ML20111B654
| ML20111B654 | |
| Person / Time | |
|---|---|
| Site: | Waterford  |
| Issue date: | 03/12/1985 |
| From: | Bernabei L GOVERNMENT ACCOUNTABILITY PROJECT, JOINT INTERVENORS - WATERFORD |
| To: | Atomic Safety and Licensing Board Panel |
| References | |
| CON-#185-986 OL, NUDOCS 8503130181 | |
| Download: ML20111B654 (268) | |
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' UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION 'C'
' 00G ung C"m Before the Atomic Safety and Licensing Appeal BoaJrdyA.12 no;59 rc. , ~.
In the MaNter of , ;;, - .u. -
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LOUISIANA POWER & LIGHT COMPANY )
) Docket No. 50-382 OL "
(Waterford Steam Electric ) Station, Unit 3) )
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JOINT INTERVENORS' MOTION FOR LEAVE TO FILE REPLY TO APPLICANT'S ANSWER TO JOINT INTERVENORS' MOTION FOR LEAVE TO FILE SUPPLE!1 ENTAL MEMORANDUM AND APPLICANT'S RESPONSE TO SUPPLEMENTAL MEMORANDUM Joint Intervenors request leave to submit the following reply to Applicant's Answer to Joint Intervenors' Motion for Leave to File Supplemental Memorandum and Response to Supplemen-tal Memorandum. Leave is sought to correct outright misrepresentations in Applicant's brief concerning a Middle South Utilities, Inc. (" Middle South") offering statement of December 21, 1984; the blackout of the City of New Orleans occurring on January 21, 1985; and the lack of independence of James Cain, and applicant Louisiana Power & Light Company ("LP&L") from the financial constraints of its parent and holding company Middle South. Further, Joint Intervenors have submitted a number of docu-ments released by the Nuclear Regulatory Commission ("NRC") on March 1, 1985, pursuant to Freedom of Information Act ("FOIA") requests. Many of these documents support Joint Intervonors' prior arguments cqnc9rning LP&L's lack of character and competence
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and the NRC Staff's failure to take effective enforcement action R Q]
i& l against the utility. Submission of these documents at this date l is timely since the NRC has refused to release them until eight
- to twelve months after the original requests, and then only l
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' pursuant to an order of the Federal District Court. Order, Govern- :
i ] ment Accountability Project v. U.S. Nuclear Regulatory Commission, f C.A. Nos. 84-2554, 84-2555, 84-2556, 84-2557, 84-2558, 84-2559, 4 l 84-2560 (D.D.C. Jan. 9, 1985). These documents demonstrate that ) j both LP&L and the NRC Staff have not been completely forthright 4 j with the Appeal Board in their opposition to Joint Intervenors' f l Motion to Reopen. j I. MIDDLE SOUTH'S LATEST SECURITIES OFFERING STATEMENT DID NOT DISCLOSE THE CITY OF NEW ORLEANS' LEGAL POSITION THAT THE OFFERING WAS ILLEGAL. j Joint Intervenors argued in their supplemental memorandum i that Middle South failed to disclose in its latest offering i i I statement that the City of New Orleans claimed the offering was ! illegal because New Orleans Public Service, Inc. ("NOPSI") did not obtain prior approval of the City Council. The motion stated, 1 further, that "[i/egardless of whether the City or Middle South j succeeds in this litigation," Middle South was under a legal ob-i j ligation to make the risk of the City Council's opposition known 4 l to potential investors. Joint Intervenors' Supplemental Memor-i l- andum at 2. Joint Intervenors analogized Middle South's failure to disclose this risk in its offering statement to prior offering l l statements filed with the Securities and Exchange Commission ("SEC") l l which included misleading and false statements about the progress- 7 of Waterford. i
2 a LP&L answered that in fact the City's legal position was "specifically and directly disclosed in Form U-1," presumably in Exhibits F-1, F-1(a) and F-2, attached as Exhibits 1, 2 and 3 to Applica,nt's Answer. Applicant's Answer at 6-7. However, a thorough review of these exhibits will find no clear statement of the City's legal position. Instead these exhibits discuss at length Middle South's position on the offering, without ever stating the City's position. Next, applicant states that NOPSI cannot be charged with concealing the city's position because it was " thoroughly addres-sed in a special public proceeding before the SEC" and NOPSI filed on February 1,1985, a Form 8-K Current Report with the SEC report-ing the position of the New Orleans City Council on the matter. Applicants Answer at 7. However, it was not NOPSI, but the City of New Orleans which catalyzed the proceeding before the SEC. Moreover, although the SEC did authorize the issuance, at least one Louisiana state court has issued a temporary restraining order enjoining their sale. (City of New Orleans v. NOPSI and Cain, No. 85-01562 (Civ. Dist. Ct. Parish New Orleans, filed January 28, 1585). Although NOPSI's Form 8-K, filed on February 1, 1985, may have disclosed the Council's current position, this occurred after the Council had sued in Iouisiana state court on January 28 to enjoin the issuance of the securities. Therefore, NOPSI did not disclose any in-formation not generally known within the investment community . II. JANUARY 21, 1985 BLACKOUT. Applicant argues, inter alia, that the fact that individuals
. 4 L . l 1 i responsible for the blackout.were also responsible for the con-I struction 'of Waterford 3 does not mean that' LP&L's current manage-i ment can not operate the plant competently. Applicant's Answer at 11. , However, any determination about whether a utility can
#" operate a plant safely is predictive in nature and must be based f !
) on the company's past performance in constructing the plant. See { generally Houston Lighting & Power Co. (South Texas Project, Units 1 and 2), ALAB-799, NRC (Feb. 6, 1985), slip. og. at 16 n. 35. Certainly if management has failed to construct a safe plant,
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! that same management cannot be trusted to operate the plant safely-in the future.^ / i Applicant also states that the City Council's investigative 1 report attached as Exhibit 3 to Joint Intervenors' motion, demon-i strates explicitly that LP&L and NOPSI did not deliberately or ! negligently blackout the City of New Orleans. However, this prelim-i i inary report states: i ! The report prepared by the City's investigators is l only a preliminary report and did not reach any final j conclusions regarding the ultimate cause of the fail- ! ures of the generating units, the prudency of the i procedures followed by NOPSI/LP&L during the emergency, or the prudency of policy decisions regarding weatheri-zation or 'mothballing' of plants. j Exhibit 3 at 5.1/ I IV. LP&L'S LACK OF INDEPENDENCE FROM MIDDLE SOUTH UTILITIES. l l Joint Intervenors argued that according to the sworn testi-i 2 mony of LP&L's vice president for corporate control John Chavanne, I l Middle South's Chairman and President Floyd Lewis threatened to l 1/ The second investigative report is also preliminary in nature and does not examine the causes for the blackout. See-Exhibit 9. l l ?
fire James Cain, LP&L and NOPSI Presiden% unless he supported a plan that he (Cain) felt was against the best interests of his companies. Joint Intervenors' Supplemental Memorandum at 5-6. Appl,1 cant contends Joint Intervenors mischaracterized a _ newspaper account of this deposition and that "[lL7he executive's depotition testimony was tentative and uncertain on the subject, and represented only the witness' impression." In fact, the story stated the other LP&L officials corroborated Chavanne. See Ex-
) hibit 10.
Moreover, Chavanne's complete deposition provides more than
" tentative and uncertain" testimony on the subject. See Deposition -
of John Chavanne, In re Application for an Increase of its Elec-trical Rates, La. Pub. Serv. Comm. Docket Nos. U-16091 and U-16092 (Jan. 23, 1985), attached and incorporated herein as Exhibit 1. - the following excerpts from Chavanne's deposition illustrate Joint Intervenors' argument persuasively:
- 1) At an executive staff meeting on January 2, 1985, Cain informed his executive staff that a special LP&L board meeting would be held on January 3, 1985 to discuss an offer of settlement concerning Middle South subsidiarias' allocation of power from 1 rand Gulf.
Cain stated at the meeting that Lewis may ask him to ! resign. He became visibly upset. Cain stated further that Lewis expected him to have the Board of Direc-4 tors of both LP&L and NOPSI approve the offer of settle-ment. Id. at 56-61.
- 2) Although Cain did not want to urge the Board of Directors to accept the settlement offer, he said "he was torn by the feeling that if he did not have the offer of settlement accepted at the board meeting, that he may be asked to resign." Id. at 68; 80.
- 3) Vice-President Mike Leddick advised Cain that he should " follow his conscience, that he owed the board the responsibility of giving...his frank opinion."
Cain's frank opinion was that the offer should be rejected. Id. at 70-71; 80.
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- 4) Chavanne stated to Cain that in his opinion "what i Mr. Leddick had advised him was the best advice anyone could give him, and that if he were forced to resign for giving his frank opinion, and for standing on what he felt was a proper principal in this matter, that I would be very proud to be fired, or to resign with him, f,or standing on principals." Id. at 71-72.
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- 5) Cain told his executive staff that Lewis had forbidden him from contacting board members to oppose the offer. Id. at 72-73.
Cain told his staff that Lewis could terminate any of Cain's staff who made calls to the Board of Directors of i LP&L and NOPSI to urge rejection of the offer. Id. at 73-74. It is clear that Applicant has greater access than Joint Intervenors to the facts concerning LP&L's reversal of position re-
- garding allocation of power from Grand Gulf. Therefore, Appli-cant's statements that Chavanne's deposition testimony is "tenta-tive and uncertain" and th'at only one witness recounted this ver-sion of the January 2, 1985 meeting are both deliberate misstate-ments.
l This Appeal Board should find LP&L management and LP&L attorneys' willingness to make false statements in filings before it is further evidence of a basic lack of corporate character and
- competence.
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- V. DOCUMENTS RELEASED TO JOINT INTERVENORS PURSUANT TO COURT ORDER PROVIDE FURTHER SUPPORT FOR PROPOSED CONTENTIONS.
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- The NRC Staff has argued that the problems at Waterford do i
not approach the seriousness of the quality assurance breakdown 4 at the troubled Zimmer and Midland nuclear power plants, and there- ! fore less stringent reform programs are permissible. NRC Staff's Further Response (Feb. 28, 1985), Harrison Aff., at 13-14. However, a draft of the Staff's June 13, 1984 Letter to LP&L demonstrates l
1 4 that in fact the NRC Staff at that time considered the quality I assurance. breakdown as serious. Moreover, some members of the Staff were prepared to recommend that LP&L hire an independent third party to carry out "an objective and comprehensive assess- , ment." John J. Harrison, head of the Task Force's Quality Assur-ance Team, drafted this letter. See Draft Letter to LP&L, attached and incorporated herein as Exhibit 2. The NRC Staff has also told this Appeal Board.that inac-curate statements in applicant's April 27, 1984 letter to the NRC Staff in response to CAT Team findings.were not of concern and understandable given the "very general nature of the Staff's letter l of April 2, 1984..." Crutchfield Affidavit of December 21, 1984, i at 4. However, it appears that the NRC Staff discussed on August 1, 1984 whether to investigate and/or take enforcement action against LP&L for material false statements made in that letter. See Meeting Agenda, attached and incorporated herein as Exhibit 3, at 11. The NRC Staff did.not' inform the Board of-its earlier concern concerning ! false statements in that letter, emmi thmagh they believed LP&L's false statements were significant. t Joint Intervenors obtained under the FOIA draf t sections of the SSER 7, which indicate that the NRC Staff verified many of - the 350 allegations, but " watered down" or eliminated a number of their most critical findings and conclusions. Moreover,_ these draf ts indicate that statements made in the various NRC Staff re-sponses. to Joint Intervenors' Motion to Reopen are not accurate. l
.. .a. . .. ,
> 9 4 l For example, the NRC Staff has stated that it did not re-
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quire-100 percent reinspection of the work of unqualified QC in-l l spectors because it obtained adequate confidence in the quality l of the hardware they inspected by " alternative methods" . Harrison ~ 4 Affidavit at 15-16. However, earlier drafts of the section concern-ing unqualified Mercury QC and QA personnel reveal that the NRC Staff originally intended that 100 percent of the work of unquali-fled Mercury QC. inspectors was to be reinspected prior to fuel load. See 5/23/84 Draft of Allegation A-01, attached and incorpor-ated herein as Exhibit 4. Fur ther, the NRC Staff stated the following in their initial ] response to Joint Intervenors' claim that LP&L had failed to up-I grade its staff after repeated warnings by the NRC: This allegation is without support. As noted in the Crutchfield Affidavit at 16B, Applicant commenced a recruiting effort in 1981 and significantly increas-ed staffing levels. The Staff has tracked and acknow-ledged the improvement in Applicant's staffing in sev-eral SER Supplements. The Staff has also concluded l that staffing levels and staff qualifications are ade-quate for operation of Waterford 3. NRC Staff Response to Joint Intervenors' Motion to Reopen, at 15. However, both the draf t and final versions of the NRC Staff's analysis of allegation A-48 indicates that in fact LP&L had re-peated warnings about inadequate technical'and QA staff which it
- ignored. For example, SSER 7, at 100, states
The long held policy of LP&L has been to conduct their I business related to engineering, construction, and op-eration of power plants by utilizing a very ' lean' in-house organization with almost total reliance on the Architect-Engineer (AE) constructor for engineering and construction. This policy of ' lean-ness' and al-most total reliance on . the AE/ constructor is one of the 1 i i
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problema associated with Waterford 3. This problem wasc.previously identified by outside consultants but was not acted on. The draf t version of the SSER 7 section is even stronger: The NRC staff reviewed portions of evaluations made -
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by MAC of LP&L management at Waterford 3 in 1977, i 1979 and 1980. The " Executive Summary" of the 1979 ' MAC Report outlined many problems which "can criti-cally impact the Waterford 3 Project." The particular concern was stated as follows: (1) "The long-held policy of Louisiana Power and Light has been to conduct their business related to engineering, construction, and operation of power plants by utilizing a very
' lean' in-house organization with almost total reliance on the Architect-Engineer (AE) for engineering and con-s truction. . .
The'1979 MAC Report to LP&L states, in part, "The QA i group overall is strong...but few in number...it is MAC's reccmmendation that additional manpower be obtained. LP&L'should monitor, audit and watch all of the crit-ical activities. . .as they are accomplished at the site
... Additional QA manpower should be applied to ensure l contractor QA records are in auditable and buyable i order.
The 1980 MAC Report deals mainly with startup and op-eration; however, the theme of under-experienced and inadequate staff is a recurring theme and should be evaluated by NRC Staff who are responsible for oper-ational startup, testing, etc. { See 5/30/84 Draft, attached and incorporated herein as Ex-I hibit 5, at 23-25. Certainly both the draf t and final Staff analysos supports Joint Intervenors' basic contention that LP&L failed to upgrade its operational and QA staff adequately despite warnings that it was l- adversely impacting the quality of construction of Waterford 3. Fur ther , a comparison of the final version of the NRC Staff's
- analysis of allegation ~A-48 with the draft version contained in i
Exhibit 5 discloses the NRC Staff's failure to reveal in SSER 7
l 1 e ! 1 the true extent of the QA breakdown at Waterford. The follow-ing porti~ons of the draft section on allegation A-48 were omit-ted from SSER 7:
- 1) Assessment of Allegation: The implied significance Z of this allegation is that a " complete" QA breakdown occurred. That is, quality control inspectors did not do adequate inspections; Mercury personnel did not have the freedom to write nonconformance reports (NCRs) and.obtain effective corrective action; EBASCO and Mercury did not folicw any procedure; QA records
- did not adequately document QA activities; and the licensee and contractors audit program, which is the last defense for identifying QA/QC problems were not adequately implemented. This breakdown also extends to Louisiana Power & Light (LP&L) because as appli-cant for the license and the holder of the construc-I tion permit they have QA overall responsibility for all work at the site.
