ML20081C528

Motion for Reconsideration of ASLB 830714 Memorandum & Order Re 830530 Suppl to Motion for New Contention. Certificate of Svc Encl

ML20081C528
Person / Time
Site:	South Texas
Issue date:	03/08/1984
From:	Sinkin L Citizens Concerned About Nuclear Power, INC.
To:	Atomic Safety and Licensing Board Panel
References
OL, NUDOCS 8403140152
Download: ML20081C528 (18)

Text

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DOCKETED UNITED STATES OP A!1 ERICA NUCLEAlt REGULATORY, CO:1!!ISSION N MAR 12 AlI:51 DEPORE Tile ATOMIC SAFETY AND LICENSING DOARD In the Matter of

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E,EP,S,;

llCUSTO!! LIGl! TING AND POWl:R

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Docket Nos. 503498 OL CO!!PANY, g AL.

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50-499 OL

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(South Texas Project,

)

Units 1 and 2)

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CITIZENS CONCERNED-ADOUT NUCLEAR PCMER (CCANP) 110 TION FOR RECONSIDERI.TIO:: OF BOARD ME!10RANDUM AND ORDER OF JULY 14, 1983 I.

INTRODUCTION On March 18, 1983, Citizens Concerned About Nuclear Power (CCANP) filed its Motion for New Contention in this proceeding. A supplement to the Motion for New Contention was filed on I:ay 30, 1983. Through these pleadings, CCAMP raised serious questions concerning the financial ability of !!custon Lighting and Power Company (IIL&P) to support the safe operation of the South Texas Nuclear Project (STNP).

By Memorandum and Order issued July 14, 1983, the Istomic Safety and Licensing Board denied C C A:!P 's

!otion for New Contention. The Board based its decision on an amendment to the Nuclear Regulatory Commission ruleu.thich eliminated further inc;uiry into the financial qua l i f ic s t ion:5 cf applicant utilities during construction permit and operating license proceedings, an

' inquiry whicn had previously been required by 10 C.F.R. Section 5 0.3 3 (f) (19 8 2). See 4 7 Fed. Reg. 13,750 (1922). The Board refused to grant CCANP an exception to the new rule.

The United States Court of Appeals for the District of

Columbia, in Ney Cngland Coalition on

cclear Pollution v.

840314D152 840308 PDR ADOCK 05000498 O

.PDR 1

[0 Nuclear Regulatory Commission, I:u. 82-1581 (D.C.

Cir. 1984),

recently declared the new NRC rule invalid. As the rule eliminating consideration of financial qualifications of utilities from operating license proceedings is now null and void, CCANP moves for reconsideration of its Motion for New Contention of 11 arch 18, 1983.

11..DISCC-I0::

A.

As stated in its !40 tion, the basis for CCANP's new contention is that

"... the poor economic outlook for the nuclear industry generally, the financial condition of !!L&P, the recent hostile regulatory actions towards IIL&P by the Public Utility Commission of Texas, and the questions raised by th'e City of Austin's law suit against !!L& P cast substantial doubt upon !!L & P 's financial ability to saf ely complete and operate ST:!P." CCANP's !!otion for New Contention at 3.

Ilo weve r,

since the !!RC's new rule barred considerations of f'inancial' soundness as required evidence in licensing proceedings, CCANP was forced to seek an exception to this rule under 10 C.F.R.

Section 2.758 (1982) in-order to have the contention considered by the Board. The Eccrd declined to grant the exception, stating that there was a lack of the unusual circumstances necessary to obtain a ';aiver of a rule under Section 2.758.

Nevertheless, the Board recognized in its opinion that the new rule amending 10 C.F.II. Section 50.3 3 uas the primary, if not sole, obstacle to CCANP's motion. The Board wrote:

"Were it not for this rule change, we tr.ight likely have accepted at least certain aspects of CCANP's contention for litigation either in Phase II or Pnase III of this proceeding." P.e.morandum and Order at 7.

On February 7, 1984, the United States Court of I.ppeals for

l.

the District of Columbia Circuit declared the IIRC rule barring financial qualifications inquiry invalid in ?!eu England Coalition on Nuclear Pollution v. Nuclear Reculatory Commission, supra, on the grounds that it failed to statc a basis and purpose which showed a rational connection between the facts established by the Commission and the rule chosen, as is required by 5 U.S.C.

Section 7 0 6 ( 2) (D) and 5 U.S.C.

Section 553. Id. at 9.

This decision ef fectively removes the bar to CCAMP's contention.

The rule eliminating the proof of financial qualifications is currently null and void. Therefore, no-reason exists for

-denying CCAriP's Motion f or New Contention. As the rule has been declared invalid, one may either consider the old rule re i'ns ta ted, or, at the least, recognize that a rule barring financial qualifications inquiry does not exist. In either case, the Board possesses the discretion to allow CCA::P's contention.

Alternatively, even if-one views the Court's remand of the rule'as merely instituting an interim period between the remand and the NRC's reissuance of the rule in a dif ferent form, this does not change the fact that there is currently g bar to the admission of a financial qualifications contention under NRC rules. Thus, the Board has the discretion to allo;. CC At!P 's contention in light of the fact that the I;:tC has not reissued the zule.

Certainly, it would be unf air to ma::e the granting of the motion' for a new contention contingent on the NRC's reissuance of the rule.

First, the Court set no timetable, and thus the reissuance may be months away. Second, the Court did not require that the' ru'.e be reissued at all. The Conmission could decide not 7

to reissue the rule.

At this point in time, C C AN P ' contention would be most fairly judged on its meritr, and not made subs 2rvient to the uncertainty of.the bureaucratic timetable. In fact, to deny admission of this contention while the NRC considers whether to

. reissue the rule would be ta.ntamount to adopting the rule itself Jin clear. contravention of the Court of Appeals ruling.

B.

Fu r the r rco r e, since CCANP first filed its motion, new evidence of the collapse of the nuclear industry and of financial difficulties for STNP and IIL& P has..urfaced.

See Exhibits attached hereto. This additional evidence make the admission of CCANP's contention more urgent and relevant than when the previous motion was filed. Moreover, the financial trends evident

- over this period of time indicate further vorcening of the Applicants' financial condition and. ability to raise funds during the foreseeable future.

III. :TIMELIN!-:SS Under 10 - C.F.R.

Section

2. 714 a ( a ),

appeals from certain rulings on petition must be filed within tc.n (10) days of service

-of such rulings. CC;sNP complied with that rule by filing its Motion for Reconsideraticn of tiic. ASLB Ruli:.g of July 1/,, 1984 on July 29, 1983.

CCANP.now requests that the !!aard reopen this ruling and

. allow.this appeal on the grounds that the decision of the United

' States Court of Appeals'and additional evidence as t o ll L S, P 's financial capacity to operate STNP constitutes good cause to reconsider the ruling. This motion is not an appeal from an order as much as

a. request for reconsideration in light of a s

substar.tia'l change in circumstances. :3ince the Court's ruling was a

issued on February 7,

1984, CCANP is timely in filing this motion.

A For above and foregoing reasons, CCANP urges the Board to grant this motion and' admit the financial qualifications contention.

t IV. CONCLUSION 4

A recent ruling of the United States Court of Appeals for

'the District of Columbia Circuit declared the NRC's rules S. amendment which climinated financial qualifications inquiry in

licensing proceedings invalid. New Encland Coalition, supra. As the Board relied upon this new rule in denying CCANP's I otion for New Contention, CCANP moves that the Board reconsider the motion i-in light of the court ruling. I! o r e o v e r,

this :* o t i o n for Reconsideration is timely as to the date of the Court of Appeal's decision declaring the rule invalid.

Respectfully submitted, h

j.

()

Lanny Sinkin l'e p r ese n t a t i ve for Intervenor Citizenn Concerned About.

'Juclear Po.ter, Inc.

