ML20071N201
| ML20071N201 | |
| Person / Time | |
|---|---|
| Site: | Limerick  |
| Issue date: | 06/02/1983 |
| From: | Conner T CONNER & WETTERHAHN, PECO ENERGY CO., (FORMERLY PHILADELPHIA ELECTRIC |
| To: | Edles G, Gotchy R, Kohl C NRC ATOMIC SAFETY & LICENSING APPEAL PANEL (ASLAP) |
| References | |
| NUDOCS 8306060322 | |
| Download: ML20071N201 (13) | |
Text
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[C y "(,C LAW OFFICES GONNER & WETTERHAHN, P.C.
1747 PENNSYLVANI A AVENUE. N. W WAS111NGTON. D. C3*yOppe-3 $ 3 MA&MJ.WE 7 HANN e
R O S,L R T M. M A D E R IN O2gM. O LSO N A3sC H A+ M OO R E. J R.
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June 2, 1983 GABLE ADDRESS: ATO M LAW Christine N. Kohl, Esq.
Dr. Reginald L. Gotchy Chairman, Atomic Safety Atomic Safety and and Licensing Appeal Board Licensing Appeal Board U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, D.C.
20055 Washington, D.C.
20555 Gary J. Edles, Esq.
Atomic Safety and Licensing Appeal Board U.S. Nuclear Regulatory Commission
/
In the Matter of Philadelphia Electric Company (Limerick Generating Station, Units 1 and 2)
Docket Nos. 50-352 and 50-353 Gentlemen:
In conformance with the Applicant's obligation to give the Appeal Board timely notice of significant developments affecting matters before it, this will inform the Board that in a referendum held on May 17, 1983, the voters of Bucks
- County, Pennsylvania voted that the County withdraw from further participation in the Point Pleasant Diversion Project, which will, inter alia, supply supplemental cooling water for Limerick.
Two of the three Bucks County Commissioners notified the Company that they "are terminating our contract with you to operate the Point Pleasant Pumping Station pursuant to the agreement between the Neshaminy Water Resources Authori-ty and Philadelphia Electric Company dated February 12, 1980" (see attachment).
Contentions relating to environ-mental considerations associated eith the diversion of water r306060322 830602 PDR ADOCK 05000352 g
PDR MO3
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' Christine N. Kohl, Esq.,
Chairman Gary J. Edles, Esq.
Dr. Reginald L. Gotchy June 2, 1983 Page 2 from the Delaware River at Point Pleasant are the subject of pending exceptions in the captioned matter.
Philadelphia Electric Company does not regard the nonbinding referendum or the Commissioners' action as impairing its contractual rights respecting the Project and fully intends to seek judicial enforcement of those rights.
Accordingly, the Company does not regard the referendum as affecting this proceeding.
For the further information of the Board, the Supreme Court of Pennsylvania, Eastern District, on May 27, 1983 reversed the decision of the Commonwealth Court in its review of the Pennsylvania Public Utility Commission deci-sion concerning Limerick Unit 2.
A copy of the Court's Judgment and Opinion of the Court are attached.
Sincarely, A
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, Jr.
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. Conner Counse for the Applicant TBC/dlf cc:
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i4ay 18, 1983 Philadelphia Electric Ccapany 21st and I4arket Streets Philadelphia, PA 19103 St;ention:
IAr. Vincent Scyer Vic.e President De a:- i4r. Boyer:
Please be advised that we, the Bucks County Cce.mi s s ion e r:, are hereby te'rminating our contract with you to operate the Point Pleasant Pumping Station pursuant to the Agreement between the IJeshaminy ' dater.9escurces Authority and Philadelphia Electric Company dated Febr.uary 12, 1980.
Very truly yours, t
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Elaine P.
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Chairman I
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/h Andrew L.
t..'a r r e n I
p._u - F
- i PENNSYLVANIA PUBLIC UTILITY
- Nos. 23 & 24 E.D.
Appeal Docket COMMISSION, Appellant at No. 23 1933 V.
- (Co=monwealth Court No. 2365 PHILADELPHIA ELECTRIC COMPANY,etc.
C.D, 1982)
WALTER W.
