ML20086C888
| ML20086C888 | |
| Person / Time | |
|---|---|
| Site: | Hope Creek  |
| Issue date: | 11/18/1983 |
| From: | Bridget Curran NEW JERSEY, STATE OF |
| To: | NRC OFFICE OF THE SECRETARY (SECY) |
| Shared Package | |
| ML20086C887 | List: |
| References | |
| ISSUANCES-OL, NUDOCS 8311290242 | |
| Download: ML20086C888 (45) | |
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CFrict 0F SELEti/o 00CKETING & SERV hlNEWARM, N.J. 07:02 Passioce aci-e4a-aoa7 BRANCH November 18,1983 Office of the Secretary U.S. Nuclear Regulatory Commission Washington, D.C. 20055 In Re Public Service Electric and Gas (Hope Creek Generating Station)
Docket No. 50-354-OL Ladies and Gentlemen:
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On September 9,1983, the Department of the Public Advocate of the State of New Jersey (Advocate), filed a Motion with the Nuclear Regulatory Commission (Commission or NRC) requesting admission to the above proceeding pursuant to 10 C.F.R. Sec. 2.714 and 2.715.
Thereafter, by letter dated November 7,1983, the Advocate filed a Memorandum of Law in Support of Intervenor's Contentions and a document entitled Appendix I, which document delineates those issues which the Advocate contends should be the subject of public hearings which were previously requested by the Advocate through its Motion of September 9. The New Jersey Board of Public Utilities (Board), having jurisdiction, regulation and control over public utilitic.s operating in this State pursuant to N.3.S.A. 48:2-13 g seq., respectfully offers the following comments for your consideratiori in this proceeding.
The Board, while taking no position with respect to the merits of contentions raised by the Advocate or whether he is statutorily permitted to intervene herein, views the Advocate's determination to participate in this matter as an attempt to exercise the discretion reposed in his Office by the legislature to represent matters which M determines to be "in the public interest".
It should be made clear, therefore, that positions espoused by the Advocate in this proceeding are not those of the Board, or, for that matter, of the State of New Jersey.
4 8311290242 831121 PDR ADOCK 05000354 G
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e -a As heretofore related, it is the responsibility of this Agency to regulate public utilities operating in this State. Accordingly, it should be emphasized that it is the duty of the Board, to ensure that New Jersey's public utilities " furnish safe, adequate and proper service and... maintain... property and equipment in such condition as to enable" them to provide the same, N.3.S.A. 48:2-23.
In furtherance of this obligation and its statutory jurisdiction over rates, the Board has established a mechanism through which the construction of the Hope Creek I nuclear generating station is being subjected to ongoing thorough review by this Agency, and others (including the Advocate) who may wish to monitor the same. Indeed, the position taken by the Board with respect to those aspects of the construction and operation of this facility over which it has jurisdiction is a matter of public record and is set forth in the documents which are attached for your review and consideration. It has been the Board's policy to defer to the expertise and judgment of agencies such as the NRC with respect to those aspects over which the Board has no jurisdictbn or where such jurisdiction has been pre-empted by federal legislation as in this instance, by 42 U.S.C.A.
2201 ej seq., and Title 10 of the Code of Federal Regulations promulgated thereunder. In short, the Board is confident that the procedures established by the Commission for review of safety and other aspects of licensir:g applications through which such applications are exactingly scrutinized by the Commission and its staff provide more than adequate assurances that such issues will be examined in detail.
Accordingly, it is the position of the Board that the Advocate is speaking for his Office only and does not represent an official position of the State of New Jersey or this Agency, which is responsible for ensuring the provision of safe, adequate and proper service by the public utilities operating in this State.
Thank you for your consideration of the above comments.
Sincehly u' A n arbara A. Curran President Enclosures cc: Service List e
________m__
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DECISION AND CRDER PUBLIC SERYICE ELECTRIC AND CAS
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wurAeE IN ELE *:TRIC AND GAS
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RFU DOCIIT 50. 812-76 MAT 123 AMD FOR CIANGES IN TEE
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CAL DOCIET 50. PUC 808-81 JutIrFS FOR ELEcTnIC AuD GAS
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SEITICE, P.U.C. N.J. 30. 8,
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ELECTRIC, AND P.U.C. N.J. 30. 7,
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GAS, PUESUANT TO 1.5. 48:2-21
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AND 1.5. 48:2-21.1
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Lawrence 1. Codey, Corporate Este Counsel.
Francia E. Delaney, Jr., Esq., and Jack B. Kirsten, Esq., for Public Service Electric and Gas Co., Petitioner 31oseon A. Perets, Deputy Attorney General, for the Boerd of Public Utilities (Irvin I. Eisnelman, Attorney General of the State of New Jersey, attorney)
Nueva Elas. Este Analyst I, Mark Sperduto, Accountant II and Robert Schain Research Economist II, for the Staff of the Board of Public Utilities Roger L. Canscho Deputy Public Advocate, Diana Johnston, A.sistant Deputy Public Advocate, and Nusha Wyner, Assistant Deputy Public Advocate. Intervenor (Stanley Van Hess, Public Advocata)
Charles J. Maikish, Esq., for the Port Authority of New York and New Jersey, the Port Authority Trans-Eudson Corp., the Delaware River Port Authority, and the Port Authority Transit Corp., Intervenors Vf114== k. Watkins Esq., for tha New Jersey Energy Users Association Intervenor (Lindsbury, McCormick f, Estabrook, attorneys)
Richard A. Levac, Esq., for Linden Chemical &
Plastics Intervenor (Shanley & Fisher, attorneys)
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Er rus BoanD On February 13, 1981 Public Service Electric and Gas Company (petitioner Public Service, or Company) petitioned this Board for an increase in rates for gas and electric service effective March 15, 1981. h relief requested would have produced additional annual revenues of approstaately $536,470,000.
h instant case was transmitted to the Office of Ad=ia4=trative law for determination as a contested case pursuant to W.J.S.A. 52:14F-1 g y,g,.,
on February 18, 1981. Da March 12, 1981, and July 24, 1981, the Board issued orders which suspended the date of the proposed increase until October 15, 1981 (see W.J.S.A. 44' 2-21). During the course of this proceeding, the Company filed motions to increase its Levelised Energy Adjustment Clause and its invelised Baw Materials Adjustment Clause. Final Decisions and Orders implementing changes in these clauses issued from the Board on July 29, 1981, and November 9, 1981, respectively, and the latter motion was heard by the Board pursuant to N.J.S. A. 52:14f-8(b). Additionally, by letter dated August 13, 1981, under the signature of Board Secretary Gerald A. Calabrese, this Board certified certada issues from the case unto $tself for determination.
Finally, os Anaguet 25, 1981, all but two parties to this proceeding submitted a stipulation on tariff design. By Initial Decision dated October 6, 1981. AA=4=istrative Law Judge Diana Sukovich recommended that said stipulations be adopted by this Board. A Decision and Order issued from tha Board on November 25, 1981, adopting said recommendation.
h foregoing stipulation and Order is incorporated in this Decision and Order as though it were fully set forth herein.
Approximately fif ty hearings were held in this matter between April 25,1981, and September 9, 1981. h Board feels that the Administrative Iaw Jud;a should be co-==aJ-4 for the manner in which she resolved a syraid of couplex issues presented in this case. Initially, however, we believe it to be important to anunciata the appropriate constitutions 1 and statutory standards for setting rates, and how they have heretofore been applied by this agency.
h legislative framework under which this Board operates requires it to fix just and reasonable rates N.J.S.A. 48:2-21. This requirement is consistaat with constitutional principles enunciated by the United States Supress Court in F.F.C. v.~ Hope Natural Gas Co.,
320 U.S. 591 (1944), and by the New Jersey T==w Court in Public Service Coordinated Transoort v. State, 5 N.J.196, (1950).
These principles require this Board to fiz a level of rates that will provide for the finamef =1 integrity of a utility, provide it with an ability to finance needed construction, enable it to earn a reasonable return on its investment, and met importantly, provide it with the ability to reader safe, adequata and proper service N.J.S. A. 48:2-23.
