ML20062J650
| ML20062J650 | |
| Person / Time | |
|---|---|
| Site: | Three Mile Island  |
| Issue date: | 10/27/1980 |
| From: | NEW JERSEY, STATE OF |
| To: | |
| Shared Package | |
| ML20062J648 | List: |
| References | |
| NUDOCS 8011040414 | |
| Download: ML20062J650 (51) | |
Text
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'N I VOLUMU 10 una azaSsr on>>n=x2ur or zuzaar O 2 DOARD OF PU3LIC UTILITIES 3
MONDAY, OCTOBER 27, 1980 IIEWAIUC, NEW JERSEY 4
OAL DOCKOT NO.
5 In tha flatter of the Pctition of )
PUC J$18-80 Jorsoy Contral Power and Light )
6 Com;any for approval of an increase) BPU DOCKET 110.
in ratos for electric service and )
804-285 7 for acondcont to the Loveli::od )
Energy Adjustment Clause and fac- ) 807-483 8 tor for such nervica. )
)
9 BEFORE: 110N. STEPIIEN G. MARSHALL 10 Administrative Law Judgo I.
! 11 A P P B A R A Il C E S 12 For the Petitioner, Jorsey Central ;
O:I 13 Pc er nd L1 2 ht Cc=Panz, >Pueers i
e j 14 KIRSTEN, FRIEDMAN & CHERIM, ESQS.,
DY: JACK D. KIRSTON, ESQS., and 15 DOLORES OULADAR, ESQ., I
- 17 Academy Street 16 ticwark, Now Joraay i
17 and 18 WILLIA 11 P. IPJLhUD, ESO., of Counsol JAMES 3. LIDERMA1, ESQ., of Counsel 19 Por Departmont of Public Advocata, 20 Division of Rata Counsel, appears:
21 ALTROD L. MARDELLI, ESQ.,
Deputy Director 22 10 Commerco Court Novsrk,IIow Jersoy 23 J. II. BUEllRER & ASSOCIATES 24 24 Ccmarca Court u -arx. nc Jor er O 25 (201) G23-1974 8 01104 0J.{ g y
r e i
2011 APPEARAUCESt (Continued) ,
O ,
I For the Staff of the Board of Public
"E" ####
3 i
CARLA VIC7di EELLO, ECC. ,
4 Deputy Attorney General ,
5 I. PAUL CLLVIN, 6 Supervising Rate Analyst 7
For the 3 card of Chocen 7recholders of Ocean County, appears:
8 DERRY, SU:DiURILL, PIECAL, FJ GAU &
9 PRIVCCOnA, ESCS.,
BYs JOHN C. 3?JIRADNIK, E30. ,
34 dachingten Street 10 Toss 2ivor, Now Jernoy
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A 2012
,, 1 JUDGE MA2511ALL: Good mornin3, Ccensel.
C 2 This is a centir:ued hearir; in the zeter of 3 the Pc:ition of Jcrsey Ccatral Pcwer s '.ight 4 Cocpcny, CAL Dochet No. PUC-3513-SO, with 5 Stephen Marshc11, preciding ce lininistrative 6 Law Judge.
7 Before va go on to tho tchedcled matter, 8
which is the presentation of lir. Eafer, I 9
would ach the part!.as are there any house-10 heeping T.atter: thst they vanid like ta bring 3 .
t 2
11 up thin =crain3? .
12 h Cb response.) [
m :
13 k) l JUEGE Y.A3E!MLL: Thcre bcirs acae, ye 14 j will proceed to fr. Hafer. I belicyc Mr.
15 f Hafer has bean preiionely m rn in.
16 TdE WI'CiE'2S: 'le 3.
I7 JUEGI MAIiSFJ.LL: I.11 ri$t.
18 19 FRED HAFER, previously sworn, tastifies as 20 follows:
21 FURTHER DIRECT 2'GMIIUTIOM 2' ~
BY MR. IU.RSTEN:
l 23 Q Mr. Hafer, will you state your position with
- x. j the Petitioner?
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A Yes, I an Vic e Pra41 dant af 3?J Cer"iea .
l l
if il llafer-direct 2013.
I 1 Corpcration, responsible for all ratemcking and reguistory 2 cffairs for the GEU Systen Ccmpanies. I am also a member 3 of the 3oard of Directors of Jersey Central Power 4s Light 4
Ccmpany, snd each of the other two operating utility sub-5 sidiaries of GPU,2ict Ed, and Penelec.
6 7
8 9
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. 11 E
12
.; 13 w
i 14 i
d 15
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'l al nafar - redire.ct 2014 C .wl I 9.14 you had identiflod haforo, but if 1
/ ,3,
(_/ I cm wrong in that, juat ?ake sure, in the Petitioner there is a ou.n=ar, of the Cocpany'a position. Is that aurar.ary cr haa that su cary been prepared by you or under your super -
viaica? ,
5 '
.i Yea, it hao. !
6 !
At that tien it was not stated as to the posi- l G
7 g g tion of tha Ccinanv vith res"ect to the troatnont of the Forted ,
i i River Project, is that correct?
9 i-A ::c, it usa not.
10 i 11 G Can you tell us nov what is the po:ition of
- the cccpany in respect to that project?
12 s
A Yes, I can.
(~}
y 4 5 13 ,
I think the sit = nary to tahich you'ta i rsfarring in the no-called rtatorent of reanons and benefits
- 14
} which was included as an appendi:: to the Company's April 15 I
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29, 1900 Petitica for th9 rate increase.
16 C Thet's correct, cir.
A In that ap;endi:c which was prepared by to and sponsored by na in these prcccadinen, there was an item iden-tified as a clain for a'~n:cximatniv 51-1/2 nillion dollars 20 of annual revonnac acrociated with the Forkod River !!uclear 21 Generating Station. The methodology employod in arriving 22 at that number hn;poned to ho by the . inclusion of about 23 J225 million of Forked Elver inveetment in rate base. But s 24 (l
k- tho methodolcgy that una cepicred is really incidental to the 25 .
t 32 Rafer - redirect 2#15 l l
g issuo that wo *vanted to bring before the Doard in those pro- L 0
(V~) ceedings and was therefore put in for strictly that purpose' 2 f i
l of identifying : cubctantial ancunt of revonnes neconsarv for }
l Forked River. ?,nd, vc said, a3 I said in the paragraph de- r 4 \
\
voted to Porked River in the outlino, the need for a decision i
, 5 6
for the future of the Torhed Eiv?r Project is upon un. "o outlined in there the opportunity to look at aither going 7
8 forward with the project c0 a nucinar plant, converting tho 9
p roject t : mothing elce nuch as coal or abandoning the
- ' * ' " # " * "7 "" #~
10
! native source of ener 7 to :ccet t".m noods of tha Jaraov Contral ~
. 11 g custe . ara. ,
i Oj v 13
"" 3 3 l'accari has outlined and tosti-i ficd to tha financial conditien cf the Cc- pany and vill bo 14 a
- testifying with scre curplemental inferration in the' coming
- 15 16 preceedingc. "arv Pater hac tertified and idantified tho-l need for adfitional banc load capacity not only for Jercay 17 18 g alco tantified about tho ?crked River Project so far as the options are concerned, opticna such ar, coal and the tining of
,0 trying to go forward with the station, the inpcdiments of going forward frca a regulatory point of viou on uel1 an the costa and problem encountared in trying to convn t the plant to becono a coal-burning =tation or alt:rnativaly to simply p'
24 ,
ccnctruct a ncy ccal burning ctation froc acratch.
25 Q i
V s
C Ilafer-direct 2016.
I 1 A (Continuing.) The problems facing us so far 2 in the construction of Forked River and in the future are 3 not necessarily unique to Forked 2iver but they are in sany 4 ways unique to nuclear pewer in general.
5 The regulatory delays which have been en-6 perienced and which we will experience in the future in 7 trying to construct this are ever ::cuating, ever Tora fre-8 quent, and end up costing us more and more r.cney.