Exhibit 5 at 1-2.
- 2) Interviews and Evaluation of Mercury Management.
' The Mercury Company was plagued by poor and discon-tinuous management. For example, therc were six pro-duct superintendents, six product engineers and six QA site supervisors from mid 1978 thru mid 1983... There was a high turnover among QC inspectors. EBASCO management was aware of these problems short-ly after Mercury came on site. More _ than one source stated that LP&L and EBASCO did not properly control and assure that Mercury QA records were . retained on-site but allowed Mercury to " haul" away Waterford , Project records that should have remained on site. NRC Staff members also found that LP&L was still un-sure as to exactly what. records were on site and ! what records should be on site. EBASCO and LP&L man-agement became fully aware of serious Mercury prob-lems in 1981 and 1982, almost three years after Mer-cury came on site and almost 80% of the work was done. At this time EBASCO management . supplemented Mercury management to complete the work, because they ap-parently assumed that it was too late to obtain cor-t rective action or else /Jhat7 was an impossible task. l _I_d at 5. i i f
-.- - - - - - , , . . , - , . , t - ~ ,.,e. , - . , - . - . . .
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- 3) Nonconformance und Corrective Action System Breakdown.
. The breakdown iii the corrective action system between Mercury and EBASCO management is evident in the in-ability of either Company to obtain corrective actions.
Both companies apparently failed to review, recognize or take action on trends which should have been appar-ent shortly af t< r Mercury implemented their site QA J program. It also appears that the Mercury nonconfor-mance system impeded the freedom to initiate NCR's which could have been upgraded to CARS as a result of EBASCO management involvement. Id at 15.
- 4) In conclusion the NRC Staff found considerable evi-dence indicating there was a significant breakdown in the QA program both at EBASCO and Mercury, and be-tween EBASCO and Mercury, to the point that EBASCO management was used to supplement Mercury management.
Also a breakdown of the QA program was evidenced in that LP&L did not thoroughly evaluate, determine all the causes, and identify the entire extent of the QA breakdown at the Mercury Company, even after receiv-ing a civil penalty violation on December 6, 1982. Id at 23. The NRC Staff moderated its conclusion in SSER 7 to state merely that "there was a breakdown of the LP&L QA programs at EBASCO and Mercury. Also, a breakdown of the LP&L QA program was indica ted . . . " SSER 7, at 100. Moreover, the NRC Staff's current position is that there was only a " partial" QA breakdown, rather than a complete QA breakdown, as stated in its original analysis. See Harrison Affidavit at 12. The NRC Staff has also failed in SSER 7 to disclose the ex-tent of corrective action it has required of LP&L. For example, in a draft of the NRC Staff's analysis of allegation A-128d it was stated that in most cases rewelds were inspected and found adequate. See Draf t of allegation A-128d, attached and incorpor-ated herein as Exhibit 6 at 1. ("In most cases the rewelds were
e . - t reinspected and found adequate.") However, the Staff's analysis in SSER 7' suggests that all rewelds .were inspected. SSER 7 at 137. ("The rewelds were reinspected by LP&L and found adequate.") Moredver, the draft sections of the staff's analysis of -
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Allegation A-141 indicate the significance of the allegation. It is not resolved in either SSER 7, at 149, or SSER 9, at 90-94. The i NRC Staff fails to explain how 70 concrete packages disappeared for over a year and were found only in August 1984 in EBASCO's vault. The Staff also ignores the fact that these concrete pack-ages or Deficiency Reports noted deficiencies which LP&L's re-view of the records did not. As Joint Intervenors ergued, the fact that a 1982 QAIRG document review uncovered document defi-ciencies which LP&L's 100 percent documentation rcreview did not, reveals LP&L's inability or unwillingness to carry out adequate corrective action, even under intense NRC Staff scrutiny. See generally, Drafts of analysis of allegation A-141, attached and-incorporated herein as Exhibit'7. The abovecited drafts of SSER 7 and SSER 9 demonstrate the i weaknesses in the NRC Staff's analysis of the QA and con'struction deficiencies at Waterford and the NRC Staff's downplaying of ser-ious safety problems of the same magnitude as those detected at the Zimmer and Midland nuclear power plants. Moreover, these t
- draft analyses in some cases _ indicate that the NRC Staff's re-sponses to Joint Intervenors' Motion to Reopen have been misleading.
IV. CONCLUSION. l In conclusion, Joint Intervenors request that the Appeal l-I
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4 Board grant leave for filing of this Reply to Applicant's Answer i to Joint Intervenors' Supplemental Memorandum, and further, in consideration of the record before it, that it grant Joint Inter-venors' Motion to Reopen the Record for Litigation of Quality , Assurance and Character and Competence contentions. Respectfully Submitted, LM- mA n e Bernabei ernment Accountability Project 555 Connecticut Avenue, N.W. Washington, D.C. 20036 (202) 232-8550 Attorney for Joint Intervenors Dated: March 12, 1985 s I i
s . _. Exhibit 1 - a 1 STATE OF LOUISIANA
.2 PUBLIC SERVICE COMMISSION 3 DOCKET NO. U-16091 4 Lo u i s i a n a Po we r & Light l l
5 Co m pa n y (New Orleans, Lo ui s ia n a) , Ex ) parte, In Re: 6 Application for an Increase 7 of its Electrical Rates. 8 DCCKET NO. U-16092 9 New Orleans Public Service, Inc. (New Orleans, Lo u i s i a n a ) , Ex Parte. 10 In re: 11 Application for an Increase of its Electrical Rates. 12 --------------------------------------- TESTIMONY OF JOHN H. CHAVANNE, taken 13 before Mary Virginia Hughes, Certified Shorthand Reporter, in the Law Offices 14 of Stone, P i g m a n,, halther, Wittmann & Hutchinson, 546 Carondelet Street, New 15 Orleans, Lo u i s i a n a 70130, taken on the 23rd day of January, 1985. 16 APPEARANCES: 17 Representing Lo u i s i a n a Power & Lignt IS Company, New Orleans Public Service, Inc.: 19 MONROE & LEMANN 20 Attornays at La w BY: J. WAYNE ANDERSON, ESQ. 21 Whitney Building New Orleans, Lo u i s i a n a 70130 22 Representing Lo u i s ia na Public Service ! 23 Commission: 24 STONE, PIGMAN, WALTHER, WITTMANN & HUTCHINSON 25 Attorneys at La w BY MICHAEL R. FONTHAM, ESQ. huGHES & ASSOCIATES, INC.
2 1 PAUL L. ZIMMERING, ESQ. NOEL J. DARCE, BSQ. 2 546 Carondelet Street New Orleans, Lo ui s i a na 70130 3 Representing the State of Lo u i s i a n a l 4 OFEICE OF THE ATTORNEY GENERAL: 5 BY R. M. TROY, ESQ. Suite 700 6 2-3-4 Lo yo l a Avenue New Orleans, Lo ui sia n a 70112 7 Representing the City of New Orleans: 8 VERNER, LIIPFERT, BERNHARD, 9 McPHERSON & HAND Attorneys at La w 10 BY: GLEN L. ORTMAN, ESQ. Suite 1000 11 1660 L Street, N.W. Washington, D. C. 20036 12 Representing Occidental Chemical 13 Corporation: 14 SUTHERLAND, ASBILL & 8RANNAN Attorneys at La w 15 BY: ROBERT W. HORROW, ESQ. Suite 800 , 16 1666 K Street, N.W. Washington, D. C. 20006 17 Representing Lo uis ia na En e rg y Users 18 Group, Intervenor: 19 R. GORDON KEAN JR., ESQ. Baton Rouge, Lo u i s i a n a 20 Videotape Operators: 21 JANET DENSMORE 22 LECLARE RATTERREE i 23 RdPORTED BY: 24 MARY VIRGINIA HUGHES Certified Shorthand Reporter 25 In and for the State of Lo ui s ia n a nUGhES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo ui s i a n a 70130
J s, 1 ...o0o... 2 JOHN H. CHAVANNE, 3 Vice President, Corporate Control and 4 Assistant Secretary, P. O. Box 60340, 5 317 Baronne Street, New Orleans, 6 Lo u i s i a n a 70160, having been first duly 7 sworn, was examined and testified under 8 oath as follows: 9 E3hdIEh112E 10 11 MR. FONTHAM: 12 Let the record show 13 that this is a deposition of Mr. John 14 Chavanne, being taken pursuant to a 15 notice of deposition and a deposition 16 subpoena istved by the Lo u i s i a na Public 17 Service Comnission. 18 fly name is Michael Fontham. 19 I am s p e c i a it counsel for the Lo ui s ia n a 20 Public Service Commission; and I will l 21 be the initial counsel asking questions 22 of Mr. Chavanne in this deposition. 23 There are a number of other 24 lawyers present representing various 25 parties. In order to help in l l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo ui s i a n a 70130
4
. 8 1 identifying the people asking questions, 2 when they do ask questions for the 3 videotape, I request that these lawyers 4 now identify themselves for the record.
5 MR. MORROW 6 My name is Robert 7 Morrow with the firm of Sutherland, 8 Asbill & Brannan, representing 9 Occidental Chemical Co r po r a t io n . 10 MR. TROY: 11 Richard Troy, 12 Lo u i s i a na Department of Justice, 13 representing the State of Lo ui s i a n a . 14 MR. DARCE: 15 Noel Darce of the law 16 firm of Stone, Pigman, Walther, 17 Wittmann & Hutchinson, special counsel 18 for the Lo ui s i a na Public Service 19 Commission. 20 MR. ORTMAN: 21 Glen Ortman of the 22 firm of Verner, Liipfert, Bernhard, 23 McPherson & Ha n d , and I represent the 24 City of New Orleans. 25 MR. KEAN: l l t l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
5 l l 1 I am R. Gordon Kean 2 Jr., attorney for the intervenor, 3 Lo ui s ian a Energy Users Group. 4 MR. ANDERSON: 5 hayne Anderson of the 6 firm of Monroe & Lemann representing 7 Lo ui s ia na Po we r & Light Company and New 8 Orleans Public Service. 9 MR. FONTHAh: 10 I believe the camera 11 is now focused on the witness. 12 I have a few other 13 preliminary comments to make. I 14 believe that, at least it is my 2 15 understanding that this deposition is 16 being taken pursuant to the rules of 17 the Lo u i s i a n a Public Service Commission, 18 which would permit the use of the 19 deposition for any purpose permitted 20 under Lo u i s i a n a civil practice. t 21 Counsel, it is also my 22 understanding that there is an 23 objection you wish to reserve to the 24 use of the videotape; is that correct? 25 MR. ANDERSON: HUGHES & ASSOCIATES, INC. , 1619 Coliseum Square, New Orleans, Lo ui s i a n a 70130
6 1 That is correct. We 2 would like to make that objection 3 continuing with respect to all 4 depositions at which the videotape is 5 made. And we would like to reserve all 6 of our objections, except those as to 7 the form of the question, until such 8 time as the deposition may be sought to 9 be used, either through transcript or 10 the videotape. 11 MR. FONTHAM: 12 That's satisfactory. 13 That's my understanding of your 14 privilege. 15 Mh. ANDERSON: 16 We also would like to 17 reserve our right to read and sign the 18 transcript; and we would like to make i 19 that just a general stipulation, 20 applicable to all of the depositions 21 that the Commission has noticed in 22 connection with these two proceedings. l 23 MR. FONTHAM: 24 That is agreeable 25 with me. Is there any objection from HUGHES & ASSOCIATES, INC. ' 1619 Coliseum Square, New Orleans, Lo u l s l a n a 70130
io . 7 I any other party? 2 In view of the fact that 3 each of these are going to be 4 separately videotaped, I w111 try to 5 remember to have that put on the record 6 at the beginning of each videotape; but 7 it is satisfactory to me for yo u to 8 make that a general reservation of your 9 right. 10 MR. ANDERSON: 11 Thank you. 12 MR. FONTHAM: 13 At this time, I 14 request that the court reporter swear 15 the witness. 16 ( Witness sworn by the 17 court reporter. ). 18 MR. FONTHAM: 19 Are we ready to 20 proceed? 21 BY MR. FONTHAM: 22 Q. Would you state your name, 23 please? 24 A. John Chavanne. 25 Q. hhat is your address, Mr.
!! U G li E S & ASSOCIATES, INC.
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a l 1 Chavanne7 2 A. My business address is 317 3 Baronne Street, New Orleans, Lo u i s i a na . 4 Q. What is yo ur home address? 5 A. My home address is 2257 New 6 York Street, New Orleans, Lo ui s ia n a . 7 C. What is your current 3 occupation? 9 A. I am vice president 10 corporate control of both Lo u i s i a n a 11 Po we r & Light Company, and New Grleans 12 Public Service. 13 C. What is the vice president 14 corporate control? 15 A. The responsibilities under 16 my area include auditing, financial 17 planning, MIS modeling and load 18 research and corporate performance. 19 In addition to that, I work 20 a considerable amount in rate case 21 matters. 22 Q. Would you tell me what i 23 educational degrees you hold? 24 A. I hold a law degree, a 25 Masters degree, a CPA certificate, and I li U G H E S & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo ui s i a n a 70130_
r 9
.1 a Bachelor of Business Administration 2 degree.
3 Q. Tick them one at a time. 4 Would you tell me the year and the 5 college from which yo u received yo ur 6 law degree? 7 A. 1971, from Lofola 8 University of New Orleans; 1967, the 9 P. B A ; 1960 -- 10 Q. Where did you get the MBA? 11 A. All the degrees were from 12 Loyola University. 13 Q. Give me thc years? 14 A. NBA 1967, the BBA, 1963. 15 Q. When did you receive your 16 CPA certification? 17 A. I think it was 18 approximately 1974; in that time frame. 19 Q. What course of s t ud y , if 20 any, did yo u pursue to obtain the CPA? 21 A. The standard courses that 22 one must take, some 27 to 30 hours of 23 all levels of accounting and business 24 law. 25 Q. Was this at Lo yo l a ? HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
. o.
10 1 A. No. Most of that was at 2 Tulane University. 3 Q. Your law degree, was that 4 received in connection with pursuit of 5 a course of study in tae day school or 6 the night school at Lo yol a ? 7 A. That was in the evening 8 division of Loyola. 9 0 Wnen did you first become 10 employed with any company in the Middle 11 South Utilities group of companies? 12 A. In April of 1966,- I was 13 em plo ye d at New Orleans Public Service. 14 Q. Would you describe your 15 work history since the time you were 16 employed at NOPSI? -- and I will refer 17 to NOPSI as an acronym for New Crleans 18 Public Service in this deposition; I 19 will refer to LP&L as an acronym for 20 Lo ui s ia na Po we r & Light Company, and I 21 may refer to the Middle South utilities 22 holding company, or the group of 1 23 companies as Middle So uth 24 interchangeably. 25 A. I was hired as a data HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
, li 1 processing analyst in the methods and 2 procedures department in April of 1966, 3 and worked there for approximately a 4
year and a half or so, in which case I 5 was transferred to what was then the 6 budget and statistical department, and 7 worked in a number of positions, 8 including supervisor and manager in 9 that area. 10 I then was promoted, as I l 11 recall, to assistant to the vice 12 president of finance; then to the 13 controller position -- 14 Q. What would you, as you go 15 through this history, would you tell me 16 about when each of these promotions 17 occurred; and take your time and -- 18 A. From -- 19 0 -- just give me a general 20 idea. . 21 A. Generally speaking, I
- 22 worked in the budget and statistical 23 department probably from sometime in 24 1967 till sometime in the early 1970s.
