license is-sought.
In pertinent part, 10 C.F.R 5 50.33(f) requires-that applications for operating licenses contain information that shows "that the applicant possesses the funds necessary to cover estimated operating costs or that the applicant has renonable assur-i ance of obtaining the necessary funds, or a combination of the two."
In addition, an applicant for an operating license of the type sought in this proceeding is required to show that it " possesses or has
' reasonable assurance of obtaining funds necessary to cover the esti-mated costs of operation for the period ~ of the license or for 5 years, whichever is greater, plus the estimated costs of oermanently shutting
- ne facility down and maintaining it in a safe conditico.
t.
With regard to the latter requirement, Appendix C to 10 C.F.R.
L Part 50 provides the following guidance:
For purposes of the latter requirement, it will ordinarily be sufficient to show at the time of filing of the application, availability of l
resources sufficient to cover estimated operating costs for each of the first 5 years of operation i
plus the estimated costs of permanent shutdown and maintenance of the facility in safe condition.
It it also expected that, in nost cases, the appli-cant's annual financial statements contained in i
its published annual reports will enable the Com-mission to evaluate the applicant's 'inancial i
capability to satisfy this requiremeat.
y j
The Commission has provided an interpretation of the " reasonable j
assurance" requirement of 10 C.F.R. 5 50.33(f) as being satisfied where an applicant has "a reasonable financing plan in the light of relevant f
circumstances."
Public Service Co. of New Hampshire (Seabrook Station,
~
Units 1 and 2), CLI-78-1, 7 NRC 1, 18 (1978).
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. 1 Q.9. Please describe the information submitted by the Applicants which the Staff reviewed in the process of assessing the Applicants' finan-cial qualifications and in preparing Section 20 of the SER.
A.9. In the process of preparing Faction 20 of the SER, I reviewed pri-marily the Applicants'. financial data and other information submitted in response to the Staff's request for information.
The Applicants' j
submittals were dated April 13,1981, and !!ay 8,1981, and included the following documents, among others:
(1) estimated facility 'oper-ating and decommissioning costs and expected sources of funds; (2) the facility joint ownership agreement; (3) recent prospectuses and financial statements for each owner; (4) rate development summaries for each Applicant; and (5) financial statistic summaries for each Applicant.
I also referred to Moody's Public Utility Manual and Moody's Municipal and Government Manual (floody's Investors Service, Inc.).
In addition, I reviewed the Applicants' April 28, 1980, request for amendments to the Construction Permits (cps) to reflect revised ownership interests for Dallas Power & Light Company (DP&L), Texas 51ectricServiceCompany(TESCO),andTexasPower&LightCompany (TP&L), pursuant to which there would be a transfer of ownership interests from DP&L to TESCO and TP&L, such that DP&L and TESCO i
would each acquire an additional 2.5% undivided interest in the Comanche Peak facility.
I also reviewed the letter or May 28, 1981, by whict the Applicants requested CP amendments to add Tex-La Electric Cooperative (Tex-La) as a co-owner of the subject facility 1
through the sale of a 4-1/3% ownership interest by TP&L to Tex-La, as i
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- well as the Staff's action grar ting both of these requests by CP Amendments dated September 30, 1981.
I also reviewed a loan guarantee commitment notice dated August 3,1981, from the U.S. Rural Electri-i fication Administration to Tex-La, in the amount of $180 million, to cover Tex-La's acquisition of a 4-1/3% interest in the facility.
Q.10.
Is the information submitted by the Applicants sufficient for the Staff to reach a determination as to the financial qualifications of the Applicants?
A.10.
Yes.
Q.11.
Please describe the determinations you have reached as to the Appli-cants' financial. qualifications, along with a reference to the applicable section of the Staff's SER where such determinations are set forth.
A.11.
The Applicants and their respective ownership shares in the Comanche Peak facility are as follows:
l Participant
% Ownership Interest Dallas Power & Light Company (DP&L) 18-1/3 Texas Electric Service Company (TESCO) 35-5/6 Texas Power and Light Company (TP&L) 31-1/2 Brazos Electric Power Cooperative, Inc. (Brazos) 3-4/5 Texas Municipal Power Agency (TMPA) 6-1/5 Tex-La Electric Cooperative of Texas, Inc. (Tex-La) 4-1/3 (SER 5 20.1; SSER 5 20.1).
