ML20038C054
| ML20038C054 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 11/20/1981 |
| From: | Horin W, Reynolds N DEBEVOISE & LIBERMAN, TEXAS UTILITIES ELECTRIC CO. (TU ELECTRIC) |
| To: | Atomic Safety and Licensing Board Panel |
| Shared Package | |
| ML20038C053 | List: |
| References | |
| NUDOCS 8112090484 | |
| Download: ML20038C054 (14) | |
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- .t N:vember 20, 1981 UNITED STATES OF AMERICA C0gCED NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD'81 NOV 23 Pl2:12 In.the Matter of
)
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TEXAS UTILITIES GENERATING
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Docket Nos. 50-445 COMPANY, et al.
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50-446
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(Comanche Peak Steam Electric
)
( Application for Station, Units 1 and 2)
)
Operating Licenses)
APPLICANTS' ANSWER IN SUPPORT OF THE NRC STAFF'S MOTION FOR
SUMMARY
DISPOSITION OF CONTENTION 25 (FINANCIAL QUALIFICATIONS)
Pursuant to 10 C.F.R. 2.749, Texas Utilities Generating Co.,
et al. (" Applicants") hereby submit their answer if in support of the NR0 Staff's October 28, 1981, Motion for Summary Disposition of Contention 25, concerning the financial qualifications of the Applicants to operate Comanche Peak.
In support of their motion for summary disposition of Contention 25, the NRC Staff submitted a " Statement of Material Facts As To Which There Is No Genuine Issue To Be Heard" and an " Affidavit of Jim C.
I Petersen on Contention 25."
Applicants submit that the Staff's pleadings i
conclusively demonstrate that there is no genuine issue as to any material l
fact concerning Contention 25 that needs Le litigated in this proceeding.
l Accordingly, the Board should grant the Staff's motion for summary disposition and dismissal of Contention 25.
I. BACKGROUND The Board admitted Contention 25 in its June 16, 1980 " Order l
Subsequent to the Prehearing Ceference of April 30, 1980." That l
contention was proposed by Intervenor Citizens Association for Sound Energy if Pursuant to the Board's July 23, 1981 Scheduling Order answers l
to motions for summary disposition tre to be filed by November l
23,1981 81j2090 g4 h$ ooh 5
$D ADOCK O PDR j
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- 1. -
' (" CASE") as Contention 16 in CASE's " Supplement" to its Petition for leave to intervene, dated May 7,1979. As accepted by the Board, Contention 25 provides as follows:
Contention 25 The requirements of the Atomic Energy. Act, as amended, 10 CFR 50.57(a)(4) and 10 CFR 50 Appendix C have not been met ta that the Applicant is not financially qualified to operate the proposed facility.
Both the Applicants and the NRC Staff have conducted discovery against CASE on Contention 25. 2/ In view of this discovery, Applicants believe that no genuine issues of material fact exist and that Contention 25 may be disposed of summarily. Accordingly, for the reasons set forth in the NRC Staff's Motion for Sunmary Disposition and attached affidavit and Statement, and this Answer to the Staff's motion, the Board should summarily dispose of Contention 25 and dismiss the Contention from this proceeding.
II. APPLICANTS' ANSWER TO THE NRC STAFF'S MOTION A.
General Applicants have previously set forth the law governing summary disposition in NRC proceedings in their Motion for Summary Disposition of Contention 9, dated October 28, 1981, at pages 3-6.
Applicants hereby adopt that discussion and refer the Board to it in support of the instant answer.
2] See Applicants' Second Set of Interrogatories to CASE and Requests to Produce, January 12,1981 (CASE's Answers, Fcbruary 6,1981 and Supplement to CASE's Answers, March 13,1981); NRC Staff's First and Second Set of Interrogatories to CASE, January 19, 1981 and March 26, 1981, respectively (CASE's Answers, February 17, 1981 and April 24, 1981, and CASE's Supplementary Answers of August 18 and August 21, 1981).
a
It bears reemphasis that admission of a contention does not " carry with it any implication that... the contention [is] meritorious."
Houston Lighting and Power Co. (Allens Creek Nuclear Generating Station,
. Unit 1), ALAB-590,11 NRC 542, 549 (1980). Thus, even though a contention might be admitted to a proceeding it does not perforce follow that the contention must be taken up at an evidentiary hearing.
