ML20097B582

Recommends That Methodology Specified in Order 20,475 Be Revised to Require Util to Include in Base Rates,Amounts Required by Nuclear Decommission Financing Committee 17th Supplemental Order

ML20097B582
Person / Time
Site:	Seabrook
Issue date:	05/27/1992
From:	Rodier J NEW HAMPSHIRE, STATE OF
To:	Arnold W NEW HAMPSHIRE, STATE OF
References
92-077, 92-77, NUDOCS 9206050239
Download: ML20097B582 (5)

Text

. --

STATE OF NEW H AMPSHIRE 4

7:

CHAIRMAN C-s  % EXECUTIVE Dir: ECTO 8

~. AND SECRETARY -

L Douglas L. Patch

}

hN Mm E. Atnod 06MMISSioNERS ~ . .

TDO Access. Re:ay NH -

B B. Os Wa G. B:sse

' 800'7354*64 PUBLIC UTILITIES COMMISSION 8 Old Suncook Road , y Concord, N.H. 03301 5165

,/. Q O

May 27, 1992 \ 84 tl5

}

Wynn E. Arnold, Esquire New Hampshire Public Utilities Commission /,

8 Old Suncook Road Concord, NH 03301 Re: DR 92-077 - Nuclear Decomm_issioning Charge

Dear Mr. Arnold:

On May 11, 1992, the New Hampshire Public Utilities Commission (commission) issued an order nisi which, inter alia, established a method by which Public Service Company of New Hampshire / Northeast Utilities (PSNH/NU) should calculate the nuclear decommissioning surcharge and ordered that any interested party was free to file written comments or request an opportunity to be heard in this matter no later than May 27, 1992. Order No.

20,475 (May 11, 1992). Staff hereby offers its written comments.

In Order No. 20,475, the commission specified the following method, in part, for calculating the nuclear decommissioning surcharge:

1. Identify the original amount of decommissioning costs included in the base rates;

2. Compound that amount by the January 1990 5.5%

increase, then by the May 1991 5.5% increase, then by '

the anticipated June 1992 5.5% increase.

3. Surcharge any remaining amount to be assessed in order to collect the amount ordered by the NDFC.

From this order, it is apparent that the commission is concerned about the inter-relationship between recovery of decommissioning costs and the annual 5.5% base rate increases.

While staff shares this concern, a modification to l- Order No. 20,475 may be necessary to reflect the Rate Agreement's l provisions regarding decommissioning costs, as distinguished from other costs that may be recovered as a surcharge under Section L DUv,5(a_)(v)

, y ,

of the Rate Agreement. f u t) 9206050239 920527- 3 ADOCK 0300

[g ajJD dLp Q'

DR i0

, .. . _ .. . ._ . . _ . _ . . . _ _ ~ . . . _ _ . _ ._ _ _ __ . _ _ . _ .

4

. , s

o. 'e

. l

(

Section 8 of the Rate Agreement contained in Exhibit NU lE in' Docket-No.'DR'89-244 provides that:

Seabrook decommissioning costs will be collected by ,

Stand-Alone PSNH and NUNH from customers as a separate surcharge on rates.....Such' costs, as-specified by tl.e Nuclear Decommission Financing Committee's Seventeenth Supplemental Order of June 2, 1989, even though a separate surcharge, are inclu_de_d in the rate _ilLc_ rem m el provided in paragraplc5 of_tjlijtAgreement. (Emphasis added).

Moreover. Section 5 of the Rate Agreement authorizes PSNH "to_ reflect changes required by the Nuclear Deccmmissioning I Financing Committee in the level of monthly payments to be made t into the Nuclear Decommission Fund frcm the level prescribed in the Committee's Seventeenth Supplemental Crder of June 2, 1989."

On March 9, 1992, the Nuclear Decommissioning Financ(

Committee-(NDFC) issued its Sixth Supplemental Order in Docket NDFC 91-1 providing for a new, higher level of payments to be made into the Nuclear Decommission Fund.

The levels of contributions contained in the NDFC's Seventeenth Supplemental Order have been assumed to e collected under the base rate levels authorized under the Rate Agreement approved by this Commission in Docket DR 89-244. The NDFC re-evaluated the costs of decommissioning in 1991. A new schedule of contributions, higher than those assumed in the Rate

! Agreement, was approved by the NDFC for payments beginning April

., 1992. Under Section 5 (a)(v)3 of the Rate Agreement, PSNH is entitled-to recover this increase in contribution levels in its rates and charges.

Staff believes that the interpretaticn and L

implementation of the-follcwing provision mf Section 5(a)(v) may be at issue:

(R] ate adjustments authorized under this paragraph will increase or decrease the l: ongoing base rate level which is subject to l'

the 5.5% annual _ increases occurring in the remainder of the fixed rate period.

It-is Staff's understanding that PSNH/NU interprets

! -this section to allow an additional $681,901 of nuclear

' decommissioning charge to be included in retail base rates, subject it to the annual 5.5% increases authorized under the Rate Agreement. Any excess earned would be retained as income. This would result in an annual increase to PSNH/NU of approximately

$37,500 in income.