When making appropriate statutory findings, this Board sets the level of investment upcn which a rata of return may be earned.
h Board has wide discretion to determine that investment which is subject to earning a rate of return. It is incuchent upon the Board to consider the fact that it must baf ance the level of rates against the Company's need to maintain that level of investment and construction necessary to provide safe, adequate and proper service to the public. In the Matter of the Petition of Jervey Central Power and Limht, 85 N.J. 520 (1981).
Thus, in 1975, this Board pomitted a level of petitioner's construction
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work in progress to earn a race of return (see Order, Docket No. 744-335, dated 10/31/75, at p. 2) and in so doing adopted the finding of the Chief Hearing Fwa=4aar that
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ability to continue to provide safe, adequate and proper service pursuant to N.J.S.A. 44:2-23.
At page 9 of the A1J's Initia, Doctrice is is concluded that:
...a reasonable standard for inclusion of itens in FEFU is that it is probable that they will be put to use during the period which the rt.tes approved will be in effect...and that there is 0
a specific intended use and/or specific need of petitioner's customers for which that use is 1steded. (sic). F. 9. Initial Decision.
We g the foregoing analysis based upon our above discussion of the Board a policy on the "need and useful" concept.
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The proposition that this Board may include utility inveetnents in property not yet dedicated to public service in its determination of the fair value of a company's property in calculating that company's rete base, has been endorsed by the New Jersey Supreme Court since 1939 when the Court affirmed in principle the Board's inclusion in New Jersey Bell Telephone Company's rate base of an additional 23as million dollars representing that Company's average increased not investment in property.
State v. New Jersey Bell Teleobsne comoany 30 N.J.16, 23 (1959). In considering a challenge to the Board's inclusion of a future addition to property in determining rate base in that case, the Court stated inter h that
...it has been recognised that
...there are a nimber of formulas useful in determination of fair value of a utility's property for use as a rate base and that the Board is not and should not be bound by any sinole formula or combination of formulse. _Public Service Coordinated Transport v. State, egra 5 N.J. at page 217 In to New Jersey powe? & I,itht A, ege_a,, 9 5.J. at page 510. (New Jersey Ball a
Telephone Co. v. Esportment of Public Utilitt_es, Board Pub. Utility Cos'rs. 12 N.J. 568, at page 585 (1953).) State v. New Jersey Bell Teleobone comoany. enors, 30 N.J. at 29 (1959).
The Court concluded that:
The Board is not girdsd in its determination with an irsdound fornela which must be auto-antica117 at, plied in each instance. Rather, as stated by Mr. Chief Justice Vanderbilt in Public Service coordinated Transwrt v.
- State, 5 E.J. 196, 217 (1950): "The determination of fair salue...should reflect the reasonable judgment of the Board based upon all the relevant facts." State v. New Jersev Bell Telephone Comoany, supra, 30 N.J. at 29 (1959).
Thus, the Board has wide latitude to adopt any rat - WT formula it sees fit provided that same is based upon the evidence presented, or in other words, based upon the 3 card's expertise, and rationally related to the problem attacked. State v. New Jersev Bell Telephone Ccupany, g.,
30 N.J. at 36 (1959).
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Ue M as does the AIJ, that petitioner's depreciation reserve relating to its electric rate pasa should be increased by
$7,048,000 to reflect ces year's operation of the Salen II nuclear generating station and ADOFT her rationale for the instant adjustaant.
Moreover, we FIID the AIJ's positions on the con Ed Intercounsction, Depreciation On Inactive Units, and Year-Ind Plant-In-Service, to be reasonable, and ADOFT same as though set forth at length heress.
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Accumulated Amortization of Nuclear Fuel We believe that petitioner, in making adjustments which reflected pas year's operation of the Salen II nuclear generating station, should have ande a st=fiar adjustaant to reflect one year's use of fusi associated therewith. Accordingly, we AD0FT the positions of Staff, Este Commel, and the AIJ and breby increase the Company's acemlated amortiaation of nuclear fuel to $46,514,000.
Cash Workins Capital In petitioner's last rate case, this Board ordered that a de'. ailed land-lag study be performed. We believe that a company the size of Public Service Electric and Gas Company should not rely upon an oversimplified methodology for the calculation of its cash working capital allowance and concur with the AIJ that a lead-lag study is more reliable than the 1/8th formula, though still an appromination of cash working capital requirements. In that such studies provide a better analysis of cash werking capital requirements through a more exacting asasurement of factors pere =ining Wreto, we believe that they should be performed in future rate procaadings. We therefore consign the 1/8th operating and maintenance expense formula to history for purposes of this Company, and DIRECT petitioner to submit updated lead-lag studies in future base rate procsedings.
The record relative to this issue reveals that the lead-lag study submitted by the Company produced negative cash working capital requirements, as did Este Counsel's analysis thereof.
Notwithar=adig the foregoing, petitioner requested a positive allowance based upon a number of factors which were not quantified therein.
As heretofore stated, we consider a lead-lag study to be a more inferaad and detailed analysis serving to give tha Board guidance in its accert=f a=aat of a proper cash working capital allowance. Accordingly, while affording this study great weight, we do not feel constrained to abide by its and result. After giving due consideration to the number of issues raised in the study as well as to the testimony of the parties relative thereto, the Board ADOFT5 the position of the AIJ of a aero cash working capital requirement. Moreover, we strongly endorse the statement of AIJ Sukarrich that:
The parties in the Company's next case should' focus not upon whether the lead-lag study should be used, but how it should be used and what modifications, if any, should be ande (to it).
Inarry Develoweene Corporation (EDC)
In this proceeding, as in a nimber of petitioner's prior rate cases, the issue of the proper re.gulatory treatment of the Energy Development Corporation (IDC) has been heavily litigated. In the instant case both petitioner and the Fuhlic Advocate have submitted separate proposals, each of which would remove the EDC from the Board's jurisdiction.
W e
The petitioner has deacastrated the need to raise substantial amounts of capital required to support itar construction program.
Iz. order to efficiently complete this program, the petitioner's financial integrity mast be strong as measured by its bond rating (AA),
relevant interest coverage tests, and its ability to attract espital
]
in highly competitive markets.
4 The Board has reviewed the basic methodologies employed by the rate i
of return witnesses to establish a reasonable return on equity; namely, the 1
discounted cash flow (DCF) and the comparable earnings approach. Each method requires the evaluation of expert opinion la the record. Further, in order to properly estimate the market's required return on equity, the methodology and the associated judgments of the experta should reasonably reflect the rational decistes processes typically amployed by the real investor, i.e.
what the anchet perceives as " risk."
With respect to the Public Advocate's witness, we believe that his DCF analysis is not persuasive for thode reasons. First, in calculating the growth escinates required to taplement his method, he erred in eliminating the 1974-1975 period which results in an underestination of the petitioner's growth in boek value and dividends. Further, although the Public Advocats's witness produced a range of growth estimates between 2.26% and 5.151, he used a 2.502 growth rate for his ultimate recounsadation. This estimate is substar.tially below that used by tastitutional advisors (3.0% to 5.5%). The Public Advocate's witness did acknowledge (T1. 2796) that investors de rely ou these advisors for forecasts of growth rates. Finally, the result produced by his DCF analysis does not comport with the realities of existing capital market conditions.
The petitioner's return on equity testimony was. on an overall basis, more in line with capitel market guid*Maam. Although there are a anaber of landequacies in its testimony, e.g., discrepancias in esaparability indeses, the resultaat recomendation is reasonable.
However, our reviou of the record indicates that the risk level estimated by the petitioner has not been fully justified, and there-fore should be accounted for in our ultimate finMng.
The Board recognisee that the growth rate is the most subjective componaat of the DCF analysis. The growth rates discussed by the varioue witnesses during these proceedings ranged from below 2.0Z to 6.5%.
For the purposes of arriving at a representative estimate of investor expectations of dividend growth, a reasonable range is 3 0% to 4.5%.
This more closely approzinates the actual increases for the last six years. This is also at the low and of the dividend growth estimates recently made by Value Line (6%) and Standard and Foor's (41) (T1-2796). We will use 3.0% to further insure our judgment is conservative.