25 I worked as assistant to the vice i HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
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L o 1 1 president of finance for a few years in 2 the mid seventies. I was named 3 controller, probably sometime in the 4 late 1970s; and in the assistant to 5 vice president of finance, and in the 6 controller I had increasing 7 responsibilities in rate case matters, 8 primarily. 9 I was named vice president 10 of finance, as I recall, I believe in 11 November 1980, and had the -- the 12 normal functions of a person in that 13 position of autnority, including the 14 treasurer functions. 15 C. Do you hold any position 16 witn Lo u i s i a n a Po we r & Light Company? 17 A. Yes. Commencing, as I 18 recall, in August of 1983, I was named 19 a vice president of corporate control j 20 of Lo ui s ia na Po we r & Light Company. 21 Q. Would you describe the rate 22 case duties that you referred to a few 23 n.i n u t e s ago. l 24 A. For a number of years, I 25 have participated directly and HUGHES & ASSOCIATES, INC. ~ 1619 Coliseum Square, New Orleans, Lo u i s i a n a 7e130
13 O e I substantially in the preparation of the 2 president's testimony in electric, gas, 3 and back then transit rate matters 4 before the New Orleans City Council; I 5 also assisted substantially in the 6 preparation of the financial vice 7 president's testimony. 8 When I assumed that 9 position, of course, I wrote my own 10 testimony, and substantially assisted 11 in the preparation of data responses to 12 all intervenors date of request in rate 13 cases, and testified myself in a number 14 of gas, electric, and transit matters, 15 before the New Orleans City Co un c il ,
- 16 anc before the Lo u i s i a n a Pub]ic Service 17 Commission.
18 Q. Would your -- did your rate 19 case responsibility before the.New 20 Orleans City Council involve any 21 revenue requirements? I 22 A. Yes. 23 C. -- duties? 24 A. Yes, it did. f 25 Q. Is there any difference HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Louisiana 70130
14 I between your rate case responsibilities 2 beginning in the early 1980s, or the 3' late 1970s, whenever you said, and your 4 rate case responsibilities now. 5 A. They are essentially of the 6 same magnitude; the dollars are greater, 7 but the preparation and the work during 8 the course of it is approximately the 9 same. 10 Q. In connection with your 11 duties in, as a person dealing with 12 revenue requirements and financial 13 affairs of these two companies, have 14 you had occasion to perform any duties 15 or be a member of any committees that 16 are so-called system committees for the 17 Middle South System. 18 A. Yes. I, for several years, 19 served as representative for Public 20 Service on the Middle South Utilities l 21 financial officers committee, for some 22 three to four years, I have served as 23 Public Service representative on the 24 Middle So uth Utilities retirement 25 committee; for a couple of years I have l l hUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
l 15 1 been both Public Service and LP&L's 2 representative on MSU employe stock 3 ownership plan committee. 4 Q. Let me just back up for a 5 second and ask you this: What is your 6 understanding of the relationship of 7 New Orleans Public Service and LP&L to 8 Middle South Utilities, Inc.? 9 A. We are an operating company 10 subsidiary of Middle South Utilities 11 under the Public Utility holding
- 12 Company Act of 1935, and Middle Louth 12 Utilities, in that regard, owns one 14 hundred percent of the common stock of 15 both com pa nie s .
j 16 Q. Are you familiar with a ! 17 company known as Middle So ut h Services, l 13 Inc.? 19 A. Yes, I am. 20 Q. What is your understanding t 21 of the relationship of that company to 22 Middle South Utilities, Inc. and to 23 LP&L and NOPSI? 24 A. Middle South Services is a 25 service company subsidiary of Middle HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo ui s i a n a 70130
. 16 l
1 South Utilities that provides a number I l 2 of areas of expertise to the operating 3 c o m pa n i e s and to other entitles within 4 the Middle South System that provides a 5 more efficient basis for these services 6 being provided than by the companies 7 duplicating such areas of expertise. 8 Q. Coes Middle South Services 9 perform any tasks for any of these 10 committees, these system committees 11 that you mentioned, that you have had a 12 part on? 13 A. Yes, they do. 14 Q. What sort of things would 15 Middle So u t h Services do for, for 16 instance, the financial officers 17 committee?
,l a A. Depending on the aajenda 19 item, dusing tax season, the vice 20 president of tax services would provide 21 various schedules showing the tax 22 liability for each company in the l
, 23 system, based on budgetary matters, the l 24 financial planning d e p a r t. m e n t of Middle l 25 South Services would provide the i HUGhES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
17 1 outputs generated primarily from the . l 2 inputs provided by the operating ! 3 com pa n i e s that make up the annual 4 budget and the several-year fortcast. 5 In essence, they are ' 6 responsible, of course, for 7 consolidating the financial results for 8 each of the companies in the system to 9 provide consolidated accounting 10 expertise. 11 Q. Who are members of the 12 financial officers committee? 13 A. There have been some 14 changes recently, but in essence, as I l 15 recall, Ed Lupberger is chairman of the 16 committee, Ed is senior vice president 17 and chief financial officer of Middle 18 So u th Services and president of Electec. 19 0 Why don't you, before you 20 go on, you said the w o r ') Electec; what 21 is that? 22 A. Electec is a f o r-pro f i t l 23 subsidiary of Middle South utilities; ( 24 it was f o rmed within the last, I think 25 18 or so months. l HUGhES & ASSOCIATES, INC. l 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
18 1 Mr. Frank York, the 2 financial ,vice president of Mississippi 3 Po we r & Light is a member; Mr. John 4 Harton, the financial vice president of 5 Arkansas Po we r & Light is a member. 6 Mal Mc Le tc hie , the senior vice 7 president of finance and treasurer of 8 both LP&L and NOPSI, is a member. 9 In addition to these 10 members, typically a number of other 11 ind iv id ua l s , both for Middle So uth 12 Services, and one or two individuals 13 usually from each of the operating 14 companies attends the meetings, and 15 based on the subject metter being 16 discussed, participates in the adjenda 17 items. 18 0 hhat, during what time 19 period were you a member of the 20 financial officers committee? 21 A. From the date of the time 22 of Mr. Brodtman, which as I recall, I 23 believe was November of 1980, until Mal 24 Mc Le tc hie coming over in November of 25 1984, in that time frame, I served as l l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
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1 representative for Public Service. 2 Q. You say Mal Mc Le tc h i e 3 coming over. 4 Where did Mr. Mc Le tc h ie 5 come from? 6 A. He was vice president of 7 tax for Middle South Services. 8 Q. Is he now the chief 9 financial officer of LP&L and NOPSI? 10 A. Yes. 11 Q. What would, in your 12 e x pe r ie nc e with the financial officers 13 committee, did that committee have 14 occasion to review computer projections 15 of revenue requirements of the 16 operating companies under various 17 alternative scenarios? 18 A. To the best of my 19 recollection, I never recall a revenue i 20 requirement printout, if you will, l 21 being distributed and/or discussed at a 22 financial officers meeting. 23 Q. Do you recall seeing 24 printouts of utility kilowatt hour 25 costs at financial officers meetings, 1 1 HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
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1 projected k ilo wa t t hour costs for the -- 2 A. To the best of my 3 recollection, no. I could stand 4 corrected, but as of this moment, I 5 don't ever recall that being discussed. 6 There are a number of other 7 committees within the Middle South 8 System, such as the operating committee, 9 and the rate committee, which perhaps 10 more properly by their definition may 11 have seen such. But I don't recall i 12 such being an adjenda item and 13 distributed and discussed at financial 14 officers meetings. 15 Q. Did the financial officers 15 discuss the ability of a given company 17 to finance generating units that the 18 operating committee may have proposed 19 that these companies construct? 20 A. I don't recall any specific 21 discussion along those lines in recent 22 years. Going back, probably as much as 23 approximately ten years ago when I l 24 accompanied Mr. A. J. Brodtman, who was i 25 the -- my predecessor, vice president HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
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i 1 of finance at Hew Orleans Public 2 Service, I do recall some discussions, 3 problems associated with operating 4 companies being able to finance Grand 5 Gulf I and Grand Gulf II. 6 As I recall from almost a 7 decade ago, I know there were some 8 serious discussions at the financial 9 officers level there, where it was 10 quite obvious to the representatives 11 for Public Service and for Mississippi 12 Power & Light, that those companies 13 could not finance the construction of a 14 nuclear power plant. 15 But beyond that, I don't 16 recall in recent years any serious 17 discussion, or any discussion at all of 18 those matters. 19 C. In fact, when you 20 accompanied the NOPSI representative to 21 the financial officers committee, did 22 that committee take any action, or make 23 any recommendations with respect to the I 24 difficulty in financing Grand Gulf? 25 A. Mr. Fontham, I truthfully HUGHES & ASSOCIATEC, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
22 I don't recall what happened a decade ago. , i 2 I would hope that there would be some l 3 minutes that could more accurately 4 reflect than my memory can of ten years 5 ago. 6 I do know there were 7 serious discussions, as I mentioned 8 earlier, I do know that Mr. Brodtman 9 and the vice president of finance at 10 hississippi Po we r & Light at that time 11 were quite frank in indicating tnat
. 12 eney would not, their com pa n i e s , would 13 not be able to finance those units.
14 Beyond that, I can't recall 15 discussion of ten years ago. 16 Q. Does the financial officers 17 committee, based on your experience, l 18 make decisions as to the timing of 19 securities offerings by the various 20 com pa n i e s in the Middle South System? 21 A. The finance committee does 22 not; no, sir. 23 Q. hhat does it do? 24 A. In my interpretation, the 25 finance committee convenes to discuss huGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
- 23 I matters of common interest of a 1
2 financial nature throughout the system, 3 to be brought up to date on matters 4 from personnel to Middle South Services 5 and Middle So u t h Utilities of
,a common 6 interest, and to advise the CEos for 7 whom we report issues discussed at 8 those meetings.
9 Q. To your knowledge, has the 10 financial officers committee made any 11 decisions since 1980 or so? -- made 12 any decisions that in essence were 13 recommendations to someone? 14 A. Sir, I am sure the finance 15 committee has made some decisions. 16 Again, I -- I would think the minutes 17 could far more accurately than I 18 reflect specifically what decisions; 4 19 but I would consider the finance 20 committee, like most committees, 21 primarily an advisory group to the 22 respective CEOs o f. the operating 23 com pa n ie s . 24 (. To your knowledge, do you 25 have personal knowledge of any h U G il E S & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
44 l l 1 recommendation being transmitted by the 2 finance committee to anyone? 3 A. I am sure that the 4 individual representatives of the 5 operating companies have returned to 6 their respective companies and made 7 recommendations to the CEOs, as to a specific items discussed, for the CEO 9 to discuss at a subsequent CEO meeting 10 or Middle South Services meeting. 11 Q. But other than that, I am 12 asking you for any, say a written 13 recommendation by the financial 14 officers committees do you know of any 15 of those? 16 A. I don't recall any written 17 recommendation per se. 18 Q. Are you familiar with the 19 board of directors of Middle South 20 Services? 21 A. Yes, sir. 22 Q. Who comprises the board of 23 directors at Middle So ut h Services? 24 A. It is my understanding that 25 the CEcs of each of the operating l HUGhES & ASSOCIATES, INC. l 1 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
25 o l 1 companies, the CEO of. Middle So u th 2 Services, the CEO of Middle South 3 Utilities, as well as the CEO of System 4 Fuels, Incorporated, comprise the board 5 of Middle South Services. 6 Q. Is it your understanding 7 that there is any effort to coordinate 8 securities placements among the Middle 9 South com pa n i e s , the timing of 10 securities placements? 11 A. I think certainly with 12 regard to the placement of common stock, 13 that there is a coordinated effort. It 14 is obviously there has to be a i . i 15 coordination of Middle south utilities l 16 having the funds available in a time 17 frame when the operating com pa n i e s l j 18 require the funds. i 19 So certainly to the extent 20 of common stock funding, there is 21 definitely a coordinated effort. 22 I think with regard to debt 1 23 and preferred stock issuances, I think l 24 generally speaking, the operating 25 company has substantial attitude as to HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Louisiana 70130 _ . . -- .. - __ ~ _ . . _ . _ _ . . - - . _ _ _ . _ _ .. _
26 1 . hen it goes to the market for such 2 issuances. 3 Q. Does Mr. Lupberger 4 participate in the decision with an 5 operating company as to when to go to 6 the market with an issuance? 7 A. I am sure he coes, and I am 8 sure Mr. Drake Keith, who is a vice 9 e resident at Middle South Services, 10 also I think is quite possibly even 11 more involved now than Mr. Lupberger is 12 in assisting the company in financials. 13 Q. hell, in your ex pe r ienc e 14 with NOPSI and LP&L, have you had 15 occasion to be in charge of a debt iG issuance? 17 A. Yes. But not in recent 12 years, because New Orleans Public 19 Service has had very, very few external 20 financings within, frankly, the last 17 21 years, since our last major 22 construction program. 23 So it's been several years 24 since I have been directly involved in 25 the financing issue. i -. HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
27 1 Q ., What is your understanding 2 of the position of LP&L -- well, let me 3 back up. 4 Are you familiar with 5 Middle South Energy, Inc.? 6 A. Yes, sir. 7 Q. Would you describe that 8 com pa n y to me? 9 A. Middle South Energy, Inc. 10 is a subsidiary of Middle South 11 Utilities, that was formed, I believe 12 in the early 1970s, in recognition of 13 't h e need fo r the development of an 14 innovative financing mechanism for 15 obtaining substantial so urc e s of funds, 16 which perhaps otherwise would not be 17 attainable in connection with 18 construction of Grand Gulf Unit I and 19 II. 20 Q. Ho w is that unit being 21 financed; how are those funds being j 22 obtained? 23 A. There have been various 24 debt issuances of various types, I 25 believe i t. c l u d i n g the venture bonds. I HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Crleans, Lo u i s i a n a 70130 __
Ao 1 believe some mortgage bonds, 2 substantial amounts of bank loans, 3 including some Euro-dollar bank loans, i 4 and, of course, a substanti~al amount of 5 common stock equicy. 6 Q. hhat is your understanding 7 of who makes the ultimate decision 8 concerning whether equity is invested 9 in an operating com pa n y or in Middle 10 South Ene rg y? 11 A. I would say, sir, that 12 initially, it is a coordinated type 13 effort, in that thore are certain 14 strategic planning capitalization 15 ratios that the Middle So u t h System has 16 for several, years established, and that 17 we are moving to wa r d , in an effort to 18 improve our security rating. And as a 19 company needs external funds, whenever 20 possible, the operating companies want 21 to issue additional common stock equity 22 to get the debt ratio and preferred 23 ratio down, the common equity ratio up. 24 Obviously after the initial 25 coordinated effort, another factor that HUGhES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo ui s i a n a 70130
, 29 I deserves serious consideration is the 2 ability of Middle South Utilities to 3 raise the common equity that the 4 operating company needs to finance its 5 ongoing construction program and for 6 other corporate needs.