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. The rates for electricity charged by the Applicants (other than TMPA) are established by the Public Utili.ty Commission (PUC) of Texas (SER 6 20.5). The PVC requires that overall revenues be set at a level which permits a utility to recover its allowable operating expenses together with a reasonable return on its investment and, in addition, that the rate of return be sufficient to assure confidence in the utility's financial integrity and "be adequate under efficient and economical management to maintain proper discharge of its public duty" (id. ).
In addition, the cooperative participants (Brazos and Tex-La) w311 receive additional assurance of obtaining the funds for operation of the facility through wholesale power agreements with their respective member cooperatives (SER 5 20.5; SSER G 20.5).
TMPA has power sales contcacts with its member cities that obli-gate the cities to establish rates sufficient to pay TMPA all amounts required to service its debt and cover all operating costs, including TMPA's share cf Comanche Peak costs. TMPA has-its own rate-setting authority independent of any regulatory agency.
(SER 9 20.5).
The Applicants have estimated the facility's first 7 years of operating costs, based upon the assumption that the first year of commercial operation will be 1983 for Unit 1 and 1985 for Unit 2.
As an element of conservatism, the estimated operating costs are calculated for capacity factors of 50, 60 and 70 percent (Table 20.1, SER 9 20.2).
The Applicants plan to recover all costs of operation through revenues derived from customers in system-wide sales of electricity (SER 9 20.5).
Under Texas rate regulation, rate base inclusion of.
. the facility will enable the Applicants to recover the capital costs associated with facility construction (interest on debt and a rea -
sonable return) (SER 9 20.5).
The Applicants' (other than Tex-La) Icng-term statements of opera-tion demonstrate the consistent recovery of historical costs of operation (SER.Q 20.5).
Because 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 relevant circumstances (SER $ 20.5).
While long-term statements of operation are not available for Tex-La, a new entity which has no historical operating results (SER 9 20.5), the $180 million loan gurantee provided by the U.S. Rural Electrification Administration--an amount substantially in excess of Tex-La's estimated $135 million capital contribution to the facility--demonstrates that Tex-La has satisfied the NRC's financial qualification requirements (SSER 9 20.5).
The Applicants have estimated the costs to decommission the facility, assuming the use of the immediate dismantlement mode (SER s 20.3); these estimated costs of decommissioning are consis-i tent with the estimated costs of decommissioning found in NUREG/CR-0130 (SER @ 20.3). The Applicants have indicated that they believe they i
will be able to recover decommissioning costs in the rate process, I
and intend to build the collection of these funds into depreciation i
rates of the facility under the " negative net salvage" approach (SER
-Q 20.6).
_9-The Applicants' plan to recover decommissioning costs provides reasonable assurance for financing the decommissioning of the facility upon the end of its serviceable life (SER 9 20.6).
This conclusion is based on the nature of the Applicants' business, their present and historical financial strength, the fact that utilities customarily adjust their annual charges for negative net salvage amounts to com-pensate for changes in decommissioning estimates, and other considera-tions (SER 5 20.6).
Also, because the NRC requires that any operating reactor be safely decommissioned when it is retired (for the protection of the public health and safety), it is reasonable to assume that those amounts will be allowed in customer rate charges as necessary and reasonable expenses. Accordingly, the Applicants' plan to finance these expenses from customer revenues constitutes a reasonable financing plan in light of relevant circumstances (SER 6 20.6).
Q.12.
Has the Staff reached a conclusion as to whether.the Applicants have complied with the requirements of 10 C.F.R. 5 50.33(f) and the guidance
'provided by Appendix C to 10 C.F.R. Part 50?
A.12.
Yes.
The Staff has concluded that the Applicants have provided a' reasonable financing plan in light of relevant circumstances to operate, shutdown (if necessary) and maintain the Comanche Peak facility in a safe condition (SER 9 20.7). Accordingly, the Appli-cants have reasonable assurance under 10 C.F.R. 5 50.33(f) of obtaining the necessary funds to cover estimated operating costs to the extent of their respective ownership interests in the facility
. (SER @ 20.7). As a consequence, the Applicants are financially qualified to operate and safely decommission the Comanche Peak facility (SER s 20.7).
JIM C. PETERSEN PROFESSIONAL QUALIFICATIONS
_0FFICE OF STATE PROGRAMS
^G*
'I am the Senior Financial Analyst.in the Office of State Programs, U.S. Fluclear Regulatory Commission.
I am responsible for the review and evaluation of the financial qualifications 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
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Board in a number of proceedings. My wcrk also involves keeping abreast of developments in the money and capital markets and in the electric utility industry.