9 When the Oyster Creek station was constructed to and went into operation in 1959, the cost of that station j.
11 was $150 a kilowatt. Scac five ycara later, ti! Unit Zio.1 12 g vent into service in September of 1974. Tha cost of thct
/~T :
\J j 13 station uns about $500 a kilowatt. In Decacher of 1973, i
I4 l 'DII No. 2 went into service. The cent of that see nearly 15.
f: 4800 a kilowatt. And, based on the numbcro that 'ir.
c Raber 16 ha_s put in the testi=cny in this proceeding, with only a 17 two-year delay which would be the coat optimistic vier for 18 Forked River, the cost of that statica would be sencuhere 19 in the area of about $1600 a kilevatt.
'O The tremendous frcat end cost of conscructing
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a nuclear plant, that is the capital icvest=ent that is re- l-1.
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quired coupled with the ever increacing lead thacs due to '!
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~ i the regulatory probicma that I adciressed before, nahe it
( ') ever more difficult to construct, let alane operata, a 95
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nuclear poder plant. Certainly the e:gericaca that CFU haa
i i
11afer-direc t 2017.
I had at TAI :r.txe it even nore difficult for the GPU Companies.
2
'4a had tried to case that problen somewhat 3
trithin the GPU Gyaten by nuggeating a change in ownership 4
bot' men the til unit and tha Forked River unit. That change 5
in ownership vaa, of courne, approved by the limi Jersey 6
dear <1 of Public Utilitica as far as the authorisation to 7 ,,,,11 an interest in Forhod "iver was concerned, but the 8
other side of the ccuation, that ia, the cuthorization in 9
Pennsylvania to sell en interect in the T<'!1 Units 1 and 2 l,
10
, in e:chan,7,e for cc1 utring en interest in Forked River for I i
II ll i Met Ed and Penelee was denied by the l'ennsylvania Public 12 Il s
i s
Utility Cenainsion, co the trcnsaction could not take place.
13
'd 2 -
a Ec cisa hcyn icoked frca time to time towards i 14 i sprecdica, this rich a littic bit more by inviting addi- 'l s 15 g tienal participation in the Forked River station. For I 16 rese period of tina, Atinntic City Electric had indicated 17 en inte-t to be a partner in Forhed River to chout 10 per-18 cent of the statien, but the uncertainties associated with 19 the c::mlatias of th:t project, both in tising and cost, 20 nede it,necescary for Atlantic Elcetric to back out and to 21 pursue their own alternste ways of providing capacity.
22 l
23 24 x) 25 ,
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F t
20 1 IIafer - dircot 2010 .
I A (Continuin:) He also he.d in indication frca t
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the Allegheny Electric Cooperative System that they vould par- l 3 ticipate. Initially they indicated they vould participate up to about three parcant of the project. There had bcon ;
4 l 5
cone ontensive diseassions with representativoc of Allegheny I
6 to try to encourage then to parcicipato in a greater extant, 7
something in thu area of alcut 10 pcr:2nt was envisionud by 8 ua. Routver, because of tha restriction placed on then by 9 the govern =2nt, frcn whom they get their coney, the uncer-10 taintio2 about being able to complete the project and when it cculd be corplated, conced thoca negotiations to to fruit-l 33 12 10 8 3C PPil.
3 On April let of thin year CPU announced
(~')
(, ;: 13 a
j 14
--- Corsey Central and GPU, I gucco jointly announced that
- 15 they were ceasing to take the AFC credita to incot40 anaccia-I 16 ted with the Forked Eiver Cencrating Station. The reasono 17 citod were the uncertaintiha of completion of the projoct Tha jg and the uncertain status of it at the current tiro.
j9 AFC credits have buen calculated, and perhaps it is a nis-20 ncmer uince they are not being carried to incono to rafor 21 to then ds credits, but nevertheless the capital carrying cocts casociated with the ycrked River invostnant are con-22 23 tinuing to be calculated and beched on the balanco shouts of the Company sven though the credita ar not boing used
~'s 24 J to improve not incemo availabla to stockholders. .
o.5 4
If 2c 2 nafor - direct 2019 The botton line is that it will be my I the
() 2 roccamendation st/noxt eneting of the Deard's of Directors of Jersey Central and CPU that the Forked River Project not be 3 l pursued as a nuclear generating ststion, that Jorsey Central 4
look toward an alternative sourco of capacity. Initially 5
that would be the link with Ontario Hydro and on a long-term 6
basis the first choice would be to try to find a suitabla 7
cite to construct coal-fired generating capacity within the 8
State of Mcv Jertcy.
9 Secondly, to look for a suitable site 10 g
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for ceal-fired capacity outside the State of New Jersey.
'11 i The most logical eno, obviously being in Wootorn Pennsylvania
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12 7s j in the area served by Penelec. ,
(m) j 13 g The problems facing Jersey Contral, of ,
i 14 l l
- ceurse, have bcon discussed et considerablo length. The fcet !
s I 15 j cf the matter is wthat whether we go forward with Forhed 16 Riv0r or uhother ve look to some altornativo a:urco, thoro 17 l
rc= sins nhout 5400 million of capital investr 1 in the project 18 I and befcre us. have an opportunity to attract any new capital 19 for whatevar reason, there must ho some provision made in the 20 rates of,the Conpany to deal with the S400 million.
21 It uculd he our position and my recem-22 ccdaticn that that capital be recovered over noma reasonablo 23 period of time in the future and that the carrying costa on (g 24
(,j it be recovered during the pandency of that time. 1~think 25 l
}/
2020 3 Hafer - direct j the Forked River station is different than sore of the other 4
O 2 plants which have r;one beforo.it, the most notable of which 9
i
! 3 would be the Atlantic Station of Public Servica Electric and
- 4 Cas.
5
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8 9
10
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i 14 i d 15 i,
8 16 17 18 19 20 i
21 e 22 23 24 25
D lla fer-direct 2021.
3 A (Continuing.) Forked River does not have the P)
V 2 technological uncertainties or irpedicents that vere as-3 sociated with the Atisntic Station End, I tht:k thers sre 4 many other differences but the bottom line of my testi m ey 5 is that we will not be pursuing the Forked River nuclear 6 Senerating station.
7 Q Is that deter ination a deterninstion s ich 8 has been cade and approved by the Henrd of Directors us yeti 9 A No, it is not. And technietilly, le'3511, 7 i 10 that is a determinatica which can enly rently be fi ally ,
l 11 made by the 2carde of Directors. Aa I indic.:ted, I :111 ba [
I 12 =2 king that rece=endati:n at the next restin; of thaac
[
b, $, 13 Desrds. The CPU Beard sects the first "faursds-; cf euch .
115 14 centh so they will be meeting a ucch freu this co..ing t
15 Thursday. ,
! 16 The Jersey Central Beard does not have set
.s 17 meeting dates. I don't recall when their actr r.ceting is 18 but I believe it's within the neat neveral uanks. I have 19 no reason to believe that the Boards veuld disagree with ~~
20 this recemnendation or not adopt it.
21 4
IG. KIESTE'.i: Thcnk y:u. Mr. Hafer 22 is available for crocr-exrnination.
23 JUDGE K W FALL: rc ycu want a feu I p) t u
24
=cuents to rcvinv or talk it cver uith your -
25 cnpert uitncer, Mr. NO.rdelli?
)
a llafar-direct 2022. r
- m. PARDELLI
- h Yes; could we have a 1
' O 2 short break?
l ll JUEGE MARS 11ALL: Certainly. We'll fl tako a break for a few minutes.
4 5
e m p n, a m ess was taken.)
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f 2023 .
J. Hafer - crocs L
j' j (After the racess.) !!
Os JUDGE MARSHALLS Dack on the record.
2 4 1
i 3
Lir. Nardelli?
4 CROS3 EXAMINATION-5 BY M2. NTJ1DELLIt
.r.
