ML20049J483
| ML20049J483 | |
| Person / Time | |
|---|---|
| Site: | Clinch River |
| Issue date: | 02/19/1982 |
| From: | Feld S Office of Nuclear Reactor Regulation |
| To: | Rathburn D NRC OFFICE OF POLICY EVALUATIONS (OPE) |
| Shared Package | |
| ML20049H240 | List: |
| References | |
| FOIA-82-272 NUDOCS 8203180252 | |
| Download: ML20049J483 (4) | |
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0 7EE 19 ;c82 "E"M N:DVD FOR: Dennis Pathbuq, issistant F.i rector Fffice of Folicy Evaluatien Fant:
Sidney Feld, Econcnist i.ntitrust and Econortic Analysis ~ ranch, FT, "SS 5"NECT:
CP0"P COST OF DEla?
In the staff's February 12th briefing to the Cccrissioners, uc identified and discussed the cerits of the four clerents contributina to the iroli-cants' cost of delay estiriate. The followino review attmets to solidify cur position based urjon the applicants' subsequent oresentation of Feb-ruary 16th and bocefully will be resconsivo to Co-nissioner thearn's request for a final staff wrac-up on this issue.
ELC"c'rTS Or CDST SF PFLAY
!.FLATTT ^:! Fl'T!!DF FXPFf!DTTURFS All parties are currently in full acreccent that a savincs of approxinately l
?' nillion will result once the tir:e value of conev is factored into the analysis. Inis estinate assu-'es eight percent escalatfor, an 11 nercent disccunt rate, and the applicants' estir.ates on the future strean of excen-di tures.
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- taf f's Fa';1 tion rcrains that this constitutes a real cost of delay but j
that it is overstated by the aoplicants because (a) these ccsts actually occur ever an eight to nine year pericd and conscoucqtiv the tire value cf rcocy should be acplied to this strean of increased costs, ard (M
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kncfits of sone unscecified cannitude should result fro:- this incrcrentai j
effcrt resultino in scoe decrease in the actual cost of maintaininn rSis extra none cntnt.
The staff concluded that the arnlicants' cost esti-rte of M3.9 millien should be viewed as an upner bound.
The golicants scen to have aclnowlecaed the effect of the time value of t oney and indicatei a reduction of ill aillien attributable to t'it factnr.
Da splicants still ::crceive no increrental benefits rasultinc fre-this increased nanacerent effort.
Althouch we contand this is unenelistic, t5 l
ult 1nate irpact en the Sottnr line is inconsec9antial, nd not ure i
raisiM r i.+rc, :f4 m ecc.e n t.
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-E-FEB 1 S 1982 PEFFDPE9 ST'Mf:ffrF Tbc staff identified this as a legiti: rate real cost of delay,
- cwever, u
under questionine by Comissioner 3radford, ve acknouledned that the aanlicants usee <;ross revenues ::s its measura of the delayM benefits when in fact a net value (i.e. the difference in cocratinc ccsts between
- 5. hat the energy would cost TVA if it had to generate it vs. what it will cost at the CP plant) is the approariate neasure. At t'.c February 16th aublic neeting, the applicants were cuestinned on this very point by On.issioner 0radford. They responded that the calculation relies on a net revenue value. Pur revi m of applicants' filings shc9s this to he a nisstatecent.
The CPPPP latest official cost estinate, provided as a part of the staff's environnental review, clearly identifies these revenues as gross values with no deduction being nade for C9's neerating costs.
The applicants' present worth estfrate of the cost of deferred revenues is 55.9nillion.)
IMTE0EST T Rp 3?ED CAPITAL Staff's position remains that this is not a cost of delay as carryino charges on nonies already expended will centinue independent of the Comissioners' decision on tne e miptinn request. The acclicant has responded with expert testfrony froo a reDresentative of Arthur "nderson and Co., who rates the point that interest durine construction will be increased by tlM.9 rillion as a r05Ull Of the delay. I!e referred tC SEC regul4tions, Cost ACCOUNT-inc principals, and rate settin-3 nrincicals to susport bis position.
l The staff is not swayed by this eninion. Clearly, interest durinn con-5truction w1!1 5e greater under the delay scenario because the construction oerios r.cu encoccasses one additional year. Therefore, from an accountinq rerspective, the P"C ledger Scots may indeed reflect this.
Powever, fron
/ TDC provided en estitate of 570 nillion as the cost of Senefits fereccq?