7 Q. So who makes the ultimate 8 decision? 9 A. I don't think, sir, that 10 there can be a simplistic decision, or 11 answer to the question. r 12 I would say that certainly 13 if certain factors existed, where, for 14 cxample, Middle South Utilities didn't ! 15 have the wherewithall to come up with 16 the funds, they couldn't provide the 17 funds. 18 I am not sure that is 19 hiddle South Utilities denying the 20 com pa n y the funds, so much as sim pl y 21 saying we can't raise it at this point 22 in time, or the market, perhaps, is not 23 advantageous for us to raise it at this l 24 point in time. 25 Another issue which is a HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130 _.. .-.o-...----..._, - . _
30 1 separate factor is, in the case of 2 Public Service, is a dispute between 3 the co m pa n y and the counsel that sit in 4 New Orleans, as to whether Public 5 Service can issue additional common 6 stock legally as a result of certain 7 provisions in the settlement ordinance 8 which the city attorney interprets as 9 saying would prohibit the issuance of 10 additional securities, and wnich 11 company attorneys feel is no longer of 1 12 any legal significance. 13 So it is not j us t the 14 Middle South prohibition in that case; 15 it also is a legal interpretation of 16 the settlement ordinanco. 17 Q. Understanding that all l 18 kinds of factors may inf1uence the i 19 decision, who makes the ultimate 20 decision in your understanding? 21 A. I would say that ultimately, 22 Middle South utilities has the final 1 23 responsibility in deciding whether or ; i 24 not it has the ability to provide the 25 funds the operating com pa ny needs; l HUGHES & ASSOCIATES, INC. I 1619 Coliseum B -
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31 I and/or whether the operating company 2 deserves an additional infusion of 3 common stock from Middle So uth 4 Utilities. 5 Q. Are you familiar with two 6 proceedings pending at the FERC, and by 7 that I mean the Federal Energy 8 Regulatory Commission, involving the 9 allocation of Grand Gulf, the Grand 10 Gulf nuclear unit owned by Middle South 11 Energy and the proper division of 12 generating costs on the Middle South 13 System? 14 A. Yes, sir. I am far more 15 familiar with the unit po we r sales 16 ogreement of the Grand Gulf case than I 17 am with the system agreement; but I am i 18 certainly generally familiar with both. 19 Q. What is your understanuing 20 of the position of NOPSI and LP&L, 21 prior to January of 1984, in those l 22 cases? 23 A. My recollection that prior i 24 to January 1, 1984, LP&L and NOPSI 25 supported the MSE filed allocation of l HUGHES & ASSOCIATES, INC.
32 I the Grand Gulf Power and the unit po we r 2 sales agreement, and supported the 3 filing of the system agreement case as 4 proposed in the initial documents. 5 Q. Are yo u familiar with a 6 change of position by LP&L and NOPSI 7 that occurred sometime early in 1984? 8 A. Yes, sir. 9 Q. What is your understanding 10 of the position that LPEL and NOPSI 11 adoptea in early 1984? 12 A. It is my understanding that 13 LP&L and NOPSI agreed to support the 14 Lo u i s i a n a Public Service position in 15 both cases, namely on the allocation 16 issue, and the unit power sales 17 agreement case, and on the equalization 18 of production cost issue in the system 19 ag r eemen t case. 20 C. In your opinion, did the 21 original filings of Middle So u th En e rg y , 22 and Middle So u th Services, lead to 23 results, projected results, that would 24 be unfair and unjust to NOPSI and LP&L i 25 and their customers? HUGHES & ASSOCIATES, INC. 161J Colisemo
. . 33 1 A. Mr. Fontham, at the time 2 the documents were filed, I was not 3 involved in any of the decision-making 4 sessions leading up to the filing of 5 those documents. To the best of my 6 recollection, I was not provided any 7 financial or rate data upon which I 8 could have formulated an opinion.
9 c. I am not asking yo u what 10 your opinion was back then. I am 11 asking you, based on what you know now, 12 what operating results you have seen up 13 to the present. here the o r ig inal 14 filings to be adopted by the FERC, do 15 you believe that those original filings 16 would lead to results that are just and 17 reasonable to LP&L and NOPSI and their 18 rate payers, or unjust and unreasonable? 19 A. Mr. tontham, in my opinion, 20 your question asks me about the filed 21 documentation; and I cannot divorce 22 myself from how I, or any reasonable 23 person, would have viewed the 24 rasonableness of that at the time the 25 uocuments were filed. 1 HUCHES & ASSOCIATES, INC. I
o ". 34 1 I think it can be 2 unreasonable for anyone, a few years 3 later, after substantial facts have i 4 changed, to say how they would have l 5 viewed the filing documents today. 6 I certainly acknowledge 7 that today a reasonable person could 8 draw considerably different conclusions 9 than that same reasonable person woulo 10 have concluded, perhaps, at the time of 11 the filing. 12 Q. Given the fact that you 13 don't know what you would say at the 14 time of the filing, if you had the 15 results, and you certainly sympathize 16 with the people who made their 17 decisions at the time of the filings, I 18 am only asking one question, nnowing 19 what you know today, if today the 20 original MSS filing was adopted by the 21 FERC, the original MSE filing was 22 adopted by the FERC, knowing what you 1 23 know today, after conditions in your 24 view have changed, would the results be 25 reasonable or unreasonable? l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
. . 35 1 A. In my opinion, from a LP&L 2 Public Service parspective, I could not 3 support the document as originally 4 filed with the information that I know 5 today.
6 Q. Is that -- may I interpret 7 that as a judgment on your part that 8 the results would be unreasonable? 9 A. I think, sir, that 10 unreasonable is a relative term that 11 overyone in this room could have a 12 cifferent interpretation on. 13 But from my perspective, 14 based on hat I know today, I would not 15 recommend that the LP&L-NOPSI 16 management support the o r ig inal filed 17 allocation of the Grand Gulf case. I 18 am far less familiar with the system 19 agreement case, but as I stated carlier, 20 LP&L-NOPSI management supported the 21 equalization of power production costs 22 from I think the first quarter oi 1984 i 23 on; and I think that was a wise course 24 of action. 25 MR. ANDERSON: l HUGHES & ASSOCIATES, INC.
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. 1 26 1 Let me interrupt just 2 for a moment. I noticed Mr. Chavanne 3 used an abbreviated term Public Service 4 that he obviously interchanges with 5 NOPSI and New Orleans Public Service; 6 is that correct? So the record will be 7 plain, when you are referring to Public j 8 Service, you are referring to Now 9 orleans Public Service?
10 THE WITNESS: 11 That is correct. 12 BY MR. FONTHAM: 13 0 All right, Mr. Chavanne, we 14 can beat t t: 1 s all morning, but I am 15 really just asking you for your belief, 16 n hen you said you wouldn't recommend 17 the adoption of those o r ig inal filings 18 today, is that because you believe it 19 would prod uc e unreasonable results for 20 LP&L and NOPSI? 21 A. Based on the information I 22 have today, Mr. Fontham, yes. I think i 23 I should point out to this group that 1 24 do not have present access to all of 25 the most recent cata upon which some HUGHES & ASSOCIATES, INC.
. 37 I recent decisions have been made. 2 Q. Now are you familiar with 3 the events that led to the change of , 4 position by LP&L and NOPSI in early 5 19847 6 A. I think that it was a 7 combination of factors which obviously 8 Mr. Cain, the CEO of both com pa n ie s , 9 could far better address enan I could. 10 It was my understanding 11 that it was a combination of a number 12 of factors, probably including the 13 administrative law judge's initial 14 decision, which substantially changed 15 the pro po s ed allocation of the power 16 from that unit from the initially filed 17 amounts to substantially different 18 amounts. 19 I think that as additional 20 information was brought to his 21 attention, and probably to the board of 22 directors' attention, that there was a 23 com pl e te review of the entire matter. 24 I don't think it was any 25 one factor; I think it was a HUGHES & ASSOCIATES, INC.
38 I combination of factors. 2 Q. Have you ever had occasion 3 to hear Mr. Cain describe the meeting 4 of the chief executive officers, or a 5 meeting of the chief executive officers 6 of the system companies, in which it 7 was determined that LP&L and NOPSI 3 could assert, or would assert a 9 different position than Middle South 10 Energy and Middle South Services. 11 A. Mr. tontham, I am sure that 12 Mr. Cain brought that to the attention 13 of his staff at that time. I don't 14 recollect, you know, the specifics of 15 the discussion, other than in a general 16 manner such as you described them. 17 That is I recall that Mr. Cain 18 indicated that the operating companies 19 had the authority to present their own 20 individual respective views before the 21 Federal En e rg y Reg ul a to r y Commission. 22 Q. Was it your impression, 23 based on yo u r discussions with Mr. Cain, 24 or what you heard Mr. Cain say, that 25 the authority gained by LP&L and N O P S 'I HUGHES & ASSOCIATES, INC.
l 39 I to assert their own positions, was a 2 change of circumstances in the sense 3 that LP&L and NOPSI did not have that I 4 authority prior to that meeting? 5 A. It is my understanding, 6 subject to Mr. Cain's correction, 7 because he was there and I was not, 8 that the authority had not been 9 provided him before to take an r ! 10 individual operating company position; 11 but that wa s granted fo r the number of 12 factors, some of which I mentioned in 13 response to yo u r previous question. 14 c. Was it your impression that 15 the authority that we are talking about 16 is authority flo wi ng from the chief 17 executive officer sitting as a group, ! 10 or Middle South as the parent, or Floyd 19 Lewis as the chairman? 20 A. It is my recollection, 21 agein subject to correction from br. 22 Cain, that the authority came from Mr. l 23 Lewis. l 24 I could stand corrected on 25 that, but to the best of my l l H U G i! E S & ASSOCIATES, INC. N
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40 ) l 1 1 recollection, I believe that was the 2 way it was presented. 3 Q. Are yo u familiar with a 4 change of position acopted by LP&L and 5 NOPSI in those cases recently? 6 A. Yes, sir, I am. 7 Q. Would you briefly describe 8 what you understand to be the LP&L and 9 NOPSI action that changed that position. 10 A. I think the action that 11 changed the po si tio n from a legal 12 corporate viewpoint was the board of 13 directors' action of both companies, 14 which was held on January 3rd, 1985, 15 which directed Mr. Cain and the com pa n y , 16 or' authorized, to support the recently 17 filed offer of settlement with the 18 Federal Energy Reg ula to r y Commission. 19 Q. Who filed an offer of 20 settlement with the Federal En e rg y 21 Reg ul a to r y Commission, to your 22 knowledge. Who were parties to that ! 23 offer? i 24 A. To my understanding, each 25 of the Middle South System operating i l i h u G il E S & ASSOCIATES, INC. 1619 C o l_i s e mci A
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- 41 I com pa n i e s in the unit po we r system 2 agreement case, Middle South En e rg y was 3 a party, and Middle So uth Services was 4 a party to the system agreement case.
5 Q. Is your understanding that 6 this offer of settlement has been filed 7 in both of those cases? 8 A. Yes, sir. 9 C. hould you briefly describe 10 what your understanding is of the terms 11 of tnat offer of settlement? 12 A. Yes, but I should, at the 13 outset, indicate that my involvement in 14 the preparation was nonexistent, for 15 all practical purposes. My review of 16 the document has been of a very general 17 nature. 18 But my understanding, in 19 essence, is that the allocation of 20 Grand Gulf Unit No . I was allocated 21 17.1 percent to Arkansas Po we r & Light; 22 19 percent to Mississippi Power & Light, l 23 17 percent to New Orleans Public i 24 Service, 14 percent to Lo ui s i a n a Power 25 & Light, which I believe adds up to HUGHES & ASSOCIATES, INC.
42 , I l 1 67.1 percent allocation, which is 2 referred to in the document, I believe, 3 as the initial entitlement amounts, 4 which, in essence, would remain in I 5 effect, assuming the Federal En e rg y 6 Reg ula to r y Commission accepts the 7 document as filed, without any 8 modifications. 9 Upon the Commission 10 accepting that document, there would be 11 additional entitlement percentages to
- 12 become effective in 1991, for each of 13 the four companies in varying l
14 percentages, which I don't recall from 15 m e ra o r y , but in essence, New Orleans la Pubile Service's goes up approximately 17 three and a quarter percentage points 18 to slightly over 20 percent in 1991, 19 Lo ui s ia n a Po we r & Light's goes up 14 20 percent to I believe in the 21 neighborhood of 26 to 27 percent; so 22 approximately the sum of the two i 23 com pa n ie s is about 48 percent. i 24 Arkansas Po we r & Light's i 25 goes up I believe about ten percent to HUGHES & ASSOCIATES, INC.
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43 I a total in the neighborhood of 27 2 percent, and the balance is an 3 increased responsibility of Mississippi 4 Po we r & Light. . 5 The document provides, in 6 essence, that Middle South En e rg y would, 7 up through the years 1991, receive one 8 hundred percent reimbursement of all 9 the ONM expenses, taxes other than 10 income, taxes and decommissioning 11 expunse on the pro rata percentages of 12 the initial entitlement divided by the 13 67.1 percent. 14 The Middle South utilities 15 shareholder would not receive a full 10 return on tne 32.9 percent inventoried 17 amount of Grand Gulf revenue 18 requirements to the extent of 19 approximately $50,000,000.00 a year 20 enrough, as I recall, 1991. The to tal 21 revenue requirements, I have been 22 informed, would be reduced 23 approximately $200,000,000.00 a year 24 from the commercial operation date to 25 about 1991, i li U G h E S & ASSOCIATES, INC.
44 1 In connection with the 2 system agreement case, it was decided 3 that in the offer of settlement, one of 4 the terms be that each of the companies 5 would ag ree to support the initially 6 filed system agreement. 7 0 Is it your understanding 8 that these two aspects of the offer of 9 se t tl em en t are connected in the sense 10 that the offer requires that both be 11 accepted before the offer is com pl e te ? 12 A. In accordance with my 13 understanding of the terms of the 14 agreement, the entire document, in toto, 15 as filed with EERC, must be acceptable 16 in order for the offer to stand. 17 Mr. Fo n t ha m , could a e take 18 a five minute break, please? 19 Q. Sure. I was going to 20 suggest the same thing. 21 (Brief recess.) 22 0Y MR. FONTHAM: 23 0. Let the record show that we 24 are now reconvening the deposition of 25 Mr. John Chavanne. HUGHES & ASSOCIATES, INC.
r 45 1 Mr. Chavanne, what was your, 2 the first that you learned -- before I 3 get into that, I want to ask you a 4 couple of other questions. 5 Do yo u know what the 6 average fuel cost is on the NOPSI 7 system at this time? 8 A. Sir, I would really be 9 9uessing. I think it is in the 10 neighborhood of three to three and a i 11 quarter cents. It may be a little i 12 higher. 13 Q. Do you know what the 14 highest cost fuel that NOPSI uses in 15 its generators that gets burned a fair 16 amount of time is? 17 A. No, sir. It would be a 18 pure guess on my part. 19 Q. Do you know why the Middle 20 South people, in explaining the impact . 2) of the offer of settlement, used two 22 and a half cents as the avoided cost 23 that would be paid to Middle So uth 24 Ene rg y for system fuel that would be 1 25 replaced with that 32 percent? [ HUGHE8 & ASSOCIATES, INC.