Thi. issue was raised by staff in Docket No. DR 89-244 and partially resolved by the parties and the commission in the o

, . - - . ~ . - . . = . _ - . . _ . - - - - _ _ -

_ l .- ( '

4 _. .-

.c .

following manner:

Effe_gr of CompouAding 5 ( a ) ( v ) Bay _e_Ege Miustments by the 5.5% Annual'IncJeases_ a Staff recommended-that rate a justments authorized under Section 5 (a)(v)(A) through (D) should not increase the ongoing base rate ,

lovals which are subject to the 5.5 percent annual increases. Ex. Staff 1-C, Recommendation No. 12. In response, NU and the State have proposed that all incremental C&LM costs recovered under Paragraph 5(a)(v)(D) of the Rate Agreement in one year sha'11 be increased by NU by 5.5% annually for the remainder of the fixed rate period. The intent of this proposal is that compounding of the 5.5% increases in allowed C&LM costs '

-will-be matched by corresponding increases in C&LM. expenditures and will not be retained by PSNH as income. -Joint Reccmmendation at

^

7(ii).

This proposal satisfactorily addresses .

the problem of compounding C&LM expenditures.

Re Northeast' Utilities /Public____Setvice Company of New Hampshita, 114 PUR:4th 385 at 421 (1990).

Whether-increases in decommissioning costs under Section 5(a)(v) 3 of the. Rate Agreement would be subject to the compounding effect of the 5.5% annual base rate increases was not explicitly resolved by the commission in its report and order

-approving the Rate Agreement. ~

The commission, therefore, must now resolve:an issue it left unresolved in DR 89-244 and in so-doing must employ'the rules of 1aw pertaining to contract interpretation.

When interpreting a provision of the Rate Agreement in ,

an unrelated proceeding, the commission recently set out the standaras by_which it would interpret the Rate Agreement:

In interpreting'a contract, the New Hampshire Supreme Court has instructed us to focus on -

the intent of the parties at the time _of the agreement. R. Zeppo Co., Inc. v, City of , .

Dover, 124'N.H. 666 (1984). Moreover, we must also consider the situation of the parties at the time of their agreement and the object that was intended thereby, together with all provisions of their agreemeat taken as a whole, because the interpretationaof a contract is, by necessity, fact oriented, Id.; see also, Post Machinery Co., Inc. v. Targes, 705 F. Supp.

..,.--r- - -

,w-

m ,

^ '..

.sb :-

.es 9

55 (D.N.H. 1989)-(language of any written agreement is not completely dispositive of parties' intent, but must be considered in light of parties' situation at time of agreement and object that was-intended thereby, together with all provisionc of their agreement _taken as a whole).

Report. and Order !!o. 20,280 (October 25, 1991) at 13.

The commission, therefore, must focus on the intent of NU and the State at the time the Rate Agreement was entered into.

The staff believes that in Section 5(a)(v) the parties to the Rate Agreement intended to assign the risk of changes in certain expenditures, including nuclear decommissicning charges, to ratepayers rather than stockholders. Therefore, the Agreement treats these costs as # pass-through to ratepayers. The staff strongly believes, however, that it was not the intent-of the

- State to allow pSNH/NU to compound otherwise legitimate increases in decommissioning costs by the 5.5% annual base rate increases and to retain the excess as income. To argue otherwise would,be to assume-that-the-state intended to convert the Nuclear

- Decommissioning fund into a profit center for the company, by allowing pSNH/NU to expropriate an annual windfall on the-flow through of decommissioning costs.

In fact,-profit on decommissioning charges is

- specifically prohibited by statute. RSA 162-F:19,I provides, in pertinent part, "The monies in such fund chall not-be subject to any federal or state taxes and shall not provide any monetary profit to the owner or owners of the facility."

The~ staff, therefore, recommends that the commission revise the methodology specified in Order No.-20,475 to require pSNH to-include in~ base rates the amounts required.by the NDFC ' s

- 17th Surplemental Order-and' return to customers any incremental

=

benefit associated with the compounding of increases in decommissioning costs by the 5.5% annual base rate increase.

This willEalso result in decommissioning cost increases being treated the same as incremental C&LM expenditures, as specifically ordered by the commission in Report and. Order No.

- 19,889 (July 20, 1990).

Very truly yours, i

ames T. Rodier Staff Attorney JTR:bj

- cc: Service List 077 l

l L

.r 0 State of Netu liampshire f 9;n

• i 4+w

.g G' "~ ky%7'" 1T d = ~~.f':

} Pueuc UTiUTIES COMMISSION g u V?jjU5911~,;a f p e a n ucn 3 acc so , p' Op \g v2s'u ...h.e;:

C-cornua m cuaamaa . . 3 ~ 0 , .y1e e e,:;

. \ 'N b' ~eI$',, ii [ _ j3' o

6

\W Director of Nuclear Reactor Regulation Nuclear Regulatory Comm.

Washington, D.C. 20555-9 i

j fl 5 Ill& 4 Ii 6 iI ) let I -

k ,%M~,-- .w m. .,

4

'9

._-p t .'*..

M' : . i , ,