6 Mr. Hafar, I belisva you said the GPU Doard O
\ ' 1, 7 -
N nsets the first Thursday of every inonth? N 8
A Yes.
9 Q And that would be November 6th?
10
- A Yac.
i
. 11 0 Do you think it can be anticipated that the 12 j
Jersoy Central Doard of Directors would most around that pd 4 13 .
tima? S,
! 14 The Jersey Contral Board noetings are not 3 A 5
15 schadulod. They aren't regularly scheduled like the GPU
- 16 ;
Board. They are coro flexible and based on the availability 17 of people and need for certain actions,to be taken.
18 I just don't rocall. I will find out 19 very shortly, liko within the next 10. minutes or so when tho 20 next Jersey Cantral Board meeting is scheduled.
21 I think, howavar, that I'd lika to make
. 22 the distinction that while, you know, the decision is not 23 technically nada until those Boards function, that I havo fi LJ '
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discussed it obviously with Mr. Kuhns and Diackamp, Condon and nysolf - and, all four of us are on the Board and in
3
,2 Hafer - cross 2024 fact constituto al:nost a r.ajority of the Board, I guess. I 4 3 n :1 that the occision would be any
] 2 have no reason to believe different. lut, I will..let you know when the next reeting 3
cs is scheduled and can confidra it after the actions are formally 4
5 taken. ,
- s 6 0 I gather th' ough that you would expect an of- '
., ficial dociaion, probably by the first;or second week of Nove m-ber? -
~ ,_
'9 A. Yo3.
10 0 NC" ~~~
f 33
... A Thero are cortain disclosura considerations i,m 1 ,
s vhich are involved and that's why I a:2 saying although I
. 12 j
! S w l
- 13 don't know of 'any reason that the decision would bo differ-
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, s-l: 34 ont than what ,g a= outlining today, thero are certain things s ,.
f ,33
-that have 30 be, done-which hava formal recognitica by a -
s,. s 3 -
! .74 goard of Directors,,vhich vill trigger in terms of SEC dis-q 17- o ci sursa and tha' lika.
~ '
,, g Q I'd lika to'go over with you the impact of the x
decision you have mado today or tha decision that -- the Y' 39 20 .,
p asiola deci.sion that you have outlinad for us today upon g this rato proceeding. For exampic, when you are making a
. pro,penatation beforo the GPU Ecard of Directors,'would I.be 22 x >
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c et in thinking that part of the prescatation would be 23 a financial impact upon irersey Central of this decision?
24 2s i ves.
- , ,c
'M 1
__.___L__.____
as aes.s wsu.. a'u s a Q t.nd, wouldn't you be outlining before the Board f
() 2 I
of Directors tha consequences upon the rate proceeding of this possible decision?
3 l A Yos. ;
4 could you give us the paranaters of this decis- ,j Q
ion upon the rate proceeding? What will bo if this do-6 cision is indebd adopted by the Scards of Directors, uhat 7
would be the specific financial consequences upon this rato
~
8 proceeding? IIow would it affact the rcto application? [
9 A wall, it won't affcet the rata application at q 10 all, por so. Thora has been an amount of money requestad i i II i within tho aggregato asking of Jorsey Central. Thors 8 s 4 1
gg
()i }
- 13 about S51-1/2 nillion which han boca provided to take cars of Forhed River.
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4 16 17 l
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20 s e e
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tr I
? 11afer-cross 2026.
1 A (Continuino,.) So that any determination by 2 the Board would be m:de, I would asstate, within that a.mtat 3 of money. So that there vouldn't have to be any anendannt 4 to the claim or renoticing for a higher ar. cunt you sec.
5 Q I understand your ansuer. Would I be correct, 6 though, in thin'cing that even thourJh the a=ount of :oney, 7 the 51 :sLilion that ycu hsve alluded to, would not have to ,
r 8
b2 amended, the mechanics and her,i to <tet chare trould neu !
9 he filled in?
{
10 A yc3, 11
- Q Could uo go over sene of th.3 nudars with as 19 g
auch specificity that y7.1 are in a position to prevido?
s :
13 1 . For example,1 asst ae you will be asking for a certain a
14 g amount of money to be written off as a result of this 15 l abandon =cnt?
16 A Yes.
17 Q Do you know what that a= cunt of mucy is?
18 A I think I can give it to you in round ne::.bera.
19 The investment in Forked River right now is reughly 433G 20 million. Of that amount, about 090 million is acec=ulated
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< AFC, as I recall. And, that 1 caves a balcnce of al: cut 3C0
> million. That would presu= ably be ineligible to take fer 23 abandonment tax loss under the Federal Tax Code. That n- 24 U would be a net of 150 millien after ter.as, co the 150 l 25 million coupled with the 90 million or so of MC voulti bc l
l
f iia fer-cros s 2027.
g- I a not loss to Jersey Central of about $240 million. And,
\
2 it could be that amount that ue would be asking to be re-3 covered through base rates over zo:ne reasonable period of 4 tioe in the future.
5 It uould also be the net. investment that we 6 weuld be ashing to have recognized, at least at the outset, 7 and then on a dec1Lning bants thereafter to be recognized 8 la base rates, that is, the carrying charges.
9 Now --
Q 10 A Excuse :ae, the next Jercey Central Board of i l
- 11 tirectors necting is scheduled for October 31st, this ,
12 I y coming Friday. '
Ol i 23 a uen1d you exgeot Jer.ey Cenere1 aoard of i I4
[e Directors to consider this recomendation at that neeting? i 15 f A Yes, they vill definitely consider it. And, 16 I p use only for this reason, that I am not sure in this I7 instance who gets the last say, whether it's the GPU Board ,
I8 of Directors, which nould be a wecit from this Thursday, or I9 vhether ic'a the Jerney Central Board of Directors, or -
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whether that's even critical. But certainly they will be
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cencidering it at this meeting.
o,
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Q Ucu, I understand your answer to my previous
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tr: cation to be that the Cenpany nould be looking for rate O 4 base treat, eat et +2a ,1tito - te that correct 2 95
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A Yes. Asain, you have to accept my numbers l
Itafer-croaa 2023.
~T I as being within tha ball park, but those uculd be the (V
2 principais.
3 Q And you would be caortising that $240 million 4
over a certain period of years, and you would be putting 5
the unamortized a= cunt in rcte bano and seeking to earn a 6
return on that?
7 A Yen.
8 Q What period of yeara crortinction would y:u 9
be seeking?
10 A Well, I think to =cca degree that has to ca-
~
11 i ploy scme judgment. Mr. Baldassari'a forecast that he is 12 7 i trying to put together neu siill giva yeu a batter inaight
(_) 4 13
.i into what the particular financlud probless are of Jersey i 14 i Central.
5 15 g As I nald in =y atetecent at the cutsat, the I 16 real probics is that Jersey Ce= tral has this capital invested 17 in this case and once it's abandoned, the 0240 nillica er -
18 so has to be serviced before no can go forward and attract ~
19 i any new capital.
20 I To the extent that the acrvicing of that i
21 ;
capital isn't provided for, then the ecpital has to be paid '
t 22 off. But I think there is a balancing act that can be 23 achieved by looking at the projectiens and deccraining at
/~T 24 V what rate the invest = tent can be a=ortized or should be 25 amortized and what cost in turn vould be expected by the customers of Jersey Central.
i
Y 2f 1 Refer - cross 2029
, A (Continuing) The $51 million or so that's in-b cluded as revenues in the rate claim is about the amount that
-2 i '
vould be required to writo-off the investment absent carry-3 ing chargos,.over a 10 year period.
1
- It also is about the 4
4 the amount that vould be required to carry / investment with no 5
a=ortization into infinity. And, I think that probably the 6
i combination of the writa-off and carrying charges on scre-7 8 what of a mortgage typa bacia, if you will, a constant amount, 9
with a declining principal balance or increasing principal 1
10 pcrtion of the payment vculd work out to be something like 20 years. 3ut, it'a largely a function at that point of how 33 2 3 4
39~
much canh Jersey Central nouda to centinuo to do its business i:
t i l Ol *a cerve a:<i=*i=9 cu=*c=== "ca va * *a r a ea i= the <=r= as '
- 13 <
f 3,3 carnings to raise than additional capital to add genarating :
( i i f capscity in tha future.