See Allens Creek, ALAB-629, 13 NRC 75, 76 (1981). Further, as with the analogous Rule 56 of the Federal Rules of Civil Procedure, 3/ in order to defeat an appropriate motion for summary disposition an opposing party must present facts in the proper form; conclusions of law will not suffice. 4] The opposing party's facts must be material 5] and of a substantial nature, 6] not fanciful or merly suspicious. 7] Applicants believe that CASE has failed to raise any genuine issues of material fact cognizable as such by the courts, and accordingly urge the Board to grant the NRC Staff's motion for summary disposition.
3/ Guidance as to the appropriate interpretation of particular NRC Rules of Practice may be obtained by referring to authoritative interpretations of analogous Federal Rules of Civil Procedure. See Pacific Gas and Electric Co. (Stanislaus Nuclear Projcct, Unit 1), ALAB-550, 9 NRC 683, 689-90 (1979); Boston E_d_ison Co. (Pilgrim Nuclear Generating Station, Unit 2) LBP-75-30,1 NRC 579, 581 (1975).
~4/ Pittsburg Hotels Association, Inc. v. Urban Redevelopment Authority of Pittsburg, 202 F. Supp. 4s6 (W.D. Pa.1962) aff'd, 309 F.2d 186 (3rd Cir.1962), cert. denied, 376 U.S. 916 (1963).
5/ Egyes v. Magyar Nemzeti Bank _,165 F. 2d 539 (2nd Cir.1948).
~6/ Badler and Bookmeyer v. Universal Ins. Co.,134 F. ' J 828, 831 i
(2nd Cir.1943).
7/ Griffin v. Griffin, 327 U.S. 220, 236 (1946); Banco de Espana
- v. Federal Reserve Bank; 28 F. Suppl. 958, 97T(S.D.N.Y.1939) aff'd,144 F.2d 433 (2nd Cir.1940).
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' B.
Standards Applicable to Financial Qualifications The NRC Staff sets forth in its Motion a detailed discussion of the standards for detennining whether the Applicants are financially qualified
.to* operate the Comanche Peak facility. Applicants believe that discussion fully addresses those standards. However, Applicants would like to reiterate and expand on some aspects of that discussion.
Section 182 of the Atomic Energy Act of 1954, as amended, 42 U.S.C.
52232,, authorizes the Commission to decide.whether applicants are financially qualified to perform the activities required under the license sought. Specifically, Section 182 provides:
Each application for a license hereunder... shall specifically state such information as the Commission, by rule or regulation, may determine to be necessary to decide such of the technical and financial qualfications of the applicant... as the Commission may deem appropriate for the license. [42 U.S.C. 52232(a),
emphasis added.J Pursuant to Section 182, the Comnission promulgated 10 C.F.R.
i l
5 EJ.33(f) requiring the applicant to show that it l
posseses or has reasonable assurance of obtaining the funds necessary to cover the estimated cost of operation for the period of the license or for 5 years, whichever is greater, plus the estimated costs of permanently shutting the facility down and maintaining it in a safe condition. [10 C.F.R.
550.33(f).]
Further, the Commission has provided that in order to satisfy the requirements of 10 C.F.R. 5 50.33(f),
[I]t will ordinarily be sufficient to show at the time of the filing of the application, availability of resources sufficient to cover esticated operating costs for each of the first 5 years of operation plus the estimated costs of permanent shut-down and maintenance of the facility in safe condition.
It is also expected that, in most cases, the applicant's annual financial statements contained in its published j
- annual reports will enable the Commission to evaluate the applicant'.s financial capability to satisfy this requirement. [10 C.F.R. Part 50, Appendix C.]
In.Public Service Company of New Hampshire (Seabrook Station, Units 1 and 2),' CLI-78-1, 7 NRC 1 (1978), the Commission examined these financial qualifications requirements and addressed the " reasonableness" standard of 10 C.F.R. 5 50.33( f). The Commission explained that a ' reasonable assurance' does not mean a demonstration of near certainty that an applicant will never be presseu for funds in the course of construction.
It does mean that the applicant must have a reasonable financing plan in the light of relevant circumstances. [Seabrook, supra, 7 NRC at 18.]
As the Staff has pointed out in its Motion, the Commission did not specify the " relevant circumstances" with which it was concerned. Nevertheless, several factors have been examined by the Staff, on the basis of the analysis in Seabrook, in determining whether applicants are financially qualified. While those factors are generally as relevant in operating license proceedings as they are in construction permit proceedings such as Seabrook, at the operating license stage more emphasis should be placed on the applicant's ability to generate revenues through the sale of electricity, rather than the applicant's ability to raise capital for 1
l construction. See Duke Power Co. (William B. McGuire Nuclear Station, Il-Units 1 and 2), LBP-79-13, 9 NRC 489, 525 (1979).