COHEN, CONSUMER (PUC I-80100341)
ADVOCATE, Appellant at No. 24 v.
PHILADELPHIA ELECTRIC COMPANY,etc.
JUDGMENT ON CONSIDERATION WHEREOF, it is now here ordered and adjudged by this Court that the ORDER of the COMMONWEALTH COURT, be, and the same is hereby REVERSED.
i BY THE COURT:
Ilarlene F. Lacnman, Esq.
Prothonotary Dated:
May 27, 1983 u
1 l
l
[J-#145-83)
IN THE SUPREME COURT OF PENNSYLVANIA EASTERN DISTRICT PENNSYLVANIA PUBLIC UTILITY No. 23 E.D. Appeal Docket COMMISSION, 1983 Appellant No. 24 E.D. Appeal Drket, 1983 v.
Consolidated Appeals from the Order of the Common-wealth Court of Pennsyl-PHILADELPHIA ELECTRIC COMPANY, vania at No. 2365 Common-Appellee wealth Docket 1982, entered December 15, 1982, which and reversed an Order of the Pennsylvania Public Utility OFFICE OF CONSUMER ADVOCATE, Commission at I-80100341, Intervenor entered August 27, 1982.
WALTER W.
COHEN, CONSUMER ADVOCAT-,
V.
PHILADELPHIA ELECTRIC COMPANY ARGUED:
APRIL 26, 1983 and PENNSYLVANIA PUBLIC UTILITY COMMISSION, Appellees l
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i OPINION OF THE COURT MR. JUSTICE FLAHERTY FIIID:
MAY 27, 1983 f
This is an appeal from an order of the Commonwealth J-145-1
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l Court which reversed an adjudication of the Pennsylvania Public Utility Commission ("PUC") which declared that it would refuse to approve additional securities proposed to be issued by the Philadelphia Electric Company
("PECO")
in conjunction with construction of the Limerick 2 nuclear power plant.
In August, 1980, the Pennsylvania Consumer Advocate, as representative of consumer interests before the PUC petitioned the PUC for an investigation of the need for and fiscal wisdom of constructing the Limerick Nuclear Generating Station, consisting of two units, Limerick 1 and Limerick 2, scheduled for completion in 1985 and 1987 respectively.
The PUC initiated an investigation,
- and, following extensive discovery and hearings, the presiding administrative law judge determined that completion of both Limerick units was in the best interest of ratepayers, as well as of PECO.
Exceptions to this finding were
- filed, following which the PUC rejected, in part, the administrative law 3
judge's decision and issued a declaratory order that if PECO did not suspend or cancel construction of Limerick 2 the PUC would not
- register, pending completion of Limerick 1,
any new 4
~
securities issuances the proceeds of which would be used, in whole or in part, for construction of Limerick 2.
l
(
IPhiladelchia Electric Co.
v.
Pennsv1vania Public Utility Commission, Pa. Commw.
455 A.2d 1244 (1983).
2See 71 P.S. 5309-2.
3 Pursuant to 66 Pa. C.S. A. s S331( f), which provides for issuance of declaratory orders.
4 Securities of public utilities must be registered with the PUC prior to issuance.
66 Pa.C.S.A. 51901(a).
h This order reflected the PUC's conclusion that 5
completion of Limerick 2 is not financially feasible due in part to the PUC's unwillingness to provide rate increases of such magnitude as would be required to support construction of that project, whereas the combined cost to completion of both Limerick units would range from five to six billion dollars.
The PUC further concluded that exorbitant funding burdens of Limerick 2 would incur risk of deterioration in future service, as well as endanger the timely completion of Limerick 1,
due to PECO's already grossly substandard financial condition, associated with an existing bond quality rating of just BBB (Standard and Poors' lowest investment grade) that would predictably decline to a
speculative rating upon issuance of securities to fund Limerick 2.
Such a decline, the PUC reasoned, would in all likelihood preclude PECO's access to financial markets altogether.
5 We find that the record amply supports the PUC's determination, the finding of financial infeasibility being supported by substantial evidence.
See 2
Pa.
C.S.A.
5704 (substantial evidence required).