15 i i i 16 Q licw, in your ciscuasica of how you reached the 37 nu=bor of approximately 240 million, I heard no contion of tha term or concept of salvago value. Is my understanding 18 I 19 correct that you haven't nentioned this? [
20 A I haven't mentioned it. The reason I haven't was because in talking in those kinds of broad numbers, I 21 don't think the onlvage, as I understand it, would have a 22 unterial offect on that. I think it's the testimony of the 23
,'3 Jersey Contral pecple that they believe realistically the hs salvage value f r Forhed River might be somewhere in the 25
22 2 unrsr - cross avao j area of 10 or 15 million dollars. Within the range, if you l ;
() will, that I have been addressing in davoloping by 240 mil-2 lion, I don't think I could cut it fine enough. But, I will l 3
say this, that certainly to the extent that any of the ecm-4 -
ponents are nold, tho value received for the sale of those 5
would be uced to reduce the Forked River investment and 6 '
thorofore, it would be that much loss for which the customers 7
would be asked to pay. JustasthesalefortheForkedRiverl ' '
8 fuel, the nuc1 car fuel that had been earmarkad for that sta-9 tion, the procceda of that hava been credited to the Forked solling 10
. River work order and the profits cado as a result of/that
' fuel aro cortainly more than the ccat of the fual and those profits have been used to reduce the Forked River invontmant O' j 4 13 d
as voll.
i
- 14 i 0 uow since, at least a prolininary decision
- $ 15 g has bocn mado to abandon Forked Rivar, 'isn't it trus that 5 16 the Ccapany should be fo31cwing all avenues to ace that they 17 can got as much Dalvage for what is at Forked River as poa- .
18 siblo?
19 A Ya;. I would like to also say, Mr. Hard3111, 20 just so thoro is no miaunderstanding, that wo have to make 21 a deciolon betwoon the Forked River !!uclear Conorating Sta-tion and the Forked River cito. It is not a recommandation 93
~
to abaondon the mito. That is, it continuas to be a gcod
() 24 site, one of the few that tao have been abic to identify l 25
_ -- l
I l
1 Hafer - cross 2031 af 3 within the State and we vill continue to investigate it in
(} I terms of construction for an alternative form of generating 2
3 station, namely the number one candidate would be a coal-fired station. So.when I talk about abandoning the Forkod 4
5 Riversite,I'mtalkingabouttheForkedRivorlluclearGenerkt-6 in( Station as opposed to the entire Forked River cite.
7 8
9 10 i
i: 11 12 13 I4 2 :
5 15 E
16 17 l .
18 19 20 21 22 23 0 24 25
if J Hafer-crocs 2032.
1 Q Mr. !!afer, are you fa:niliar with Exhibit 2 JC-111? It was put into evidence through Mr. Raber, but it 3 ic narhed Preic en it. It's entitled'7orked River Invest-4 cent in Millions of Dollars."
5 A Yes, I rm generally fa:niliar uith it.
6 Q It's cy understanding of that first page of 7 JC-111 that there to seco $133 exillion ucrth of equipe.ent 8 at Forked River which could constitute a potential salvage 9 value. Do you dica 3rce with that?
10 A No, that's my understanding, at least in
- 11 theory, that there is that arount of salvageable type of [
t m
12 g
cquip:ent. f
/7 : 1 O; 13 Q 'fr. liafer, I an trying to visualize the rate- l
- i 14 caking treament of Forhed River under various assunptions.
l 15 023 assunptien tmuld be that Jersey Central would, by the 16 end of 1931, lat's say, realize sec:e $133 million of salvage 17 fret t.he equlynant they have at Forked River. How would .
18 that be hcndled in Jersey Central's rates?
19 A The first answer to it is that to the extent 90 cny eenies are reali=ed for salvage, they would be credited 21 aZainst the total izriestment in the project and the bottom 22 line is that it 'eculd be used to reduce the amount for 93
~
shich the custcmers would be asked to pay.
O '4 tr ==1veze t= reatizea decore the r ce r-25 set in this proceeding, then of course the rates as they
If Hafer-cross 2033.
I are set would recognize the reduced icvel of investment.
2 If salvage is reali=ed after the rates are cet 3 in this proceeding, it would be still credited to the pro-4 ject and the amortization period would then be that emch if 5 shorter. For avample,/it's new, if the Board determines ;
6 that the appropriate amortization period for this entire 7 project is 15 years and all of a sudden the Ceapany so=c-8 where doun the road reali=cs salvage valus of 4100 ciillien, 9 which might be a third of the investment, again picking 10 nuchers out of the air, then af ter 10 years the plant would i 11 have been fully c=orti:cd rather than 15.
g 12 Now, I an anticipating that Jeracy Central 13 will be having rate proceedings during, you kncv, during
! I4 the period of ti=a when the plant is being trritten off and f: 15 there will be a continuing ability to reset the c=ortization 16 rate, at 1 cast re-e::enine the storti=stica rata, durira I7 those various rate proceedings and to tahs a 1cok at any ,
I8 salvageability that has occurred in the intervening periods.
19 In theory, if we received enough in the way
~O of salvage 1.nd had recovered the balance fully thrcugh
'l rates to the customers and were not in a rate proceeding, 22 then we would have to file a rata proceeding to stop that
- 3 amorti=stion being charged. But, I think that is highly O 24 theoreeica1 etnce th1 obvicesty w111 cover a smbetentist
'5
~
a:nount of time and there will be a=ple opportunity to
11 P.a fer-cros a 2034.
I review the:1 in the rate cases in the intervening periods.
O.
g/
5' 2 Q Uow, we have had Mr. Baldassari as a witness !
3 in this case, as ycu kncu. It's my understanding of his 4 testinony as f.t uns presented on several occasions and 5 croa3.exanined on coveral days thct his testimony revolves 6 around an assunption that 'iorked River would be abandoned 7 on February 1,19G1, and that X-amount of money would be 8 stortised over 10 years, but there would be no rate base 9
treatacnt of the nmrtized asounts.
10 Is my understanding cor:cet?
j 11 A Yes; that's the assumption he has put into 12 g bis fore.caat.
13 Q l gather you ars now changing the Ccmpany's Y I4
! ccaiticn on that?
15 3 Ig e s difficult to call it a Ccepany position.
l
- 16 lir. Baldassari has to put together forecasts for the Boards 37 of Directors and others, financial cc,,mity, to show what .
I8 '
the Conpany vould look like under a variety of assumptions.
19 11e was faced with a probles of how do you present a fore-20 cast to the financial emmity which would be substan- .
21 tially different than come of the recent actions by the Board and uhich wculd essentially be presenting a more 23 i opti:tistic vicu than sene analysists would argue is appro- !
24
{} 25 prista. .
lf 2035 29 1 Mafor - rrces (Centinuing) For u=acpic, if he had included 1
A
/'s
\-) the sscus:ption he would be getting the full carrying costa 2
on the Forhed River Project and the anortization then it would 3
4 he as I an proposing, then it would ha casentially a =ako Whethar 5
whole kind of condition fer that placa of invostr,ont.
it's realistic for Mr. ;aldasaari to assuma that in putting 6
7 out information W ich the invostmant consanity usa and in 8
turn raly u7en in laading Jersey Central ncncy, is quaation-9 abic, and typically, no tend to take a mora conscrvative ap-He proach in putting tcgether our forocust in that regard.
i 10 don't annunc full ad;quate tinely rnte rolica" uvan though wo l 11 0h710:017 f331 that va n ed is and are entitled to it, but 12
]i 2 13 in : any ways it in un:calistic to accume bucauso the regula-4
=
w.
j4 tery prcecas juut dec;n't ucrk that ucy.
i.