Na also believe that Iste Counsel's witness erred by not recognhing any factor for selling costs. A 4I-51 allowance for selling costs applied to the ytald couponent is appropriate to ir.sure that additional coemon stock can be sold without impairing the capital of the company. The record clearly shows there will be sales of common stock in 1982 (T1-5236 sad Exhibit P-41, p. 49). Obviously, if Hope Creek I is to be financed, there will te aumerous common stock offerings in the coming years. For purposes of this calculation, we will utilize 4% to account for these selling pressures.
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o (I)t has been held that where utility corporations have inherent or statutory p'aent is properly allowed ower to make charitable gif ts and donations, the pay in a rate determination as ah operating expense where it has an affect upon the creation of the service or product of. the corporation and therefore any be considered as reasonably necessary in the rendition of service to the consunar...this appears to be a salutary legal premise.
N.J. Bell, &
at 596-97. (Citations aulated).
Prior Board policy was based upon the foregoing Decision as well as the United States Supreme Court's Decision in Denver Union Stock Tard Co.
vs. United States. 304 U.S. 470, at 432-443 (1938). Ir permitted recovery of contributions only when they were made in a manner as suggested by tbc AI,7.
l N Board, in In'the' Matter of the Schedules Filed by New Jersey Bell Teleobone, Docket Neber 709-494, 1/13/ 72, at 38-40, changed this policy. Citing the opinion of Justice Jacob in A.P. Smith Mfa. Co. v. Earlow,13 E.J.145 at 154 (1953), as well as a total revision of the General Corporation Iaw in 1968 through the enactment by the New Jersey Legislature of Title 14A and specifically E.J.S.A. 14&t3-4, the Board recognised what it perceived to be a shif t from the nr.ed for finding specific corporate benefit to the general obligation of corporations to make such contributions when considering whether same were permissable and therefore recoverable through rates.
N Board stated that:
I We are of the opinion that there has been a change in the philosophy in dealing with the treatment of corporate contributions toward I
a more forward looking approach in light of andern day corporate obligations and operations. b re is no doubt that the corporate social responsibility of a public utility is equal to, if not greater than, that of a nonregulated industry. h service arsa of a utility rwa = fairly constant and as a result the utility is in contact on a day-to-day basis, with various charitable and educational institutions, who for the most part are recipients of these contributions. h re is, as a rssult, established a certain rapport amor4 thau groups and the utility serving these groupa that any not exist in the nonregulated industry. h wider the service area the larger the number of persons and institutions which look to the utility for financial contributions and technical advise and support. It is the very customers of the utilities who benefit either directly or indirectly by virtue of the contributions made to couanunity funds, educational campaigns and the like. See N.J. Bell, supra (709-794) at 40.
Based upon the above, we E2 JECT the recossendations of the i
AI.7 that the Board revert to its prior treatment of charitable donations I
in that we FIND that no basis in law or fact exists that would require the review of our present policy on charitable contributions which treats same as above-the-line expenses, recoverable subject to the l
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t Moraalisation of Tazes Talated to Nuclear Decommissionian Costs i
The Board, while M th's recoeumandations of the ALJ on this issue, notes that the fahc Recovery Tax Act of 1931 (IRTA) requiree that public utilities moraalise the tax benefits of IRTA, and that such i
normalisation be reflected is any rata orders entered into after the date of enactamat (August 13, 1981). Upon review of the record herein, the Beard M that the accelerated depreciation benefits and the investment tax credits included is the test period are normalised as required by IRC sections 168 (e)(3) and 44 (f)(2) and in accordance with ERTA.
Investasat Taz Credit Proareas Favnents We c.ucur with the ALJ's finding that there exists a possibility that implementation of the recomendations of staff and Este Counsel night reenit in the loss of investamat tax credits (ITC) and note that the Company, at p. 62 of its exceptions, has agreed to abide by the l
Internal Eevenue's ruling, sought by Consomwealth Edison, on the instant issue.
The Company is DIRECTID to inform this Beard of the result of said ruling, at which time, determination will be made as to the treet-most of this issue.
Inclusion of AFDC Accrual on CUIF
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The Company has requested in its filias, additional azelusion of AFDC accrual on $250,000,000 of CVIF and has also sought automatic
$250,000,000 yearly increases in CWIP without AFDC accrual. For reasons set forth below, the Board 5 that, for purposes of this proceeding, an additional $125,000,000 of should not accrue AFDC and thereby ears a full
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rate of retura.
Our decisica in this issue ir premised upon two factors. First, the record revaals that the Company must bring the Hope Creek I anclest secerattag station to timely completion for capacity purposes as well as for additional fuel costs savings. In 1975, as heretofore related, this Board permitted a level of petitioner's CWIP to ears a rate of return se as to enable this petitioner to adequataly fund and thereby bring the Sales projects on-line as expeditiously as possible. The Board indicated at that time that given the circumstances surrounding the construction of that facility, it was prudent that the company be pesuitted to ears a return on its construction as invested.
(see gje, Docket No. 744-335, dated 10/31/75, at F. 2) Our analysis 2
of the record herein reveals that circumstances are presently similar to those in 1974, particularly insofar as this petitioner's construction projects are concerned. Then as now, the Company was faced with the necessity of bringing expensive energy facilities on-line so as to meet projected capacity needs.
l koreover and secondly, we FIED that the fiasacial conditica of this petitioner is reaszkably s4= Car, if not more severe, than it was in 1974 The record reveals that the Company's percentage of aca-cash earnings has risen substantially, that its ability to internally generate cash has substantially decreased, and that coverages are inadeguate.
Ihus, our decision on this issue is cased upon petitioner's need to bring Hope Creek I to ciasly completica at the lowess long-run cost in that petitioner will set accrue AFDC on this CWIP and will 4
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6.
Petitioner to advise this Board of the Internal Revenue Service's ruling, sought by Comonwealth Edison,'on investment tax credit progress payments' as soon as practicable after such ruling is made; 7.
That petitioner's rates for electric service be increased to produce additional annual revenues of $337,814,000 and that its gas rates be increased to produce additional annual revenues of
$52,061,000, for service rendered on and after February 14, 1982 in accordance with tariffs submitted by petitioner pursuant to this Board's Interia Decision and Order of February 11, 1982.
E*EDt April 20, 1982 30ARD OF FUBLIC UTILITIES (SEAL)
EY: (SIGNED) unnaA A. CURRAN FRESIDENT GEORGE R. BARBOUR CIBetISSICIER ATIESTt IDEARD H. ETIES CGefISSIONER e
GERALD A. CALABRESE l
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PUBLIC SERVICE ELECTRIC LND GAS COMPANY FINAL ORDER - DOCEET NO.
,-/6 REVENUE REQUIREMENT 12 MONTHS ENDED OCTOBER 31, 1981 (12 MONTHS ACTUAL)
(Thousands of Dollars)
Il i
Electric Gas Total Rate Base
$4,709,437
$899,951 35,609,388 Rate of Return 10.671 10.67%
10.67%
Operating Income Requirement 502,497 96,025 598,522 Pro-Forma Operating Income 343,675 71,549 415,224 Operating Income Deficiency 158,822 24,476 183,298 Revenue Factor 2.127 2.127 2.127 Revenue Requirement S 337,814 3 52,061 5 389,875
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PUBLIC SERVICE ELECTRIC AND GAS COMPANY FINAL ORDER - DOCKET NO. 812-76 CAPITALIZATION TEST PERIOD ENDED OCTOBER 31, 1981 Weighted Amount Percent Cost Cost (Thousands)
Long-Term Debt
$2,413,442 41.65 8.03 3.34 Preferred Stock 632,994 10.92 8.11
.89 Dividend Preference 29,568
.51 6.28
.03 Short-Tera Debt 82,208 1.42 15.00
.21 Customers' Deposits 13,360
.23 9.00
.02 Deferred Taxes Ill 386,302 6.67 Common Equity 2,236,404 38.60 16.00 6.18 TOTAL
$5,794,278 100.00 10.67 (1)g g Pollutim Cmtrol S 5,284 C3 233,523 ACRS - malam 2 6,929 ampair.111-ar=
51,953 Cost of amieval 8,579 34 Investment credit 16,700 tktilled Revenues 63,770 Itaclear fuel - Tail End (5,615)
Salem II 9,355 tav-1 mar De rew'=4==4rming (4,176)
$386,302 S 9 e
Page 2 of 2 PUBLIC SERVICE ELECTRIC IND GAS COMPANT FINAL ORDER - DCCKET NO. 812-76 PRO-FORMA OPERATING INCOME TEST PERIOD ENDED OCTOBER 31, 1981 (12 MONTHS ACTUAL)
(Thousands of Dollars)
Electric Gas Total Total Adjustments Brought Forward 3 2,237
$(6,084)
$ (3,847) 20.