46 1 A. No, sir. 2 Q. Do you consider that 3 realistic? 1 4 A. It is beyond my level of ' 5 expertise, sir. I am sure Mr. 6 Cunningham is better qualified than I 7 to address that rate matter. 8 Q. We will save it for Mr. 9 Cunningham. 10 What is the first yo u heard 11 of an offer of settlement in connection 12 with the events that led to this recent 13 offer of settlement? 14 A. I was out of the office on 15 vacation most of the last two weeks of
- 16 December, and to the best of my 17 recollection, I don't recall hearing 18 about any offer of settlement till 1 19 returned to the office on January 2nd, 20 1985. I may have heard about it in 21 early December; if I did, it didn't 22 make a significant impression on me as 23 something that was imminent. And so in 24 all candor, the best I can say is the 25 first I heard about it, where it really hUGHES & ASSOCIATES, INC.
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, 47 I made an impression on me, was when I 2 returned from vacation on January 2nd, 3 1985.
4 Q. Are yo u telling me that yo u 5 never heard of the events in which Mr. 6 Lupberger, at the, some retreat, 7 suddenly had it come into his mind that B chere could be a settlement based on 9 terms somewhat similar to what 10 eventually got adopted, during December?
- 11 A. To the best of my 12 recollection, and I am not hedging by 13 saying to the best of my recollection, 14 1 truthfully never recall hearing Mr.
15 Lupberger's name mentioned in 16 connection with any offer of settlement, 17 until January 2nd, 1985. 18 Q. Knat days were you out of 19 the office in December? 20 A. I don't recall exactly, Mr. 21 Fontham. But it was, in essence, the 22 last two weeks of the year. I did come l 23 in intermittently simply to go through l 24 the mail, I did call in my secretary, 1 25 and as I recall, I think a day or so hUGHES & ASSOCIATES, INC. 1619 Coliseum Squete, New Orleans,_ Lo ui s l a n a 70130
48 I before the late December board meeting, 2 which I believe was December 28th, she 3 did indicate to me that there was some 4 financial data which had been left on 5 my desk in connection with information 6 that possibly was going to be presented 7 to the board, whatever the date of the 8 special board meeting was. 9 But other than a very brief 10 conversation with her, in that regard, 11 I really didn't know any of the 12 particulars. By the time I went in the 13 office, within the next few days, 14 someone nad picked up the data that hac 15 intermittently been left on my desk, so 16 that it as no longer there. 17 So I never had distributed 18 to me a, whatever data was presented at 19 the December 28th, I believe it is, 20 board meeting. 21 0 When did you speak with l 22 your secretary? I 23 A. I believe it was De c em be r 24 the 27th, the day before the board 25 meeting, I believe. It may have been l l HUGHES & ASSOCIATES, INC. m -
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49 j l 1 the morning of the 28th itself; it was 2 one of those two days. 3 But she didn't know 4 anything other than there was a special 5 board meeting, and there was some 6 financial data which she' thought was 7 being presented to the board that had 8 been left on my desk for me to pick up 9 whenever I came in. 10 other than that, she didn't 11 xnow enough to tell me more, and I felt 12 like no one from the office called me 13 and asked for my input, or for me to 14 come into the board meeting. So it was 15 not nothing that in my opinion was 16 being sought. 17 0 Did yo u undertake to try 18 and find out what the board would be 19 talking aoout? 20 A. No, sir. 21 , Q. Did yo u -- was it your 22 understanding at that time that the 23 board would be discussing some sort of 24 offer of settlement, or settlement 25 possibility? HUGHES & ASSOCIATES, INC. l -
. . 50 1 A. I think in a general way, 2 that I knew that there was, I don't 3 know if the offer of settlement term l l
4 was used; but as I said earlier, to my 5 recollection, I think my secretary is 6 the only person I talked to prior to 7 January 2nd. And I knew nothing more, 8 that I recall, other than what I have 9 just explained to you. 10 Q. Yo u did not attend any 11 meetings relating to the December 28th 12 board meeting? 13 A. No, sir, I did not. 14 Q. And your testimony is that 15 no one consulted you concerning the 16 matters that were presented to the 17 board at that time? 18 A. Yes. 19 Q. Yo u attended, then, no 20 staff meetings in December relating to ! 21 that offer of settlement, to your 1 22 recollection?- 23 A. Right. To my recollection, l 24 I believe I attended every staff 1 25 meeting held in December up till around HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
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. l 1 the 18th or 19th. I think the last I 2 attended was a Wednesday morning one of 3 whatever the 18th, 19th time frame came 4 in.
5 Whether there was a staff 6 meeting the following week that I 7 missed, I am not sure. But I attended 8 all staff meetings through the first 9 three weeks of December. 10 Q. During any of those staff 11 meetings, was the issue of a po te n t i al 12 settlement ever mentioned? 13 A. I do not believe so, sir. 14 I certainly do not recall such. I feel 15 confident that had it been, it 16 certainly was not done in a way that 17 impressed me as something that was IS about to occur, or something that I 19 should make special note of, and find 20 out more about. 21 So if anyone's notes 22 indicate enat it was mentioned, I think 23 they were only indicated very 24 peripherally, because I have no , 25 recollection of it. 1 HUGHES & . ASSOCIATES, INC. ~ 1619 Coliseum Seuare o New O r lSL)n s; 1068060@O ? @ B l@- __.
52 1 Q. Do you recall whether the 2 Middle South cases, at the FERC, were 3 discussed in those meetings? l 4 A. Generally we discussed 5 those cases, at least briefly, at each 6 meeting, to the extent one of us will 7 ask our general counsel, Andrew Carter, 8 what is the prognostication as to when l 9 a decision is going to come out on 10 either of the cases. But other than 11 that, I don't believe there was any 12 specific new strategy formulated of 13 which I was aware. 14 Q. Were you aware of any 15 discussion of any inside information l 16 concerning the time within which the i l 17 FERC, or the administrative law j udg e 18 might reach a decision in those cases? 19 A. I am not aware of any 20 inside information. I think that from 21 time to time, principally, I believe 22 Mr. Carter, as I recall, wo uld hazard 23 an opinion as to when a decision would j 24 be forthcoming, as I recall, I think as 25 early as October. HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
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1 And Andy Carter thought 2 that a decision would be forthcoming 3 imminently. But other than Andy l 4 stating just his best feel for the case, 5 I have no knowiedge whatsoever of any 1 1 6 inside information as to a decision l 7 oeing imminent. 8 I would like, Mr. Fontham, 9 to add, for the attorneys present, a 10 change that Mr. Cain made some several 11 weeks ago in his staff meetings, which 12 may be of interest; namely, there have 13 oeen a number of management changes 14 occurred at LP&L and NOPSI since 15 November 1st. I 16 And in connection with that, 17 Mr. Cain now has two staffs. He has 18 the senior staff, which in essence l 19 consists of a smaller number of people, i 20 primarily his executive vice president 21 and some of the senior vice presidents 22 with wnom -- 23 C. Who is the executive vice 24 president? 25 A. F. r . Gerald Mc Le nd o n . HUGHES & ASSOCIATES, INC.
. . 54 1 Q. Okay. Who are the senior 2 vice presidents on the senior stsff.
3 A. Mike Leddick, John Cordaro, 4 Mal bc Le tc hie , Mack Hurstell, and Dick 5 Murlowski. l l 6 In addition to that staff, 7 in which time Mr. Cain indicated there 6 would be, from time to time, issues of 9 which he would want to discuss with a 10 smaller number of people than what he 11 refers to as his senior staff, he has 12 an executive staff which consists of 13 several other individuals, of which I 14 am included in the number. 15 It was possible that some 16 of the issues that you have addressed 17 to me may have been discussed at the l 18 senior staff level, as contrasted with 19 the executive staff level. I have no 20 knowiedge of that, but it is po s s ibl e 21 that may have been done. 22 Q. Who else is on the 23 executive staff? 24 A. In addition to the members 25 of the senior staff, Bill Nelson, Bill HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
55 1 e 1 Talbot, Andy Carter, Bill Peperone, and 2 myself; I believe that includes everyone . 3 Q. Where does Cunningham fit 4 in? ! 5 A. I am sorry, Shelton 6 Cunningham is on the executive staff. 7 Q. All right, you said that -- i 8 is John Erwin on either of these staffs? 9 A. No. John Erwin is now a 1G senior vice president and consultant 11 for both companies, but he is no longer 12 on the executive staff. 13 G. What did yo u learn on 14 January 2nd; or what happened on 15 January 2nd? 16 A. At tne outset, I would like 17 to empnasize that what I am relating is 18 my recollection of Mr. Cain's 19 recollection. I was not present at any 20 of the meetings between him and Mr. l l 21 Le wi s about which certain matters were 22 oecided, along with other CEOs; but at 23 that meeting, in essence, Mr. Cain -- 24 0. What meeting? 25 A. At the January 2nd meeting HUGHES & ASSOCIATES, INC. SuiutA/st
a .u . . 56 i
. I 1 you referred to, sir.
2 Q. There was a meeting on 3 January 2nd? 4 A. Sir, would yo u repeat your S question, please. 6 Q. I said what happened on 7 January 2nd. Are you referring to a e staff .n e e t i n g on January 2nd? 9 A. Yes. 10 Q. Who was -- 11 A. There was an executive 12 staff meeting of Mr. Cain, of all of 13 the individuals I have previously 14 referred to. 15 Q. What time did that occur? r 16 A. At 8:00 A.M.. Or 8:30, I 17 believe. 18 Q. Ho w were you notified that 19 this staff meeting was going to take 20 place? 21 A. It had previously been 22 established a few weeks ago, a few 23 weeks prior to that. We have routine 24 weekly staff meetings, and it had been 25 established two or three weeks ago, as m HUGHES & ASSOCIATES, INC.
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. . 57 I a normal staff meeting.
2 Q. Tell me what happened in 3 the staff meeting. 4 A. Sir, could you please be 5 more specific as to -- 6 Q. You said that Cain had some 7 recollections? S A. Mr. Cain started off the 9 staff meeting by informing the staff 10 that there would be a special LP&L 11 board meeting on the next day, January 12 3rd, 1985, to discuss an offer of 13 settlement. 14 Q. Did he describe the offer 15 of settlement at that time? 16 A. As I recall, in general 17 terms, as I indicated earlier, I had 18 been out for a few weeks; and I think 19 most of the other individuals on the 20 staff had already been involved in 21 various discussions, and/or were far 22 more familiar than 1, who in essence 23 was walking in in a new region in which 24 I had not heard about previously. 25 There was a very broad
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. . 58 1 outline presented. .
2 Q. Why did Mr. Cain say he was 3 calling a board meeting? 4 A. It is my recollection, sir, 5 that he indicated that Mr. Lewis had 6 asked him to convene a special board 7 meeting. 8 Q. Did Mr. Cain indicate that 9 he wanted to call this board meeting, 10 or that he was being pressured to do so? 11 A. Sir, I am not sure if he 12 referred to the fact that he was 13 pressured to call the special boaro 14 meeting as such. As I mentioned 15 earlier, there was another special 16 Loard meeting on December 28th, and I i 17 truthfully don't know if as a result of 18 that board meeting, whether the board 19 had directed Mr. Cain to get back to 20 him to discuss matters more or not. 21 I don't recall Mr. Cain 22 saying words to the effect that he was 23 pressured to call the board meeting. 24 Q. When yo u said Mr. Lewis 25 asked Mr. Cain to call a board meeting, hUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleansp. Lo u i s i a n a 7@88$
59 I are you referring to Floyd Lewis, the 2 chief executive officer of the system? 3 A. Yes. 4 Q. Did Mr. Cain, during the 5 course of this meeting, make the 6 statement that he might be asked to 7 resign, by Mr. Lewis? 8 A. There was a statement made 9 by Mr. Cain to the effect that he may 10 be asked to resign, yes, sir. Whether 11 he added by Mr. Lewis, I don't recall 12 exactly. But -- 13 Q. What was your understanding l 14 of who would ask Mr. Cain to resign, 15 during the course of that staff meeting? 16 A. I had the impression that 17 if anyone would ask Mr. Cain to resign, 18 it would be Mr. Lewis. 19 Q. Did Mr. Cain begin to cry 20 in that meeting? 21 A. I would say he became 22 visibly upset, and his voice choked. I 23 am not sure whether he cried as such, 24 but he was visibly upset. 25 C. Was this -- when did he HUGHES & ASSOCIATES, INC.
60 1 become upset? What wa s he discussing? 2 Was he discussing the resignation, the* 3 possibility of being asked to resign? 4 A. He had indicated that in 5 essence, as I recall, that he was 6 expected to have the board of directors, 7 of both com pa n i e s , approve the offer of 8 settlement. 9 Q. has it your impression that 10 this was something he did not believe 11 to be in the best interest of the 12 companies? 13 A. Yes. i 14 Q. Was it your understanding 15 that he wa s upset because he was being, 16 he was expected to do this? 17 A. Yes. 18 Q. has it your impression that 19 he was expected to do this by Mr. Lewis? 20 A. Yes. That was the l
; 21 im pr e s s io n he gave the members of his 22 staff. That was his interpretation of 23 Mr. Lewis' communications.
l l 24 Q. What happened when Mr. 25 Cain's voice choked, and he became l HUGHES & ASSOCIATES, INC.
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. . 61 I emotional?
2 A. It was suggested by one of 3 the members present that we take a 4 brief recess. 5 Q. And what happened then? -- 6 did the staff leave the room? -- did 7 Mr. Cain leave the room? a 8 A. As I recall, I think 9 several of us j us t got up and got a cup 10 of coffee, i ncl ud i ng Mr. Cain, and we 11 sat down. 12 It wasn't but probably less 13 than a half a minute to a minute. 14 0 What outline was presented 15 of the offer of the settlement by Mr. 16 Cain? 17 A. As I referred to in an 18 earlier question, Mr. k o g. t h a m , as I 19 recall, very, very brief outline, 20 because I believe most of the 21 participants at that meeting had been 22 involved in other meetings during the 23 Christmas holidays and were familiar , 24 with it. I 25 but as I recall, Mr. Cain I l HUGHES & ASSOCIATES, INC. 1619 Coliseum Smuaren New Orlea@On SG810iOQO 9@RM@
, . 62 I began by saying that a couple of 2 advantages to LP&L and NOPSI included 3 the fact that AP&L would, upon the 4 filing of the offer of settlement, make 5 a pro rata retroactive settlement of 6 the advance purchase power payments, 7 the 12 and a half million dollars a 8 month that the other three operating 9 companies in the system had been 10 providing to Middle South Energy since j
11 January of 1984, on the pro rata of the ! 12 initial entitlement, namely Arkansas 13 would be entitled to 17.1, 67.1 of the 14 cumulative 12 and a half million dollar 15 amounts, which would have been over a 16 13-month period, which by a calculation 17 I made, would have pr od uc ed a benefit 18 of some several million dollars e: a s h 19 flow immediate benefit to Public 20 Service, and I believe about a 21 $28,000,000.00 cash flow benefit to 22 Lo ui s i a n a Po we r & Light Company. 23 Q. Yo u made that calculation 24 in the meeting? 25 A. In a meeting. Whether it I HUGHES & ASSOCIATES, INC. . 1619 Coliseum Square, . New Orleansp. _Lo ui s i a n a 7@8@@
. . 63 I was that meeting or a subsequent 2 meeting the next day, but I remember 3 leaning over to Mal .McLetchie with my 4 calculation and asking Mal if my logic 5 in calculation were correct, and he 6 concurred with the calculation.
