ML20101R063
| ML20101R063 | |
| Person / Time | |
|---|---|
| Site: | 05000000, San Onofre |
| Issue date: | 10/26/1983 |
| From: | Rowsome F NRC |
| To: | Harold Denton NRC |
| Shared Package | |
| ML20101R032 | List: |
| References | |
| FOIA-84-433 NUDOCS 8501180402 | |
| Download: ML20101R063 (6) | |
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UNITED STATES y'f3-c,( '..h NUCLEAR REGULATORY COMMISSION s >%'
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WASHINGTON, D. C. 20555 ss, us,r i-October 26, 1983 NOTE T0: Harold R. Denton FROM:
Frank H. Rowsome
SUBJECT:
LETTER TO CPUC ON THE PRODUCTIVITY INCENTIVE I understand that you want me to ghost a letter for you to the California Public Utilities Commission on the productivity incentive program they instituted for SONGS-2. A draft is Attachment I to this note. Jim Petersen l
of OSP has summarized the CPUC decision in a draft memo, which is enclosed as Attachment 2 for background.
I did not get a clear picture of your objectives in writing to CPUC, thcugh
! inferred that you wanted a non-argumentative "we note with interest" flavor, communicating the thoughts in the Stoller briefing package. Note that CPUC has already had access to the briefing memo I prepared for you prior to the Stoller interview; Stoller attached it to his report to CPUC.
Petersen's draft memo and Stoller's report both rote that a number of nuclear plants have been subjected to or are being considered for economic availability ircentives. Some of the incentive formulas being employed elsewhere are less desirable from the point of view of safety than the one developed by CPUC for SONGS-2. They seem to have followed our advice to Stoller. You may wish to re-think whether the CPUC ruling is the arena in which you wish to surface with a show of interest.
We should encourage Jerry Saltzman to proceed with further inquiry into availability incentive programs elsewhere, as suggested by Petersen in his draft memo.
Following that, I think we should a) prepare a preliminary assessment of the potential significance to safety of the several productivity. incentive formulas in use or under study, b) give some thought 6
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to making our views known to the several ~POC's and states involved..and
~ c) sensitize the Regions.and IE to be alert to tymptoms that the tricentive programs may be affecting safety, and solicit their assistance in evaluating whether'there.is a problem.
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Frank H. Rowsome Attachments:
As stated cc w/ attachments:
T. Speis' W. Minners J. Saltzman, OSP D. Nash, OSP
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Central File PPAS AD/T R/F DST R/F NRR R/F Mr. Leonard M. Grimes, Jr., President T. Speis California Public Utilities Commission W. Minners 350 McAllister Street J. Saltzman San Francisco, CA 94102 J. Petersen F. Rowsome
Dear Mr. Grimes:
E. Case H. Denton I note with interest the productivity incentive program that the California Public Utilities Commission has established for San Onofre, Unit 2, and commend the concern that you have shown for reactor safety in this matter.
Economic incentives for high capacity factors, applied to reactor owner-
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operators, ve both positive and negative effects on reactor safety, although ith are likely to have a strong influence on safety.
On the positive
, better protection of the investment in the facility correlates positively with better accident prevention.
A regulatory climate favoring sound preventive maintenance and plant bettermant tends to enhance safety. On the negative side, situations do arise in which safety considerations favor a shutdown that would not otherwise take place.
A penalty for voluntary shutdowns to deal with degraded performance in equipment important to safety could have an undesirable effect upon safety. Generally, shutoowns are formally required for safety significant problems by the terms of reactor operating licenses issced by the NRC.
There are, however, so.ne situations of marginal importance to safety not explicitly covered by license conditions.
We are pleased to see that the formula adopted by CPUC for San Onofre contains no sharp thresholds at which the owners' profitability would incur a large step change.
Should a plant happen to, be operating near such a threshold, the owners may be subject to an incentive to keep the plant on line "at all costs."
On balance, we believe the productivity incentive program for San Onofre Unit 2 is consistent with reactor safety.
Nonetheless, we shall remain alert to syrptoms of adverse influences on safety.
Sincerely, Harold R. Denton, Director
-Office of Nuclear Reactor Regulation Crl
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Asm MEM0RANDUli FOR: Jerome Saltzman Assistant Director for State and Licensee Relations Office of State Programs THRU:
Darrel Nash, Section Leader Licensee Relations Section, SLR Office of State Programs FROM:
Jim C. Petersen Licensee Relations Section, SLR Office of State Programs
SUBJECT:
INCENTIVE REGULATION OF SONGS 2 AND OF GENERATION FACILITIES BY STA~ PUCS NATIONALLY L
In accordance with your request we have reviewed both (1)fAifer-the recent
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California PUC decision that specifies a target capacity f ct tw and related A
financial rewards / penalties for SONGS 2; and (2) the recent NARUC study on construction and operating performance incentives in the electric utility industry nationally.
Following are brief sumaries of each document and suggestions for possible additional staff action.
In its September 7, 1983 decision, the California PUC softened the reward /
penalty provisions that its staff had suggested in ta proceeding. The PUC provided that additional fuel costs resulting. from SONG 5 2 capacity factor below 55% and fuel cost savings for capacity factor above 80% would be shared equally (50/50) between the company (stockholders) and ratepayers.
The PVC staff had recommended that additional costs and savings above and L
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below g 65% capacity factor should accrue entirely to the company.
The California PUC thought that standard was too harsh, particularl-y in the 94-4
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relatively untested area of incentives. TheCommissiong:;.;u:dthe y
utility's obligation to adhere to all NRC rules and regulations and stated that the record of its proceedings included examples of other jurisdictions that have instituted nuclear performance standards without apparent detriment to nuclear safety.
The PUC agreed with its staff that a performance standard such as a target capacity factor would not comprise
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safe %plantoperation. The PUC also recognized that nuclear plant outages
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may be due solely to factors outside the utility's control and that it would be flexible toward considering the causes and effects of such events on a case-by-case basis.
f The working NARUC staff subcommittee on electricity published a report on September 20'"thatsummarizedince$tiveregulationofelectricutilitiesby states of the U.S.
The report's sumary characterized incentive regulation and state studies that may lead to incentive regulation as representing "a
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very significant level of regulatory effortX."
" Currently, the greatest regulatory effort appears to be directed at the efficiency of operation and utilization of generation facilities." My review of the report and discussions with the California PUC author indicate that 36 States either
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" Report to the NARUC Comittee on Electricity on Incentive Regulation in the Electric Utility Industry," NARUC Subcommittee on Electricity, September 1983.
-a-have some form'of incentive regulation in effect or are studying various NAK W-V incentive regulation plans. According to the CalHemE. study, seven States 3
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'have incentives aimed specifically at nuclear plants and another @
States have incentives aimed at generating plants generically.
Additional OSP effort in this area could include more research and reporting on the specifics of incentive plans in operation or under study in the various States. We presently have only very brief summaries of State activity except for California where we have somewhat more information.
Significant additional work has been done by the National Regulatory Research Institute and published studies are available that could be
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obtained and :umarized. MycontactswithNRRindicatethat)(eoffice's activity has essentially been limited to comments by Der. ton and other
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officials. 4 5ereisno RRstaff/tudyunderw y entacts at Vu 00E indicate that a group there is ' pretty much up-to-date on monitoring State PUC activity in this area. 00E has no intervention or enforcement authority in the area.
Jim C. Petersen Licensee Relations Section, SLR Office of State Programs
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