114 E.

7th, Suite 220 Austin, To:<a s.78701 (512) 478-7197 i

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l JANUARY 30.1984 AMEROWN FOR ECLE#A POWER AS COSTS SCAR AMD SMEYV ESWES F.MTERN, f30a5 PLANTS Wil! BE SCRAPPED or more than a decade the electric

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j cluding the records of 2.000 welds. Now utility i..Justry has been destabi-i

. ;W the partners face $1.E billion in addition-2 l

al costs to comply, for a total of $3.5 lized by its commitment to nuclear j

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i billion. Since early 1933, when long Is-power. Suddenly these troubles look more like a crisis. First, Chicago's Com-f' h/h "'

land Lighting Co.'s Shnrcham plant was monwealth Edison Co., which has seven E WT essential!y f.nished, delays cacsed by re-f

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! pairs of backup generators and contro-nuclear plant.s on line and five in the 1

versy over emergency evacuation plans works, was abruptly denied a license to operate its $3.4 billion By ron units. With-Y

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added nearly $G00 million-largely inter-V W'

est-to the cost of the plant, now put at in days. Public Service Co. of Indiann

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$4 billion. According to the Energy announced it would suspend cer.struc-

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Dept.'s latest survey of nuc! ear con-tion on its half-built Marble Hill comp!ex struction, final cost estimates were more

'.'e and cut its dividend. Then the leai utilitt a

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for the Zimmer facility in Ohio indicatei!

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-I tions for 2D of the plants bui!t to date.

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than four times preconstruction projec-11 ;

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that it, too, might abandon its all.but-Ih CAfuNG oUT EARLv. Such economics in-finished project. To Wall Street, the 7.>.

news put utilities on notice: If you are H.

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firm. "We sav we are perfectly accurate

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spire grim humor at National Economic L.h Research Associates, a utility consulting building a nuclear plant, you are at risk.

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The warning overturns the conven-

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, a in estimating the first F4 of every nu-tional wisdom that has reassured utili-ties and investors alike. Until now, the f.-

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clear plant, but we have absolutely no

, " l 'T idea about the last 27," quips Irwin M.

financial community has been able to de-fine discrete trouble spots-the " basket electricity has reduced the need for new Stelzer, NERA president.

cases"-by obvious cost, management, capacity. For Public Service of II. diana, Thus it is starting to seem prudent to l

or safety problems. But it has steadfast-the $2.5 billion already spent on Marble cancel early. Likely candidates, accord-ly believed that utilities with wide nucle-Hill represents r.n estimated 1781 of ing to Donaldsen, Lufkin & Jenrette Se-ar experience still offered safe invest-company equity; for other utilities, the curitiet; Corp., are Consumers Power's msnts, that plants more than 25%

situation is alsn bad itable) \\!arble Hdl.

two-unit Midland (Mich ) plant. 85'J com-complete were too far along to be originalh priced at St4 billion, was con-plete but 10 years behind schedule; Pub-scrapped, and that companies with ruch ceived when dcmand for ek.ctricity was lic Service of New Hamashire's Sea-projects could te counted on to regain projected to increase by 7'- a year. Tne brook 2,250 complete; and Phi!adelphia financial health once construction ended growth rate has, in fact. sha ai to 27 Electric's Limerich 2, W complete.

and costs began to be recovered.

Just plodding on to the' f:nish line no The Marble Hill cancellation came af-Lino LcAo w.tes. The fate of T>7 units longer soems to guarant. c th,t a plant ter a discouraging report by a commis-under construction-two-thirds more will open. The Nuclear Regu:atcry Com-sion named by Indiana Goveiner Robert than half. finished-has turned murky,, mission limits its review largd to ai.dit-D. Orr. Alarmed by estimatcs that put as has the future of the utilities buil:!ing ine company documentat on ur.til the ti-the final cost of the p' ant at S7.7 bilhon, them, at a combined cost of some $140 nal licensing " walk throughs." Thus it is the group also recommended that Public billion. "I would bet that less than a these nominally compkte plar.ts that Service of Indiana cut or skip its divi-quarter of [the plants on order] wi!! be-have faced the most intense scrutiny-dend. The report, and the announcement gin producing electricity on a commer-and some of the greatest de:ays and that followed, prompted the utihty's cial basis," says Duane Chapman, a Cor-most dramatic cost increases.

stock to fall to $135 by Jan.13. Its T,2-n(l) University economics prnfc.ar.

The W. H. Zimmer nuclea p' ant, far week high was more than $27 a share.

Investcr<wned utilities, mainly small example, w:>s said by its owr.er.4 Cmcin-Skepticism from regulaters, who fear ones, have good reason to fear Chapman nati Gas & Eh etric Amernn Electric the political fallout of a big increase in may be right. Runaway costs and long Power's Co!umbus & Sounea mt, a:id consumer bills to cover new l ant con-l lead times have made them financial Dayton Power & 1,ight to 1. T ' com-stn.ction, has been another problem for slaves to construction programs. At the p!ete when the NRC nrdt. red te cm..pany } utditiu already burdened with huge sr.mc time, disappointing demand for to rein poet more than 2W.0 ) ihms, in-l amounts of debt, intricate regulatory re-e n e m. tr - o **

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1 UUCLEAS [ '{0HCT5 THAT WOMPI WM.L STREET

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Lves"nentucate M Company F ciec:cdcest Percent as s perce.t of

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4.0 100 159.3

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-e Mid:and (2 units)

I f Kansas City Power & Light 2.7

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.n quirements, and delicate technology. So with a spurt in sales last.sunaner-lifted cost plant con:pletions. Nothing has far. regulators have been reluctant to let third quarter earnings. By e arly Decem-changed, one spokesperson insists. "This utilities recover the cost of abandoned ber, uti!ity stocks as a group hit a 20 is not a hardware problem-piping or p! ants, a factor that has contributed to year iiigh. Some analysts :.re still kmk-systems-it is a paperwork problem per-the industry's "do or die" mentahty.

ing forward to improved cash !!ow, debt minir.g to the qualifications of the in-liut if regulators do not provide relief.

repayment. and a return to solvency-if spectors that the subcontractors wotdd they may have bankruptcies on their p! ants are completed. The Edison Elec-hire to review the quality of work."

hands. Abandoning the Zimmer plant. tric Institute, an industry group. has But the board report seemed to ques-would imperil Cincinnati C&E, which has even prepared. SG mi!!!or, advertising tion contractor competence as well as more than 31 of its equity wrapped up campaign, in part landing ti.e ituiustry's the project's documentation. Singling in the project. By h,w the company can-management successes.

out electrical contractor Hatfield Elec-not recover the ce>t from ratepayers if nusa or scLL onc::nc. T1.e x:a:'s ik eision tric Co.. for ennple, the board said it the plant is scrapped. If PuHic Senvice on the Dyron plant will can. shadow on "has no confidence in the quality of Hat-of Indiana does not get rate relief. says the m campaign. The 1+ar,i said Com.

tield's work. We recogni::e that a rein-1:ichant Spehzer, an analyst at ik!T &

monwealth Edison " failed in iis responsi-

.si.cetion program could be an empirical Phelps ine., cutting its dwidend wouhl bihty to ensure that its co: *ractors car.

demonstration that Hatfielfs work is not only restrict its access to the ciputy rieil out their de ceated quahty satisfactory, but we has, no confidence j market but "in all probabil.ty. they a<scrance task." Connnonwealth sip it in t he reinrpecti n. program. either."

I wonid base a hell of a tm.t accessing the will appeal the ruling, but re. ohdion of After the N1:r ruling. Comm6nwealth

' capital markets." The com;; ay has filed the i> sue wdh at best add m.nths to the

>hareho: der > called in sell orders in for an emergency rate increase.

I planti startup schedule.

droves. pushing the stock down 20%.

The bad news came just as some in-The deci< ion-the first flat de: :al of a Wall Street judged that response an 3 g

duury > pot esmen and brokerage hou.-es beense by the serN Aton.

8arctv &

ov. rreattion. : uni the shares began i were dnating o!I newly twitive outlooks 1.ieensing lioard-war e pe a!!y shock-erau hng 1.ack the next day. Still, says !

for utilitie.<. Industrial t vwer.lemand.

ing to a company that i co:midered the Mark 11. i.uftig, an analvst at Salomon $

which flagged during the recession. La*

indn tryk flaeship for n:anagement, I?n.x, "when it coraes to'nuelear issues, !

been rom'ng 1.ack, and that - coupled com; ct ene.

afety. anal W..nw!3 low I na estors ha. e 1.ceome gun. shy."

