ML20039D160

Requests Info Re Influence of Plant on Util Request for billion-dollar Rate Increase Pending Before Public Util Commission of CA

ML20039D160
Person / Time
Site:	Diablo Canyon
Issue date:	12/08/1981
From:	Bennett W CALIFORNIA, STATE OF
To:	Mielke F PACIFIC GAS & ELECTRIC CO.
References
NUDOCS 8112310374
Download: ML20039D160 (7)

Text

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MCMSER. 5 TATE SO ARD O F COU AUL ATION ,

Nc5:PiDFyg J December 8, 1981' ' g,ggny!c:;

Mr. Frederick W. Mielke ~

Chairman of the Board and DOCKET NUMUM .g 76!3d3 Chief Executive Officer PROD. L UTIL. FAC.. . . .m Pacific Gas & Electric Company oo 245 Market' Street ' / g$

San. Francis,co, California ,94106 ,

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Dear Mr. Mielke:

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Re: Impact of Diablo Canyon Nuclear Project Upon Pro'perty Value p{ up ;Q"

\ r By letter dated November 19, 19 81, to Mr. Roy C;.(Bagley,,,((O'r Manager of your Property Tax Department, Mr. Buddy Florence,4 Area Office Administrator of the Board's Valuation Divilifi~on, requested that_ records and work space ~be made available for

' three members of the Division's audit staff to study ~the financial-impact the'Diablo Nuclear Project (Diablo) has had upon your company. Specifically, the history of.the project, the cost of the project from its inception, sources of funds for the Iroject and for other of your projects, and your company's imbedded debt and equity cost from the inceptio,. n.

of the project to date were specified as matters to be studied.

By letter of November 20, 1981, Roy C. Bagley, Manager, Property Tax Department, of Pacific Gas & Electr.ic Company (PG&E) asked-that the study of Diablo be canceled. Mr. Bagley was quick to state that PG&E will cooperate" fully with the Board's statutory, audit responsibilities, but after making .

. the' usual empty commitment to cooperate, Mr. Bagley then takes it upon himself to decide that the material requested would be "no material benefit to the Board", and further that

• any additional new audit "would not serve any useful purpose" .

Mr. Bagley then reached the grand conclusion, and one which may be self -serving depending upon the outcome of the study, that such study would be " unnecessarily duplicative, expensive, and burdensome to both the taxpayer and the Board, with lit'tle likelihood of producing commensurate benefits". Obviously p0 3

- if any study is duplicative", it is unlikely to be expensive,- f f.

but, more than that, it is .not the place .of Mr. Bagley nor -

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• PG&E to make determinations which are vested solely..in Memberstwo of the State Board of Equalization and its staff..

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. Mr.* Frederick W. Mielko December 8, 1981

__ The impact of Diablo upon the earning, financial

-condition, and market value of the properties of PG&E is of

.- great concern and interest not only to the State Board of Equalization and its staff but as well to the people of the State of California, and so far as you are concerned, to the stockholders of PG&E. ,

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It is of particular concern to me!

Article XIII, Section 19, of the California Constitution provides that the Board shall assess property owned or used -

. by companies transmitting or selling gas or electricity.

Construction work-in-process of a company transmitting and/or 4.5, . selling gas.and/or electricity is an essential and, in many

- ' cases,' significant element in both the income and cost approaches to value, and it is such construction work-in- *

^ process pertaining to Diablo which is of concern.

Government Code Section 15618 provides that the Board may examine through its staff the books, accounts, and papers 7

of all persons required to report to it, and Revenue and

- Taxation Code Section 828, which provides that' records, including records pertaining to the amount, cost', and value of all property a state assessee owns, claims, possesses or controls within the state, pertinent to the appraisal of state-assessed property shall be made available to the Board.

Request is hereby made for the prompt discharge of your statutory responsibility to make the specified records available. .

[ If PG&E' is not now presently aware of-the financial l impact of Diablo on PG&E, it is hightime that it is.- .On the l

other~hend, if PG&E presently has facts, knowledge, and data.

I clearly revealing the financial impact of Diablo upon the .

earnings of PG&E, then such information is obviously available and should be furnished to the staff as reg'uired by law. In

. either event, the. refusal of PG&E to comply with a request clearly within the constitutional and statutory jurisdiction of the State Board of Equalization places it.in the dubious

' position of refusing to comply with lawful authority, and beyond that of concealing from state authority, from the people of the State of California, and from the stockholders^

l of PG&E the financial, co~nsequences of the decision by the corporate officers and directors of PG&E to construct a ,

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nuclear plant at Diablo.

PG&E as a public utili'ty -is sub'j ect to' close scrutiny and regulation by. state authority. The decisions of.PG&E have an impa,ct upon Califo'rnians. Your letter of November.20, l

1981, discloses no reasons why the request of Mrl Buddy Florence,

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December 8, 198.'

, y Nr. Fredcrick W. Mielko t the Area Office Administrator of the Board's Valuation Division c should not be met in the spirit of complete cooperation. No less it.< expected.

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For the year 1981 the State Board of Equalization found

• market value for the properties of PG&E in the amount of

$8 billion. The value placed upon Diablo was $2.5 billion. -

Thus, the question naturally arises, how is any debt and equity cost associated with Diablo being serviced by PG&E system since Diablo is not now in rate base and is not I wish to know if the earnings contributing to earnings?

required to service the cost of debt and equity capital

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associated with the construction of Diablo is being placed a ^

upon..the rate payers of PG&E. Since Diablo represents almost one-third ~of the system of PG&E, it may well be that Diablo is causing revenue deficiencies, attrition upon rate of return, and is compelling PG&E to reek rate increases to make the company whole. Obviously, this possibility is of concern to California, its people, its rate payers, cnd to the stock-holders of PG&E. It is relevant to a determination of market

-% ' .value.