In regard to an applicant's abilf ty to recover the costs of j
l operation through rates, the state utility commission (and not the NRC) generally is charged with evaluating and setting rates necessary for a utility to recover generating and maintenance costs and to receive an adequate return on its investment. See, McGuire, supra, 9 NRC at 525.
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- The law governing the establishment of rates by commissions regulating public utilities is well establihsed.
In FPC v. Hope Natural Gas Company, 320 U.S. 591, 603 (1944), the Court summarized the criteria to
- be employed by commissions in setting rates:
Thus we stated in the Natural Gas Pipeline Co. case that ' regulation does not ensure that the business shall produce net revenues.'
315 U.S. p. 509. But such considerations aside, the investor interest has a legitimate concern with the financial integrity of the company whose rates are being regulated. From the investor or company point of view not only for operating expenses but also for the capital costs of the business. These include service on the debt and dividiends on the stock. Cf. Chicago & Grand Trunk Ry. Co. v. Wellman, T47 U.S. 339, 345-346.
By that standard the return to the equity owner should be commensurate with returns on investments in other enterprises having corresponding risks. That return moreover, should be sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain,its credit and to attract capital. See Missouri ex rel. Southwestern Bell Tel. Co. v.
Public Service Commission, 262 U.T. 276, 291 (Mr.
Justice Brandeis concurring).
Significantly, the Court in the passage quoted above cited tne concurring opinion of Mr. 'Justic Brandeis (in which Mr. Justice Holmes also concurred) in Southwestern Bell Telephone. 8/ There Mr. Justice Brandeis stated (at 290-291):
The thing devoted by the investor to the public use is not specific property, tangible and intangible, but capital embarked in the enterprise. Upon the capital so invested the Federal Constitution guarantees to the utility the opportunity to earn a fair return. Thus, it sets the limit to the power of the State to regulate rates. The Constitution does not guarantee to the utility the opportunity to earn a return on the value of all items of property used by the utility, or of any of them.
8/ Missouri ex. rel. Southwestern Bell Telephone Co. v. Public Service Commission, 262 U.S. 276 (1923).
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m a_. _
. The investor agrees, by embarking capital in a utility, that its charges to the public shall be reasonable.
His company is the substitute for the State in the perfonnance of the public service, thus becoming a public servant. The compensation which the Constitution guarantees an opportunity to earn is the reasonable cost of conducting the business. Cost includes not only operating expenses, but also capital charges.
Capital charges cover the allowance, by way of interest for the use of the capital, whatever the nature of the security issues therefor; the allowance for risk incurred; and enough more to attract capital. The reasonable rate to be prescribed by a commission may allow an efficiently managed utility much more. But a rate is constitutionally compensatory if it allows to the utility the opportunit the service as thus defined [y to earn the cost of footnote omitted].
The NRC has recognized the legal requirement that public utility commissions allow electric utilities to recover the costs of operation and maintenance through rates, including a fair rate of return. See, e.g.,
Public Service Co. of New Hampshire (Seabrook Station, Units 1 and 2),
ALAB-422, 6 NF.C 33, 77-78 (1977), aff'd, CLI-78-1, 7 NRC 1 (1978).
Accordingly, it is proper for Boards to assume that rational regulatory j
policies will prevail with respect to the establishment of rates sufficient to recover operating costs. See, e.g., Virginia Electric and Power Co.
(North Anna Nuclear Power Station, Units 1 and 2), LBP-77-68, 6 NRC 1127, 1162-3 (1977), aff'd, ALAB-491, 8 NRC 245 (1978); Duke Power Co. (Cherokee Nuclear Station, Units 1, 2 and 3), LBP-77-74, 6 NRC 1314,1330 (1977).
Finally, with respect to the demonstraction that an applicant has l
reasonable assurance of obtaining the funds to cover the estimated costs of I
permanently shutting the facility down and maintaining it in a safe condition, the Commission has not prescribed any particular mode of decommissioning or method of financing decommissioning which an applicant need follow. Accordingly, an applicant need only provide a reasonable cost estimate for decommissioning the facility using a selected mode of
. decommissioning. Further, based on that estimate, an applicant need only demonstrate a reasonable plan for financing decommissioning expenses, such as recovery through the ratemaking process. See Duke Power Co. (William B.