Donations (265)
(114)
.(379) 21.
Energy Development 11,659 11,659 Corporation 22.
Inclusion of AFDC 75,643 87 75,730 23.
Exclusion of AFDC on
, 3125M CWIP (10,625)
(10,625) 24.
Annualization of (13,797)
Salem II (13,797) 25.
Annualization of Carrying Charges on Intermediate Financing (641)
(123)
(764) 26.
Tax Savings on Annualized Interest (2,244) 259 (1,985) 27.
Annualization of Sales and Depreciation 1,541 l',872 3,413 28.
Tax Normalization -
Nuclear Decommissioning 4,176 Costa 4,176 Total Adjustments 56,025 7,556 63,581 Pro-Forma Operating Income
$343,675 371,549 3415,224 O'
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- AGENDA DATE: 3/4/82 00tKEip usw.
g gN 28 N0:09 DEPANTMENT OF ENE7tGY CTFCE E SEChtW BOARD OF PUBUC UTTLITIES D@
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INTERIM ORD O CDHSTEDCTION FLAEE: FEASI3ILITT )
0F CO N ERSIONE T3 C0&La ElpI
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CREIE INISTIGATICE
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D0CEIT No. 8012-914 Imrrence 1. Codey, Eag., and Francia Delaney, Esq.,
os behalf of the Public Service Electric and Ces Company Eirsten, Freidman and Cherin, Attorneys at Law by Jack 3. Eireten Ieq. and Robert O. Brokaw, Esq., on behalf of the Jersef Central Power and Light Company Bloseon A. Perets. Deputy Attorney Gemaral on behalf of the Bev Jersey Board of Fablic Utilities Claude Solomos Deputy Attorney General os behalf of the Bar Jersey Departamat of Energy Alfred L. Eardelli, Iaq., and Boger Camacho. Eag.,
on behalf of the Department of the Public Advocate, Drivisica of late Cotasel, in the Public Interest BT TIE BOARD:
On December 6,1979, Assembly Bill No. 3037, was adopted by both Houses of the Eer Jersey Legislature with Senate Committee a-d= ants. This legisla-tion would have required the Board to make a positive finding of fact that the United States Government had approved a technology for the construction and operation of permanent nuclear fusi disposal sites with adequeta cepecity to store or otherwise dispose of radioactive weste generated from the anetaa' power plants of this State. Absent such a finding the Board wonid have been precluded from allowing the recovery, through rates, of costs incurred in the maintenance and operation of anetaae generattag stations fog which on-site construction, including site preparation, was not in progrees on or before December 6, 1979.
The Board would also have been required to idantify with specificity the costs of permanent nuclear fuel disposal. Finally, Assembly Bill No. 3037 would have required that a study be canducted to determine the feasibility of a.mu.ng nuclear generating stations, then under construction, to coal.
As part of a veto measure of this Bill, Governor Brendan T. Byrne requested this Board to determine (within the context of rate making proceedings) the rete impact of the construction of nuclear plants as compared to that of the constnetion of coal fired facilities and secondly, to open a separate dockat wherein the economic feasibility of converting nuclear stations to coal was to be explored (see Statement attached to Assembly l
In accordance with tim above directive, prati=inary hearings.
limited to the issues hereinabove mentioned cosmienced on January 4, 1981, wherest testimony was adduced from the Commissioner of the Departamat of Energy, the Deputy Director of the Division of Este Counsel, a representative of the American Lung Asocciatica of Eow Jersey, the President of the Atlantic City Electric Company, the President of the Jersey CeAtral Power and Light Company, and finally the Vice Presidaat of Systems Fi===4=g for the Public Service Electric and Gas Company.
Qa February 13, 1941, Public Service filed a petition with this Board requesting as incresee in base rates for see and electric service. The matter. Decket Eo. 812-76, CAL Docket Eo. FUC 804-41, was transmitted to the Office of Admi=4=trative Im on February 18, 1981, for determination as a contested case pursuant to N.J.S.A. 52:14F-1
.g1331. In accordance with our directive in the Decision and Order of apr u 11, 1981, in Public Service's last rate case, the Company filed detailed testissay with the Office of Administrative Law on, 3at3r h, the iseen of the possible coal conversion, and/or abandsument of the Este Creek I and/or Espe Crsak II nuclear power facilities, the only nuclear generating stations then m der constructica in this Stata. Da Angust 13, 1981, by letter over the signature of Secretary Gerald A. Calabrese, this Board certified unto itself all questions relatias to the coal conversion and/or abandonment of the Eope Creek facility, and indicated further thereia, that they would be heard within the contest of this docket. Thereofter, on August 26 1981, an administrative order issued setting a conference on the states of Espe Creek II for September 24, 1981. In thec Order we stated that:
This conference will be specifically directed to the status of Eope Creek II, the need for this facility and potaatial options to prwride for the service needs of Public Service Electric and Gas Company or the other electric utilities serving Bow Jersey.
At the September 24, 1981 conference presided over by Commisrtmaar George I. Barbour, and o,f which a stenographic recording has been ande part of the record herein, pr=14=4=ary positions were advanced by the participants to this proceeding respecting the potential coal conversion of the Eope Creek facilities and the need for same by this State. Subsequently, participants were advised by administrative I
order that further hearings were to be held on October 15. 1981, whereat the noticed electric utilities won'd be required, throvsh summary I
testimony to evalustas their current base load needs, their present construction or other plans to aset these needs, any energy or capacity shortfalls they espect over coming decades, whether their baseload conclusions are consistaat with those set fcrth by the New Jersey Department of Energy, whether a sharing or further sharing of capacity and energy plassed to be available from Espe Creek II is a viable alternative to present utility planning and construction otrategies and finally, whether the conversion to coal of either Eope Creek Project would be a viable option at this present time.
l l
l
-3..
Des to the foregoing action, further hearings were;- e schedaled for February 19, 1982, wherest Public Service was directed to produce expert witnesses capable of providing justificaties for the abandomment of Espe Creek H3 of providing details of the Company's plans to meet their custoest's energy and capacity needs for the anzt 15 years; of specifying the anocation of costs between Boye Creek I and Espe Creek H; of submitting the current estimate of the seats of bringing Espe Creek 1 is service by 19863 of discussing the amortiaaties p c-M _=; and of providing testinsay of the Ceapeny's plans to mitigste the petaatial for major facility abandomment in the future. Addicianally, the Board directed that the Public Advocate asks its witnese available to address isones raised is his Angust 1981 testimony filed is Docket Ee. 812-76, entitledt Steslammatal Testinoat of Jemahed E. Medes re Espe Creek Wuclear Generattag.74 tion.
On February 19, 1982, and February 23, 1982, the foregoing witnesses were prodecad by Rats Counsel med the Company. Our analysis of that testimony and their crese esseinam, as well as our review of the entire record in this metter leads us to conclude and FIED as fo nows:
1.
The Company's decision to construct a a=elaar generating stacian at New Bold Island, and later to coastzuct this same facility as the Espa Creek II Nuclear Generating Stattee, was prudent aban made.
2.
The decisica of the Board of Directors of the Public Service Electric and Ces Company of December 23, 1981 to' abandon the Espe Creek II seclear gaaeratias station was prudent when ande.
3.
Th.t the set abandomment 1oes has sever been in dispute and is $362,i72,000 ($172.185,000 is after taz 1meses).