7 Q. This was explained as an 8 agreement to accept the pro rata 9 responsibility upon filing, rather than 10 upon approval, of the offer of the 11 settlement? 12 A. At that time, Mr. Cain made 13 the statement that we would receive 14 cash later that week. Upon filing. 15 Q. Did he say unoer what 16 ogreement, or pursuant to what l 17 discussions he had participated in to t l 18 obtain that understanding? ! 19 A. I don't -- I don't recall 20 the specifics. To the best of my l 21 recollection, that provision was never 22 intended to be a part of the official 23 filed offer of settlement. A 24 There may or may not have - l 25 been some discussion of a side hUGHES & ASSOCIATES, INC. ' 1619 Coliseum Square, Now OrleanOn Re @ A n R amn R&AAR
. . 64 I agreement type document. I don't 2 recall whether it was going to be 3 written or oral; but from my 4 understanding, on that occasion, I had 5 no doubt but that the parties had 6 agreed to it, and that it would be 7 something that Lo u i s i a n a Power & Light, 8 and Public Service, could put forward 9 as a cash flow benefit upon the, 10 agreeing to the offer of settlement. 11 A second po in t that Mr. 12 Cain mentioned was that AP&L had agreed 13 in a nonenforcible, from a legal 14 perspective, agreed to give its best 15 faith efforts in providing, possibly 16 providing some White Bluff energy to 17 LP&L during the 1991-1992 time frame, 18 when I understand some of the Texaco 19 gas contract will be expiring. 20 It was not described as 21 legally binding, but something that was 22 discussed, I understand, by the CEOs, 23 probably in a meeting on December 31st. 24 0 What do you mean probably 25 at a meeting on December 31st? HUGHES & ASSOCIATES, INC. . 1619 Coliseum Smuare o New Orleans, Lo u i s i a n a 7013@
. . 65 1 A. To the best of my 2 recollection, that was the time frame 3 that Mr. Cain indicated at the staff 4 meeting that these various advantages 5 were discussed by the CEOs. 6 0 Where did that meeting 7 occur? 8 A. In Little Ro c k , Arkansas. 9 Could I continue on answering your 10 previous question, on advantages that 11 Mr. Cain propounded when he initiated 12 the discussion on the January 2nd 13 meeting concerning the offer of 14 settlement. 15 He also indicated that the 16 financial community was quite concerned 17 about the operating com pa n ie s taking 18 separate positions, and that any coming 19 together in an offer of settlement 20 could have positive impact on the 21 financial community, where the system 22 would need to borrow substantial sums 23 of money in the next few years. 24 And as I recall, the last 25 po in t that was mentioned, at that time, HUGHES & ASSOCIATES, INC. 1619_ Coliseum S Ru a r e n New @B10090n ROWAOiOQO W@A2@
66 I was the po te n t i al substantial negative 2 impact, both on Arkansas Po we r & Light, 3 and on the Middle So u th System, if 4 Reynolds Aluminum left the Arkansas 5 service area and pr od uc ed a substantial 6 loss in revenues from Arkansas, which 7 would have to be made up possibly by 8 the system companies. 9 Q. Did Mr. Cain, in outlining 10 these things, did he discuss in any 11 general terms, or whatever, the actual 12 terms of the offer of settlement? 13 A. I don't recall it as such, 14 Mr. Fontham. 15 As I mentioned, I believe 16 that the key people on his staff, whose i 17 opinion he would rely on primarily, had 18 been directly involved during the 19 Christmas holiday season, when I was 20 out of the office. But to my 21 recollection, if there was any 22 discussion, it was of a very broad 23 nature, which I don't recall any 24 specifics of. 25 Q. Would -- well, was it your HUGHES & ASSOCIATES, INC. fl @ R O @ car A nn
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'l I 1 impression that Mr. Cain thought these 2 advantages outweighed the disadvantages 3 to LP&L and NOPSI of the offer of the l 4 settlement. l 5 A. I did not get that 6 impression. 7 Q. Was there any discussion of 8 disaavantages in this meeting? 9 A. No , sir. 10 Q. Was it -- was Mr. Cain, in 11 essence, relating something that had 12 been described to him as advantages, or 13 what? 14 A. I am not sure.who indicated 15 to Mr. Cain all of those factors. I do 16 recall him mentioning, I believe Ed 17 Lupberger and Al Wright, had brought 18 over some data that indicated some of 19 the advantages; and the ones that stick 20 out in my mind, that I think he 21 referred to in that connection, was the 22 financial community and the Re ynold s 23 Aluminum reference. 24 Q. Was it y o u r' impression that 25 Mr. Cain was hoping the board would 1 hUGHES & ASSOCIATES, INC. 1619 Coliseum S6uare o New _@?AOanOn ReulsiO@O TMAM@
. . 68 I approve this offer, or disapprove it?
2 A. I think, sir, that Mr. Cain 3 was in a Catch 22 situation, where I 4 personally believe on one hand he was 5 not totally convinced that the offer of 6 settlement was something that he wished 7 to espouse acceptance by the board; and 8 on the other hand, I believe he was 9 to rn by the feeling that if he did not 10 have the offer of settlement accepted 11 at the board meeting, that he may be 12 asked to resign. 13 Q. Mr. Chavanne, did Mr. Cain 14 and the members of the staff aiscuss 15 contacting board members, in that staff 16 meeting? 17 A. Yes. 1C Q. Did Mr. Cain and the 19 members of the board, or members of the 20 staff, any of the members of the staff, 21 discuss resignations by other staff 22 members, if Mr. Cain resigned or were 23 asked to resign? 24 A. I would like to explain l l 25 first the context in which the matter l HUGHES & ASSOCIATES, INC. 1619 Coliseum Souare o Now Orleans n Lo u i s i a n a 70130
69 1 you indicate arose, Mr. Fo n t ha m . 2 Q. Well, answer the question; 3 and then you can e x pl a in anything you 4 want. , l 5 A. There was a discussion of i 6 the potential of other resignations 7 being requested. 8 Q. All right. Now explain. 9 A. From my perception, Mr. 10 Cain presented, to his executive staff, 11 the situation in which he had been 12 placed, and asked for advice, from his 13 executives -- 14 Q. OKay, now, when you say 15 situation, do you mean the 16 Catch 22 situation? 17 A. Yes, sir. 18 Q. Was it -- I mean your 19 impression of the Catch 22 situation is 20 based on statements made by Mr. Cain? l 21 A. Yes, sir. l l 22 Q. All right. Go on. 23 A. Mr. Fontham, I would 24 appreciate it if you wouldn't interrupt 25 my train of t ho ug h t , because it is hUGHES & ASSOCIATES, INC. 1_6 A O CA1_i s e Mrm Memnreon mnn cqRJLo nfigh_JVtmAnArviuLSt9UU1C-
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1 difficult for me to remember where I 2 left off -- 3 MR. ANDERSON: 4 That's all right. 5 Let's let Mr. Fontham ask you a 6 question. 7 bY MR. FONTHAM: 8 0 You were going to explain 9 the context, and I think you said there 10 was advice sought about Mr. Cain's 11 situation. 12 A. Mr. Cain had asked his 13 staff for any advice that could be 14 offered as to how he should proceed at 15 the board meeting of the next day, 16 January 3rd. 17 And in that connection, as 18 I recall, the first person to speak was 19 Mike Leddick, senior vice president of 20 nuclear,. who advised Mr. Cain that he 21 felt he should follow his conscience, 22 that he owed the board the 23 responsibility of giving him his frank 1 24 opinion. 25 Subject to Mr. Le d d i c k 's i HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
71 l 1 statement. ) l 2 Q. What was yo ur understanding 3 of what thet frank opinion was? 4 A. It was my understanding 5 that Mr. Cain would have preferred not i 6 to have endorsed the offer of 7 settlement. S Q. Okay. After Mr. Le d d ic k 9 said follow your conscience? 10 A. I don't remember the exact 11 sequence. There were several people 12 that said various things, but one 13 member of tne staff suggested that 14 perhaps it would be more appropriate 15 for Mr. Lewis and Mr. Lupberger to make 16 the presentation, and for Mr. Cain to 17 in essence remain silent at the board 18 meeting the next day. 19 In support for the position 20 that Mr. Cain felt that he was in, I 21 indicated that in my opinion, what Mr. 22 Leddick had advised was the best advice 23 anyone could give him, and that if he 24 were forced to resign for giving his 25 frank opinion, and for standing on what 1 huGHES & ASSOCIATES, INC. _ __ __ _ 1619_ _ Ce l i. s O Mca f3 -
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I he felt was a proper principal in this 2 matter, that I would be very proud to 3 be fired, or to resign with him, for 4 standing on principals. 5 As a result of this general 6 discussion -- 7 Q. Did other members of this 8 staff, in this staff meeting, make that 9 same -- 10 A. As I recall, Mr. Le d d ic k 11 endorsed the concept of standing behind 12 Mr. Cain for standing behind principals; 13 yes, sir. 14 Q. Did anyone else in that 15 staff meeting do that? 16 A. Sir, I don't recall. It 17 was in that context where advice had 18 been sought that someone -- and I oon't 19 recall whether it was Mr. Cain or 20 another member present -- developed the l 21 idea that it may be worthwhile for 22 certain board members to be contacted 23 to seek their support in opposing the 24 offer of settlement. 25 Q. Did Mr. Cain say that he li U G H E S & ASSOCIATES, INC. 1619 Coliseum Sauaren New @glea@On RAM 1000fdO 911 C
73 1 couldn't contact the board, or that he 2 was informed by Mr. Lewis not to 3 contact the board members to oppose the 4 offer? 5 A. That's my understanding. 6 Q. I mean do you recall that 7 from that meeting, him saying that? 8 A. Yes, sir. 9 Q. What did he say? 10 A. Sir, it was my , 11 understanding that he had been directed 12 not to attempt to contact LPEL-NOPSI 13 board members in an effort to dissuade 14 them from voting for the offer of 15 settlement. 16 Q. By whom? 17 A. by Fl o yd Lewis. 18 Q. has there a statement made 19 in this staff meeting that floyd Lewis 20 expected Mr. Cain to get the offer 21 passed, get the offer accepted by the 22 board? 23 A. That was my understanding 24 of what Mr. Cain was saying. 25 Q. hell, then, did the staff,
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. . 74 1 in essence, agree to have staff members 2 contact the board members, so Mr. Cain 3 would not have to?
4 A. Sir, every member of the 2 5 staff volunteered to make calls to 6 assist in an effort to have t,h e offer 7 of settlement defeated at the LP&L-NOPSI 8 board meeting, despite, I might add, 9 Mr. Cain's advanced fo rewa r ning that 10 any such person that made such calls l' 1 may be terminated. 12 Q. May be terminated by Mr. 13 Lewis? 14 A. That's my recollection. 15 Q. Mr. Cain was not saying he 16 would terminate the people; was he? 17 A. No, sir; he was not. 18 Q. Was he in favor of having 19 these staff members contact the boaed? 20 A. He did not put any pressure 21 on anyone. I would say he was in favor 22 of, but wish to emphasize, that he 23 forewarned everyone of the risk they 1 24 may be taking in so doing; and again, 25 wish to emphasize that in no way, shape HUGHES & ASSOCIATES, INC. , , 1619 Coliseum S6uaren New Orleansn ROuisia@O 7@AM@ l
75 1 or form, did Mr. Cain attempt to put l 2 any pressure on anyone to make such a 1 3 call. i i I 4 Q. Did the -- were the 5 assignments made while the staff l 6 meeting was still taking place? 7 A. I wouldn't characterize 3 them, sir, as assignments. As I 9 mentioned before, everyone in that room 10 volunteered to make phone calls. From 11 the volunteers, Mr. Cain did let the 12 respective ind iv id ua l s know who it 13 would be permissible, from his 14 viewpoint, to contact. 15 Q. Was that while the staff 16 meeting was still occurring? 17 A. Yes, sir. 18 Q. To your recollection, was 19 everybody still in that staff meeting i 20 when that occurred? 21 A. Yes, sir. 22 Q. Was Mr. Huratell in that 23 staff meeting when that occurred? 24 A. Sir, typically in a staff 25 meeting, several people will walk in J HUGHES & ASSOCIATES, INC. ! 8 DAfl_SnRATV1mr1 Jlc1m/Vtch_R1nr1_l&z N i
76 I and out from time to time, getting 2 phone calls and messages and all. And 3 I can't say with specificity that Mr. 4 Hurstell was there. I would say the 5 probability was high that he was there. 6 But I should emphasize again that it is 7 not un us ua l for any of us to leave from 8 time to time to take urgent phone 9 messages, or for whatever else. 10 Q. To your recollection, did 11 you leave the staff meeting at any time 12 except for the, when it was briefly 13 adjourned when Mr. Cain became upset? 14 A. I don't recall it, sir. 15 C. What were the I use the 16 word assignments -- what were the 17 decisions as to who would call which 18 board members? 19 A. I don't recall all of them, 20 and I would stand corrected by anyone 21 else's testimony that would contradict 22 this; but as I recall, I specifically 23 remember that Andy Carter ag reed to 24 call Father Carter; as I recall, -- 25 C. Are they related? HUGHES & ASSOCIATES, INC. , 1619 Coliseum m um e -
. o , 77 1 A. Sir, I really don't know.
2 Q. Okay. 3 A. I believe that Mack 4 Hurstell agreed to call Brooke Duncan; 5 Gerald McLendon, I believe, was calling 6 a couple of directors; the only one I 7 recall wa s Jack hyatt. I believe John 8 Cordaro was contacting one or two 9 directors, but I don't recall specific 10 names as to who he would contact. 11 but I do wish to emphasize 12 that myself, and every other person in 13 that room, in my opinion, willingly 14 would have made any or all of those 15 calls ourselves. 16 Q. You didn't make any calls 17 yourself? 18 A. I volunteered to, sir, but 19 no, sir, I did not. But I might add 20 that I accept full responsibility and 21 would have gladly made all of the calls 22 .n y s e l f . l 23 Q. Ho w was the decision made 24 as to who would call who; did Mr. Cain 25 make those decisions? 1 1 HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
, ~. 78 1 A. Mr. Cain made the decision, 2 yes.
3 Q. Was it discussed in the 4 staff meeting that the board members 5 should be informed that even if Mr. 6 Cain supported the offer in the board 7 meeting, that that was not really his 8 true belief? 9 A. I think that wa s the 10 overall message; yes, sir. 11 MR. ANDERSON: 12 Let me interrupt just 13 a minute so that your answers are 14 responsive to the questions, Mr. 15 Chavanne. 16 Notwithstanding your l 17 obvious desire to be candid about tnis, , 18 we can't rely on what yo ur impression 19 might have been. he have to rely on 20 what wa s either said to you or what you , 21 have your own personal knowledge of. 22 hithout intending to 23 restrict or otherwise alter your 24 answers, I would ask that you keep 25 tnose facts in ni i n d . HUGHES & ASSOCIATES, INC. 1619 C o l i s e u m _ S Glu a r e_ n Now @ r( 10 A rA nn _fL41mfLO Ana/L_5LaAJLM- _
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e ; 79 ! l 1 A. I will say unqualifiedly, 2 that Mr. Cain indicated to each of the 3 people that the message to give to the 4 directors contacted was not to listen 5 to .his words endorsing the offer of 6 settlement at the board meeting, but to 7 oppose it. 8 BY MR. FONTHAM: f 9 Q. Did Mr. Cain say that he 10 planned to give -- to give lip support 11 for the offer of settlement in the 12 neeting the next day, to satisfy Mr. 13 Lewis? 1 4' A. I don't recall him saying i 15 that at all; no, sir. 16 Q. Yo u said that they should 17 not listen to what he says. 18 A. Another alternative may 19 havv been, sir, for him to remain 20 silent. 21 I don't recall him saying 22 at his staff meeting of January 2nd, 23 whether he was going to actively 24 endorse the plan, or whether he was to 25 remain silent. So I -- HUGHES & ASSOCIATES, INC.