Rather than indulge in the wasteful efforts to lobby and dissuade Members of the Board from such a study, a public utility such as PG&E should have no hesitation in furnishing the information requested. I specifically wish to be advised as to the influence of Diablo upon the request of PG&E for a billion dollar rate increase pending before the Public Utilitie Commission of the State of California.

An early reply is expected. If you or Mr. Bagley have any questions concerning this letter, telephone my office

( 9.16 ) 445-4081. . .

Sincerely,

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Member and Chairman, Public Utility Assessment Committee F s cc: Honorable EdmundG. Brown, Jr.

Governor, State of California Honorable John E. Bryson, President

. California.Public Ut.ilities Commission Honorable Russell Schweickart, Chairman Energy Resources Conservation and Development Commission 9

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, ., Mr. Frcdarick W. Mielko Daccmbat 8,,1981 cc:g norable Nunzio J..Palladino, Chairma'n Nuclear Regulatory Commission Honorable Thomas W. Hayes

• Auditor. General, State of California t

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'P.ACIFIC GAS AND ~ .

SAtt FRAT 40tS00. CAurCRNIA 94106 e (41$) 781

~d6 4r W3 Y 215 MARKET STREET. RM. 616 e nov c. s Aotey *

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,an.n m u.ar sm Nove=ber 20, 1981 .

RECEIVED St:te teord cf E:v:U:cfien The Honorable Ernest J. Dronenburg, Jr. 5':f: en*o Chair =an, State Board of Equalination - 1.0V231981

~ N Street m.= ento, CA 95814

.Exec Dei ,h.t' 9 !!

. .: .wtary

Dear F.r. Dronenburg:

19, 1981,.frc= Pr. Buddy Florence, Attached is adletter to =e of Nove=ber Area office A -Sistrator for the valuatica Division of the Board's This letter concerns a proposed audit staff study on the financial 1:: pact of sta the Diablo Canyon. Nuclear Project on PGandE.

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• .j The letter followed up and confirmed the telephone request r.ade the previo by F.r. Octavio Lee to Pr. Bert Birch of this department. audit st expanded or reduced at the sole discretion of the Board's staff:

1) Tne history o'f the Diablo Canycn Nuclear 2roject; .

2) The cost of Diablo Canyon frc= inception; 3)

The source of funds for Diablo Canyon and other unna=ed PGands projects; and .

4)

The i= bedded debt and equity cost tio PGandE of the Diablo-project frc= inception.to the present day, i

W.ile the Cenpany has and will cooperate fully with the Board's statutory aud responsibilities, I believe that this preposed study cuplicates the Ecard's I

i recently~ccepleted audit cnd is theunlikely Scard cctopleted be cf an

=aterial extensive benefit audittoofthe all Bo As you knnw, en August 25, 1980, 1976, 1977, 1978 and 1979.

phase: of Cc:pany records for assess:ent years l

l fnat audit disclosed that. no change was' needed to the original recc=endat .

.of the post-audit appraisal data report.

l We must nov assu=e that the Board is satisfied witn PGancI reperting Rather.prac and that an additional new audit veuld net serve any useful purpose. d ,

the proposed new audit woulu be unnecessarily duplicative, expensive an l

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• O.N Eenorable Ernest J. Dronenburg, Jr. Neverbar 20,1981 burdensor.e to both the tay. payer and the Board, with little likelihood of

• producing cor=ensurate benefits. -

PGandE therefore asks that the Board rescind the request of Mr. Florence and ,

cancel the proposed study. .

Sincerely, ~

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P:s:x=d Mf /

Inclosure 4

- .I cc Honorable George R. Reilly .

Honorable Williz:2 M. Bennett -

Honorable sichard Nevins -

Honorable Douglas D. Kenne'h Cory/

Beat, Esq.

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".a"e Propert~y Tcx De >artment Pacific Gcs & 2$.cctric Cc=pany (PGE) a um m =c - '% 1

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Subjeet:

Study of Diablo Jiuclear Projeet, E:irScia.1 I-pact en PGS -

Dear W. Basley:

This is to cenfirm &. Octavio Ino's request cado to E. Bert A. Birch '

• yesterday rescrding his assistance in making reccrds cnd verk cyaes for th'ce of our audit staff for the above study 3 tentatively scheduled to

start en November 23, 1981.,

• 93 The authorities for making this study are stated in'ths Revsnue end Tantica Code, Sectic: 828, cnd Govern .ent Codo Sectica 15618.

The teen 1cader wd.11 be Pe. Octavio Inc. F.a will be assisted by W. Orica Ecker cnd 6. Een China. .

To assist you in helping our study, cur study scope will be the follevirq areas; hcwever it may be e:cpanded er reduced depending en the ci.rcu=ste.nces:

1. History of Diablo Nucicar Project (Diablo)

2. Cost of Diablo from incepticn *

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3 Scurce of funds fer Diablo end .other PGE projecte 4.

.- Imbed &d debt cnd equity cost of PGE frca lisblo inceptica t'ill today l

i W. Iae understcnds that you will centact him by t.elepc.s, (916) 3?2J323, cace ycu ccn make records cnd ucrk space c.vailac'le. ~

We appreciate'your assistence in :.akirq the above study.

53ECerelyp ~ -

Eu dy Florence .

1. 83 Ar , nei,. 'u * 'strater ,

V!J.1;AUC:' DIVISION cc: Octavio Ino Gcrden Adolr.an -

W ennings .

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