' I think this falla into that came kind 15 l
I
- 16 of CatCUcr?.
0 Cpcaking of categories and sinilar categorios, 17 uhan I hear of your plane to abandon a $400 million nuclear 18
- 19 proj ect, ny mind innadiately goes to the cbandonnant of I
I 20 PS"50 of ita Atlantic bff-short plants for cbvious raanons.
i Arc you aware of how tho Mew Jersey 21 l
22 Deard treated that abandonment?
A Uell, I am aware how it is balng trasted, yes, 23 stipula*l and I think --- I thought it was dcalt with in a 94
(~)/
~
l
\
tion among the partina, so I don' t know, you know, whothar 25 l
r 2g 2 liafur - cross 2035 it is proper to may that's how the Ncv Jorsey Dcard dealt with it. But, I do know it's being acortised over some 2
period of tire in the future. I think it's 20 years.
O Yes, it's 20 yccrc.
4 A ?.nd that the unctortised balance is not, as I understand it, being recognized in Public Sorvice's bare ratos. .
7 8
that thic Forhed 21nr inv7ctment i<s in any
- vav used and uso -
9 ful to the custerers of 27 rey Central?
! A I couldn't --- you knev, that's to much of a 11 legal definitien, I : uldn't really ecerent on it.
(~T 3 13 0 Ucv, ynn have nontioned her ".r. Daldansari had
\_/ 4 i to nako cortain anr.umpti:n1 in order to preront the Corpany's
- 14
", financial pictura. Hau deco the changs in assunptione regard--
8 15 i: iny Forhod River aff30t tho Cor. piny's fin ncial fpicture with 16 particular regarrt to itn long-term financing pinnn?
A Dy the changa, you rean this announced deter-19 nination not to *nursue the ?crhed River Nuclear Station?
O Yes, and to ecch a return en tha unamortised portion.
21 A It affect: it tve-fold. First of all, tho 22 Forked Elver stntion ha3 heen carried on the hecks of Jersey 23 Contral to date without any arortiention en the hacis that t (~S 24 O' tho future plans for that station unro uncertain. Oncq ue 25
f 2g 3 Eafor - cross 2037
.have made the decision that that plant will nnt ha pursued 3
O 2 we are then faced with the nocessity to writo-it off and the only question that will remain then is how quickly it 3
nust be written off and when we must togin writing it off.
4 So, tha decision in that rogard, the decision not to pursue 5
6 it, can have a substantial effact on Jersey Central's finan-cial condition and financing ability in the futura because 7 ,
8 it will trigger the need to write-off the invest =ent.
And, as :sid, tha only question re-9 10 maining will be hcw rapidly an1 when wo must cet=ence that,
! and those two quantons trill largely hings On the outccme 33 Of the rata p!OcGedin7 f 12 c)s s !
4 Y
13 l $
j 14 5 15 I 16 17 18 19 20 21 22 23 24 l CE) 25 l
l
~
lI 1
1 3G Hafer-cross 2028. I 1 A (Centinuing.) I would argue to the account-O 2 ants that we chould not begin acortining it until the rates 3 have been set. I can't assere that the acecuntanta vill 4 agree with that. . So, it c:ay be that on the datermiantica 5 by the Boards the accountants vill Insist accc prevision 6 be made irunediately, beginning irrnediately, to begin an 7 amortization of the investment. There in no question that 8 having that decision befora us, thct at the cenclusion of 9 these rato proceedings caertization of the invest.nents 10 absolutely will be cade and c~.aculd the -aten not nahe any i 11 i
- provision for it at all, I uculd e- pect that then the in-12 vestment uculd have to be written off all at or.ca.
i 13 Alternatively, if the rates do nahe sema pro- .
14 vision for the amortization,1 vould c:r;cet that the boch-15
- ing of the a=crtizatica vould be consisterte with the rate-16 making treatment in that they would tactch in the future.
17 9 Ilhen was cenatruction suzpended at Forkad 18 River? Was it April of 19797 19 A Yes; I think constructica pas continning at
O
~
Forked River up until about that time. After the accider.t
') 1 at 21I, all construction to the *.anirtti cxtent possiblo unc 22 cut back, suspended, clininated, and in feet all enpendi-23 tures, wiether capital or operating, were cut to on abrolucc p
a 24 ainhxrs. Most of the prcjects were suapanded, cnd 7orked
5
~
River wculd have been included a:noreg them.
Hafer-cross 2039.
~
I What does the abandonnent of the Forked River
(^T Q
\/ ,
2 nuclear project do :o the Coapany's construction require-3 l$
cents? 1 na talking in a fin 1ncial sense, now. 1 i
4 A Uell, in a broad sense, it doesn't do anything ,
5 to that. Jersey Ccatral atill finds inscif in the position 6
of needing additionni base load capacity and that means they 7
need co have a construction program. The availability of 8
the Ontario 7.ydro connection allous ua for the next couple 9
of years to live with a inwor-than-otherwise normal con-10
. structica progren, but that is irrespective of Forked River II
- f. --
irre pactive of the dociaion on 7orked River.
12 7,
i Dut, the fac: of the matecr is that Jer cy
(.) j< 13 Ccn:ral ceill needs to construct espacity and they would i 14 i cither hate to bezin spending subscantial ccounts of :noney d 15 g
at ?cr!ced 21ver as a nucicar station or somewhere else in
~
16 pursuing conceructica of a coal-fired station in New Jersey 17 c ecucuhcre cutside of New Jerecy.
18 Neu, you know, on a ocucwhat of a more global 19 bacia, if ;uu construct a coal-fired station or if you --
00 l cad, it secc: atrange to even thing of an oil-fired station, 21 but socc other form of 3cceration other than nucicar, they 22 l
tend to be less capital incennive, to one could say, yea, l 23 .
free the everall percpccetvo the effect of abandoning a r~s. 94
~
5J nucicar project and 1 coking ecuard a focail fuel project :
25
- II cheuld hcvc the result of tending to hold down the 3 construction program.
n
11 i
H1 Hafer - cresc 2040 A (Centinuing) nut, there is enough uncertainty
/~' 1 h
in that that I think it's fair to say for the next several 2 -
years, Jersey Central will still be required to have or should ;
3 i have a substantial ccnstruction program. L 4 '
Q You r.entioned the availability of the Ontario 5
Hydro Project. Can you give'us an updato on the status of 6
thoso negotiationa with Ontario Hydro? May I assume that 7
I 8
thera has not been a latter of intent signed?
9 A I'm trying to recall because --- I just don't kncu. I'll chach up on that and get bach to you.
10 g Q !s thore a chance that there has boon a letter j
11 of intent signed?
12
(}! ,
A I don't recall tharo has been a lotter of in-a tant cignad. I bellave there may have been additional cor-j 14 i
respondence or convarcatioas between 11r. Dieckar.g and the 15 j people at Ontario Hycro and that's what I'm trying to rocall I 16 in ny nind. I just csn't do it now.
17 Q Ara you alluding to the fact brought out by 18
!!r. Rabor that chcro has been a changa in the concept of the 19 arrange =ent with Ontario Hydro in that instead of talking 20 about cevon years, the two parties are now talking about 9-3/4 21 years? Is that the sort of thing you had in mind?
22 A To toll you the truth, I'n not cura what I had 23 in mind. It just sort of aticks within my mind that within I
/~T og l-
~
the last week or two, there woro sone additional discussions I 25 i
N U2 Hafer - crons 2041 j or correspondence between the two parties. I just can't re-(A_) 2 call what it was though or that if it whs even that algnifi- T b
3 c' a t- I'll h^vo t find out 3 "t it ^^d 9 t b^ k $ Y'u-
,3 If I's accursts in rarenbering that nonething took placo, I'll 5 101 YOU ADOW-6 Q tia aro very interested in the status of the On=
7 tario Hydro arrangc=cntn and we would appreciato you doing 8 that.
9 Des: tho abandonnent of Forkod River 10 as a nuclaar project increase or decrease the icportance of 33 raaching an a;rcescat with Catario Hydro?