This Board has concluded that the Company's decision to build the Espe Creek II facility wee prudent when ande. This is based upon the fast that a stility, whos planaias for future energy needs., met evaluata and caesider a amber of factors rMuiring reasonable projecticas of ten based goa considerations beyond the control of either the utility or the Stats. The Board takas aetice of the fact that at the time Public Service determined to construct the Espe Creek facilities, this State une experiencing significant energy shortfalls. This is evidenced by the velma of a-4 cation between this Board and Public Service at the time of the Company's da*4=4os to build the units, respecting brous outs and other indices of capacity shortfalls.
The Board also roccanises that at the time the decision was ande to build the Espe Creek facilities, the Cogamy's projected growth in demand was significantly higher than new and that its forecasts indicated that both Espe Creek I and Espe Creek H would be needed for capacity purposes by Public Service Electric and Ces Company. Further, at the tian the Coupeay considered options on how to satisfy expected energy shortfalls, seclear generatias stations were considered to be both reliable and efficient. Accordingly, as berainabove found, at the time Public Service Electric and Gas company determined to construct additional facilities to meet the thea projected needs of its customers it chose the best and most prudent course of action to follow...
.O
He 3 and canelade that the following after tan costs should be reeevered by the Coupany threegh the aseh= f - of its LEAC ever a period of 15 years as folloue 15 Yeare Ammeal Recovery (000's emitted) 1 21.515 2
20.090 3
18.655 4
17.220 5
15.745 6
14.350 7
11.915 4
11.480 9
10.045 10 8.610 11 7.175 12 5.740 13 4.305 14 2.870 h foregoing figures, after giving effect to tax censideratione.
recessise the total revenne less of approximately $370 million. The fifteen year echedule was approved by a majority of the Board. Conniesioner Eynes, theegh concluding that the results obtafacd thereby are both equitabla and reaseeable, favored a tuanty year amortisation schedule.
Tha foressing amortisatica schedule will enable the Company, and we se MD it, to reduce its Lev =14=d Energy Adjustaant Clause by at least No.000.000 effective July 1, 1982. Esither of the joint positions embaitted su December 15, 1981, would have permitted this reduction, aer for that matter. did Rate Coi===1's alternative yesition of February 19, 1982. Further, we M that any tanderrecoveries during the first two years' amortisatima period will be dealt v1G in subsequent Levelfsed Energy Adjestamat Clauses, and that any overrecoveries in the first two years' amortisaties period shall be dealt with ta a amaner to be determined at that time.
We are of the opinion that the schedule set forth above will enable the Company to fund the eenstruction of Hope Creek 1 es a e4=aly beeis by providing Public Service with the financial capability to reduce external capital requiremsats associated with
1 l
3.
The Company take all state necessary scrissure the claaly completion of Espe Creek Unit I and advise the Board in a e4=='y fash of any occurrence or contingency that any,.abotaccially delay or impede its ability to plaae thim unit in service as sehd =1 d 4
Abesat emargaat ciretestances. 'the ;Coussay shall refrain from seeking further rata relief until.fuly,1983.
A major policy and legal confrontation 'ans been avoided due to the fact that this record fully supports the tensonablaness of the Company's unilateral act of abandonment. Ecuever, we regret that Public Service abandoned Espe Creek II during the pendancy of a anjor Board faquiry into utility construction plans without recairing the prior approval cf this Board. Ordinarily va vos14 not conat=== such acties.
BLTED: April 1. 1982 30&ID OF FUBI,IC UTILITIES (SzaL) 3Y: (SICuID)
BARE &BA A. CUEEAR FRESIDENT GEORGE I. BARBO R COhilSSICtEIR 9 4 ATTIST:
EDRAID I.
CCastISSIONEk
+
CIRALD A. CALABRESE SECRETAIT i
-9..
AGENDA DATE: 7/15/83 t
I DOWETEC UiNRC 9 tate af Nrm 3rrseg 13 NN 28 NO$9 BOMO OF PUBUC UTIUTIES 11o0 RAYWONO SLVO.
f7 NEWAfeC. NEW.lERSEY 07102 r
BRANC.H a
IN TIE MAITER OF UTILITY
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DECISION AND ORDER CONSTRUCTION PLANS;
)
EOFE CREEK INQUIRT
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Docket No. 8012-914-IPERA Claude E. Solomon Deputy Attorney General, on behalf of the Department of Energy (Irwin I. rt-iman, Attorney General)
Lawrence 1. Coday, Esq., and Francis E. Delany, Jr.,
Esq., on behalf of the Public Service Electric and Gas Company Daniel F. Duthie, Esq., on behalf of the Atlantic Electric Company (IeBoeuf, Lamb Leiby and MacRae, attorneys)
Joseph R. Eodrigues, Public Advocate and Roger L. Camacho.
Director Division of Este Counsel, on behalf of the Department of the Public Advocate Carla Y. Bello, Deputy Attorney' General, on behalf of the Board of Public Utilities Eduard L. Lloyd, Esq., on beaalf of 3e Public Interest Essearch Group and the New Jersey Federation of Senior Citisens, Intervenors t
IT THE BOARD On August 11, 1982, the Department of Energy (DOE), the Public Advocate (Advocate), the Public Service Electric and Gas Company (PSE&G) and the Artantic Electric Company filed a action with the Board requesting approval of en agreement into which they had entered. The agreement, described by the signatories as the " Incentive / Penalty Revenue Require-sf asnt Adjustment Plan", calls for implementation of an incentive or penalty mechanism upon the completion of the Hope Creek Unit I
't (BCI) nuclear generating station being constructed by PSE&G on i
Artificial Island in Inver Allowaye Creek New Jersey. The Agreement, as supplemented by joint statements of the parties filed September 24, 1982, February 25, 1983 and July 12.1983 (the last having been joined by Intervenor Public Interest Research Group (PIEG)) provides that one of the below for-1a will be applied to costs above $3.7952 billion, when found by the Board to be reasonable, so as to effect a revenue requirement g
=
4 E)
he signatories, af ser making opening statements expounding upon the serits of the agreement, supported their positions through witnesses sponsored by PSE&G and D0E. The sole witness to proffer testimony in any way contravening the amerits of the agreement (a position paper of Allen Goldberg, a pyg,3_ intervenor in many PSE&G rate cases was also received by the Board on June 23, 1982) was Mr. Elliot Taubman, sponsored by Intervenors PIRC and the New Jersey Pederation of Senior Citizens.
Ihe purpose for which this testimony was presented was to support alternative assumptions to those used by PSE&G. (Esply brief of Intervenors dated July 5, 1983 at p. 4). A review of his suggested alternatives reveals that many have been implemented by this Board in previous proceedings.
Por essmple, this Board has recognised the beneficial effect that increased conservation. load massgement and cogeneration efforts on the part of the acilities under our jurisdiction would have on this State, and has ordered implementation of such programs by all utilities. (Dockets 3012 ~)14-C and 8211-1032). The possible importation of canadian Hydroelectric power to offset increased fuel costs has also previously been investigated by this Board in Docket No. 8111-952. This projec: was eventually abandoned by the company involved, the Jersey Central Power and Light Company. The Board, however, is of the opinion that such alternatives are complimentary to, and do not negate the overwh=1=4ng evidence adduced in this and other proceedings that =Adad capacity will be needed by PSE&G to meet custonar requirements and thereby to enable it to continue to provide safe, adequate and proper service pursuant so 5.J.S. A. 48:2-23.
The 3 card has had occasion to address the above issue in previous proceedings. In Docket No. 794-310, the Board permitted the continu==re of $250 =4114aa of CWIP in the company's rate base so as to help fund the construction of BCI. In Docket No. 812-76, after this issued had been jofned by PSE&G through pre-filed testimonial evidence that:
an issue of overriding importance in this (rate) ease is the completion of Hope Creek Units L.3 h the Matter of the Petition of Public Service, Docket No. 812-76 Exhibit No. P-2 at 1 (April 20, 1982),
this Board permitted an additional $125 =1111an in PSE&G's rate base without APDC offset based upon the fact, inter alia. that the:
... record reveal (ed) that the Company must bring the Hope Creek I nuclear generating station to timely completion for capacity purposes as well as for additional fuel cost savings. H. Decision and Order at 11.