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I NEW YORK TIMES FEDRtJARY 28, 1984 i

DespiteH' h Cost Some Utilitles

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f au the nuclear industry have occurred as a result of its own management fail-om'pe to mis eactors

~ "tu ~ n - ~' " ~ ~in e

e ee known examples include mistakes the esecution of dai ms mismanage.

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ment of constructim projects and poor

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ByMATIHEWL.WALD _ _ _.

operating practices.

L*85838 DI'F8880 g

. Even as a growing number of elec.

New York's Difk s 1

tric t.tilities are aba+af aa unfinished

' nuclekt plants, others are pressing on..

De Public Servim Company of New But the logic of charging utilities for

'1 driven by a combination of regulatory Hampshire, for example, has spent

. their ermrs has another mmage, ac.

, and financialincentives

' nearly g100 miH!on on Seabrook 2, and cording to Dr. Axelrod. "De utility ex-ecuti am tba

' Some of these plants will eventually that money, together with about $800 g

mEon fmm otkr panriers, has

• be scrapped, industry leaders acknowl-he said.

' edge. Every reactor ordered since 1974 brought the reactor to about 28 perant

!! construction prneasde far enough of completion. Since New Hampshin in a state that does not have liberal has been canceled at some stage of has no clear law or precedent regard-rules m cost recovery, be said, "then

-completion. In one case the reactor ing the division of costs of an aban.

you torte completion."

i was 60 percent completed. Some of doned genenting plant, the only,way Some people who are familiar with l

those abandoned represented invest-the utuity can be assured of a mturna theindustry saythemieson costw-ments of hundreds of millions or even itsinvestment is to finishit, ery may have been a factor at Cincin-A survey completed last Aprilby the '

nati Gas and Electric's Wmiam H.

buBonsofdollars*

"Are we being so hard on the cornpa*

Department of Energy found that most Zimmer plant, in Moscow, Ohio, on nies that we make it difficult for them states allow at least a partial return of which the Nuclear Regulatory Com-money spent on abandoned plants, but mission ordered all safety-related many require that the money be col-work stopped in November 1982. Ohio A*orns and Electricity:

lected imm ratepayers over five or lo does not allow any return of rooney in.

years,with nointerest added.

vested in abandoned plants. The com-The Rising Costs oniy New York State has consis-pany waited until this January before

' Last olthrec articles, tently allowed full recovery of the announcmg that it would give up on money, cornplete with interest to the Zimmeras a nuclearplant, time it is collected from consumers, ac.

The question is of special interest in to do the economicaHy rational thing?"

cordingtothe Federalstudy.

New Jersey, wl-re six reactors repre-said R. Winiam Potter, assistant public Fourneories Predominate senting an ir,estment of nearly $1 bil-

' advocate with the Board of Public nat position is rejected by most Lion have been canceled,the most most Utilities, which regulates rates in New state regulatory commissions because advanced being less than 20 percent,

Jtrsey. "It's a very important philo-it does not punish utilities for their er-cornplete. Amag those canceled was l sophicalquestion."

rors.The Department of Endrgy found

. The huge costs of abandonrnents are four reasons for the prevailing method Hope Creek 2, 'in Lower AUoways not borne by the utilities' shareholders of forcing utilities to bear the cost.

Creek. The cancellation was an-i First, it said, was "a political desire nounced by Public Service Electric and '

clone. A Government study reported t share costs equitably between th Gas Company in December 1981, when utility's ratepayers and its investors.,e the plant was less than 15 percent com-that because of the tax laws, the Treas-ury usually bears the biggest burden, Second, it pointed out, some states' '

plete followed by shareholders and then rate-commissions are bound by longstand -

The company decided, however, to payers. All 38 plants still under con-ing laws prohibiting utihties from pras ahead with Hope Creek 1, sched.

struction represent investments of sub.

charging customers for plants and uled for completion in 1986 and de-l stantial sums, and 35 of them are de-equipment before they are "used and scribed now as being 81 percent fin-:

useful.'

ished. It is *rpaMM to cost 53.79 bil-scribed as being more than half fin-

"Next is the view that investors lion,up from an estimated 3000 mHHan isMd*

should be penalized when a major for Hope Creek 1 and 2 enmhinart The problem, according to Howard project controlled by the management '

In many cases, however, itis knpos.

Axelrod, an araaamiet with the Con-

~ representing them fails to reach frui-sible to pmatha the companies without sumer Protection Bonn! in New York tion," the study found.

hurting consumers. Many of the utili.

Finally, the study detettnined that ties are financial midgets relative to State,is that in many cases tne regula-many commissions find value in fol-the giant plants they are bunding. In tory systems used by state public serv-lowing their own precedents, thus con-New York, for example, a panel ap.

1 l

ice cammi=* ions nave "taken all the in-tributing to "a uniformity to the regu-pointed by Governor Cuomo to study

- centiveout of making a good decakn."

latory treatment of similar ca= "

the Shoreham Nuclear Power Station,'

".'ionce a few million donars have been ne Nuclear Regulatory Commis-the nation's most expensive nuclear sion does not take a position on the plant in relation to its generating ca-spent, he said, the company has a i Issue because it concerns itself with pacity, concluded that if the stockhold-strong reason to go ahead.

safety.not economics.

ers of the Imag Island Lighting Com-This is because most public utility The concept of nan =fM investors pany were forced to absorb as httle as

'.. com'nissims allow shareholders to m for management's" errors is especially

$1 billion of the cost of the reactor,one.

coup their investment in a plant and strong wbere there are suggestions fourth or less of the reactor's final cost,'

earn a specified return only if it is corn

• that the costs rose not only because of thecompany would be bankrupted.

< pleted. Some states allow the compa-rmstaken predictions about demand

- nies to get back from customers at and the price of competitive electricity t.' least part of the investmentin a can-sources, but also because of mieman-aged construction, such as that noted in

! i celed plant, but most do so on a delayed September by a study on the future of basis. Since the money is usually bor.

nuclear power by the engmeemg de-rowed and interest must be paid, a de-chusetts M layed collection is equivalent to a cost.

gy

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The Bundlag of h8a===*==

The utlities crgue tint bankruptcy is 9 ThePublicService ampmayofIndi.

imilarly damaging to ratepayers.

r ana was in n af milar position in relation Generally, a bankrupt ctility is sx;mpt to its Marble Hill pro}ect, =handr=ad from the limits on rate increases set by after the awp==dinne of g2.25 bulica, state regulators. Also, Ii electric serv-and maynow face 6ankruptcy.

ice becomes unreliable because the In the case of utilities whose ruin companycannat affortl adequate main-l

bcpe for solvency lies in f%inhing a tenance, businesses would hkely leave reactor regardless of cost, Charles or choose somewhere else to expand, Komanoff, a New Yak based energy according to economists.

. analyst, argued that overspending i "The business of utuities is so much builds momanan= "There's an old a part of any state's economic spbere saying, if pu loan ~%dy a dollar.

Ethat there is no way any adverse devel-j

. then you control him," he said. "If you

' loan,,=a-ahady $1,000, they control opment would not have an impact oc everyone," according to Robert Stew.

ntu recently, me ~ argument has art, a lawyer with the Oklahoma Gas been over how to alincate asts M an and Electric Companywho was once on labaMoned prokct beween a uuHty's the staff of the Oklahoma Corporation stockholders and ratepayers. Now Commission, which regulates utlities in thatstate.

bondholders, whose etsim on earnings

,g,,,,,. takes W over No matter what happens to the util.

stockholders', have been drawn into ity,me FederalTreasuryloses menue

! the situation with the cancellation of a in an abaMonment. Accordng to h Department of Energy s study of can-seriesof plantsinWashingtonState.

Of the Washingtoc Public PowerSup..

cellations, the Treasury usually bears a bigger share than do ratepayers or.

ply System's five plants, only one shareholders.

seems likely ever to operate. The $2.64 billion cost of Units 4 and 5 has been DepletingtheTreasury collected in part from customers of the.