12 A I think it increasca it although tha Ontario i
! 13 Uydro firm capacity would b3 available during a period of l Q'~T ., ; \
l g,; ting wh:n Pcr%cd River would act be erpocted, any way. Tho '
i t
$ 15 Exlatanca tha tie cut int the future through the 1990's '
r i 16 will unquect ona ly be halpful to Juracy Central.
37 And new the fact that clearly Pcrkod 18 Rivar will n t be in the picture, I think, underacores tho g9 iniportance of the CntarlO Uydro connection in that regard, 20 Q If the ont ri nydro arrangc= ant were not con-su ao, acuu a a cey n uu pursuo ot.Sor possi-21 bilitias for 1cag-tera purchnac of energy?
~
,3 A Wa ara continuing to leoh for those while we aro pursuing Ontario Hydro. So yo , wo vculd keep on with I 4
O
() ,,a that progran but it's not as though va neu are content that I
l
t l'
t, 43 11afor - crosa 2042 1 wo seo Catario !!ydro and are not locking around for other U<~<
2 opportunitics.
C Cn the cubjcet of other opportunitica, is l 3
4 Jor: y Central continuing ;o c::plcra the pecaibility of get-5 tinJ pieces of other projects such sa llopa Creek No. 2 or 6 Philadciphia 210ctric's Lincrick Plant?
7 A Uc are coaciauing to explero it, yua. Thara 8 are a couplo cf thinga, a couplo of charactoristica about 9 Joracy Central that influenca our dociaions and our enthusi-10 a n f r sona of thoso discusaiona. And, one is the fact f 33 that we are not rcally 1cching to incruasa the percantago of 12 nuclear capacity within the G20 System. J.nd , the only thing
()i .
13 that sacas to be available at laast tha liksly candidataa
! 14 at tha proaant tina are nuclan' gonarating stations nuch as i
- 15 tae Public Gervicc atations or tna Limerick Plant or the
! 16 Ponnsylvania Powcr and Light Ccapany's Scaquehanna unitJ 17 which will cccc on aven bofore Linarick, I believe.
18 S condly, apart frcm nuclear vertus 19 fo3311 type of consideration, wo aron't in a position to 20 be able to co=a up with tho front-end capital to buy into
,.,n thosa projecta or to support tha project that would be re-quired.
2 23 So, wa are a a disadvantage in that regard whuro us would ha intarosted, for instanco, in speak-() ,
~
D to Puh11: Sarvica wa al= at hava to try to work out a 25
Iafor - crocs 2043 a4 i
deal that allcws us to cocehow or another becoms a partner but not have to pay the fair chare. And, that makes it 2
l very difficult frca a negotiating point of view. !!evertheless, j 3 l$
we do continue to 10cI:. We are looking nore towards oppor-4 5
tunition to buy cap-city for periodn of tine rather than pieces of specific plants. f 6
8 o
9 l
10 l N
g 11
. 12
) 13
! 14
$ 15 i
a
- 16 17 18 19 20 21 22 23
{} 24 25 t
i o
2 11 ,
Hafer-crocs 2044. ;
I 1 A (Continuing.) So that for cotupanies like c O 2 Pennsylvania Pcuor G LLght Company, for instance, when their ,
1 3 Susquchanna units n,o in, we are looking very hard to try 4 to ent2r into sene, hind of arrangements to be able to take 9
5 that ex can capacity, if you will, off their hands. Whether 6 ve will be able to do that without being specific to the 7 units or not, I don't know. But we are continuing to work 8 in that rogard.
9 Q Enen you vore being questicnod by Mr'. Kirsten, 10 you referred to the petition and the appendix thereto. One
- 11 of the docux. cats in that -- one of the pages in either one 12 of there two documents -- offhand I don't recall which one, g
Oi V I3 31ves a becahdcun c' ;m $173 millien rato increase. Do ,
I4 you recall that?
15 A f: It's in the appendix that I was referring to.
- 16 4 And you did say that you prepared that or at 17 least supervised ir?
18 A Tao.
19 Q Tant breakdcwn shows scrae $24 million asso-90 cinted with the return of Tnree Mile Island No. 1 to the
~
91
~
Cc:cpany's rate base. Is rf recollection correct in that 1 ,,
~~
regard?
l 23 A It shows 21.6 million dollars, including 24 i l j tan:.:n , yes . ;
I 9
~5
! Q Fino. Tami you. If the Board chould continue
<r P
lL2fer-eross 2045.
6 1 to consider T111-1 not used and useful e.d continue to keep U
2 it out of Jersey Central's rcte base, would I be corrcet 3 in thinking that chla would rec'ece the C.xpany's request i 4 to aczething lika 4150 nil. lice?
5 A 1:o, I &nt't believe ce because the :: ques:cd 6 return on ecuz:ms equity cf 15-1/2 parcent vr.a itt no way 7 cnticipating having substantial cacants of Je. <scy Central's 8 capital ignored or eliainated fres rate base. 2crticularly, 9 capital that's rapresenting a plant th n had been operating to as ons cf the boat in the country fer several years and 11 for which there is no technical ceuperent :ccrie:ny suc~
12 y gesting it uon't return to service. 30 the answer is thac j 13 shat will happen is, if that's the decision and :ha:, of 14 couraq is no7 being appealed in the Courcs, but if thac's 15 f: the outeemo of the Courts and the BW'a deciuien chat plants 16
,. hat are not operada for so a period of time a"a a - I7 nated fr a basa ratic, then the 211cuunces which the Cc2-.
I8
- sission mahea on cer.on equicy, util have to bo increaced 19 substantially over historical levels and the 15-1/2 pereent "O
clearly is not in that ball park.
- 1 Every time Jeracy Central's alloued return n,
on equity goes up by 1 percent, it egnatas to scacching 93 like 09 aillion or co in additionni revenues.
/~N 24 V
i r.. iWDEL:.1: Jud;;e Marshall, I'd 95 like to defar to thu other p:Jrtian at thic I
r L
liafer-cross 2046. !
s I point and then =syhc rcceene citer they are 2 dcne.
i 3 oCECC "A74111 G : .all rific. i Does the i 4 Staff wish to start 1ou or do you vinh to ;
5 tak. a fun tJ.nutes sad review your netos?
6 M3. 3ELID: May va w.vc a couple of 7 minutes, Yohr ibnor. He do have sc:ce ques-8 tirena for Mr. '.tafer but er.ybe ue should take 9 c 7:.ry chort break now.
10 J';TGO Mt.RSil'.LI.: Ct:ay, we'11 tahe a i
~
11 bruak.
12
- Gihercupon, a recess was tchen.)
O.
g; 13 i
14
.EOS FAPSIL\LL: We will go 5.xick ca f
y 15 the record neu.
i
- 16 .
.d e~O.3 **r,.- ws l n*o m* m .
6V V34 17
. L'? HS. BILLO-18 Q Ur. il2for, uauld it be ure.a1 p aceduro for you or sc= cone in the Ccctpany to propane a pacha3c, an 20 infor:.ut ica pachn32 for the respective Boarda of Directors 21 prior to deciding a:rf major polley iscue?
22 A 1 thish the infor:ntion package 2130 nahe 23 1:: sound like it's a littre hit 2cre than it typically is.
}'
p)
~.
24 But, ic would be a usual procedure for un to propre a '
canorandum setting forth che b:ssia for our reccmadaticn.
\
, lh fer-cro.so 2047. ,
1 Q Ibs i:cch a act:oran:'tra heen prapared u'.th re- '
1 2 c.:act to the Forhed P.i',rar prebl<ru we a- a dice.naing here "r
3 codf.y?
4 A lic .. it has not.
5 Q Do yeu enpect one ta Sa prepared cho.ely?
6 A y ri ,
7 q .;ppron bitely when?