- Further, PECO's challenge to the sufficiency of the record, based upon the fact that the PUC relied upon evidence not appearing in the record bearing the instant case
- number, is without merit.
Although some of the evidence re. lied upon appears in the record of what is, in form, another case, to wit PECO's rate determination case bearing a different number, that case involved the same major perties as well as the same administrative law judge and the same counsel.
The record of the rate case evolved concurrently with that of the Limerick
- case, and the substantial similarity and interrelationship of issues in the two cases was expressed, in the rate case
- record, by PECO's counsel.
Under these circumstances, elevation of form above substance so as to distinguish between the two records would be unwarranted.
s J-145-3
..---e-
The primary issue presented is whether the PUC can properly withhold approval of securities necessary to the financing of Limerick 2.
The PUC's authority over approval of such securities is set forth in Section 1903 (a) of the Public Utility Code, which provides, in pertinent part, as follows:
51903.
Registration or rejection of-securities certificates.
(a) General rule.--Upon the submission or completion of any securities certificate the commission shall register the same if it shall find that the issuance or assumption of securities in the amount, of the character, and for the purpose therein proposed, is necessarv or orocer for the present and probable future capital needs of the public utility filing such securities certifice.te; otherwise it shall reject the securities certificate.
The commission may consider the relation which the amount of each class of securities issued by such public utility bears to the amount of other such classes, the nature of the business of such public utility, its credit and crosoects, and other relevant matters.
Act of July 1,
- 1978, P.L.
- 598, No.
- 116, 51, 66 Pa.
C.S.A.
S1903 (a)
(1979)
(emphasis added).
It is claimed that the PUC has too far intruded upon PECO management's realm of exclusive l
l discretion by determining that the power plant in question is not requisite to the company's capital needs.
While the statute expressly delegates to the PUC authority to determine whether proposed securities are "necessary or pecper" to meet those needs, PECO claims that management, not the PUC, must determine s
capital
- needs, and that the PUC is constrained to take J-145-4 I
6 management's stated needs as a civen, and then inquire only as to whether the securities are necessary to finance those needs.
The
- PUC, however, asserts that the statute confers authority to reject management's opinion as to capital needs, in the limited realm where recurities issuance is required in order to finance those needs.
It is well established that, absent express legislative i
authority, the PUC is powerless to interfere with the general management decisions of public utility companies.
Swarthmore Borouch v.
Public Service Commission, 277 Pa.
- 472, 478, 121 A.
488, 489-490 (1923).
The Public Utility Code does not expressly grant the PUC general authority over the siting and construction of all utility plants.
Nor does it require PUC approval for expansion of all facilities, the discretion of the company's management over such matters being generally beyond the PUC's power to supersede.
Duquesne Licht Co.
v.
Uccer St.
Clair Tcwnship, 377 Pa. 323, 337, 105 A.2d 287, 293 (1954).
Even the PUC concedes that it is without power to order that construction
~
of Limerick 2 be ceased, an order which the PUC did not issue here.
PECO contends
- that, through the refusal to approve i
securities funding the project, the PUC is attempting to exert indirectly a power that has not been bestowed directly or by necessary implication.
Delaware River Joint Toll Bridce Ccmmission v.
- Carver, 399 Pa.
- 545, 550, 160 A.2d 425, 428 (1960).
We disagree, and, for the reasons that follow, believe 3
~ _ _ _ _ _ _ -..
the PUC's action to be directly authorized by the securities registration provision of the Public Utility Code.
Abuses of managerial discretion may be buffered against consumer impact through exercise of the PUC's rate-setting powers, disallowing rate increases which would reimburse
~
utilities for expenditures imprudently made.
E.g.,
Park Towne v.
1 Pennsvivania Public Utility Commission, 61 Pa. Commw. 285, 295-
- 297, 433 A.2d 610, 615-617 (1981).
Nevertheless, due to the unique character of public utilities, as, in
- effect, governmentally licensed monopolies, imprudent management decisions may occur that are not shielded from public impact through free market competition, or even through the traditional rate-setting mechanism.