According to Ronald A. Pearlman, Bonneville Power Authority, an elec-deputy assistant secretary of the tricity wholesaP r, but the courts will Treasury for tax policy, utilities that probably determine where the money"

. abandon plants are entitled m write off will come from to cover the $1.2 billion their value, and the amount of the spent on Unit I and the $2.54 billion write 4ff is subtracted fro:n taxatle spent on Unit 2. The power supply vs-earnings.

tem has defaulted on $2.25 biluon in 1ho write off can also be subtracted bonds, and the Washington Supreme

. from retained earmngs, mning it p.s.

Court refused to make the 88 utilities sib;a for the utility to pay dividends that had contracted with the supply that are tax. free to its shareholders.

system for the power pay off the bonds.

The Treasury's loss is thus a combina.

'The case is being appealed and is ex-tion of direct tax p:/ments from the pected to go eventually to the United utnities and individual income taxes States Supreme Court.

from shareholders.

Holders of bands issued by several Mr. Peariman said he could not esti.

investor. owned utilities may also face mate what portion of an abandoned lessof theirmoneybecauseof cancena-plant's cost might be absorbed by the tionsof nuclearplants' Charles Bayless Treasury in this way. The Department Some experts, like of Energy estimated the figure at 40 of the Public Service Company of New perrent.

Bampshire, argue that the wen being The final verdict on the wisdom cf of ratepayers is inextricably linked having chosen to build nuclear plants with that nf the bondbolders and stock-will be clear only retrospectJvely when bolders.

utilities know whether the output was

{

queesters Aren't Dundt needed and what the cost would have M h M, sud as W and I Mr. Bayless, who is in charge M Ge e,,3-stock and bond Mferings M W ut 7,r now, however, critics of th'e in-which is stmggHng wnh its Sea dustry are arguing that many utilities P ant, said utilities were perceived as l

g,3 nsk-free investments 10 years a(gor changes of the 1970's. As Joseph Giar.

the time, he said, their bonds so russo, a City Councilman in New Or.

1.5 percent r cent bee Paid by the Govemment.N leans, put it, the plants became a bad however, his company is seen as gar venture "because they didn't know,

when to turn back."

l i from nskiree.

i " Investors aren't dumb," stid Mr.

I Bayless. "look what happens when you attack the investor." The company l

had to pay 15.5 percent, well above I

what most others pay, for its recent.

I bond offering of $100 million for 20 -

years.

'"If we had been rated 'A' we might have sold at 12.5 percent," he said. The cost will be passen along through elec-tric rates, he pointed out. "So what we,

have done is locked our customers into g3 minion more a year for the next 20

, years, hesaid.

UALL STREET JOURNAL J A:lU A!!Y 20, 1994 Utilities With Troubled Nuclear D' nits n"s?"*"'"""*c"""'~"

Ieng Island Ughting has said it expects Turn to Banks as Bond, PaperRatings Fall na**rle"M"S.;&" tat,%

Izng Island is nearly finished but has run C

into strong local opposition. The company By Jstr BAILEY costs for these utilities and Continued un0er.

has said it does expect difficulty securing fi-Staff Reporter of Tus Wau.Starr7 Jot nNAL tainty because banks are reluctant to make Lancing in the bond markea Electric utilities saddled with troubled long-term commitments. Fct the banks, the Despite these companies' current prob-nuclear power projects increasingly are increased lending to troubled utilities repre. lems, they have for rnany years been fa-turning to banks for,financmg as lower sents a potential source of new income. But vored bank customers and bankers are now credit ratings edge them out of the bond and such lending could add to the banks' prob.

reluctant to turn them away..same bankers commercial paper markets.

Iem-loan portfolios if state regulators don't fear they could lose much of their utihty Public Service Co. of Indiana, Philadel.

grant substantial rate increases.

business by refusing to extend more credit phia Electric Co. and long Island Lighting None of the companies will be refused now, as they have on a much larger scale to Co., all with unfinished nuclear plants, are credit, said Salomon Brothers utility analyst foreign nations that have been on the verge looking for a combined $2 billion in new fi-Scott Sartorius, "but they may pay through of defaulting.

nancing, lenders and utility industry execu-the nose" to get it.

" Banks will operate no differently than tives said. And most of that money is ex-Most of the nation's 10 largest banks each

.have with Poland, Brazil or who have pected to come from major banks.

have more than $1 billion committed to util-y u, one utility lender said. It s not in "The banks are the only game in town" ity customers and most of those borrowers their interest to precipitate a bankruptcy.

for some power companies, one utility appear to be in excellent financial condition.

1:nder at a New York bank said. He said Bankers refuse to discuss their exposure to banks are preparing to assume a much troubled power companies, but one New larger lending role to companies with aihng York utility knder estimated that each of nuclear projects in the months ahead.

the top 10 banks has $100 milhon to 1500 mil-The switch to bank loans from conven.

lion out to companies that may have diffi-tional financing will mean higher borrowing culty sening bonds or commercial paper.

The utilities' problems range from severe to mild. PS Indiana said Monday that it wouldn't complete its Marb!e Hill nuclear power plant, after spendmg 52.5 bi!! ion on the project, and announced a (Fc cut in its quarterly common stock dindend.

PS Indiana officials confirmed that they are unable to sell bonds or commercial pa-per and that they are seeking to increase to 1500 million from $135 million the utility's credit facility from major banks.

The company has asked for a $105 million emergency rate increase and one source said-the company fears it would be forced into seeking court protection from its credi-tors if banks don't increase its borrowing limit. Indiana Gov, Robert O. Orr recently met with officials of Chase Manhattan Bank of New York and American Fletcher Na-tional Bank of Indianapolis to show his sup-port for the company and to assure the lend-ers that his admmistration won't stand a the way of rate increases.

PS Indiana's banks, led by Chase, are close to approving the $500 million loan package, a source said.

Meanwhile, Pht!adelphia E!ectric is talk-ing with banks and the Pennsylvania Public Utilities Comm!.;sion, trying to arrange as much as $1 bi!! ion in new bank financing for its Umerick nuclear plant near Pottstown, Pa. The commission earlier rejected Phila-delphia Electric's bid for authority to estab-lish a $1 bilhon line of credit, a company spokesman said.

Cincinnati Gas & Electric Co., in the midst of deciding whether to cancel its Zim-mer nuclear plant 27 miles southeast of Cin-cinnati, hasn't any immediate need for new bank eredit, the chief financial officer, Jack-son H. Randolph, said. Nonetheless, he said, the company has held informal talks with its banks on the subject. "I expect we w1!!

e

=,

w

. THE NEW YORK TIMES, TUESDAY, JANUARY 17,1984

..e

= * -

- ReactorProblems Growing er m

~aw.

'tions Ha haveTo be r2UIIt.' What is more,~there ate' y

The troubles at the Marble Hill and Byron nuclear caus forit to bmavened to a gas-or coalM plant.

plans.: are only the most recent additions to a long list, Standard & Poor's also lowered the bond ratings for the Cincinnati Gas and Electric Company and the which in recent months has come to include the.can-Dayton Power and I.ight Company, two of the cellation of more reactors nearing completion. Ac-project's three main partners, to below investment cording to a Department of Energy study last year.

grade because of the risks associated with the facility.

utilities had canceled 100 reacurs by the end of 1982, Another partner, the Columbus and Southern Ohio totaling nearly half the nuclear capacity ordered in Electric Company, has had its ratings downgraded to the United States up to that time.

the lowest investment grade.

These are among several other facilities that may never be opened because of safety or financial prob.

Seabrook, N.H.

lems:

This New Hampshire project is suffering from a ShOreham, L.I.

short, age of cash, quarrels among partners tnd th,e

,oo, inanci,i condition of, eve,ai,artici,atin, u111 The Shoreham plant, owned by the Long Island ties. Seabrock ! is about 85 percent complete and does.