,McGuire Nuclear Station, Units 1 and 2), LBP-79-13, 9 NRC 489, 527-28 (1979); North Anna, supra, 6 NRC at 1162-3. 9/
C.
Applicants' Financial Qualifications As demonstrated in the NRC Staff's Motion, there is no basis in fact for Contention 25 and no genuine issue of material fact regarding Applicants' financial qualifications to operate the Comanche Peak facility.
Thus, Applicants urge the Board to grant the Staff's motion for summary disposition of Contention 25 and to dismiss the Contention from this proceeding.
9] The Commission now has before it two rulemakings which address the issue of decommissioning.
First, in a rulemaking begun in 1978, 43 Fed. Reg.10370 (March 13,1978), the Commission is examining the various modes of decormnissioning power reactors and the question of whether applicants may be required to utilize any particular funding mechanishm for financing decommissioning. See " Plan for Reevaluation of NRC Policy on Decomissioning of Nuclear Facilities,"
l l
NUREG-0436, Rev. 1 (December 1978), Rev. 1, Supp. 1 (August 1980) and Supp. 2 (March 1981). Second, a proposed rule was recently published for comment that would eliminate or significantly alter the Commission's financial qualifications reviews of renelated utilities, including the review of an applicant's ability to finance the operation and permanent shutdown and maintenance of the facility in a safe condition.
46 Fed. Reg. 41786 (August 18,1981).
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_g.
Applicants wish to emphasize some points made in the Staff's Motion regarding the ability of each of the Applicants to recover the costs of
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operation and eventual decommissioning through the ratemaking process.
Accordingly, Applicants provide attached hereto the Affidavit of Erle A.
Nye, Executive Vice President and Chief Financial Officer of Texas Utilities Company, as support for the determination that there is no genuine issue of material fact regarding the Applicants' financial qualifications.
As discussed above, NRC's Regulations require that Applicants demonstrate that there is reasonable assurance of obtaining the funds necessary to cover the estimated costs of operation and of permanently shutting the facility down and maintaining it in a safe condition.
10 C.F.R. 50.33(f). At the operating license stage, emphasis should be placed on the Applicants' ability to generate revenues through the sale of electricity, rather than the ability to raise funds for construction.
McGuire, supra, 9 NRC at 525.
With respect to electric utilities for which rates for the sale of electricity are established by regulatory bodies, it is the history of ratemaking and likelihood of future ratemaking adequate to recover costs which are material to the issue of the Applicants' financial qualifications to operate the facility. McGuire, supra, 9 NRC at 526-27.
Of the six participants in the Comanche Peak facility,10/ only l
TMPA does not have its rates established directly by the Texas Public l'
Utility Commission of Texas ("PUC").
Affidavit of Erle A. Nye. The PUC 10f Dallas Power & Light Company ("DP&L"), Texas Electric Service Company
("TESC0"), Texas Power & Light Company ("TP&L"), Brazos Electric Power Cooperative, Inc. ("Brazos"), Texas Municipal Power Agency ).
("TMPA") and Tex-La Electric Cooperative of Texas, Inc. (" Tex-La" f
l t
. has orginidt jursidiction over electric rates and service in unincorporated areas and exclusive appellate jurisdiction to review the rate and service orders and ordinances of municipalities. Each municipality has original
-jurisdiction over the regulation of electric rates and service within its corporate limits unless the municipality elects to have the PUC exercise original jurisdiction.
The authority of the Texas PUC to regulate the rates of electric utilities (including cooperatives) is provided for in Article 1446c of Vernon's Annotated Texas Statutes which is the Public Utility Regulatory Ac t.
11/ Section 38 of this Act provides that the PUC shall set "just and 1
reasonable rates for electric utilities." Section 39 of the Act provides that the regulatory authority "shall fix [the utility's] overall revenues at a level which will permit such utility to recover its operating expenses together with a reasonable return on its invested capital." See Affidavit of Erle A. Nye.
Pursuant to this authority the Texas PUC has adopted substantive i
rules governing the setting of electric rates in the State of Texas. PUC Rul e 052.02.03.031 provides for the rate base to be used in the l
l establishment of rates. PUC Rule 052.02.02.033 sets out the rules i
---11/ The Board may take official notice of Texas State law and regulations.
