ML20058E229
| ML20058E229 | |
| Person / Time | |
|---|---|
| Site: | Byron  |
| Issue date: | 07/26/1982 |
| From: | Petersen J NRC OFFICE OF STATE PROGRAMS (OSP) |
| To: | |
| Shared Package | |
| ML20058E218 | List: |
| References | |
| NUDOCS 8207280102 | |
| Download: ML20058E229 (8) | |
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O UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of COMMONWEALTH EDIS0N COMPANY Docket Nos. 50-454 50-455 (Byron Station, Units 1 and 2)
)
AFFIDAVIT OF JIM C. PETERSEN ON WAIVER OF OR EXCEPTION TO FINANCIAL QUALIFICATIONS REGULATIONS I, Jim C. Petersen, being duly sworn state as follows:
1.
I am employed as a Senior Licensee Relations Analyst in the Office of State Programs, U.S. Nuclear Regulatory Commission.
I parti-cipated in the development of the new financial qualification regulations and I was the financial reviewer for the Byron facility prior to promulgation of the rule. A copy of my professional qualifications is attached.
2.
The purpose of this affidavit is to respond to the Rockford League of Women Voters request for waiver of the financial qualifications regulations.
3.
The League states that:
(a) C.E. does not possess or have reasonable assurance of obtaining the funds necessary to complete construction of Byron, to cover related fuel cycle costs, or to cover operation costs for the period of the license, plus the costs of permanently shutting the facility down and maintaining it in safe condition - even if one were to accept C.E.'s understated cost projections.
(League petition at 3, 4-6)
The Staff has historically assumed that a utility planning to construct or operate a nuclear power plant would move ahead with these activities only within the confines of its financial ability 8207280102 820726 PDR ADOCK 05000 0
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. to do so. When the staff was reviewing utilities' financial qualifications for construction permits and operating licenses it was common if not universal experience that construction cost and operating cost estimates escalated over time. This frequently occurred from the point at which a construction permit application was tendered through the period of construction and up to and including the period of operating license review.
In the face of rising costs and limited construction budget financing, utilities have typically stretched out construction schedules, deferred facilities, and in some cases cancelled planned facilities. Such actions represent prudent management decisionmaking in light of escalated costs and/or limited available funds. Such actions are also seen as being consistent with safety considerations. The above rationale was used by the Commission when it published the new rule on financial qualifications. 47 FR 13750, 13751 (March 31, 1982).
If, at one extreme, C.E. were simply unable to raise sufficient funds to construct or operate Byron, the Staff would assume that the facility could be deferred, suspended or cancelled.
One or more of these actions have been taken in other projects reviewed by the Staff that encountered financial difficulties. The Staff knows of no such instances in which a utility's financial constraints or limitations led to decisions or actions detrimental to safety.
4.
In support of its arguments, the League refers to a number of statements made by witnesses before the Illinois Connerce Commission (ICC). These statements generally refer either to the alleged negative consequences of C.E. not being granted its full rate
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. increase requests by the ICC or to the effects of significant construction and operating cost increases.
It has been the Staff's observation over the years that statements of the type and tone cited are common to the public utility commission forum, particularly when the often emotional issue of a significant rate increase is being litigated.
It is expected that the parties to such a proceeding will make the strongest possible arguments for their positions, emphasizing the maximum possible or conceivable effect of a particular action. However, the testimony contained in the League exhibits does not lead the Staff to conclude that the Applicant will not act within the confines of its financial wherewithal.
5.
The League states with regard to rate relief that:
(b) The presumption - which underlines the new regulations that the state regulatory body (the Illinois Commerce Commission) will raise C.E.'s rates high enough to enable C.E. to finance Byron is rebutted by evidence showing that there is no reasonable assurance that state regulators will in fact do so.
(See League petition at p. 3, 6).
The Staff did not assume at the Byron construction permit stage nor did it assume in previous licensing cases that a particular level of rates would be granted to a utility and that therefore the utility was financially qualified to design, construct or operate a facility. Such an assumption is outside both the expertise and the authority of the Staff and the Commission.
Sections 271 and 272 of the Atomic Energy Act of 1954, as amended, reserve such authority and jurisdiction to the state public utilities commissions (including the ICC) and the Federal Energy Regulatory Commission.
The staff does not assume that the ICC is obligated to provide any
. particular level of rate support to C.E.
The Staff does assume, in the absence of contrary evidence, that the ICC continues its ratemaking support to C.E.'s construction financing by allowing recovery of all reasonable costs associated with the safe construction and operation of its facilities, including Byron.
6.
The ICC's substantial economic regulatory authority also enables it to effectively force deferral or cancellation of Byron or any other C.E. facility.