Lighting Company, was supposed to cost $261 million; not face the n egulatory problems of some other nearly the final estimate now stands at 54 billion, Inore than finished plants. Seabrook II, however, is not likely to 15 times the original.1.ilco once aimed to open Shore. be completed.

ham in 1975; if the plant ever operates, it will open at' The Public Service Company of New Hampshire least 10 years late.

originally projected that the two plants would cost One of the key problems is that with wi Lhction $973 million, but it has raised that estimate to 35.8 bil-almost cornplete, the local authorities have refused to lion. 07ponents and the S; ate Public ULlities Commis-participate in emergency planning, contmuntr that it sion say the total could rise to $3 billion.

is impossible to develop a realistic evacuation plan to If Seabrook I opens in mid-1955, as projected, con-be put into effect in the case of a serious nuclear acci-sumers would face a 50 percent rate increase, accord.

dent at the plant. Supporters of Shoreham maintain ing to the chairman of the commi"fon. Public Serv-that an accident of the scope feared annnt occur at ice's bonds have been downgraded by both Moody's the plant and that safety measures are adequate to and Stancard & Poor's to below investment grade.

cope with any lesser accident. A second problem is the pir nt's diesel generators have been found to be faulty, Midland, MiCh.

e and might have to be replaced.

Construction has Laen stalled for more than a Ulco, whose stock price dmpped 39 percent last yemh'le the Consumers Power Company works aut.

vear, loses $1.5 million each day a start-up is delayed. a plan to complete constructwn. Originally scheduled It 's one of tha few utilities whose boods are listed at in 1967 to cost $350 million, the latest L fmate is $4.4 below investment grade by both Moody's and Stand-billion, with officials at the state's I ablic Service ard & Poor's. Critics charge that Shoreham will raise Commission predicting that costs will reach $6 billion.

Lot.:; ;sland's utility rates by more than 50 percent.

He two. unit project, which the company says is 64 percent complete, faces charges of sloppy construe.

Zimmer, Near Cm.emnatz tion and was buiit on soit that has subsided. ne com.

When it was announced in 1969, the Zimmer plant, mission is studying means of maintaining service for 27 miles southeast of Cincinnati, was supposed to cost the utility's 3.3 million customers in the event of bank-just $240 million; the current estimate exceeds $3 bil-ruptcy.

Uan.

Consumers Power is suffering from cash flow In November 1982, the Nuclear Regulatory Corn. problems because of the project. It is seeking to aise mission banned safety-related construction because of rata by more than 10 percent tms year and wants a charges of shoddy work and forged documents. A1 27.7 percent increase if and when 141idlana becomes though the facility is 97 percent complete, major por-operational.

O

Ol)cM.W OrkOtmes

~

~.

c russoax IAuvaav n, us4 Cops ghtSiss4Ths New Yart Timse

'~

DCC3enin 0:: 3 UC Car WOCS

' ndustry experts now'say that the i

Lw 2 ACt10nS vaSC4 v ),{

plant's demise not only raises doubts r,CH.

about the survival of the relatively M a'p aco sman Indiana utinty, but also win d

t

• C make investors and utillry planners BYRON V

Stun Industry

- q OH10

- ci>l * = v of a r r e s pmy l

even more skeptical about the com.

nearing completion.

!CpcionaU After what has happened at Marble ILLINOIS oscow Ell, the industry and-its financial By THOMAS J. LUECK PWT

(

Y Madison.

backers "have to be more nervous,"

In thelast four days the nation's nu.

ZIMMm said William Haugan of E. F.Hutton.

o m

"If this can happen to Common-clear energy industry has bean KY-dison, which h perceived as rocked by what many analysts say the best in the industry, it can happen are two stunning and potentially de.

to anybody," said Judith B. Warrick structive precedents.

of Dean Witter Reynolds.She charac.

to vars Tuonna n. tan

. First, a nuclear power plant was Sites of three troubled nuclear terized the N.R.C. decision as "very distressing for the whole industry."

scrapped nearer to completion and power plants in the Middle West.

Of the 60 nuclear plants now under with more money invested in it than everbefore.Second,the Fede alGov..

construction, about threequarters ernment for the first time denied a pe t that plant'to eventually-ate are more then half complete. Most of utihty permiss on to operate a newly elec ricity, they also say th them have experienced rapidly rising completed nuclear plant.

a costs, construction delays and other heard-of wulmgness to judge a' ce problems, but only a handful to the Last Friday, a Federal Nuclear pleted plant unsafe and keep it fr.

Itent of those at Marble Hill.

Replatory Commissiou licer. sing. starting up.

The' Cincinnati Gas and Electric teard told the Commonwealth Edison Then, yesterday, the Public Service I.pany, for example, has said it is Company that it could not operate the ' Company of Indiana said it was aban.

-nsidenng scrapping its Zimmer nearly completed S3.35 billion Byron doning its Marble Hill nuclear plant, plant in Ohio. The Cincinnati utility Nuclear Power Station near Rock-even though 32.5 billion had been has already spent $1.6 billion on the -

ford. Ill., because of inadequate qual. spent and the unit was 50 percent fin.

project, but, because of safety-re,

ity controls dunng its construction.

ished. Marble Hill was known to be in Although most industry experts ex-considerable financial trouble. But Continued on Page 39 She said the company is consider.

The N.R.C.'s ruling was based

• in J Continued From First Disiness Page ing three options. First, it can ask the par., on testimony provided by con.

' lated construction problems, now sumer and environmental groun in

!t to or ide ts ec.

estimates it would have to spend an.'

Illinois. Although neither these o*her $1.5 billion to meet Federal hr.fitt)s

,f gr ups nor the N.R.C. ruling poh.:ed sion b c s stantiards, to 2ny specific safety problems at the Other utilities with severely trou-appeals board. And third, Commm.

plant, they argued that Common.

bled nuclear projects include the wealth Edison had not adequately to t fe e o

ue tong Island Lighting Company, Pegulatory Cemrnission, who have m nit red the work of contractors on whose Shoreham nuclear plant is he site, nearly complete at a cost of $4 billion, rarely acted directly on license appil-cations.

Stanley Campbell, a Rockfoni resi-but has not received an operating 11 cense, and the Seabrook Nuclear Construction on the Byron statica, dent and member of the Sinnissippi consisting cf two nuclear reactcrs, - Alliance, a group that has opposed the Pow;r Station, under construction by began in IW4. Commonwealth Edl.

Byron proj ect, said the license review c consoruum led by the Public Serv.

son's just rejected application to the committee had heard testimony from ice Company of New Hampshire.

N.R.C. was for permission to begin five former employees of the contrac.

Tougher Stance loading fael and preparing one of the tors that Commenwealth Edison used l

Mrs. Warrick of Den Witter and two reactors to go into operation late at the site. The former workers testi-others said that if the ruling by the tMs year. The second reactor was fled that compliance with safety N.R.C.'s licensing board reflects a scheduled to begin ger.erating elec-procedures had not been adequately new, tougher stance at the Federal tricity in late 1985.

documented.

cgency, many more nuclear projects James Mackenzie, a senior staff could be in for closer scrutiny.

Premier Utility scientist with the Union of Concemed "The Byrcn project wasn't on any.

Commonwealth Edison, with seven Scientists in Washington, D.C., main-body's list as a problem," she said, reactors in operation that produce tained that the Byrcn plant "mr.y be cddmg that if the license committee about 45 percent of its generating ca.

perfectly O.K., but there is no way of ruling stands, "it's impossible to pacity,is considered the nation's pre-knowing that because Common-know how manyotherplants would be mier nuclear utility. In the years wealth Edison has failed to provide in trouble."

since the accident at the Three Mile the paper trail" of documentation.

She estimated that at least a dozen Island nuclear power plant in Penn-Mr. Mackenzie criticized the utiliths would apply for operating 11 sylvania, when reany utilities have N.R.C. staff for allowmg the plant to cerses for new reactors this year.

emuntered severe problems meet.

be completed before adoptmg its new But the Chicago utility was cptimis-ing c;ughened Federal safety recuire-tough posture. But, "it is inconceiv-tic cbout its prospects. !rene Johnson, o Commonwealth Edison spokesman,

.ments, the go utillty has had able that this plant will not go into said the company expects the N.R.C.

relatively few difficulties.

operation," he said he:nst rulmg to be overturned and Up until now, the Bron project has The nuclear entic said he expected the Byron project to experter.ce "a been pointed to as a relative success.