Additionally, in affizing an appropriate amortization schedule through which costs associated with PSE&G's abandonment of Hope Creek Unit II were to be recovered, the Board, after analysis of a voluminous record developed in that proceeding, opined:
...tinac the schedule set forth...will enable the Cosgany to fund the construction of Hope Creek I on a tiaaly basis... In the Matter of Utility Construction Plans, Docket No. 8012-914 Interia Decision, at 7. (April 1, 1982).
Both the DOE and the Advocate, through either parti.ipation in or separsta analysis of these proceedings have obviously reached similar conclusions as evidenced by the submission of the subject agreement for Board approval. An analysis of Exhibit No. SCC-2, submitted in this Docket by DOE in response to staff request S-12, reveals that DOE believed that BCI should be. brought to timely completion and that an
the parties to the agreement have stipulated that they will accept actual costs between $3.55 billion and $3.7952 billien. We view this as an indiention by :he parties that the appropriate time for them to a===4aa the costs for this facility will be when FSE M seeks recovery of these costs through rate base treatamat thereof, upon commercial operation of BCI, he, a anjor impediment to the constructing company's ability to obtain tiaaly rate relief during the construction phase of this facility has been removed.
Finally, the Board is in a position at this time, when the plant is 70E complete, as a result of our continuing scrutiny of project costs to assess PSEM's progress and to determine the probability of this facility coming on line at or below the target cost. Our present and continuing aassassent reveals that absent unforseen events PSE&G will conglete the plant at or near its projected costs.
Ar related hereinabove, several of the active participants in this proceeding suggested that that portion of the agreement relating to extraordinary evente be modified to identify certain events that the Board deemed to be extraordinary. After careful consideration of the record developed on this singular issue, the Board must conclude that it would be inappropriate to endeavor to define or describe what any constituta an extraordinary event before a declaration by any party that one haar occured.
As recognized by the signatories, such a determination falla strictly within the purview of this Board's continuing oversight of the construction of the project. It is the Board's belief that an untianly definition or description would delimit its ability to carefully review and analyse the ciretanstances surrounding such a declaration when and if it occurs, to the detriment of the ratepayer. Accordingly, as agreed to by the parties, litigation of what canstitutes an extraordinary event will occur, at the Board's discretion, at the tian such an event has been declared, or when FSIM seeks to recover costs sesociated with the construction of this plant through rates.
Therefore, based upon the above, the Board HEEEBY FINDS 1.
h t approval of the " Incentive /Fer.alty Revenue Beguirement Adjustment Plan" will not impair the Board's ability to carry out its statutory functions, nor is it to be construed as an act by which the Board has relinquished any of its authority or jurisdiction; 2.
h e the submission by the parties of the instant agreement to the Board constitSted an endorsement of this Board's findings in Dockets 8012-914 and 812-76, which we reaffirm herein, that BCI is needed and should be brought to ciasly completion at the lowest possible cost; 3.
h e approval and adoption thereof will provide' an added incentive to FSE M to bring ECI to completion in a timely and cost efficient manner; 4.
That the incentive and penalty aschani - are appropriate and will not adversely affect FSEM's ability to attract outside financing at reason-able races, if it is required; and 5.
h t litigation of what may constitute an extraordinary event should occur after such an event has been declared to have occured, as agreed to by the parties and Intervenor FIEC in their joint positica filed herewith July 12, 1983.
Accordingly the 3 card, after review of the incentive / penalty procedure set forth in the u:BrFWTNT OY THE FAITIES, submitted as Attachment A to the Joint Notice of Motf qc and Hocion dated August 10, 1982, and filed August 11, 1982 in the above docket, FINDS that it is reasonable regulatory procedure and mechanima and TEREBY APPROVES the agreement as being in accordance with the public intprest.
0%MADATE: 10/20/83 Matt Of NetB 3rrg n 28 NO 09 BOARD OF PUBLIC UTILITipS, y gg., LEGAL 1100 RAvuoND eLVo. I0cdiin & SEN '
NEWARK. NEW JERSEY 07100 BRANC$i IN THE MATTER OF UTILITY
)
ORDER DENYING MOTION FOR RECONSIDERATION CONSTRUCTION PLANS;
)
AND CLARIFICATION HOPE CREEK INQUIRY
)
Docket No. 8012-914-IPRRA Claude E. Solomon, Deputy Attorney General, on behalf of the Department of Energy (Invin I. Kimmelman, Attorney General)
Lawrence R. Codey, Esq., and Francis E. Delany, Jr., Esq.,
on behalf of the Public Service Electric and Gas Company Daniel P. Duthie, Esq., on behalf of the Atlantic Electric Company (LeBoeisf Lamb, Leiby and MacRae, attorneys)
Joseph Rodriquez, Public Advocate and Roger L. Camacho, Director Division of Rate Counsel, on behalf of the Department of the Public Advocate Carla V. Bello, Deputy Attorney General, on behalf of the Board of Fublic Utilities Edward L. Lloyd, Esq., on behalf of the Public Interest Research Group and the New h rsey Federation of Senior Citizens Intervenors BY THE BOARD:
By order entered in this docket on August 12, 1983, this Board ap-proved an Incentive / Penalty Revenue Requirement Adjustment plan (hereafter agreement) filed by joint motion of August II,1982, by the Department of Energy, the Public Service Electric and Gas Company, the Atlantic Electric Company, and the Department of the Public Advocate. Our detemination that the agreement was "in accordance with the public interest" (Decision and Order, Docket No. 8012-914-IPRRA, at 5 (8/12/83)) was based upon our analysis of a record developed over the course of one year during which time four public evidentiary hearings were held, the agreement was supplemented on three occasions and a number of briefs were filed regarding the merits thereof (See generally Id. at 1-3). Thereafter, on August 29, 1983, pursuant to N.J. A.C.14:1-lEl, one of the sigcatory parties to the agreement, the Public
.e Board for reconsideration and clarification of the Advocate, petitioned foregoing order. While we note that this motion was filed two days out-of-time,j we have detemined to consider the same.
I.J.A.C. 14:1-14.1 provides in pertinent part that:
N (a) A motion for rehearing, reargument or reconsideration of a pro-of any final decision or order by the Board. ys of the issuance (emphasis supplied) ceeding may be filed by any party within 15 da This " petition" was filed herewith on August 29, 1983, IJ days after our order issued.
f e e
I The specific relief sought by movant herein is modification of our order by:
1.
Deleting the language which indicates that the Advocate has conceded need for the unit; 2.
Inserting language indicating that no party or person in the future will be prejudiced on the issue of need for the unit by virtue of the Advocate's having signed the IPRRA; 3.
Inse rting language to indicate that the Public Advocate and any party shall have the right to hold the utility to its legal burden of proving the justness and reasorableness of HCI construction costs at the time when the utility seeks rate base treatment of HCI experditures prior to the unit's becoming commercitlly operable; and 4.
Inserting language which distinguishes ths*
agreement to include a neutral zone from $3.55 uillion and $3.7952 billion for IPRRA purposes from the Advocate's and all parties' right to question and the utility's duty of proving the justness and reasonableness of HCI con-struction costs at any level. (Petition by the Public Advocate for Reconsideration and Clarification uf the Board's Decision and Order in Docket No. 8012-914-IPRRA pursuant to N.J.S.A. 14:1-14.1 [ sic], at 7 and 8 August 29, 1983).
, e shall deal with each specific request a_d_ seriatim.
W We are of the opinion that the Advocate's request to delete that language in our order which indicated that the submission of the subject agreement evidenced his concession of the need for Hope Creek Unit I (HCI) should be DENIED. This Board has had occasion to address this issue in previous proceedings and has heretofore concluded that there is a need for the timely and cost efficient construction of this unit.
Decision and order, Supra., at 3.
