ML20041B510
| ML20041B510 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 02/22/1982 |
| From: | Karlowicz M NRC |
| To: | |
| Shared Package | |
| ML20041B504 | List: |
| References | |
| NUDOCS 8202240159 | |
| Download: ML20041B510 (6) | |
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1 UNITED STATES OF A'1 ERICA NUCLEAR REGULATORY C0!1'11SSION BEFORE THE AT0!11C SAFETY AND LICENSING BOARD In the Matter of
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ARIZONA PUBLIC SERVICE
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C0f1PANY, et al.
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Docket Nos. STfl 50-520 STil 50-529 (Palo Verde fluclear
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STN 50-510 Generating Station,
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Units 1, 2 and 3)
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AFFIDAVIT OF MICHAEL L. KARL0tilCZ ADDRESSING CONTENTION fl0. 7 State of 11aryland
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SS County of f1ontgomery
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I, Michael L. Karlowicz, Jr., having first been duly sworn, do hereby dispose and state as follows:
1.
I am employed as a Financial Analyst with the U.S. Nuclear Regulatory Commission.
A statement of my professional qualifications as an expert in utility finance is appended hereto.
2.
As part of my responsibilities with the U.S. Nuclear Regulatory Commission, I prepared an analysis which evaluates the finacial qualifications of the applicants in this proceeding to operate and safely decommission the Palo Verde facility. That analysis was published as Section 20.0 to the staff's Safety Evaluation Report I
in this proceeding (NUREG-0857, November 1981).
3.
I have read Ms. Hourihan's contention No. 7 which states:
"The Applicants have failed to demonstrate their financial qualifications as required by 10 C.F.R. 550.33(f) anc 10 C.F.R. Part 50, Appendix C, because they have inadequately figured decommissioning costs."
4.
I have read the Joint Applicants' Motion for Summary Disposition of Intervenor's Contention No. 7 in this proceeding dated January 29, 1982.
I have also read the affidavit of Albert A. Weinstein on Contention No. 7 in this proceeding dated January 28, 1982.
B202240159 820222 PDR ADOCK 05000528 0
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Under contract for the flRC, the Battelle Pacific florthwest Laboratory issued its report "Tec!.nology, Safety, and Costs of Decomissioning c Reference Pressurized Water Reactor Power Station" - flVREG/CR-0130 (June 1978).
In both this report and its August 1979 Addendum the Battelle Laboratory estimated the costs of decommissioning various types of reference pressurized water reactors under various types of decomissioning methods. The maximum cost of decomissioning
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one reference pressurized water reactor unit under the immediate dismantlement method was estimated by Battelle to cost a total of
$42.1 million or $126.3 million in 1978 dollars for a three unit combined facility. Since their publication, the Battelle Report and Adde.Jum have been adopted by the flRC staff as the benchmark estimate for pressurized water reactor decomissioning costs.
6.
As part of their operating license application and in response to the staff's request for financial information, the applicants submitted an estimate of the costs necessary to safely decommission the Palo Verde facility and their plan to finance such costs under letter dated September 15, 1981.
The applicants estimateo in this submittal that it will cost $56.7 million to safely decomission each unit of the Palo Verde Station or $170.1 million for the entire facility. The applicants based this acunt on an independent cost study by the S. M. Stoller Corporation dated October 3,1979.
7.
As a result of the inherent conservativeness of the applicants' estimate to safely decommission the Palo Verde facility by being higher then the Battelle estimate, I adopted the $170.1 million funding requirement to evaluate the applicants' financial qual-ifications to obtain such an amount.
8.
The applicants plan to finance the estimated $170.1 million necessary to safely decommission the fccility is to collect these funds through revenues over the operating life of the facility. Since this amount will be collected over 33 years, the annual funding requirement will be $5.2 million for all of the co-owners. This amount will be shared by each co-owner to the extent of percentage ownership. The premise behind this approach is that customers who receive the benefits of electric energy provided by a nuclear facility over its service life should pay for the total costs of providing for such service, including the costs of ultimately decommissioning the facility safely, and that future customers should not be required to pay for facilities in which they derive little or no benefits from. To adjust for inflation and other cost factor revisions, utilities comonly conduct periodic reviews of decommissioning costs to account for any changes in economic reviews of decommissioning costs to account for any changes in economic conditions and advances in technology, and such changes are customarily incorporated into the annual charge or decommissioning cos ts. Under contractual arrangement, each of the participants in Palo Verde is responsible for its share, equal to its ownership
. interest in the facility, of the costs of decommissioning Palo Verde.
Each of the participants in Palo Verde intends to collect such revenues through rates charged to customers for their respective share of decommissioning costs. The manner 11 which decommissioning costs are accounted for, included in cost of service determinations, and finally recovered from the respective customers of each of the participants will be ultimately decided by those federal, state, and local agencies having jurisdiction over the rates changed and operations of each of the participants.
9.
Should additional amounts be needed over the above those realized through accrual of annual charges the applicants annual decommissioning have two other traditional sources of funds available to meet any such amounts. The first source is internal cash generation attributable to:
(1) depreciation expenses for all utility plant; (2) retained earnings; and (3) normalized tax depreciation and levelized investment tax credits for the investor-owned electric utility applicants.
- 10. The second source of funds is the external capital market. As public utilities constitute the most capital-intensive industry.in the United States, they have long had access to funds in the public securities market.
To access such additional external funds the applicants would issue debt in the form of bonds and the investor-owned applicants would also issue additional preferred or common stock, or a combination of both. The applicants' combined demonstrated ability in raising over $6.3 billion over the past five' years, including their present $2.5 billion investment in the facility, leads one to reasonably conclude they would have little difficulty in financing additional amounts over the $170.1 million estimate in costs if renuired by the decommissioning of the Palo Verde facility.