Commonwealth Edison's appul to very short delay, if any at all."

Its 10. year construction time has eventually sway the commission.

been shorter than that of most of the nation's nuclear plants and its 53.55 billion price tag is lower than the in.

Frid;y, Jinu7ry 6,1984 e'

Austin Amerlecn-St9(asmin

.K. -ke cost figure u

t.

pace challenged THE REPORT concludes that de-9 By BILL MCCANN fault cn weeWy nuch pWN,

' American-sta.tesman staff v

From Al should not be considered a viable aly

• Th3 current construction schedule and cost esti-ternative, because it could ruin the a-credit rating of the city and leave it

• 'ours-a day, 7-days-a week pace mates for the South Texas Nuclear Project appear h

t3 be overoptimistic on the basis of experiences of of Bechtel. Beeth said two reassess-open to lawsuits.

eth:r nuclear plants, a city Electric Department 'ments of the project have been done However, the report maintains report concludes.

by Houston Lighting & Power since that the project is still cheaper for The report recommends that an' independent,Bechtel arrived, and,"We are most Austin thaninvestingin a new coalor ag;ncy, such as the Public Utility Commission, comfortable with our data."

gas-fueled plant or canceling the nu-study the question of whether the project should

^'Beeth noted that 5 to 10 percent clear project. Because of questions

• 'nore work was completed at the pro-on construction cost and schedules, be conti aed or canceled.

. The City Council is expected to consider the re-ject than had been scheduled in No-and the operating performance of r

.vember. "We have our numbers,"

the project, once it is completed, i port a;; work session Tuesday.

Beeth said,"and Austin is welcome there is a risk that continued invest,

The report, issued Thursday, says the pace of it mentin the project"may be econom-:

c:nstruction will have to more than double to to use,,whatever crystal ball Austin meet the current completion schedule for the two-ically unfavorable to~~

unit,2.5 million kilowatt project being built near City Council member Roger Dun-ratepayers," it says.

Bay City.

can commended the Austin report,

' ~ THE FASTER PACE will have to be main-saying,"It is the first time in an ex-Becauseof theneedtoavoidunac-

.tainId for 22 months - longer than has been tremely long time we have gotten a ceptable financial effects of default, Echit.ved by any other nuclear project in the past candid evaluation of this project."

the city should take immediate steps to continue paying its share of the d:ctde, the report says; Prepared by Electric Department project, the report recommends.

'"Recent major delays at nuclear projects which staff members, the report provides a i

w re at advanced stages of construction make the generally pessimistic assrsment of CONSTRUCTION PROGRESS at

, completion of these projects uncertain," the re-Austin's predicament in the project.

the project has been.6 of a percent a,

port says. "This trend raises concern over the fu-THE REPORT admits that the city month on Unit One and nearly.7 of a

, ture of STP and intensifies the uncertainty of STP is having no luck fmding a buyer for percent month on Unit 2, the report c:mpletion estimates."

Hs 16 pers share.

says. To meet the BecMel conskud The current schedule, set by the Bechtel Energy tion schedule, progress will have to, Austin already has paid more than

' Corp., the project engineer and construction man-

$416 million for its share, not count. average 1.9 percent a month on Unit rger, calls for Unit One to be in operation in mid.

ing interest, and will owe an addl. One and 1.4 percent a month on Unit 1987 and Unit 2 to be operating two years later.

tional $562 million accordir.; to the. 2 for 22 months.

The project has been plagued by cost overruns current cost estimate, the report The report calls the next 8 to IC, and construction delays that have put it more than says.

MM hem mW M-five times over the budget and six years behind termining whether Bechtel will be tc e schedule set a decade ago.

Principal and laterest payments able to meet the schedule.

for Austin are expected tojump from FURTHER DELAYS could increase construc-

$53.7 million in 1984 to $101.7 mil-

.r

' tlon costs above the current $5.5 billion estimate, tha report says The $589 million availab'e in con-

[bo The report cites results of a corrh 15 cento custo er s c tingency funds to cover cost increases may not be rent electric bill payments go for the puter model that predicts delays of 16 months for Unit One and 6 months gnough, the report suggests.

nuclear project, and this figure will Houston Lighting & Power Co., managing jump to more than 18 percent in for Unit 2, on the basis of experience partner for the project, stands by its own more op-1988.

at five comparable projects. The rei v'tirnistic studies, company official Don Beeth said -

port says, however, that the Electric The report presents no clear con-Department does not consider the

i. Thursday. "We know the completion schedule is clusion on whether the city should results of the model necessarily aci

embitious, but we believe it is realistic and can be

~

push to cancel the project. But it em-curate because of risks in forecast-

- tttained." Beeth said.

phasizes that car.cellation would re-j He said the South Texas project should not be quire approval of all four partners in per7ormance.

?

, compared to other nuclear projects on which the. the project.

w:rk schedule is not as accelerated as the 20-he Nuke, A15

N-plant won't ineet schedule, study predicts

LA W t/ thy By JORJANNA PRICE buyers have been found in a two-Post Austin Bureau year search.

H1AP officials responded to Aus-I AUSTIN - The South Texas Nu-tin's evaluation Thursday by saying clear Project will take longer to the nuclear project is on schedule build than projected and probably and they had confidence in projec-will cost more than the estimated tions made by Bechtel Corp., the

$5.5 billion, the city of Austin pre-construction company hired to re-J The study was prepared by. city ~ place Brown & Root Inc.

dicted Thursday, Reacting to the report's recom-utility officials.

mendation the S'I'NP be studied in-

The report, commissioned months dependently, the head of the Public ago by the Austin City Council, said Utility Commission said an audit of any financial benefit derived from HL&P's management efficiency will the STNP would be "small." It include the nuclear project.

warned it would not be " prudent" The assessment will tackle the is-for the city to rely on the long-over. sue of whether the plant should be due, way-over-budget project for ad-canceled, said PUC Chairman Alan ditional ger.Aration capacity needed Erwin.

He said the commission would Aus in one of four partners in have the authority to stop the proj-

'the STNP and has been critical of ect if persuaded by the outcome of flouston Lighting & Power Co. in its the audit, which he predicted would rule as managing partner. Last year be completed by this fall.

the city sad the Houston firm over Arlieged mismanlgement o* the Erw!.h, said he was asked by Aus-project.

tin May or Ron Mullen several weeks

• The city has tried to sell its 16 ago to use the HL&P audit to look at '

percent share in the project, but no the STNP.

O" Fr caysanuary6, ma PUC asked to review h project costs Chrosicle Austin Bureau structed by Ebasco Constructors Inc. under the engmeering direction of Bechtel Energy Corp.

AUSTIN - The city of Austin has called on the In Nove:.ber. Bechtel issued a $5.495 billion cost Texas Public Utility Commission to review the cost estimate and complenon dates of 1987 for the first estimates and construction schedulcs for the South ur.it and 1939 for toe second unit of STNP.

Texas Nuclear Project.

The city of Austm owns 16 percent of the STNP, In a 106-page report released Thursday, the city which is under const uction near Bay City. Other of Austin's Electric Utility Department said the co-owners are Central Power & Light of Corpus

$5.5 billion cost estimpte and projected compleuon Christa and the etty of San Antonio.

cates of 1987 and 1989 for the two-unit STNP *ap-Although Bechtel plans to begin a rotating 70-pears to be overly optimistic."

hour work weck for construction on the STNP this PCC chairman Al Erwin said a review of the cost month, the report predicts that the company will estimates and construction schedules "is a good still have trottic meet.r.g its constrtiction sched-idea."

ules.