This conclusion was based, among otner things, upon the fact that although the issue of the need for this facility had been joined in such proceedings, not one scintilla of competent evidence had been introduced to refute that conclusion. Rather, our analysis of the evidence adduced in those proceedings overwhelmingly led to the conclusion that HCI was needed and should be constructed as expeditiously and inexpensively as possible. More importantly, the Advocate and the above parties submitted a document to this Board in this proceeding which set a " targeted in-service date for Hope Creek I",
set a " reasonable targeted conenercial operation cost" thereof, established a mechanism for the imposition of incentives or penalties if this cost were not achieved and, finally, through which the Advocate agreed "not to challenge the need for Hope Creek I before any Federal or State agencies which may have jurisdiction" thereover. Agreement of Parties, Docket No. 8012-914, at 1, 2 and 3.
It is, therefore, astonishing to this Board that the Public Advocate can now infer that he has not conceded the need for this unit, particular13 in light of the fact that he has agreed not to challenge it in any Federal or State forum. Thus, we are of the opinion that we have correctly interpreted the submission of the agreement as clearly evidencing the Advocate's belief that the subject facility is needed. Moreover, our approval of the agreement and our denial of the instant request should be interpreted as serving to lay this matter to rest. Docket No. 8012-914-IPRRA f.
e
The above interpretation that the Advocate's execution and submission of the agreement constituted his concession of need for this facility cannot be interpreted as a similar concession by any party, even other signatory parties to the agreement. Therefore, the Advocate's second request is DENIED, as being unnecessary.
It is clear that a public utility operating in this State and subject to the Bcard's jurisdiction pursuant to N.J.S.A. 48:2-13, bears the burden of proving that any rate increase which it seeks, is just and reason-able.
N.J.S.A. 48:2-21(d). The Board by law cannot shift this burden from a utility to another party in a rate proceeding, but can only find that such other party has not met its burden of going forward with sufficient, competent evidence to refute evidence adduced in support of the utility's position.
As our order has not shifted the burden of proof from Public Service, but recognizes the propriety of examining construction costs for the facility when rate base treatment is sought thereof, Decision and Order, Supra., at 5 it is not in need of modification or clarification. The Advocate's request for same is therefore also DENIED.
As to the Advocate's final request, we believe that our order correctly reflects the agreement of the parties as submitted to this Board, and HEREBY DENY the same. In reaching our conclusion on this issue, we have relied upon plain and unambiguous lan3uage contained in the agreement which speaks clearly for itself.2 We repeat it below for emphasis:
The undersigned parties agree that the targeted in-service date of Hope Creek I will be December 1986 and the reasonable targeted connercial operation cost is 53.7952 billion, including Allowance for Funds Used During Construction (AFDC).
The undersigned parties also agree that at the tine ratWare set placing Hope Creek I in PTait in Service, the following formulas will apply to calculate an acjust-ment to revenue requirements:
3.
for plant cost between $3.55 and $3.7952 billion, rate base for the reve9ue requirement calculation would be the actual cost; Supra., Agreement, at I and 2.
(emphasissupplied) 2It is a well settled principle of New Jersey law that where the language of a written instrument is clear, complete and unambiguous, a court, or in this instance the Board, will not make a different or better agreement than the parties themselves have entered into. Atlantic Casualty Insurance Company v.
Interstate Insurance Company, 28 N.J. Super 81, at 85 (1953) (citations omitted); Midland Carpet Corporation v. Franklin Associated Properties.
90 N.J. Super 42, at 46 and 47 (1966) (citations omitted); Zulla Steel. Inc. v.
A. M. Gregos. Inc.,174 N.J. Super 124 at 132 (1980). Thus, "in the absence of fraud, mistake, violation of public policy, absurd consequences, or other gro;nds affecting enforcement according to its terms" (17A C.J.S., Contracts 1294, at 33), this Board may not rewrite stipulations or agreements submitted to it for approval or adoption. In that we have held abcve and jo Decision and Order. _Sugra., at 5, that the instant agreement is in accordance with the public interest we decline to rewrite the same. Docket No. 8012-914-IPRRA h O e
Accordingly, for reasons set forth hereinabove, we are of the opinion that the Board's order of August 12. 1983 entered in this docket is clear and not in need of modification or clarification.
DATED: November 21. 1983 BOARD OF PUBLIC UTILITIES BY:
M e
/ BARBARA A. CURRAN PRESIDENT B
COP 9tISSIONER n!
[y[a;,'ob.i}?M EDWARD H. HYNES ColetISSIONER ATTEST:
4 BLOSSOM A. PERETZ SECRETARY
- Docket No. 8012-914-IPRRA
$ 0 0
AGENDA WLWHEr10/20/83 1
MNRC 9 tate Df Nem 3rrBeg 13 igN 28 N0:10 BOARD OF PUBLIC UTILITIES 1100 RAYMoND BLVD.
CIflCC M $ECP I?*
NEWAAK, NEW JERSEY 07102 GCCKLI IN THE M ATTER OF THE PETITION
)
ORDER DENYING MOTION OF PUBLIC SERVICE ELECTRIC
)
AND GAS COMPANY FOR AN
)
INCREASEIN BASE RATES
)
Docket No. 837-420 OAL Docket No. PUC 04930-83 Roger L. Camacho, Director, Departmentof the Public Advocate, Division of Rata Counsel,on behalf of movant poseph Rodriguez, Public Advocate)
Lawrence R. Codey, Esq., on behalf of t==veJunt., the Pubhc Service Electric and Gas Company A3an S. Pralgever, Deputy Attorney General, on behalf of the Staff of the Board of Public Utilities Qtwin L Kim melman, Attorney General)
Oscar B. Brumback, Esq., on behalf of the Amerkan Society of UtDityIhva*",Intervenor BY THE BOARD:
On July 1,1983, Public Service Electric and Gas Company trespondent, Pubhc Service or PSEE G) fDed a petition with the Board requestdng increases in its base rates fcr gas ard electric service. On that same date the matter was transraitted to the Office of Administrative Law for determination as a wsomed case pursuant to N.J.S.A. 52:14B-10(c). On July 19,1983 the Board imaaed an crder suspending increases, changes or alteratiors in rates for amnce. Thereafter, at a prehearing conference he3d on July 22, 1983, Administrative Law Judge Joseph Rosa,Jr., asigned by the Office of Administrative Law to preside over this matter, directed that ail modons related to Pubhc Service % petition be fDed no later than August 19,1983. In accordance with that directive, the Department of the Public Advocate, Division of Rate Counsel (Advocate, Rate Counselor movant) flisd a Motion on August 19, requesting that Judge Rosa imue an order asurahlid ing a Phase II rM g for purtam' of investigating the "reasonablenes l
of Pubhc Service E]ectric and Gas Company % test year levelof CWIP expendttures which Phase IIshou]d begin upon the issuance of the Administrative Law Judge's Ihitial Decimon in Phase I." Notim of Motion, Docket No. 837-620, O AL Docket No. 04930-83, August 19, 1983. On September 2,1983, mae. Jea fDed an Arswer to said Motion, and on September 9,the Advocate a Respmae to respondent's Answer.
On Septsaber13,1983, Judge Rcma denied Rate Counsel's Moticrt from the bench Ch the Matter of the Petition of Punbc Ser rice, Docket No. 837-620, O AL Docket No. PU C 04930-83, T-586-593,9/13A3) and on September 19,1983, a written Order immed which by its terms relied tpon the Judge's transcribed mm ments as the rationale for his denialof the instant Motion. Judge Rosa observed that movant's Phase II request was tremised tpon the fact that the "PutCh: Advocate does not have a miffirmant time availahla to thoroughly investigate the reasonableness of this (the rate case) fDing as to the CWIP 3eveL" Id. at 586-587. The Judge noted that PSE & G's July 1 filing did not
=**antsaDy differ Trom that EDing which had been dismissed by this Board by Order dated Fetruary 24,1983 under Docket No. 831-25., at 588-589), wherein we directed the partins thereto to "e mploy any procedural a m, freiwiing pre-fihng dia:taanon" G
,9 1
t (Decision and Order Disminuiruz Base Rata Case and Reducing LEAC Rates, Docket No.