10 C.F.R. s 2.743(1); see Public Service Company of New Hamp-hire (Seabrook Station, Units 1 and 2), ALAB-520, 9 NRC 48 (1979).
m
. governing Rate Structure in Texas. As to the level of rates, this Rule provides that the PUC "shall fix the overall revenue requirements at a level which will pennit such utility to recover its allowable operating expenses together with a fair and reasonable return on its capital investment." Likewise, under PUC Rule 052.02.03.032 governing " Cost of Service" in the section providing for " Rate of Return " the PUC has established the rule that "[t]he return shall be reasonably 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." See Affidavit of Erle A. Nye.
The above-described requirements governing the rate-setting authority of the Texas PUC are applicable to TESCO, TP&L, DP&L, Brazos and Tex-La, and provide reasonable assurance that all are financially qualified to operate Comanche Peak.
In addition, the PUC has adopted rates for electric cooperatives which recognize the validity of mortgage requirements contained in mortgages of the Rural Electrification Administration and the National Rural Utilities Cooperative Finance Corporation. PUC Docket Nos.
2915 and 2934, PUC of Texas Bulletin, Vol. Y, No. 9 (May 1980). Thus, there is reasonable assurance that mortgage requirements of Brazos and Tex-La for such loans will be satisfied throgh the collection of rates.
p-I With respect to TMPA, it ir.aependent rate setting authority rests with its Board of Directors who are required by the terms of the power sales contracts with its member cities to collect rates for the sale of electric power and energy which will yield net revenues equal to at least 1.25 times the debt service of all outstanding bonds and to cover all the operating and maintenance expenses incurred in the operation and
l
.. - maintenance of its system. Affidavit of Erle A. Nye. TMPA's enabling legislation provides that the State of Texas will impose no restrictions that will affect the Agency's ability to collect sufficient rates to cover
'its debt service and operating and maintenance expenses.
Article 1435(a),
Section 4(a)(h), of Vernon's Annotated Texas Statutes.
Further, Applicants have historically been able to obtain rates which are sufficient to cover the costs of capital, operation and maintenance of their generating facilities. M/ Affidavit of Erle A. Nye.
Also, the Texas PUC has recognized and follows the doctrines established in Hope Natural Gas, supra, regarding the establishment of rates for public utilities. TP&L Docket 3006 Final ORDER, April 29, 1980. Thus, not only has the Texas PUC historically allowed adequate recovery of operating costs through the rate process, but its adherence to Hope Natural Gas provides reasonable assurance that such rate relief will continue.
In regard to the Applicants' ability to finance the permanent shutdown and maintenance of the Comanche Peak facility, Applicants have presented information to the NRC which demonstrates the reasonableness of their cost estimate for decommissioning and that the plan for financing decommissioning provides reasonable assurance that funds will be available to finance decommissioning at the end of the facility's useful life.
Affidavit of Erle A. Nye; see McGuire, supra, 9 NRC at 527-528; North Anna, supra, 6 NRC at 1162-3.
12/ Tex-La, as a new entity, has no historical operating results.
. Applicants have provided to the NRC an estimate of $55 million (1981 dollars) per unit for decommissioning at the end of the economic operating life of Comanche Peak using the immediate dismantlement mode.
' This estimate is based on the analyses presented in the Report " Technology, Safety and Costs of Decommissioning a Reference Pressurized Water Reactor Power Station," NUREG/CR-0130 (Jure 1978) and NUREG/CR-0130, Addendum (August 1979). Affidavit of Erle A. Nye. This estimated cost is reasonable in view of the similarity of the Comanche Peak design with the reference reactor on which the NUREG/CR-0130 analyses are based.
Further, Applicants will be able to pursue recovery of the costs of decommissioning through the ratemaking process. Applicants intend to recover decommissioning costs from ratepayers over the life of the plant through depreciation. Affidavit of Erle A. Nye. This is a standard method by which utilities recover decommissioning costs.
In view of Applicants' intentions to recover the costs of decommissioning through the rate process, and the availability of that option before the Texas PUC, there is reasonable cssurance that Applicants will be able to obtain the funds necessary to cover the estimated costs of decommissioning. See McGuire, supra, 6 NRC at 1162-3.
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. In view of the foregoing, Applicants believe there is no genuine issue of material fact to be heard regarding Applicants' financial i
qualifications to permanently shut down Comanche Peak and maintain the plant in a safe condition. Accordir. gly, the Board should dismiss Contention 25 from consideration in this proceeding.
Respectf I sub tted, h
A~
Nichola; S. Reynolds
)YI William'A. Horin Counsel for Applicants Date:
November 20, 1981 l
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