Erwin said be has previously discussed a PUC A study of nuclear plants currently under con-review of the STNP with Austm Mayor Ron Mullen.

struction " indicated that STNP's current construc-tien schedule is optimistic and ambitious in light of Erwin said that a review of the STNP will be recent comuction experience and is subject to cenducted as a part of the PUC's management inherent risks, the c;ty report said.

audit of HL&P. The commission recentiv an-city.1981, voters in Austin approved selling the I"

nounced that it will hire an inde ndent au'diting s share of the nuclear project, but the city has firm to decide whether HIAP s been poorly been unable to locate a buyer. The city of Austin managed.

has invested a total of $474 million since the project Also, the PUC requires HIAF to rubmit quar-was conceived in November,1973 ar.d will be re-terly reports on progress at the STNP, Erwin said.

quired to sper.d ar.other $504 mil!!on to continue Houston 1.ighti1g & Power Company is the man-financing i:s 16 percent share of the STNP, the agmg partner cf the STNP, which is being con-report said.

Austin Am:;ric:n St;tesm%n Sunday, January 22,1984 clear plants are operating and 49 are being built - far less than the 300 once predicted for the mid 1980s No for these plants, and borro'ving the new orders have been placed since money that is raised is going to be 1378.

i XuClear woes.

mo,e e Sensive -

L.st,..,.,..ti,,t,.s..no..c.d The financial fallout has been. further construction delays at 27 nu-prompted by huge overruns In con-clear generating units around the e

o e e

struction costs, long delays on many country. The delays ranged from 4 Pgp J

nuclear projects and fears that some months to 29 months, of those projects could be ButWinston disagreesthatnuclear On WaH Street abandoned.

,s an econo mic liab111tz.

...dd,t,on to th..ct,ons.,,ect,ng the Marble Hill and Zimmer plants, "WITH THE PROPER manage-there are continuing threats that ment and controls, you can build By BILL MCCANN nearly completed plants in other these plants in a reasonable time,"

Amedcan. statesman staff states will not be allowed to operate. Winston said. "They are not cheap.

but they are going to save consumers A growing number of electric utilities, stagger-One big concern by investment an.

money in the long run."

~

ing under the financial weight of building large alysts is that state utility regulators, nuclear power plants, have fallen from favor on a under intense public pressure, could As an example, he cited the Flor-nervous Wall Street.

force more and more of the skyrock-Ida Power & Light Co., which built The results:

eting nuclear costs on stockholders the St. Lucie 2 plant in six years. This

• Financial analysts are advising investors to rather than ratepayers.

is about half the time it is taking many of the projects, including the avoid stocks and bonds of utilities in several Although more than 100 nuclear South Texas Nuclear Project.

states.

plants have been canceled in the

• Bond ratings are being lowered, a drop that past decade, most have been in the Nonetheless,Winston and otherin-forces some power companies to pay higher inter

• early stages of planning or construc-dustry officials concede that the in-est rates on money they borrow.

tion. But now there is a growing anx-dustry has suffered from a series of

• The price of stock for ralities that are heav-lety that several nuclear units in shocks.The first one hitlast summer fly involved in nuclear energy has plummeted.

advanced stages of construction will when the Washington Public Power Some are paying dividends with borrowed money.

not be finished.

Supply System went into default or.

$2.25 billion in bonds for two nuclear

• Projects, including the South Texas Nuclear SUDDENLY THE stakes have units in the Pacific Northwest. It was Project, are showing up on warning lists issued by jumped from millions to billions.

the largest default involving munici-investment firms.

Nuclear industry officials think Underscoring these developments. Public Ser-that although problem plants have -palbonds.

vice Indiana said last week that it will abandon the received 11th attention, many s c-half-built Marble Hill plant. And in Ohio, three p

g utilities announced Saturday that they will con-out of the Marble Hill plantin whict ignored.

an estimated $2.5 billion had been in-vert the virtually completed William H. Zimmer nuclear plant to burn coal. These actions come in "Despite all the publicity about a vested. Never before had an aban-the wake of the summer default on $2.25 billion in handful of projects, the industry is doned nuclear plant been so far nuclear bonds in Washington state, quietly putting a new plant on line along or had so much mot y suni every 12 weeks and nobody hears into it.

"The economics has finally caught up with nu-n a

WE NR NUCI. EAR plant clear power," said energy economist Charles Ko-

[t0,

ec or of p ess e a lo s to was being built by Cincinnati Gas &

manoff, director of Komanoff Energy Associates the Atomic Industrial Forum, an in, Electric Co., Dayton Power & Ligh:

in New York. " Wall Street is nervous, which dustry trade troup that operates Co. and Columbus & Southern Ohic means it's going to be harder to t aise money to pay from' Washington, D.C. Winston said t c Co w be c n e o

See Nuclear, A14 14 plants a e scheduled to go into op..

urday announcement.

Nationwide, Winston said 76 nu-

thought it WIs virtually c:mplet d a Utilitics that arc buildinn nuclear Many utmtles hive blamed bur-year ago, consultants last fall said plants in a number of staten includ-densome government regulations for hich has cost $1.6 Ing Indiant Ohio, Michigar. Illinois, much of the construction d: lays and

. that Zimmer - w' cost en cddition:1 New York, Californir, Penrmylvania,

- billi:n

.w:uld added costs of miny projects, while

$1.5 billi:n to finish. Th3 cost was es-New Hampshire and Tens, have critics have contended that poor uti-

'timated at $240 million when the pro-been put ca various warnir(; lists by I!ty man em as been a big fac-ject was announced in 1969.

analysts from major investment to IN Williim Dickhoner, president of In testimony before Congress last Cincinnati Gas & Electric, said the THE SOUTH TEXAS project, for summer, an official of Morgan Stan-decisi:n to convert to coal was made example,is on a warning list in a re-ley & Co., an investment banking.

in large part because of uncertainty port issued by the investment firm of firm, reported that in 1972 the aver -

Sbout obtaining a federal operating Paine Webber. Scuth Texas and age bond rating for utilities with nu.

lic;nse for the plant.

eight other projects listed by Paine clear investments was AA, which is Webber are termed a " moderate to ISafety-related construction work high risk." Zimmer is singled out as considered very good. By mid 1983 has been halted at Zimmer since No-that average had dropped to BBB, the highest risk.

vember 1982 under orders from the one step above the lowest quality in-Nuclear Regulatory Commission af.

The nine projects are distin-vestment.

~

t:r accusations of widespread con-guished from other nuclear plants g

and ratings structi:n ' errors and faked under construction, the Paine Web.

firms have continued to chip away at docum:nts. In November 1981 the ber report said, because in each case the o e so ld financial foundations regulatory commission fined the pri- " extraordinary regulatory judg-gga mary Zimmer owner, Cincinnati Gas ments" will be required for the utili-Consider these examples:

& Electric, $200,000 for what was ties to recover their capital invested 1:rmed a total breakdo vn in the and get a satisfactory r, tu'n on the

• Standard & Poor's and Moody's quality assurance program.

capital.

Investors Service has reduced to a Paine Webber also lips 20 utilities

" speculative" rating the bonds of

- BALLOONING COSTS at the plant whose nuclear projects are consi-Pub!!c Service Indiana, which owns prompted Dayton Power & Light and dered to be "above average con.

83 percent of the Marble Hill plant.

Columbus & Southern to go to court

,, One of those on the list is Speculative is considered below in-last fall to seek arbitration about fu-Houston Industrie, the parent firm vestment grade.

us 1]g to of Houston Lighting & Power Co.,the

-

• Standard & Poor's and Moody's Po r & L ht h een managing partner of the South Texas has downgraded to a " speculative" c:nv rt the facility to a fossil fueled project. It notes, however, that quall-rating long term bonds of the Long plant.

ty control problems at South Texas Island Lighting Co., which is building To make matters worse for the in-are "apparently under control."