. .. 80 1 Q. When Mr. Leddick said to i
2 Mr. Cain: Follow your conscience, was ) 3 that -- and yo u endorsed that -- were 4 4 you saying that he should o ppo s e the 5 offer of settlement in the board 6 meeting? 7 A. The framework in which Mr. 8 Leddick made the comment was that as 9 CEO, Mr. Cain had a responsibility to 10 the board to give them whatever his r 11 frank opinion was. And to that extent, 12 I think that the board does have the 13 right to hear a CEO's frank opinion. 14 C. Did Mr. Cain say that the l 15 reason he mig h t be asked to resign 16 wo uld be if the board did not pass the 17 proposed settlement? IS A. That was the nature of the 19 comment, to my understanding, yes, sir. 20 0 Did Mr. Cain when these 21 things were told to him by Mr. Lewis? 22 A. Sir, I don't recall if he 23 did or did no t . 24 I -- I don't recall whether 25 he did or did not. hUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a _70130 _
a .
. '. 81 1 Q. Did Mr. Cain say that he 2 had met with Mr. Lew1s in the days 3 preceding this staff meeting?
4 A. He mentioned that he had 5 accompanied Mr. Lewis, I believe on the 6 afternoon of December 31st, to a visit 7 with the other CEOs in Li t tl e Rock, 8 Arkansas. 9 Q. To your knowledge, were 10 these directors called by the members 11 of the staff who agreed to maxe those 12 calls? 13 A. Sir, I have no personal 14 knowledge that they.were all made. I 15 have no reason to douot but that they 16 were. i 17 Q. Was there any further staff 18 meeting, in which any reports were e 19 given, about calls made to directors? 20 A. No, sir. None of which I 21 participated. 22 Q. Was Mr. Andrew Carter in l l l 23 this meeting? 24 A. The meeting of January 2nd, 25 yes, sir. 1 l
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1619 Coliseum SMulrem DOW @ rt l o a Q O n R981OiO@O..?@8R@ _
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1 1 Q. Did Mr. Andrew Carter make , 2 the statement that Jerry Jackson had 3 prepared the offer of settlement? -- 4 do you know who Jerry Jackson is? 5 A. Yes, sir. 6 I am not sure that Mr. 7 Carter made the statement that Jerry 8 Jackson prepared the offer of 9 settlement. I think there was probably 10 a more general comment to the extent 11 that it was a document which appeared 12 to have substantial input from Jerry 13 Jackson. 14 I am not sure ne said it 15 was written by Jerry Jackson, anything 16 as definitive as that. 17 0 Was Mr. Anoerson in tnat 18 meeting? 19 A. No, sir. 20 In that regard, I may have 21 omitted Mr. Carter's name earlier when 22 mentioning members of Mr. Cain's 23 executive staff; if I did, Andrew 24 Carter should be listed to that. He 25 does attend the weekly executive staff HUGHES & ASSOCIATES, INC.. 1619 Coliseum Square, New Orleans a Lo u i s i a n a_ 7 013 0__
. 1 83 l 1
1 meetings. 2 Q. Was there any discussion, 3 in that meeting, of the effect on the 4 FERC decision date, if the offer of l i 5 settlement was passed, or was filed? 6 A. Yes, sir. 7 Q. What was that discussion? 8 A. As I recall it, there was a 9 general statement made, that it would 10 probably delay a decision from FERC by 11 a certain period of time, and I forget 12 the particulars. It wa s either two to 13 four months, or something to that 14 effect. 15 Q. hho made that statement? 16 A. I believe Andy Carter, but 17 I could stand corrected on that. 18 Q. has this a discussion of 19 advantages and disadvantages of the 20 offer, or what? 21 A. No, sir. It has just a 22 general comment made somewhere during 23 the meeting. 24 Q. Did Mr. Cain arrange for 25 any further staff meeting in this staff ! O iiUGHES & ASSOCIATES, INC. 1619_ _ Co l n Do mra 2
o . 84 1 meeting? 2 A. I don't recall as such, j l 3 because typically we meet every Monday 4 morning of every week of the month, 5 except the week of the monthly board 6 meetings, in which case we meet 7 hednescay of that week. I don't recall 8 him setting a meeting. There typically 9 would have been one the following ' 10 Monday, which was January 7th, at which 11 time there was a staff meeting held. 12 g. Did Mr. Cain say at any 13 time during the course of this meeting , 14 that he had th r o wn up? 15 A. I don't recall any such 16 statement, sir. 17 Q. Do yo u recall any statement 18 made by him at any time in the course 19 of that day, or the following day, that 20 he had had a nervous stomach and thrown 21 up? 22- A. No, sir, I do not. 23 Q. Did anyone else make the 24 statement to yo u that Mr. Cain had 25 thrown up? hUGHES & ASSOCIATES, INC. 1619 Coliseum S q u a r_ e , New O r 1 e a n s g _ _ L o u i _s _i a @ O _1@2 7)L_
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1 A. Sir, I don't recall any 2 such statement. l 3 Q. Yo u said earlier that Mr. 4 Cain had made the statement that on ' 5 filing the offer of settlement, that a 6 payment, or based on the fact that it 7 would be filed, a payment would be made 8 within a short time period of money by 9 AP&L to LP&L and NCPSI? 10 A. Yes, sir. 11 Q. Is it your und e r s t a sid i n g 12 that is what is in the agreement, as 13 filed? 14 A. Sir, it was my 15 understanding it was never intendeo to 16 be in the agreement, per se. 17 Q. Is it your understanding 18 that is still AP&L's obligation? 19 A. No , sir. 20 Q. Do you have an 21 understanding, or have you had 22 discussions as to ho w it stopped being 23 AP&L'r. obligation? 24 A. It is my understanding that 25 sometime subsequent to the morning l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New _ Orleans, Lo u i s i a n a .7 013 0
, . 66 1 meeting of January 2nd, between that 2 time frame and 7:30 A.M., or 3 thereabouts, January 4th, that the AP&L 4 representatives disagreed with that 5 understanding, and indicated that they 6 had only obligated themselves to make 7 those pa ym en t s upon acceptance by the 8 Commission of the flied offer of 9 settlement.
10 c. Who told you that? 11 A. I believe Mal Mc Le tc h i e was 12 the person who told me that. 13 Q. Do you know if he j 14 participated in those discussions? 15 A. I know that he was a member 16 of the company's representatives 17 attending those sessions. Wnether that le aspect came up during those meetings, 19 or whether that was something that the 20 CEOs talked about, I have no personal 21 knowiedge. . 22 Q. Did yo u meet with Malcolm 23 Hurstell last night? 24 A. No, sir, I did not. 25 Q. Was there a meeting last hUGHES & ASSOCIATES, INC. - 1619 Coliseum Square, New O r_ l e a n s o Lo u i s i a n a 7 @ B @@
, . 87 1 night with Malcolm Hurstell?
2 A. No, sir; there was not. 3 Q. Did you discuss with your 4 counsel what occurred in Malcolm 5 Huratell's deposition? 6 A. I did not ask counsel 7 anything about what occurred during Mr. 8 !! u r s t e l l ' s deposition. 9 Counsel and I did spend 10 approximately an hour together, at 11 which time he informed me of potential 12 areas of interest tnat I may be asked
- 13 to address today.
14 There was no way, shape or 15 form that I have been advised to do 16 anything other than to tell the whole 17 truth, which is certainly what I am 18 doing here today. 19 Q. I am going to move on to 20 another subject. Perhaps we could take 21 a short break. 22 A. Could we take a break. 23 ( Brief recess. ). 24 BY MR. FONTHAM: 25 Q. Fo r the record, this is the i . HUGHES & . ASSOCIATES, INC. I 1619 Coliseum Square, _ New Orleans, Lo u i s i a n a 70130
, . 88 1 continuation of the deposition of Mr.
2 2 John Chavanne. 3 hr. Chavanne, were you 4 assigned to do anything at all at that 5 staff meeting with respect to the board 6 meeting the following day? 7 A. No , sir. 8 Q. What was your next 9 o p po r t un i ty to discuss or participate 10 in a discussion concerning the offer of 11 settlement? 12 A. As I recall, it was not 13 till the afternoon of the next day, 14 January 3rd, 1985. 15 C. Were you present at the 16 board meeting of the LP&L and NOPSI 17 boards? 18 A. No, sir. 19 Q. hould you ordinarily be
- 20 present at that board meeting?
i 21 A. Prior to Mr. Mc Le tc hie 22 being named senior vice president of 23 finance, I had attended board meetings. l 24 But it was no longer necessary 25 subsequent to him assuming that i HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
. .. 1 89 1 po si tio n .
2 So no, starting in December, 3 it would not have been appropriate for 4 me to have attended the board meetings. 5 O. What happened on the 6 afternoon of December 3rd, I mean 7 January 3rd? 8 A. There was a meeting of 9 several members of Mr. Cain's staff and 10 several members of John Cordaro's area 11 of responsibility, to discuss primarily 12 personal contacts to be made the next 13 day, January 4th, upon the filing of 14 the offer of settlement. 15 c. What time did tnis meeting 16 occur? 17 A. As I recall, it was in the 18 3:00 to 4:00 time frame. 19 Q. Who .a s present? 20 A. To the best of my 21 recollection, Mr. Mc Le nd o n , Mr. Cordaro, 22 I believe Richard Guthrie, hob Redhead, 23 I really don't recall the others. I 24 believe there were others in the room. 25 It would be more of a guesstimate on my l l HUGHES & ASSCCIA1ES, INC. l 1 6 1_9 C o 1 i s e u m S t5tu J_rh _ N e w @ rl 1 O o rd a n M 6 0 0 8 09 0 _ RSA 3 L _
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1 part, but I think -- I am fairly 2 certain Mr. Cunningham was at that 3 meeting also. 4 Q. has Mr. Cain at the meeting? 5 A. He was not at the meeting 6 for 1 bout an hour and a half, or 2:00 7 o' clock, as I recall, he was attending S c.icdle South Utilities board meeting, 9 wnich was ongoing at t r. a t time. 10 Q. Did he ever come into this 11 meeting? 12 A. Yes, sir. I believe around 13 0:00 or so he came in. 14 G. rnat was discussed at that 15 me. ting? 16 A. As I previously mentioned, 17 primarily who to contact the following 18 day, and who would make the contacts. 19 Q. Hew did you learn of the 20 board's action? 21 A. I really don't recall who 22 told me. It was -- as I recall, I 23 believe Dick Murlowski and I went to 24 lunch the day of the board meeting, 25 January 3rd; I believe that Gerald 110 G H E S & ASSOCIATES, I li c . 1619 Coliseum Squareo New Orleans, Lo u i s i a n a 7013C
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1 Mc Le nd o n had told Dick Murlowski right 2 before we went to lunch, and I think 3 Dick told me. 4 Q. What did he tell you 5 happened in the board meeting? 6 A. As I recall, Mr. Fontham, 4 7 s i m pl y that both boards had approved 8 the offer of settlement. 9 c. Was there a discussion of 10 the vote? 11 A. No, sir. 12 Q. Was there a discussion of 13 what action, if any, Mr. Cain had taken 14 during the board meeting? 15 A. No, sir. 16 Q. In the staff meeting that 17 occurred later, prior to Mr. Cain's 18 arrival, was there a discussion of 19 either of those matters? 20 A. Could you repeat the two 21 matters? -- there was no discussion 22 concerning the vote, I am sure. What 23 was the second matter? 24 C. Mr. Cain's statements 25 during the meeting. HUGHES & ASSOCIATES, INC. 1619 Coliseum sauare o Now O r_ l e a n s o Lo u i s i a n a 70130
. '. L2 l 1 A. No , sir.
2 Q. What assignments were made l l 3 with respect to contacts? 4 A. I don't recall the specific 5 assignments; but in essence, most of 6 the contacts were following the 7 responsibility of John Cordaro and 8 people that worked for him. But for 9 the Public Service Co mm i s s i o n members, 10 which as I recall Mr. Cain and Mr. i 11 Cunningham decided to make those
- 12 contacts, as well as I believe contact,
) 13 to contact yo u . In essence, that is my 14 recollection of the meeting. l 15 Q. Was there a discussion of 16 what people would be told? 17 A. I don't recall the 18 specitics. I am sure that there must 19 have been some general discussion to 20 the extent tnat the offer of settlement 21 was being ag reed on by the company in 22 an effort to eliminate any risks that 23 would be associated with, particularly 24 a disadvantageous decision in the unit 25 po we r sales agreement case, wherein HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, Now Orleans, Lo ui s i a n a 70130
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. . 93 1 FERC could have approved the file rates.
2 But other than that, I don't recall any 3 specifics. 4 Q. Was there a discussion of 5 the likelihoed of the FERC giving some 6 of Mississippi Power & Light's 7 a l l o c .. t i o n to LP&L or NOPSI? 8 A. That point was emphasized 9 at some meeting I attended. It may 10 have been that meeting, it may have 11 been the staff meeting the previous day. 12 I don't recall which one. 13 Q. Do you recall who 14 em ph a si ze d it? 15 A. No , sir, I really don't. I -- 16 I really don't. 17 C. Was there a discussion of a 10 leak of information in Arkansas at this 19 meeting? 20 A. At a couple of meetings, 21 there was some general discussion as to l 22 whether Arkansas Po we r & Light 23 executives had possibly initiated 24 contacts prior to Mr. Cain's understandin g i 25 of an agreement for no contacts to be ! hUGHES & ASSOCIATES, INC. ! 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
94 1 made until immediately prior to the 1 2 filing of whenever the late morning or ! 3 the early afternoon of January 4th. l 4 Q. Well, did it happen in this 5 meeting? , 6 A. Sir, I really don't recall. 7 Q. What other meetings did you 8 attend, between the second and the 9 fourth, besides this meeting and the I 10 one yo u have already described? 11 A. To my recollection, there { 12 were no other meetings. There were, I 13 am sure, informal one on one 14 aiscussions, walking back to get a cup 15 of coffee, or in the restroom or in the
- 16 elevators.
! 17 But there was another staff f 18 meeting on January 7th, and what I am l J i 19 saying is at least on one occasion, ! 20 reference was made to the possibility 21 that Arkansas Po we r & Light had 22 initiated contacts before the agreed-on 23 time table. l 24 Exactly which one or ones 25 of those meetings, I really don't i HUGHES & ASSOCIATES, INC. 1619 Coliseum S6uaren New 0 9100ra n h
95 I recall. But I would say that there was 2 at least some discussions, either at 3 the January 2nd or the January 3rd 4 meeting, which was probably repeated at 5 the January 7th staff meeting. 6 Q. With who was it believed 7 that Arkansas Po we r & Light might have 8 spoken to? 9 A. Mr. Fontham, I wish to 10 emphasize, that to my knowiedge, there 11 was no definite proof that any contact 12 hac been made. It was more a sense of 13 feeling of the people. 14 There was some general 15 aiscussion concerning the possibility 16 of contacts being made to one or more 17 of the following ind iv id ua l s , Public l 18 Service Commission members, the 19 governor, the attorney general, 20 newspaper media. 21 But I wish to emphasize, to 22 my knowledge, no one at LP&L or NOPSI 23 had any firm proof of that. It was i 24 simply a matter that was discussed as l ( 25 something that some people sensed had l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans o Lo u i s i a n a 70130_
. '. 96 1 po s sibl y happened.