831-25, at 5,254/83) that would enatse the Board to render a decision on the present rate case within the "'*-ar mandated period NJ.S.A. 48:2-214d). Thus, the Judge reasoned that h"muna the present fDing was Wallar" to PubMc Service's fDing of J
7,1983, and was the sabject of mahatantaat discovery since our disminnalot the latter on February 24, B83, a Phase I pMy of a 'bontinuing nattre" and Iacking of "a degree of finality" wouM serve to exacerbate the problem of " regulatory 3ag" and was therefore inappopriate in this proceeding. Id., at 589-590. Acardingly, Judge Rosah Order of September B, B83 was "without geTulice to the right of the Public Advocate to bring a dallar motion in Docket No. 8012-914."
By 3sttar dated September 23, B83, the Advocate moved that the Board
" reverse the Administrative Law Judge's Order dated September B,1983, which incorporates by reference his reaans contained in his malre marks fbund in the transcript dated September 13, B83 at pages 586 through 593.= notim of Motim in letter form, Docket No. 837-620, OAL Docket No. PUC 04930-83, atl, 9/23/83. A trief in mipport of the above Notice of Motion was fund on September 27,1983. The staff of the Board, the Amerloan Society of UtDity1hvestors and Pubuc Service fDad briefs in opposition to the instant Motion on October 3, October 5 and October 6,1983, respectiveW.
T
'~"mr the Advocate has appealed from that portion of Judge Rosah written Order and transcribed com ments which determined that:
A Phase H wouM muse regulatorylag especially in a.M6 in which the Board had ordered an expedited n
a.M4, and 1he reannableness of Hope Creek expenrMMres shouM be determined in the mntextof the Construction Docket 8012-914. Memorandum in Stsport of Motion, Docket No. 837-620,0AL Docket No. PUC 4930-83, at 2,9/27/83.
Our review of movanth memorandum and the triefs fDod in M7 thereto leads us to conchade tivit this Motion shouM be denied.
We are of the opinion that Judge Rcea correctly concluded that any present review of the reasonableness and prWence of costs expended to date in the construction of the Hope Creek Inuclear generating station souM not take place within the context of a Phase H rM4 to com mence in medastely after the jamaance of his ]hitial Decision.
Having so concluded, we believe that Judge Rose was aho correct in dismhaing the Advocate % Motion "without preplice to the right of the Public Advocate to bring a dallar motion in Docket No. 8C13-914". Judge Rosa did not have authority to preclude the fDing of mach a motion, nor does this Board. We note, however, that mach a motion wouM be Jocked upon with askance.
As Judge Rosa conr hdari, " Hope Creek is probaby the most r-inmaly monitored utility construction poject in the hiaitory of this State", Gh the Matter of the Petition of Pubbe Service, agg at T-593). This Board has set in place a mechanism through which costs W with the constzuction of tMs faccity are being matdocted to ongoag exacting smutiny by the Board, the Department of Energy and hopefully, the Department of the PubMc Advocate. This mechanals, amrahM4ed purmaant to this Board's directive thatthe:
" Company sabnit quarterW reports on the costs of corstructing Hope Creek I and the a:hedule fbr the irMarvice date of that tmit " Ohteria Order, Docket No. 8012-914, at 8, 02/82),
proirides more than " a troad guage l sic] of the overallstatus of the HCImrutructaan expenditures relative to the overallestimate." Memorandum, mapra, at 9. The documents submitted on a quarterW basis in accordance with our directive give an overview of the poject's status, riannrfbe whether criticalpath construction milestones have been met, indicate whether PSE & G's cost evpf.-- are beig maintained, show whether pocured hardware necessary fbe construction wfIlbe on eite on a:hedule, permit monitoring of Docket No. 837-620 O O e
P man <ower hours experded per percent of project comphte thereby enabhng WWal cost cwertuns to be anticipated, and finally, demonstrate what percent of the project has baan comphted in relatkm to the overallproject scheduk. Jhdeed, our ongcnng review of the foregoing documents has enabhd this Board to recently conchde that:
"PSE& G wmcomphte the plant at or near itsrd=Cu-d cos# Dec2sion and Order, Docket No. 8012-914-IPRR A, at 5, 8/12A3, and that it willbe completed on or ahead of schedule, Decision and Order, sLpra, Docket No. 831-25 at 3,2/24/83. Moreover, Public Sennce was further directed to take an steps necessary to insure the timely compktion of Hope Creek UnitI and advise the Board of any occurrence or u uiL% y that may substantially delay or impede its ability to place this unit in serrace as scheduhd, Interim Order, agra at 9. Jh this same vein, the parties Qnchding the Advocate) to an agree ment recently approved by this Board which is calculated to contain the costs of constructing this unit, setin place a procedure +frough which constructaan cost overruns wfIlbe examined through litigation if respondent, the Board or any party to that agreement declare thea to be " extraordinary." He a==vvi6 mechanisms and racedures provide an t
appropr2 ate avenue to both examine Hope Crech Iconstzuctaon costs on an ongoing basis and through which to Jitigate the reasonablenes and prudence of mach ccusts if mach examination reveals any inef%ncy in their expenthMre. Consequently, we believe that absent any demonstration thereof or deviation from sup.WJ tmit costs, sach an invahah would serve no pug:ose and that therefore, the appropriate time to review sucts costs wm be when respcmdent seeks to fu1]y recover them in rate base.
Our determination to hold Public fervice to its burden of proving the reasonablenes ard rudence of Hope Creek I expenditures when it seeks fullrecovery of t
such costs through rate base treatment thereof or, alternatively, when an extracrdinary event has been declared to have occurred, is consistent with our previously articulated i
t=Ihno on this isaae, a prwin,n which we have dechned to reconsider, Order Denying Motion for Reconsideration and Clarification, Docket No. 8012-914 -IPPRA,11/2]/B3.
Thus we are of the opinion that the timing of this inquiry wm not afford Public Service an opportunity at the time the unitis completed to argue that the Board [have] has i
frregone the c4portunity to contest the reassnabhrus[ sic]
I and prudence of the expenchtures on the unit through inactkn during the period of construction; Memorandum, Supra atlD.
Rather, our determination herein is a further manifpeation of our corvict2cn that it is scre apptgriate to examine the costs of this facnity at that time ard tnat the timing of sach an inquiry willnot hinder tf-is Board's ahnity to determine the reasonablenes and pradency of costs expended in the construction of HCI, Decision and Order, Docket No.
8012-914-IPRRA, Supra at 4.
NeturaDy, the parties to the lhcentfye Penalty Revenue / Requirement Adjustment agreement wf31 remain bound by its terms at the time of sach an inquiry.
l We wish to make char that this determination does not preclude the Advocate, or any party to the instant base rate case, from contesting twhik pnrIH,n on the appropriate regulatory treatment of Hope Creek Iconstruction costs speci& ally addremed within this docket. Otmously, a contentson that any #dwg= of construction crists is entitled to a return during constuction places that contenticn in vuev-y within the context of dollars being litigated in the rate caseru.wwdL,p.1/
1/
It stould be noted, however, that any cash earning aDowance on constructaan costs wou]d not constituta a judgment as to he rtrasnnablaness or prudence of such expendit res.
~ Docket No. 837-420 6 0 e
I l
a Since, as we have related above, Public Service % request for.wWrimalcash earning treatment of CWIP has been the sW of -Luva5f for some time now, there is no need for a Phase IIi=wM6 to litigate snis request. The request willbe addressed tr/ the Board in this rMg as it has been in peut caseL Accordingly, frr reasons set forth hereinabove, the Order entered cn September 19,1983 by Administrative Law Judge Joseph Rosa, Jr.,is HEREBY AFFIRMED and the Public Advocate % Motion requesting the Board to direct Judge Rosa to presde over a Phase II proceeding to determine the reannableness and prudence of Public Service Electric and Gas Company % construction Work in Progress Expenditures is HEREBY DENIED.
D ATED: November 21, 1983 BOAgD OF PUBLIC UTILITIES (SEAL)
BY:.
A.
e ARBARA A. CURR N PRESIDENT R
CO M MISSIONER Y.
ATTEST:
EDWARD H. HYN CO M MISSIONER O.
BLOSSOM A.PERETz SECRETARY
, Docket No. 837-620 0
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