' the Shoreham nuclear plant. Shore-

, dustry, a federal board this month OTHER nucleu pr@ts ham, which was supposed to cost denitd an operating license to Com-

$261 m!!!!on and be operating in around the nadon, Som Texas has monwealth Edison Co. of Chicago for 1975,is not expected to begin opera-its $3.4 billion Byron nuclear project had huge cost overruns and con-tion until 1535 at a cost approachina struction delays. The current esti-

$4 billion-being built near Rockford, Ill. The ma:ed cost of S5.5 bmion is more board cited quality control failures.

than five times the initial estimate

• Last week Standa;d & Poor's

'It was the first time a licensing board made a decade ago.

told Commonwealth c.dison that hid taken such a drastic step and some of its bonds might get a lower was regarded with particular alarm "It has taken Wall Street a long on Will Street because the utility is time to catch on, but now one com-rating after a precedent-setting step th2 most experienced nuclear pany after another is issuing warn-earlier this month by the federal builder in the nation.

ings to investors or downgrading Atomic Safety and Licensing Board, bond ratings of companies building which denied the utility a license to

1. These and other troubles have nuclear plants," said Lanny Sinkin, operate the Byron project.

struck fear into many utilities with who has been leading a long fight

. Merrill Lynch has lowered its probl:m plants. The concern is that against the South Texas project.

. suitability rating for revenue bonds if one company sinks under the

' weight of its nuclear investment, the In the past few weeks, Sinkin said.

sold by San Antonio because of its in-fin *ncial reverberations could cause he has been getting calls from invest-volvement in the South Texas pro-

- utility stocks to decline or force up ment advisory firms seeking infor-ject. Although the rating is still good, the cost of borrowing more money. mattor. about the South Texas the action signaled an ongoing con-At worst, some fear that the financial project.

cern about the project on the part of support holding up other nuclear

..This has never happened to us be.

the big investment f:rm.

utilities could fall if one goes under.

fore," he said. "But it shows they

• Last week Moody's downgrad-ed b' two notches the high ratings of 9N GENERAL, companies with they don't have complete confidence y

nuctrar plants have seen their stock in what they are hearing from the some bonds of three divisions of the dictine, while those without nuclear utilities.,

Dallas-based Texas Utilities Electric plants have done better than expect-A REPORT BY the federal Energy Co., which is building the Comanche ed," said Kevin Falvey, a utilities an-Informe!!on Administration last Peak power plant near Glen Rose' alyst with Standard & Poor's Corp. In week indicates that 77 percent of the Standard & Poor's last month put New York.

cperating U.S. nuclear plants have debt of the divisions on a " credit Falvey said that among the firms cost at least twice as much as hdtlal-watch," indicating it might down-he tells investors to avoid are Public ly estimated. In 28 percent of the grade their ratings.

Service Indinna, because of its Mar-cases the costs have been more than ble Hill troubles, and Cincinnati Gas four times the first estimate. The re.

Comanche Peak has suffered a se-

& Eltctric Co. and Dayton Power & port blamed inflation, added interest ries of setbacks, including further Light Co., because of Zimmer.

charges stemming from construction delays in the completion schedule, a A share of stock in Public Service delays, and changes required in the

$450 m!!! ion cost lacrease and a designs to meet safety and environ-stinging attack f rom a federal licens-indiana plummeted from $27 in ear.

• mental requirements.

Ing panel, which questioned the qual-ly 1983 to 39 in middanuary.

ity of the plant s design.

n Austin American Statesman Sa'urday, December 3,1983

~.

Houston ut1h.tJ g.

.S'*

will be audited 1 by state panel By BRUCE HIGHT Amencan statuman st fr EMgeWM 'f d

r.,g.

The Texas Public Uti!Ity Commission, '

^

Al Erwin,.

.j chairman carrying out a reform approved earlier this year by the Legislature, has targeted Hous-of the ton Lighting & Power Co. for its first exten-

.YU.

utility stve inquiry into the mansgement of Texas

commisc, utility companies.

S

.3 sion, says,

hhe aud" W The Houston company was selected be-. gr

(*

- Lighting &

n-cause it was slapped with a penalty for poor Pi management last year and because it is in Power Co.

one of the largest and fastest growing ser-E r.d ; has nothing tQ vice areas in the state, said Mike Williams, director of the utility evaluation division of *Q* t...

[

$f' to do with g'+' ' lawsuits.

,g, the commission.

"We'll be specifically looking at their million.Ing the Houston utility an estimated $12 handling of the South Texas Project, as well as their other construction projects," Wilt WILLIAMS SAID management audits Ilams said of the Houston ut!!!ty. Houston would cost between $125,000 and $1 mil-Lighting & Power Co. is manager and part lion. Erwin said the co;nmission will decide

, owner of the South Texas nuclear project, later whether that cost will be paid by uti-l In which the City of Austin owns a 16 per-lity shareholders or ratepayers.

i cent interest.

Most audits, Williams said, will be done TWO PENDING lawsuits also have by consultants who bid for the job, because raised questions about the Houston utility his own staff of 15 cannot do all the work.

tin, questions the handling of the nuclearmanagement. One, filed by the City project. The other, filed by the Houston uti-port is expected to be complete by fall 1984.

and the final re-lity, challenges the penalty imposed last The audits will:

year by the commission.

• Study how well the company organiza-But, said Al Erwin, chairman of the uti-tion provides customers with reliable ser-lity commission, "This audit has nothing tovice at the lowest possible cost.

do with either one of those lawsuits."

• Evaluate how efficiently the company Graham Painter, an HL&P pub!!c rela-operates.

tions official said of the audit, "We don't have any app,rehension about it. We're look redue+ Identify areas where costs could be ing forward to it.

. prepare a final report on the man ige-Last year the commission, blaming con the public and the commission. ment and op tinuous cost overruns and construction de-

~

-lays at the South Texas project on poor a management audit by the c A requirement that every utility undergo management, reduced the allowed rate of least once every 10 years was amo ommission at return-or profit-by one-half a percen merous reforms enacted earlier this year

' tage point, from 16.85 to 16.35 percent, cost-by the Legislature.

y

C3LYETEi.

U%RC UNITED STATES OF AMCRICA i

NUCLEAR REGULATORY COMMISSION W MAR 12 All:51 BEFORE TIIE ATOMIC SAFETY AND LICENSIt!G BOARD g-E[TiEG d'NE,i

.,,-..c In the Matter of

)

DCC

(

ERM4CM I!OUSTON LIGIITING AND PO* DER

)

Docket I:os. 50-498 OL COMPANY, E AL.

(

50-499 OL

)

(South Texas Project,

(-

Units 1 and 2)

)

CERTIFICATE _OF SERVICE 1 hereby certify that copies of CITIZENS CONCERNED ABOUT NUCLEAR POWER (CC ANP)

MOTION FOR RECO:!S I DER AT I ON OF BOARD MEMORANDUM AND ORDER OF JULY 14, 1983 have been served on the following individuals and entities by deposit in the United

. States mail, first class, on this 8th day of March 1984.

. Charles Bechhoefer, Esquire Brian Berwick, Esq.

Chairman Asst. Atty. Gen.

Atomic Safety and Licensing Board State of Texas U. S.

Nuclear Regulatory Commission Environmental Protection Washington,.D.C.

20555 P.

O.

Box 12548, Capitol Sta.

Austin, Texas 78711 Dr. James C. Lamb, III Administrative Judge Robert G.

Perlis, Esc.

313 Woodhaven Road Office of the Exec. Legal Dir.

Chapel 11i11, North Carolina 27514 U.

S. Muclear Regulatory Comm.

Uashington, D.C.

20555 Ernest E. Hil1-Administrative Judge Jach R. Newman, Esq.

Lawrence Livermore Laboratory 1025 Connecticut Avenue, N.U.

University of California Washington, D.C.

20036 P. O.

Dox 808, L-46 Livermore, California 94550 Melb2rt Schwarz, Esq.

Baker and Dotts Mrs. Peggy Buchorn 2000 One Shell Plaza Executive Director

!!cu s t on, Text:

77002 Citizens for Equitable Utilities Route 1, Box 16C4 Atomic Safety and Licensing 3d.

Brazoria,. Texas 77422 U.

S. ::.

R.

Washingt6n, D.C.

20555

' William S. Jordan, III, Esq.

Harmon and Weins Atcaic Safety and Licensing 1725 I Street, N.W.

Appeal Coard Washington, D.C.

20006 U. S.::. R. C.

Uashington, D.C.

20555 Pat Coy'.

5106 Casa Oro Docketing and Service Section San Antonio, Te::a s 78233 U.C.N.R.C.

g W33h n3 ton, D.C.

20555 Lanny Ginkin

-.