I received a Bachelor of Science in Business Administration degree (awarded cum laude) with a maior in Accounting from the University of Denver in 1963.
I have continued qy formal 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 1958 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 contractors.
I also assisted in the financial review of nuclear facility license applicants during the period when that function was performed by independent staff members.of the AEC Office of the Controller.
That function was sub-sequently transferred in its entirety to the NRC.
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 tiRC 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.
Safety Evaluation Report re ated to the operation of Comanc7e Pea < Steam E.ectric Station, Units 1 and 2 Docket Nos. 50-445 and 50-446 Texas Utilities Generating Company, et al.
U.S. Nuclear Regulatory Commission q
J Office of Nuclear Reactor Regulation i
July 1981 f
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i 20 FINANCIAL QUALIFICATIONS The NRC requirements for the determination of an applicant's financial qualifica-tions for an Operating License are stated in 10 CFR 50.33(f) and Appendix C to 10 CFR Part 50.
The former regulation states:
"[If] the application is for an Operating License, such information shall show that the applicant possesses the funds necessary to cover estimated operating costs or that the applicant has reasonable assurance of obtaining the necessary funds, or a combination of g
the two."
Appendix C Subsection I(B) restates the former with the additional proviso:
"For purposes of the latter requirement, it will ordinarily be suffi-cient to show at the time of filing of the application, availability of resources sufficient to cover estimated operating costs for each of the first five years of operation plus the estimated costs of permanent shutdown and maintenance of the facility"in a safe condition." This subsection concludes with the expecta-tion that:
in most cases, the applicant's annual financial statements contained in its published annual reports will enable the Commission to evaluate the applicant's financial capability to satisfy this requirement."
In response to a staff request submitted pursuant to Appendix C(IV), the appli-cant submitted the necessary financial information.
This information addresses the applicant's financial plans to operate, shutdown (if necessary), and maintain Comanche Peak Units 1 and 2 in a safe condition.
The financial information provided by the applicant states the required financial data reg:rding estimated facility operating expenses, shutdown costs, and projected maintenance expenses to keep the facility in a safe-shutdown condition.
The following analysis constitutes the staff evaluation of the applicant's sub-mittal and addresses the financial qualifications of the applicant to operate the Comanche Peak facility, shut it down (if necessary), and maintain it in a safe condition.
The cost estimates and other financial data presented are the most current figures available to the staff at the time of preparation of this analysis.
Although these estimates and figures may be revised or updated over time, the staff has no reason to expect that tha relative magnitudes as measured against the applicant's resources will vary significantly enough to affect the conclusions,herein.
s 20.1 Business of Applicant Dallas Power and Light Company (DP&L), Texas Electric Service Company (TESCO),
and Texas Power and Light Company (TP&L) are the three operating subsidiaries of Texas Utilities Company,. a utility holding company.
These three applicants are engaged principally in the generation, purchase, transmission, distribution and sale of electric energy for residential, commercial, and industrial purposes to the public in 67 Texas counties.
The combined service area includes over four million people, about one-third of the Texas population.
The companies' rates are regulated by the Public Utility Commission of Texas.
Brazos Electric Power Cooperative, Inc. (Brazos) is owned by and provides genera-tion and transmission capability to 19 rural electric distribution cooperatives in Texas.
It was incorporated in 1941 under the Rural Electric Cooperative Act of the State of Texas.
20-1
Texas Municipal Power Agency (TMPA) was created in 1975 under aut legislation by the cities of Bryan, Denton, Garland, ard Greenville, Texas It is responsible to these cities for coordinating their joint-ownership in power facilities, including their interest in Comanche Peak.
Tex-La Electric Cooperative of Texas, Inc. (Tex-La) is being organized t generation and transmission services for its seven cooperative members in the area southwest of Dallas and north of Houston.
dated May 28, 1981, The NRC received a request, Tex-La to become a joint owner of Comanche Peak.from the applicants f The results of the staff review of this request will be presented in a supplement to this SER.
After consumation of the proposed sale of a 4-1/3% interest by TP&L to lex-La the ownership interests in the facility will be as follows:
Participant
% Ownership Interest DP&L 18-1/3 TESCO 35-5/6 TP&L 31-1/2 Brazos 3-4/5 TMPA 6-1/5 Tex-La 4-1/3 Total 100 20.2 Estimated Operating Costs of Facility For the purpose of estimating the facility's operating costs, the applicant has assumed that the first year of commercial operation for Unit 1 will be 1983 and for Unit 2,1985.
the Comanche Peak plant for each of the first 7 year are presented inE Table 20.1.