8 ,\ Well, my schedule roep:tres that I be in 9 lurrisbur3 ter.orreu cnd We(r.caday and back here for a mecc-10 ing on Taursday .cniins. I w ,uld hope sc~ati:.a bewcca em i
j 11 and Friday I Eculd be ahic to at least set a f1rce draft j 12 out. Sw , l ':t. surz you con cypreciate that thi: kind of i
j- 13 thing vill go thrcugh caveral drafts and vill set the re- -
a
~
14 view of a nt:rber of p.'.ople within GPU, not the trast of f
15 1:hich wil7 i:e Urner41 Cetmnel and otherr.. "nt, it vill be r 16 pr: pared.
17 18 19 20 21 22 .
23 4
24 25 L
3h 1 nafer - cross 2049 ;I At such tire that this memorendum is prepared, Q b
(')
b/
Ir would it be poznible for the Doard's Staff and other parties ;
2 to roccive copics of it? }
3 A I believe co, yes.
4 +
O Could you toll un specifically what documents 5
tunt be filed trith the ECO and the li?C should the Eoard of 6
Directors accept your racemmendation concerning Perhed River?
7 A I cannot he apccific uith reccrds to the NRC, 8
no. I don't think thera are any dccumente that need be 9
flied with the G;C. There is a continuing requircront, a 10 3
disclocurn tyyn requircuent for any cenpany with publicly
~
11 E held coeuritics and subjact to the raguicticns of the Securi-12 ties and Exchange Cecmincion, nnu it's that typ9 of action
{} that night be required based on S"C rulac. And, that type of 3
l 14
- decision in rado by.nr. Liborman and his firn as General E 15 j 16 Ccunsci as to whether or net va nust issue a press relsasa and a notice to the stech c= change or security helders and 17 that type of thing. tut, there 13 no specific filing that IS I can think of with the SEC that vould be required.
19 C Uith ronpoct to the UKC, would you be ablo to 20 check with conacna for us and find out if you are required 21 to filo any docunents with thon?
t 22 that certainly w$
A Yes. Let no just say thist 23 l would be advising the Unc of this decision and I will let you i (s)
24 know whether, in additien to that advice there are any formal 1
i 25 i
i,
.2 IInfor - creas 2049 1 l
j docur. cats that are required.
4 2 Q Concerning the !!EC "MI rostert proceeding, do i you escct to be filing :ny studies or documents with the I 3
4 NRC concerning the forked River prcblen?
5 A I uould not anticipate it, no.
6 0 Is tb2 deciaion to abandon Forked River as a 7 nuclaar project, would afou say that's haced prinarily on URC 8 and DEP regulatory impe:II:2ntc7 !a that a major factor?
9 A Well, certainly then art probably the two big- 4 1
10 gcat hurdles to gut over, yes, f
$ 11 Q Dac% in April,1372 when the initial decision 12 to cut back ccastruction at rcrhed River was nado, was that i
Ol 13 '=" a e =1==iv 117 c= the =t= ===te==* cr ata ==7 o**er r=c-
! 14 tors, irraspactivo of the cccident, play a rcio in rn Jhing i
f 15 that decision to cut back?
3 i 16 A There vera a nu der of things which were taking 17 P laca. In April of 1979 ve cut back 23 I indicated overy-18 where we possibly could including rorked River. But ny 19 recollection is th:t Perhed Pivor's conctruction activity, 20 oven at that time had already been held down or linited be-cause we vero basically taking tha posture of trying to ob-
~
21 22 tain the requisite regulatory authorizations for the'projec 23 before we had to spend substantial amounts of r.:ency.
24 I cu, hviously vo had already opent U subatantial'ascunts of =cney, but we ucra trying to minimiza 25 l
l
lf 3h 3 Unfor - croca 2050 that and time it with recaipt of regulatory authori=ations.
() Dut even prior to the accident at TMI, the cost of construct-2 ing nuclear power plants and the costs of operating nucicar power plants, the tremendous regulatory delays for start-up and operation and return to operation that were being ex-parienced caused us to begin to reexamina the appropriatanass 6
of going forward with nuclear -9 narating stations.
- ' "" "* ###"Y *U #"*4 8
our awareness of those probicas.
9 O ifell, up to April,1979 vas the construction i schedule for ?crked River pretty much on targst in tar s of
- II i
dollars spent? l 12 i
() -
3 A T tell you the truth, I can't rocall what tho e'
i construction schedule for Forkod River was. The con:truction i I4 }
i schedule for Porhed River changed a nu=bor of biraa over the l' 15 i 3 years beginning back as I can recall in 1974 with tha finan-16 !
I cial problems of the Coned dividand omission and tho Arab oil l
- 17 l i embargo and the necessity to cut back on construction prc-granc. And, it had its ups and downa betNean that tima and April of 1979.
Q IIan there been any construction at Forked River 21 einco April, 13707 22 A There has been no meaningful construction at 23 Forked River since that data that I an c. ware of.
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A I!afer-crons 2051.
1 A (Contimtin:;.) Asid, I don't eant to argue O 2 unether it's April er luy, but thero van a certain accent 3 of winding doun civit had to be dona. W.ere were things thn; 4 were under way sud it made acnse ccotw:2ically as uell as 4 5 technically to co,plete them rather than to send all of the 6
crews htme and let the secol Inst or fall dow..
7 Eut, basically, whenever vc stop and slowed 8 dom., uc did.
9 Q Could you cell us if there are substantial 10 differences in terns of invcataant requirements in going l: 11 with a coal-fired plant in Nu Jeracy or a coal-fired plant 3
12 in Pennsylvania or coal-fired pl me at the Foriced River O; .
13 stee u m 7m> dcne en7 a=s1 7 sts a1=za eue x uneo I
i: 14 A Uc have not dono cny analyols tiaich vould }
$ 15 allau us to really qu.intify thco, although I thinh Mr. Rabcr i 16 vent over a few of the itcas the other day when ha eas tes-17 tifying.
18 Certainly the transportatien requiremente of 19 building a coal-fired station in Neu Jeracy and h ving to 20 bring the coal in froa at least western Pennsylvania, ::aybe 21 even further, introduces additional costs and additional, 22 considerations, particularly when the train line, railroad 23 lines are riot necessarily in a position to finance icng 24 ~ extensions as ::ny be required to service Forked River.
25 I thinic Hr. Raber tal'ced about c=penditures l
. . . r . s ..
1 > t L far-cro:s 2052.
, t. '
I whidh might be la che N0-70-30 n'.llicra rant;o to rostor:'
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^
rail hd a;.d that Cenrail i belim said they .'ilt!.e: ca-. ' t .
.i 3
at yo ie t fintnet that hin.1 of activity.
4 The pollutica requirwaancs, as I unbratand i 5
the:2, in the Gtste of Ne.: Jersoy tended to be troro ntringenu [
1 6
than in acher : stan and, tacrefore, the additional enpital ;
and operating coces to try to' W. those utan.farda uccid 1
8
'ca a censideration, unch as tryin3 to oJr! ser.cbora crea 9
the atac'ta. In fact, 1 thi:u"tharo la sven ecce questian 10
.~
abcut whether tha standards can hc etet with today'a Occh-
~
11 i nolo:;y, that in fa: t e.at it uculd take ia ec'ao t7p of j
relanation de.<n to the Fedcral Lcvain, perhaps.
4 13 f 30, yes, thaca types of thinge plc7 a rela.
i 14 i '
Thr. choice of .?crhed River as a site rather 8' 15 i
- than scue sther site in Uc.u Jerocy veuld be helpful to the
.I 16
- tc.ut thn:: Tre cirecd'/ own the land den there. We al-17 ready om se=e right-of-' Jay into the plant. 11o 9 . ach addi-18 .
tiennt vould Lc required, I don't k:cv offhand.
! 19 .
Q CTie final questica. Ioes the decisica you i
20
, have told u:; abcut tcday or the preli:ainary reccewnded 21 decision to abenden Forhed P.iver ca a tu: lear project have 22 any inpact en the overall risk of the Cczpany and would it 23 therefora requira any a:2:nfr.cnt to :'.: . Rela' tmti aony on O 25 rete x =emar 1 vculd enpect that it neuld be perceived as I
Y
- Hafer-cross 2053.