11.
Contrary to the intervenors' assertion in Contention 7 I believe that even if greater decommissioning costs are incurred for the Palo Verde facility, the applicants should have little if any difficulty in obtaining sufficient funds to cover increased amounts of ultimate decommissioning costs.
- 12. Accordingly, based upon the above financial plan, it is my judgment-that the applicants have demonstrated the reasonable assurance required by 10 CFR 50.33(f) that they can obtain the necessary funds to safely decommission the Palo Verde Facility. See also 10 CFR Part 40, Appendix C (I) (B). As a consequence of this, I find that the applicants are financially qualified to safely decommission the Palo Verde facility to the extent of each of their respective ownerhsip interests. In summary, this conclusion is based on each of the applicants' status as an electric public utility, the size of their respective operations, their demonstrated ability to achieve revenues sufficient to cover each of their total operating expenses, the contractual agreements among the ownership participants, and their historical financing capability.
. I attest that the foregoing affidavit is true and correct to the best of my knowledge and belief.
, fw' i'c Karlowig Subscribed and sworn to before me this c2A ad day of February,1982.
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Professional Qualifications of Michael L. Karlowicz, Jr.
1.
I am employed as a Financial Analyst by the U.S. tiuclear Regulatory Com-mission.
My primary responsibility is the performance of the financial qualifications review of applicants during the nuclear licensing process.
-This review includes an analysis of estimated construction costs in construction permit proceedings and operating expenses in operating license matters.
Concomitantly, the financial review encompasses the projected financing methods by which the required funds will be obtained.
I also review the climate and trends of state utility commissions.
In this regard, I have prepared financial testimony for inclusion in supple-ments to the Staff's Safety Evaluation Report and for presentation at Atomic Safety and Licensing Board Hearings.
2.
My responsibilities also include the monitoring and keeping abreast of the money and capital markets, particularly those affecting the nuclear energy sector of the econorqy.
In this respect, I maintain a regular course of communication with the financial community.
This includes utility securities officers and specialists representing the major rat-ing firms, investment banking institutions, brokerage houses, and the Securities and Exchange Commission.
Additionally, I serve as liaison for the f1RC in financial matters with the Federal and State Utility Commissions.
3.
I received a Bachelor of Science Degree with a major in Mathematics in 1972 from Saint Peter's College.
In 1976, I received qy Juris Doctorate from the. Delaware Law School.
Thereaf ter, I attended the post-graduate L.L.M. tax law program at flew York University in 1976 through 1977.
I have also undertaken studies in finance in the graduate program at the American University School of Business Administration.
4.
Prior to mv joining the U.S. fluclear Regu? Story Commission in December 1977, I spent three years with the flew Jersey Department of the Public Advocate, Division of Rate Counsel.
As both attorney and economist, ny responsibilities included the representation of the public interest in litigation involving proposals of increases in rates or discontinuance of service by regulated industries.
From 1969 through 1974, I was employed by Public Service Electric and Gas Company in their System Planning and Development Department and the Office of the Corporate Economist. ~ There, I was responsible for conducting short, medium, and long-range studies in financial planning, the preparation of expert testimony, the implementation and development of financial modeling, and the performance of economic analysis.
UNITED STATES OF AMERICA NUCLEAR REGULATORY COMfilSSION BEFORE THE AT0f11C SAFETY AND LICENSING BOARD In the Matter of
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ARIZONA PUBLIC SERVICE
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Docket Nos. STN 50-528 IOMPANY, ET AL.
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STN 50-529
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STN 50-530 (Palo Verde Nuclear Generatino
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Station, Units 1, 2 and 3)
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CERTIFICATE OF SERVICE I hereby certify that copies of " STAFF'S RESPONSE IN SUPPORT OF APPLICANTS' MOTION FOR SUtEARY DISPOSITION OF CONTENTION 7," " AFFIDAVIT OF RAGHAM PRASAD RELATING TO THE MONETARY COSTS OF DECOMMISSIONING," and " AFFIDAVIT OF MICHAEL L. KARLOFICZ ADDRESSING CONTENTION NO. 7" in the above-captioned proceedino have been served on the following by deposit in the United States mail, first class, or, as indicated by an asterisk, throuch deposit in the Nuclear Regulatory Commission's internal mail system, this 22nd day of February,1982:
Robert M. Lazo, Esq., Chairman
- Administrative Judge Ms. Lee Hourihan Atomic Safety and Licensing Board 6413 5. 26th Street U.S. Nuclear Regulatory Comission Phoenix, AZ 85040 Washington, DC 20555 Atomic Safety and Licensing Dr. Richard F. Cole
- Board Panel
- Administrative Judge U.S. Nuclear Regulatory Comission Atomic Safety and Licensing Board Washington, DC 20555 U.S. Nuclear Regulatory Comission Washington, DC 20555 Atomic Safety and Licensing l
Dr. Dixon Callahan Appeal Board
- Administrative Judge U.S. Nuclear Regulatory Comission Union Carbide Corporation Washington, DC 20555 l
P.O. Box Y Oak Ridge, TN 37830 Docketing and Service Section*
Arthur C. Gehr, Esq.
Office of the Secretary Charles Bischoff, Esq.
U.S. Nuclear Regulatory Comission Snell & Wilmer Washington, DC 20555 3100 Valley Center Phoenix, AZ 85073 l
Rand L. Greenfield N
i Assistant Attorney General A t-P.O. Drawer 1508 Lee Scott Dewey Q
l Santa Fe, New Mexico 87504-1508 Counsel for NRC Staff l
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