As an element of conservatism, operating costs are also presented in Table 1 based upon alternative capacity factors of 50 and 60 percent, respectively.
Operating costs include all costs associated with the capital investment and operation and maintenance including nuclear fuel.
Depreciation expense includes a compone,nt for eventual decommissioning costs.
20.3 Estimated Costs To Decommission Facility Although an applicant is not required to commit to a particular mode of decom-missioning when applying for an OL, the Comanche Peak applicant is assuming the use of the immediate dismantlement mode.
The applicant has adopted the methodology and estimated costs in a study and report, (NUREG/CR-0130) done for NRC by Battelle Pacific Northwest Laboratory.
In both this report and its August 1979 addendum, Battelle personnel estimated the costs of decommissioning reference PWRs under various types of decommissioning methods.
The maximum cost of decommissioning using the immediate dismantlement method was estidated to be $42 million.
The applicant escalated this estimate at 10%/yr for 2 yr to total approximately $50 million per nuclear unit (1980 dollars).
20.4 Reasonable Assurance of Funds, General The staff evaluation of the financial qualifications of the applicants included consideration of the Commission's decision on Public Service Company of New Hampshire, et al., 7 NRC 1, at 18, (1978), (Seabrook Station, Units 1 and 2),
20-2
T 1:
Table 20.1 Estimate of total annual cost of operation of Comanche Peak Units 1 and 2 ( millions)1 Capacity Factor, % 1983 1984 1985 1985 1987 1988 1989 Unit 1:
70
$364
$345
$332
$325
$315
$308
$302 50
$351
$330
$317
$307
$296
$288
$280 60
$358
$336
$323
$314
$304
$296
$289 Unit 2:
70
$268
$247
$239
$235
$235
$233
$231 50
$251
$233
$225
$220
$218
$214
$212 60
$259
$240
$232
$228
$226
$223
$222
'Iotal :perating expenses include all operating and maintenance expenses, fuel expense, administrative and general expenses, depreciation of the capital investment, taxes where applicable, and return on investment.
affirmed sub nom. New England Coalition on Nuclear Pollution vs. NRC 582 F, 2d 87 (1st. Cir. 1978), which states:
...the applicant must have a reaonable financing plan in light of relevant circumstances." The reasonable assurance standard, cited above, must be viewed in light of the potentially long period of commercial utilization of the facility.
Consequently, one must necessarily assume that there will be rational regulatory policies over this period with respect to the setting of rates.
This implies that rates will be set to at least cover the cost of service, including the cost of capital.
In consideration of the foregoing cost estimates, the following analysis will evaluate the reason-ableness of the applicant's financial plans ~ in covering the various costs that will result from operation of the facility.
In general, an evaluation of the financing plans of the applicant to meet opera-tional expenses and decommissioning costs cri only reasonably be considered in relation to the applicant'.s. nature of business, size in revenue, assets, net income, and overall finar,cial strength.
Because the applicant includes ongoing entities, such an evaluation requires a review of the financial results of the operation of these entities over a sustained period of time.
Emphasis is placed upon recent performatice.
The near-term financial outlook of each entity is also given consideration.
Long-term financial considerations are also important in the financial review because some costs will occur over a long time.
However, as noted in Seabrook, the number of variaoles such as interest rates, the state of the stock and bond markets, inflation, and the cost of fuel and labor, among many others, make long-term financial forecasting inherently uncertain.
Therefore, for long-term forecasts, the staff places primary reliance on recent performance and current 20-3
characteristics of the applicant's financial condition.
In consideration of those relevant circumstances, the following evaluates the reasonableness of the applicant's financial plan.
20.5 Reasonable Assurance of Funds, Costs of Operation The applicant plans to recover all costs of operation through revenues derived from customers in system-wide sales of electricity.
The rates for the f avestor-owned participants (06L, TESCO and TP&L) and for the cooperative participants (Brazos and Tex-La) are established by the Public Utility Commission (PUC) of Texas.
Texas statutes and regulations applying to electric utilities, including cooperatives, provide that the PUC "shall fix its overall revenues at a level which will permit such utility to recover its operating expenses together with a reasonable return on its invested capital" (Article 1446c of Vernon's Annotated Texas Statutes).