I adding to the rick of the Ceepany, but for the final ancwcr l O 2 on chat I would have to talk to Mr. Reis, what he etrrisioned l
, 3 - what he believes the investor envicioned when he put to-4 gather his analysis of the required rate of return.
5 - MS. B3LLO: . Taose cre all the ques-(
6 tions we have of Mr. llafer.
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.i 1 Hafer - cro33 2054 JUDGO MARSHALL: Okay. Mr. Sahradnik, P)
V I
any questions?
2 na. 3A33ADNIK Yes.
3 ..
F i.
4 CROSS EIAltINATION DY MR. SA53ADNIX: i-5 l
6 Q Mr. IIafar, are you aware of the stat $us of con-7 struction of Forked River at the preaant ti:to? Can you tell 8
us what exists thers now?
9 A Generally. I don't believe too much exists 10 there except there is an awful lot of concrete for tho various i that i
.a 11 f ootings and whatnotf.us boca poured. Thore has been so:sa
- 12 reinforcing bar, there is nc=a rainforcing bar standing
.) 13 around the site, but I think in ter:ss of percont thero is 14 a very small percontage of actual plant construction that
- s. 15 has taken placa.
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16 HR. SAHRAD3IK That's all the questions 17 I have.
18 MR. MARCELLI: I will ask cno or two 19
- ora .
20 TURTHER CROSS ELVIINATION 21 3Y NR. NARDELLIs 22 23 Q I think I hcyo hoard a figura of five percent ccmplete for Forked River. Does that sec= about right?
24 i
('-)- A Yes.
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21 2 Itafer - cro33 2055 3
Q At acr:0 point in 1979 construction was completely h 2 stcpped at Forked River, was it not?
3 A It was f r all pur; as, yeo. As I said, it 4
- sticks in ny nind that thera were solo activitics that made 5 senso to finish and to bring to cc:aplotion. Thoy did not in-6 volve substantial enounts of noney but they navartholoss --
7 you know, va did go forward with them.
8 a ::ut ovan that aini::a1 level of activity at sena 9 point in 1979, that tco couacd, did it not? I an not talking 10 about tha sacu:-ity around thu alta or anything like that.
5 A The only thing I havo in nind uhich I can't give 33
- us 12 you an anawar on at thia moment is that it was coating /a i i (n$
U 2
-[ aubstantial ar.ount of nonoy to keep punping out the excavation, i 13 l l ct t'u cito and at son pcinc in tina, I believo we uent a crcu f: 14 5 n and ac:ually had t;m backfl11, fill in the oncavation, 15 j [
16 shich would Oa a conacruction activity becsuso in the long I
g7 run it caa going to be cheapar even though you have to cote i 18 back at son:e pint in the Juture anc .Iig it out again, it 19 would be cheaper than paying the alroat, I b211cva, 0100,000 t l
, 0.0 a conth to hava punpo'horr.ing and pumping out the watar. So, l
- again i torma the total investnant and si
- :e of the project, 21 i r! all intenta and purposos, thar-2 was nothing going en but 22
! 23 thoro wore thaso littlo residual activities that continued.
l g I think, for example, sc=a painting of
! tho uteal to k place, a it w uldn't be, you kncu, caposed to l
25
1 1
l 21 3 Hafar - crono 205G i tha salt air, that typc of thing.
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\s' 2 Q But tha painting of the steel is as consistent 3 with resolling the staul as it vould be to the furthering of 4 the construction of the plant, would it not?
5 A IC3a 6 0 You aru aware of the Arthur Young Strategic 7 Option Study?
s A Yes.
9 Q Am I correct in thinking that that is due coma 10 tima this year?
$ 11 A If it continucs to be en ochcCule, it should be I
12 due --- it should be rccaived before the end of the year,,you.
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(]) } 13 0 can you conceiva of various recommended optiond ',
I f: 14 by Arthur Young that night influence in the Board in its t,
5 15 ratsmaking treatmant of Forhad nivor?
5 16 - A I think it's conccivable,.yes.
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i JI lhfer-cro:s 2037.
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1 Q Mr. llafer, has there be.cn any discussion in-O) y 2 side Jersey Central or GPU aboat the possibility of scue 3 third-party financing of the Ontario Ilydro project?
i 4 A T'iere 11ao been di.scusolon abcut try; 33 to 5 set up the Ontaria HyIro project 4J U S0? arac 2 c3rp3ratica, 6 if you will, aptre Irca Jeracy Central, cc tht: we could 7 avail ourselver of sene type of p:)jccc ELiancing, 7cu how 8 third-party in that centext ac c;,poa ?d to payim; fer it in 9 the nor:21 fashion and th ?refore having Lt acw he picted 10 up under the twr:ga.32 c-f Jerccy Central and financing cf i
j 11 1: veuld be subject to tha cov~~~ce of the Tortgage and e
j 12 charter, and so on.
o=
V j 13 We are 1cching .ct the possibility of trying I4 to inrulate it in that regard and have it financed in n l,
15 different unigte perhaps way, yes.
16 Q Is that cenaideratien still cctive?
17 3 yeg, 18 Q "'o the degree that octm fotu of unicun fi-19 nancing was developed, vould that not take sene of th:
90 financial in ecoure of Jerocy Central?
21 A lt uculd hrxc two effecto; one, in ter=n of 22 raising do11 era of capital for construction, yes, pronurab17 23 it uculd caec that rew:sihnt. "nt, in tems of the yr-
% 24
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V) ceived rish of Jercey Cenrral, it : night in fact increase 95
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that sonewhat.
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k ier-crosa n syJ G~
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1 2cr example, the only way anyone could be j '
O' cnticed in investing menay in tim: project wculd be teith 2
rl:
3 soce centrace .inich 2. auld ascure thc=1 they would be repaid.
4 Tant Uculd probably ct least initially tGhe the for:1 of a ;
5 tak3-or pay cont: cat fras J .rsey Centr::1. T at .'.r., an A
6 undertaking by Jersey Cuatral GCt ct sone point in time j 7 Into the future, tLey would begi n to pay off thet Sycat-i 8
cent irrespective of thacher there are c;y kilevant heura 9 cc:uing frc.n CanaJa or not. Tcat ' " the t;ay you i,culd get i
i 10 the 1:ricutar to I)0 uilling to go into thct venture, i
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.11 I!afer - cross 1 1
- 1 A (Continuing) That's good if the kilowatt hours N- are coming but if Jersoy Central is in a situation where they 2
3 might havo to be paying for that invest =cnt as wall as buy-4 ing oncrgy from ocma other courco, then it's not as good and 5 it's you know, it's the old problem that thero just isn't any 6 free lunch. There may be a better way to build a causetrap 7 but thero still isn't any froc innch.
8 But, all of these typen of things are 9 boing looked at.
10 lin. NAPE LLI1 Ua hava no.hing further j 11 of Mr. Hafor at this time.
12 JUDG% E"(SHALL: All right, tfr.1k you.
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(_) ; 13 Mr. Kiratan, do you have any redirect? !
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14 nn. KInSTSN: I have no further ques- f 5 15 tions at thin tina.
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- 16 JUOGS MA."SHALL: Okay. Thank you very ,
17 much for tastifying, tir. Hafer. .
now 18 Wo will/go the record to discuss the 19 next hearing dats.
20 (Whercupon, there was an off the record 21 discussion.)
22 JUDGE 2WISNALLs Back on the record.
23 That concludes Mr. Hafer for today and we will
, 24 n. cot back here next en October 29th, Wednesday l
us Thank you for-25 corning,. at nine o' clock.
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I attending.
O 2 (EUARI!iG ADJOUR?IED TO WEDNESDAY, OCTOBER 29, 1980 AT NEWARK, NEW JERSEY AT 3 9:00 A.M.)
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