Ind therefore felt little necc to challenge tre t asis for tho apnlic39ts estfrate.
The sta f f notes that 'W C's estim t* relics on the renlacc ent encry/ value or net reverue concept but is unuseally high because of certain conservative and sim11fying assu-otices e cloye ' Sy the UD"C.
Thesc include: assur.ing zero ccst of fuel for energy generated at the C" plant; assumin; escalaticn is ecual to the tire value of reney such that
.tiscountina l'as no effect or the cost calculation; and by aesunina a total loss in.~.." geceration for cre year rather than simly 5dvinc it shif t ir tire Sy one year.
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F FE5 1 9 10p
_3 society or the goverrcent's ;:ersecctive, this accountine entry is of no
-l ConsO4Ucnce.
The following tablo shows the actual cash flow of all ranics (direct ex-2 acnditures and interest) scent througM 1901 ami the future interest the 90Yernrent will he obligated to pay as a result of these past} outlays.
The analysis extends thru to the ccooletion of construction. 40 scenariis are presented:
(a) no delay in which case the unit becmes naerational enmencinn in 1359; and (b) a one year delay resulting in operation comencing in 1990, t'ote that between 1974 and 1T'l the expenditure fleMs RT identical as be-tueen thy two scenarios and that the t189.9 nillion in interest payrAnts in 1"r2, which was i@ntified as the cost of delay, occurs in either event. The only difference is in 1989.
In that year. the delay scenario incurs en interest expense of $394.2 r.1111on whereas en interest is cherced in that year under the no delay case (presumably because the goverment chooses to pay off tbc outstanding deht). The $394.0 million in IPP9 is the basis for the applicants assertion that a one year delay will result in an increased cast of 11R9.9 s'~ *".
(i.e.,1394.2 expemfed in 1939 equals $109.'J expended in 19f Jiscounted back seven years at 11 percent).
5394.1
= 1139.9
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7 (1.111 The Staff's reading af this table is that the ttro cash ficws procuce equivalent costs when Srought to the sare point.in the which is necessary i
for a velid ccparison.
If the exe7 tion is cranted, the Inf.9 total cost for tentes alrNey extenced and future interest comitted as a result therecf e'.pials $35M.4 cillien. Alternatively, if the CNP is delayed ene year the total-cost in 1990 is $3977.6 c1111on.
Assumine the governe'ent decides to recay this entire outstandina debt ence,cen:truction is conoleted they will have to pay eitber *.3533.4 million in IM9 or 9077.6 tillion in 19%. -The difference between these costs is sielv the the volve of-runey (11 percent) for that one year. That is, to concar2 these costs one rast bring tvm to the sace point in tine by discountinn the i32772 nillien by 11 percent.
c,777. r.
(1.11) 3353.1
=
Excressed another way, the coverncent should be indifferent between these two ccst estir.ites bccanse rather than pay cff the f3533.4 in l'1"9, it can invest those fun::s at 11 percent in that yMr and realire C977.6 ic 1690 y
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Arinther ottien disc.essed at the Icbruary ICth necting ws > tere the dest s T
be rolled over once constructinn 'as coroleted (i.e., the camle of con pid structing a "cre ubera construction leans
- cre convertM to a lona tern
.ortJape upon ccopletion).
Under this financial arrangenent the gevaronent couic issue long tem bends at the eno of 10% requiring annual raynents of
$39t.1.,1111on per year (.11 x $35"3.5) starting in 1961... assur ing no cclay, or it could issue sinilar Sonds at the end of IV,9 recuirinc annual payments of L137.5 cillica comencine in 1C60... assening a one vear delay.
Present uurthing Loth of these ccst strees to the sar:0 d!'e will result in tt.c same total cost.
Tne foreccing discussion,tdopts the applicants' 1 :slicit assunptice tMt once construction is ete:pleted stre actio*. is innosed on the outstanding ocht (repayrent er roll-over).
The staff questions this assurstion beceuse unlih a typtcal nuclear ocwcr,nlant this facility will not enter'a rate Mse and no atterpt will be nede to recover the capital cnsts.
Therefore, thr: staff holds t*:at there is no lenical reason to assure that the governnt will refinv.cc or reay the debt at construction's end, father, ue Selieve that the terns of the nast dcht were established *.Aen the noney w s horre #
end inus renresent a const6nt ccr.mitteent that in no way can he effected by a telav.
Sidney Fald, Fcononist tntitrust ar j Econne.ic foalysis Franc 1, CT, W cc:
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