Pursuant to this statutory authority, the PUC has adopted rules that provide among other things:
(1) that the PUC "shall fix the overall revenue requirements at a level which will permit such utility to recover its allowable operating expenses together with a faEand reasonable return on its capital investmes.t (Rule 052.02.02.033); and (2) that the rate of " return shall be reasonable, sufficient to assure confidence in the financial integrity of the utility and shall be adequate under efficient and economical management to maintain its credit and attract the capital necessary for the proper discharge of its public duty" (Rule 052.02.03.032).
The cooperative participants (Brazos and Tex-La) will receive ado tional assur-1 ance of obtaining the funds for operation of the facility through sholesale power agreements with their respective member coo)eratives.
Brazos, an estab-lished entity, sells power, and the member distri)ution cooperatives purchase power under an all-requirements contract which allows Brazos to meet its financial obligations and requires the member distribution cooperatives to purchase all power from Brazos.
Tex-La, which is a new entity being formed at the time of preparation of this SER, is expected to have similar assurances through wholesale power agreements with its members.
The staff review of Tex-La's financial quali-fications will be completed and a separate report issued in response to the applicant's request for a CP amendment.
It is anticipated that action on a CP amendment admitting Tex-La as a joint owner of the facility will be completed before the issuance of an OL for the facility.
The staff will report on its further review of Tex-La in a supplement to this SER.
TMPA has power sales contracts s",h its member cities that obligate the cities to establish rates sufficient to q TMPA all amounts required to service its debt and cover all operating cost', inc.luding Thet.'s share of Comanche Peak costs.
TMPA also has its own rate-setting authoi tty independent of any regulatory -
agency.
The sole purpose of the operation of the Comanche Peak facility will be the production of electricity for the service of the applicant's customers.
Because such capability will qualify the facility as a productive asset, frcm an account-ing viewpoint such property will reasonably be expected to qualify as " property used and useful in aublic utility service" for ratemaking purposes.
As a con 4 sequence of this, t1e facility's cost of construction will be included in the applicant's rate bases for ratemak'ng purposes in the amount of the investments in it.
Under Texas rate regulatio., rate base inclusion of the facility will 20-4 e
allow the applicant to recover the capital costs associated with facility construction, which are interest on debt and a reasonable return.
The same regulatory treatment also allows recovery of all fixed and variable operation and maintenance expenses necessary for the production of power.
Tax costs attributable to the facility would also be recovered through customer charges.
As would be expected, review of the applicant's long-term statements of opera-tion shows consistent recovery of historical costs of operation, (with the exception of Tex-La, a new entity which has no historical operating results).
Because the applicant has demonstrated the ability historically to achieve consistent recovery of capital and operating costs for other facilities it has constructed and operated, it is reasonable to crnclude that the plan to finance the facility's operation through revenues derived from rates charged to customers for utility service represents a reasonable financing plan in light of relevant circumstances.
20.6 Reasonable Assurance of Funds, Decommissioning of Unit The applicant believes that decomaissioning costs of Comanche Peak will ultimately be allowed to be recovered in the rate process.
Based on this assumption, the applicant's intention is to build the collection of these funds into de i tion The premise behind using the " negative net salvage" gativ rates of the plant.
This method is known as the "ne approach.
approach is that the rate-payers who receive the benefits of use of the nuclear facility over its service life should pay for its total cost (including the cost of decommissioning) and that future ratepayers should not be required to pay for facilities from which they derive little or no benefit.
To adjust for inflation, periodic reviews of decommissioning costs are customarily made for any changes in economic condi-tions and advances in technology.
Such changes are usually incorporated into the annual negative net salvage charge for decommissioning costs.
The applicant maintains and the staff concurs that there is reasonable assurance of financing the decommissioning of Comanche Peak at the expiration of its serviceable life regardless of which plan of action is undertaken.
This opinion is based on the applicant's nature of business, in combination with its historical and present financial strength. Additiona]ly, because the NRC requires that l
any operating reactor be safely decommissioned when it is retired (for the protec-tion of the public health and safety), it is reasonable to assume that those amounts will be allowed in customer rate charges as necessary and reasonable.
4 expenses.
Accordingly, the staff has concluded that the applicant's plan to finance these expenses from customer revenues constitutes a reasonable financing plan in light of relevant. circumstances!
Moreover, although the NRC requires no specific plan to fund decommissioning expenses, the staff believes that the applicant's plan to fund such amounts provides the necessary element of assurance in that it constitutes a reasonable method for obtaining the necessary amounts of proceeds to meet decommissioning costs. As stated earlier, utilities customarily adjust their annual charges for negative net salvage amounts to compensate for changes in the decommissioning cost estimates.