Indeed, the PUC, in issuing the subject
- order, concluded that if construction of Limerick 2
were to proceed the probable delays and cost overruns would likely result in the ultimate cost of the plant being excessive,
- and, hence, result in unreasonably high rate charges if the plant's cost were to be included in rates.
t The PUC has general administrative power and authority
,to supervise and regulate all public utilities, pursuant to the powers and duties with which it is
- charged, 66 Pa.
C.S.A.
5501(b).
It is responsible not only for assuring just and reasonable
- rates, 66 Pa.
C.
S.
A.
- 51301, but for overseeing maintenance of
- adequate, efficient, and continuous utility J-145-6 w---w--m
-n y
_y
. m,.-
service, 66 Pa.
C.
S.
S1501.
Maintenance of that service cannot be achieved without preservation of the utility
- itself, and i
circumstances may arise where it is desirable to hinder a utility frem falling victim to imprudent capital spending. programs which are of such great magnitude as to imperil the company's continued viability.
Routine day-to-day management decisions, which bear losser risk to the utility as an ongoing concern, and which do not portend such ultimate danger of burdening the public with large rate increases to escue the utility from extinction, or of impeding the utility -
ability to raise capital through securities offerings, have traditionally been beyond the ambit of the PUC's control.
Nevertheless, we believe the legislature intended, through the foregoing securities provision, to enable the PUC to intercede with respect to management's capital t
spending programs when these are of such great size as to require special-securities financing.
These
- programs, having extraordinary potential for determining the course of rates and l
~
- service, are not mere daily management matters reserved for corporate autonomy.
Such programs inevitably affect the sutility's " credit and prospects," these factors being expressly set forth in the statute as entering into the judgment as to whether a securities issuance is "necessary or proper" for the capital needs of the company.
The interpretation urged by PECO, i
- however, would effectively limit the PUC's inquiry to a
determination of whether such securities were "necessary or proper" to fund the capital improvement clans of the company, thereby foreclosing scrutiny of the underlying needs.
We believe such an interpretation would too narrowly define the PUC's 6
authority, in view of the probable legislative intent to shield the public from the effects of management's unchecked discretion in the limited realm of capital spending projects that are so large in relation to the company's internal funds as not to be sustainable without external financing.
While this is a severe intrusion upon matters that, in an unfettered, competitive, free enterprise
- economy, would normally be within n.anagement 's
- dominion, public utilities are not models of competitive behavior, and, as monopolies, have been subjected to a uniquely comprehensive regulatory scheme.
Accordingly, the PUC has authority under the securities registration statute to disapprove the proposed issuance of securities, based upon PECO's credit and prospects. The action of the PUC is consistent with the
- l i
4 6
But see Public Service Co. of Oklahoma v.
State, 645 P.
2d 465 (Okla.
1982);
Kellv v.
Michican Public Service Commission, 412 Mich.
- 385, 316 N.W.
2d 187 (1982);
Acceal of Public Service Comoany of New Hamcshire, 454 A.2d 435 (N.H.
1982).
~
regulatory power which has been vested in it by the legislature Order reversed.
Mr. Justice Larsen and Mr. Justice Zappala concur in the result.
Mr.
Justice Nix did not participate in th'e consideration or decision of this case.
7Other issues raised in the instant appeal are not presently reviewable.
As part of its order declaring the unavailability of registration for securities to finance the construction of Limerick 2,
the PUC directed
- that, if construction of that facility is suspended or cancelled, PECO l
must file an energy conservation plan designed to avert the need to install other additional
- capacity, thereby offsetting the relinquished generating capacity of Limerick 2.
The need to review the scope of PUC authority to require such a conservation plan is negated by PECO 's having taken the position that it has no objection to filing the requested plan.
- Further, the opinion accompanying the PUC's order contained criticism, of an advisory nature, directed at PECO's decision in 1976 and 1978 to defer completion of the Limerick facilities.
Such mere criticism, however, does not constitute an adjudication and cannot be reviewed on appeal.
Similarly, thd opinion included a
statement of the PUC's intention to
- deny, in any subsequent rate
- case, compensation to PECO for any funds thereafter used to continue l
construction of Limerick 2,
such compensation being known as the Allowance for Funds Used During Construction
("AFUDC").
This statement of intention is likewise not an adjudication, and the AFUDC issue is, thus, not ripe for review.
i t.
a
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