Such actions could also be taken if the ICC determined that commercial operation is not needed until some future date. The Staff knows of no evidence that such action taken to date regarding Byron.
In addition, similar actions with regard to other facilities have not been shown to be accompanied by, or to result from, inadequately financed construction or operation that precipitated health or safety hazards. The Staff has no evidence that a utility's tight financial circumstances or escalating cost estimates will precipitate actions that have a negative impact on health and safety. Many NRC power reactor licensees have experienced financial difficulty and/or cost escalations in recent years. The Staff knows of no cases in which these circumstances affected public health or safety and exhibits attached to the League petition do not demonstrate such with respect to the Byron facility.
7.
The League argues that:
(c) The costs of completing construction, operating and decommissioning Byron will be far more than the estimates on j
which the construction permit was based, far more than C.E.
currently projects, and so high that C.E. does not possess or have reasonable assurance of obtaining the necessary funds.
(League petition at 3, 8).
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- As discussed above, several options would be available to C.E. in the event escalating cost estimates and limited financial resources proved prohibitive. The construction of Byron and/or other projects could be delayed, suspended or cancelled altogether. Such actions have been taken with regard to numerous other NRC-licensed facilities and frequently because of limited financial resources and escalated cost estimates. The Staff is not aware of any such circumstances resulting in health and safety problems caused by the financial situation or cost escalation. With regard to operating costs, the Staff is unaware of any utility licensee that has been unable to fully recover such costs through rates charged to customers. Hypothetically, if the ICC were to decide that the level of rates needed to cover Byron operating costs are too high, then it would have to decide whether Byron would operate at all. Again, l
this economic decision is outside of NRC's authority.
If the ICC decides that Byron will operate on C.E.'s system and be included in C.E.'s rate base, then it, in effect, will have to approve rates to cover Byron operations. The Comission discussed this relationship in its proposal for the new financial qualifications rule. See 46 FR 41786, 41787 (August 18,1981).
8.
Finally, the League alleges that:
"As a result of C.E.'s lack of financial qualifications, completion and operation of Byron would jeopardize public health and safety." League petition at 4, 10. The League has failed to show that possibly limited financial resources and/or cost escalation in C.E.'s construction or operation program will lead to actions that jeopardize health and safety at the Byron facility.
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. When faced with similar circumstances, the management of other NRC licensed utilities have undertaken ameliorative steps, such as deferral or suspension of construction or a readjustment in construction priorities.
The exhibits offered by the League do not show that the Applicant's management, assuming it faced extremely limited financial resources and/or cost escalations, would not act accordingly.
Furthermore, the League's claim that the Applicant will not be able to pay operating expenses associated with unresolved generic safety issues is not sufficiently demonstrated. The League has neither specified the perceived expenses nor shown that the Applicant could not meet such costs when they arise. Utilities consistently have been able to recover through rates the costs of complying with NRC safety requirements, since expenses incurred to comply with the requirements are a reasonable cost of construction and operation.
Nothing in the League exhibits demonstrates that the Applicant will not receive ICC rate relief to meet the cost of complying with NRC requirements, j
including those related to unresolved generic safety issues.
9.
In conclusion, the staff believes that neither the League petition i
nor the contents of the exhibits demonstrate that "special circum-stances" specific to the Byron facility exist such that an exception to NRC's financial qualifications regulations should be granted.
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. The foregoing and the attached statement of professional qualifica-i tions are true and correct to the best of my knowledge.
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(fimC.Petersen Subscribed and sworn to before me this /36
- day of July, 1982.
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JIM C. PETERSEN PROFESSIONAL QUALIFICATIONS OFFICE OF STATE PROGRAMS i
I am Senior Licensee Relations Analyst in the Office of State Programs, U.S. Nuclear Regulatory Commission.
I am responsible for the conduct of studies and evaluations of implementation of and compliance with NRC regula-tions by licensees and related industries.
I am also 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 facilities.
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 Board in a number of proceedings. My work also involves keeping abreast of developments in the money and capital markets and in the electric utility and nuclear industries.
I received a Bachelor of Science in Business Administration degree (awarded cum laude) with a major in Accounting from the University of Denver in 1968.
I have continued my formal education through college and university courses in finance, math, economics and computar 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 1968 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 pro-cedures 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 subsequently transferred in its entirety to the In January of 1974, I joined the regulatory staff and assumed responsi-NRC.
bilities in the financial qualifications review of nuclear facility license I have worked in NRC financial analysis since that time, except applicants.
for a one-year assignment at the U.S. Department of Energy where I worked on the financing of emerging energy technologies.