This constitutes an additional level of assurance that decom-missioning funds will be available when necessary.
Furthermore, should addi-tional amounts be needed over and above those realized as negative net salvage, the applicant has two other traditional sources of funds available to meet any 20-5
4 such amounts.
The first source is internal cash generation attribt (1) depreciation expenses for all utility plants; (2) retained earning le to:
(3) for the investor owned applicants, normalized tax depreciation an ment tax credits.
The second source of funds is the external capital market.
As public utilities constitute the most capital-intensive industry in th States, they have long had access to funds in the public securities mar 20.7 Conclusion that it has reasonable assurance of obtaining the estimated costs of the activities contemplated under the license.
earlier, the Commission has determined in Seabrook that the reasonab As stated requirement for financial of relevant circumstances. qualifications is a reasonable financing plan in light Based upon the preceding analyses of their proposed financing plan, the staff concludes that the applicant has a reaso plan in light of relevant circumstances to operate, shutdown and maintain the Comanche Peak facility in a safe condition. (if necessary),
Accordingly, the staff has determined that the applicant has reasonable as ance under 10 CFR 50.33(f)*of obtaining the necessary funds to cover estimate operating costs to the extent of the respective ownership interests in the facility.
As a consequence to operate and safely decomm,ission the Comanche Peak facility.
able conclusion by the NRC staff in its review of the This conclusion CP amendment to include Tex-La as a co-owner of the facility.
for the facility.that action on the CP amendment will be completed before th 3
e e
e 20-6
1 NUREG-0797 Supplement No.1 i
Safety Evaluation Report related to the operation of Comanche Peak Steam Electric Station, Units 1 and 2 Docket Nos. 50-445 and 50-446 Texas Utilities Generating Company, et al.
U.S. Nuclear Regulatory Commission Office of Nuclear Reactor Regulation October 1981 p..n.u
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20 G QUALIFICATIONS 20..
.iess of Applicant The L sd that the NRC had received a request, dated May 28, 1981, from the appHeant for an amendment to the Construction Permits that would authorize Tex-La Electric Cooperative, Inc. (Tex-La) to becom.e a joint owner of Comanche Peak.
0 September 30, 1981, the NRC issued amendments to the Construction Permits.iuthorizing the addition of Tex-La as a co-owner in the Comanche Peak facility.
The amendments to the Construction Permits also recognized that with the addition of Tex-La as a co-owner /co-applicant, the percentages of ownership authorized agree with those given in this section of the SER and used by the staff in its earlier evaluation.
20.5 Reasonable Assurance of Funds, Costs of Operation The SER noted that the review of Tex-La's financial qualifications will be completed and a separate report issued in response to the applicant's request for amendments to the Construction Permit.
The staff reviewed the financial qualifications of Tex-La in a " Safety Evaluation Supporting Amendment No. 4 to CPPR-126 and CPPR-127," issued September 30, 1981.
That document states, "Since the date of the applicants' request to amend the Cor.struction Permits, Tex-La's plan for financing its full ownership share has virtually been realized. On August 3, 1981, the U.S. Rural Electri-fication Administration issued a $180 million loan guarantee commit-ment notice to Tex-La, an amount substantially in excess of Tex-La's estimated total capital contribution to the subject facility ($135 million).
Because this REA commitment for the loan guarantee is already in effect, Tex-La has satisfied NRC's financial qualifica-tions requirements, as described below."
The evaluation of Tex-La's financial qua,lifications concluded:
"In accordance with the provisions of 10 CFR 50.33(f) and Appendix C to 10 CFR Part 50, Tex-La Electric Cooperative of Texas, Inc. has demonstrated reasonable assurance that it can obtain the funds to purchase a 4-1/3 percent ownership interest in Comanche Peak.
Accordingly, Tex'La is financially qualified under the provisions of the above regulations to purchase such an interest."
20.7 Conclusion The conclusion stated in the SER, as it relates to Tex-La, was contingent upon a favorable conclusion by the NRC staff in its review of the applicant's request for amendments to the Construction Permits to include Tex-La as a co-owner of the facility.
This favorable conclusion was issued on September 30, 1981, and Tex-La has been authorized to become a co-owner of the facility. With that action, the staff's review of the applicant's financial qualifications is complete and the staff reconfirms its finding that the applicant is financially qualified to operate and safely decommission the Comanche Peak facility.
Comanche Peak SSER #1 20-1 w _____ _ _
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