2 Q. Was there a discussion in 3 this meeting, or any other meeting, of 4 a leak within LP&L and NOPSI? 5 A. I don't recall in any 6 meeting as such anyone suggesting that 7 there was a leak. 8 I think in some informal , 9 meetings of the nature I addressed in 10 one of your previous questions, I think 11 various parties stated the opinion that 12 some people felt that in addition to 13 the po s s i b il i t y of a leak at Arkansas, 14 there may be a possibility of a leak at 15 the other operating companies. 16 Q. Who made t h o s'e stetements? 17 A. Sir, the only one I recall 18 being made to me specifically was made 19 by Dr. Jim Hoerger, an industrial 20 psychologist for the company, 21 Q. When did that happen? 22 A. I don't recall the specific
, 23 date, but I would --
I would say 24 sometime during the week of January 7th, 1 25 probably around Thursday of that week, l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, Nww Orleans, Lo u i s i a n a 70130
97 1 January loth. j 2 Q. What happened after Mr. ! 3 Cain arrived in the meeting on the 4 third? 5 A. As I recall, I think he 6 commenced by saying that the MSU board 7 had just ratified the action of the 8 operating company's approval of the 9 offer of settlement subject to the 10 Mississippi Po we r & Light board 11 approving it the next morning. 12 As I understand, that board, 13 because of weather conditions, had not 14 been able to meet tnat day, and did not 15 meet until January 3rd. 16 Q. Ho w long was Mr. Cain in l 17 that meeting? i 18 A. I have no idea when the 19 meeting started or when it ended. I 20 believe it lasted two to three hours, l 21 but I really don't know. 22 Q. The meeting yo u were in is 23 what I am talking about. 24 A. Oh, I am sorry. 25 I would say no more than a li U G H E S & ASSOCIATES, INC. fLf1Af) . @
, . 93 I I half hour to 45 minutes.
2 Q. What was his appearance? 3 A. He looked as I think anyone )
' I 4 in similar circumstances would be, i 5 quite tired, and exhausted.
6 Q. Did he appear disappointed 7 in the results of the day? 8 MR. ANDERSON: 9 I object to the form , 10 of the question. I don't know how the 11 man can interpret. ) 12 BY MR. FONTHAM: 13 Q. Did he make any statements 14 that indicated to you that he was 15 disappointed in the results of the day? 16 A. I don't recall whether he 17 made any specific sti+,ement at that 18 point in time. 19 Q. Was the subject of i l 20 resignation discussed at that time? 21 A. Not to my recollection, sir. 22 Q. Did Mr. Cain make any 23 statement about the adequacy of the ! 24 board contacts that had been made by 25 the staff members in that meeting with HUGHES & ASSOCIATES, INC. I _ 1619 C o l i s e.u m Square, New Orleans, __Lo u i s i a n a 70130
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. . 99 1 you?
2 A. No, sir. 3 Q. Did he make any statements 4 about why various board members may 5 have voted for or against this proposal? 6 A. Not at that meeting. 7 To my recollection, the 8 only reference made by Mr. Cain at this 9 meeting was his expression that we 10 should express appreciation to those 11 members of the LP&L-NOPSI board who 12 voted against the offer of settlement. 13 Q. Did he discuss whether Mr. 14 Lewis may have spoken with members of 15 the board of LP&L or NOPSI in that 16 meeting? 17 A. Not to my recollection, sir. 18 Q. Were you given any 19 assignment to contact anyone, during 20 the course of that meeting? i 21 A. No, sir. 22 Q. What was the next meeting C , 23 you attended, or the next time you 24 discussed this ofler of settlement, 25 with Mr. Cain or anyone else? HUGHE5 & ASSOCIATES, INC. 1619 Coliseum Smuaren Now Orleana n Lo u i s i a n a 70_130
100 1 A. The answer to the first 2 question was January 7th, the following 3 Monday staff meeting. 4 The answer to your second 5 question was the f o llo wi ng morning, 6 January 4th, Mr. Cain and I rode up in 7 the elevator together; and we had a 8 very, very brief discussion at that 9 time. 10 G. hhat did he say at that 11 time? 12 A. I don't recall the exact 13 words, but -- and I think I initiated 14 the discussion by indicating that I was 15 surprised at the specific vote for the 16 offer of settlement by specific board 17 members. 18 Q. Did he sdy anything? 19 A. In essence, he echoed that 20 ne, too, was surprised with certain 21 board members' votes. 22 C. here there any other 23 discussions between the 4th and the 7th, 24 with Mr. Cain? 25 A. Not that I recall, sir. Il u G il E S & ASSOCIATES, INC. 1619 Colinemm Squnro, Onw Orinnnn, Lnmininnn 70130
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, , 101 1 There was a press conference, as I 2 ' recall, the afternoon of the 4th, which 3 I attended; but -- other than that, I 4
; 4 don't recall being with Mr. Cain again 5 until January 7th.
6 Q. What happened on January 7 7th? 8 A. It was just a -- it was a i j 9 routine scheduled Monday morning staff l 10 meeting, in which case I am sure we 11 just discussed various items concerning 12 the filing of the previous week and 13 other items of interest. I don't 14 recall anytning specifically standing 15 out in my mind, other than a debriefing 16 of the various contacts made. 17 Q. Was there a discussion at
'18 that time about pressure having been 19 brought on Mr. Cain by Mr. Lewis?
, 20 A. I don't recall any 21 discussion at that time, no, sir. 4 l 22 Q. has there a discussion at 23 that time about Mr. Lewls contacting 24 members of the board? 25 A. I don't recall any at that , il u G H E S & ASSOCIATES, INC. l 1619 Coliseum Square, New Orleans, Lo ul s l a n a 70130 _
. 102 I times no, sir.
2 Q. Was there a discussion at 3 that time concerning board members 4 votes? 5 A. I do not believe so. No , l 6 sir. l 7 Q. Was there a discussion at 8 that time concerning the reaction of 9 the Public Service Commission to this 10 offer? 11 A. I think there was a general 12 debriefing; yes, sir. 13 C. hho gave the debriefing? 14 A. I believe Mr. Cain; Mr. 15 Cunningham may have contributed. 16 C. What did ther nay? 17 A. As I recaJ hr. Cain 18 indicated that the ;n. ..o e r s he was able 19 to reach, the memt,rs he was able to 20 reach were quite 2srprised, 21 disappointed, dfApleased at the offer 22 of settlement hcing filed with FERC 23 before being discussed with them. 24 Q. Was there any discussion of 25 the position of Arkansas Power & Light l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
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. . 103 I concerning the prepayments?
2 A. Not on January 7th, because 3 as I recall, on the meeting of the late 4 afternoon of January 3rd, it was 5 brought to the attention of Mr. Cain's 6 staff that that provision would only 7 commence upon acceptance by the Federal 8 Energy Reg ula to r y Commission of the 9 offer of settlement as filed. There 10 was no need for a further discussion on 11 the 7th. 12 Q. There was no discussion of 13 the fact that Arkansas had, Arkansas 14 Po we r & Light had backed out of the 15 deal? 16 A. There was a discussion of 17 tnat on January 3rd, as I r,ecall. I 18 don't recall it being tepested on the 19 7th. 20 ft nad already been brought 21 to our attention that Arkansas 22 disagreed with the understanding that 23 Mr. Cain, and I believe Mr. Mc Le tc hie l 24 previously had, that such retroactive 25 cesh settlement would commence upon the i l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, Wew Orleans, Lo u i s i a n a 70130
. 104 I filing of the document.
2 Q. Do you know if there is any 3 written agreement that says that 4 Arkansas Po we r & Light will refund the 5 prepayment, part of the prepayments at 6 this time? 7 A. Sir, I have no personal 8 knowiedge whether such a document 9 exists. 10 Q. In your personal view, is 11 the proposed offer of settlement in the 12 best interest of NOPSI and LP&L7 13 A. I think that would depend 14 on what basis one is com pa r ing the 15 offer of settlement. If one compares 16 the offer of settlement with the risk, 17 which I think everyone would 18 acknowiedge does exist, the probability 19 of it occurring, reasonable people may 20 differ, of Federal En e rg y Reg ul a to r y 21 Commission accepting the filed 22 application as a basis of allocation of 23 Grand Gulf power, I think one could 24 come to the conclusion that to reduce l 25 that risk, obviously 47 plus percent is l H U G il E S & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130 L
105 1 l 1 substantially less than 68 plus percent. 2 If one would compare that 3 with the administrative law j udg e 's 4 initial decision, one may come to a 5 different conclusion. 6 I think it depends on one's 7 analysis of that, as well as one's 8 opinion, as to how Judge Head, and L subsequently the Federal En e rg y 10 Regulatory System, would decide the 11 system ogreement case. 12 I think the answer to that 13 would depend on the assumptions one 14 makes as to what FERC would finally 15 have decided. And I don't think anyone 16 but possibly God knows that, because I 17 don't think FERC knows the answer to 10 that. 19 Q. Based on the facts that 20 existed as of January 2nd, 1985, was it 21 your view that LP&L and NOPSI should 22 accept the ofler of settlement? 23 A. Had my opinion been 24 solicited, I would have advised tnat i 25 the offer of settlement minimally be HUGHE5 & ASSOCIATES, INC.
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. .... l 106 I modified before I would personally feel 2 comfortable with endorsing it myself.
3 Q. Modified in what way? 4 A. In my view, with some 5 modifications, I think the offer of i i 6 settlement, could be, by me, 7 enthusiastically endorsed. 8 I think, as I mentioned 9 earlier, I think the retroactive 10 settlement of advance purchase po we r 11 amount should have applied immediately 12 as Mr. Cain and Mc Le tc hie were under 13 the impression it was intended to. 14 I feel, as I understand 15 from Mr. McLetchie was the intention, 15 up to a very late hour of negotiations, 17 that the document should be activated 18 upon the commercial operation of Grand 19 Gulf Unit I as contrasted with the 20 point the acceptance. 21 I think that the offer of 22 settlement should ideally have 23 addressed Grand Gulf Unit No . 2. My 24 concern is many of these_ issues may 25 well need to be readdressed pertaining l HUGHES & ASSOCIATES, INC.
107 I to that unit. 2 And lastly, I think that 3 the offer of settlement should have 4 addressed only the Grand Gulf issue and 5 not the system agreement issue. With 6 an offer of settlement based on those 7 modifications, I think it would have a been a very, very reasonable document. 9 Q. Are you saying that if 10 Judge Head still had the perogative, 11 and tne FERC still had the perogative 12 to have cost equal, make a decision fo r 13 production cost equalization, then you 14 think this settlement of the Grand Gulf 15 issue would be appropriate, these 16 percentages? 17 A. In my opinion, sir, and it 18 is just that, as I mentioned before, I 19 have not been involved in the system 20 agreement case, I personally do not 21 feel that was going to happen. 22 I realize there are very 23 strong f e el i ng s in this room that that 24 was going to happen; but in my opinion, 25 that is a separate issue from the Grand
- HUGHES & ASSOCIATES, INC.
1 1619 Coliseum Square, New Orleansp. Lo ulalO@o 9@8 3@ _ _ _ _ _ _
[- . 1 108 i 1 Gulf issue, and I think should have 2 been treated separately. 3 If it was to have been 4 compromised, perhaps a separate offer 5 of settlement addressing that specific 6 issue. 7 I frankly feel that it is 8 not fair to Arkansas Po we r & Light 9 Co m pa n y for eq ua li za tio n of production 10 costs to come in at any one point in 11 time. And with all due respect to l 12 persons in this room who have a rg ued to 13 the contrary, I think in logic, I could 14 accept movement toward tnat over a 15 specifically defined period of time 16 agreed to throughout the system. 17 But I personally ao not 18 feel that equalization of production 19 costs, started all at one po i n t in time, l 20 is fair, just, reasonable, and 21 equitable to Arkansas Po we r & Light 22 customers; and I am personally not 23 convinced that Judge head, and/or the 24 Federal Energy Regulatory Commission i l 25 would have ruled in favor of that l HUGHES & ASSOCIATES, INC.
109 l 1 concept. 2 Q. You mentioned Grand Gulf II. 9 3 What is your understanding of the 4 system plan fo r Grand Gulf II? 5 A. Sir, based on my 6 recollection of Mr. Cain's response to 7 questions up at a Lo ui s i a na Public 8 Service Commission rate case hearing, I 9 believe on December 3rd, I believe his 10 response was that that issue should be 11 addressed in the very near future, and 12 that if in fact the Mississippi Public 13 Service Commission, in connection with 14 proceedings concerning the 15 certification of that unit, did not 16 render the decision within a reasonable 17 period of time, then appropriate 18 individuals, and/or boards within the 19 Middle So u th System, should address 20 that issue. 21 Q. Have you ever neard anyone 22 say that Mr. Lewis would like the i 23 certification taken away by the 24 Mississippi Public Service Commission 25 for Grand Gulf II? l l HUGHES & ASSOCIATES, INC. 1.6 l _.9 C o 1__i s e u m SELu n R o n m o t? @RRoomao. %6 8 O B_O GD O __9FLlLTlB
o ". 110 l
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1 A. I am not sure I recall 2 anyone saying Mr. Lewis has made that 3 statement. I 4 I have heard that statement 5 made probably more in informal settings 6 than any formal meeting. And I don't 7 recall whether Mr. Le wi s or perhaps Mr. 8 Lupberger was a source of that 9 statement, to the best of our 10 recollection; possibly the finance 11 committee meeting. But I don't recall 12 Mr. Lewis being attributed to that 13 statement per se. He may have said it, 14 but I -- he certainly never said it to 15 ma. 16 Q. have you heard the 17 statement that anyone in Middle So ut h 18 wants, would like to see the i 19 certificate denied, taken away? 20 A. It is po s s ibl e that I have 21 heard that statement made in a general i 22 way. I am no t sure if they said it is 23 hope, but in a general way, at a 24 finance committee meeting. 25 Q. What, well, in a general HUGHES & ASSOCIATES, INC. , 1619 Coliseum Square, New Orleans, Lo ui sia n a 70130
111 I way; by what do you mean? You explain 2 to me what you have heard. 3 A. As I recall, when a 4 question was raised as to the 5 construction a'c t i v i t y of Grand Gulf, or 6 whether such would continue, that a 7 response was made that pending final 8 action by the MPSC, which may well 9 include its revocation of the 10 certification, that the system would 11 probably not address the issue as to 12 whether to move forward with the 13 construction of that unit, or to cancel l 14 the unit. I 15 Q. was -- did this discussion 16 include any statements concerning what 17 the desires of the system are, as to 18 whether it -- construction should 19 continue? 20 A. Sir, I don't recall with 21 specificity the desires of the system 22 as such. j 23 Q. After January 7th, were 24 there any other meetings that you 25 participated in concerning this HUGHES & . ASSOCIATES, INC. L _
112 I settlement? 2 A. None that I recall. Again, 3 other than the weekly staff meetings, 4 we would have, of -- which I g ue ss the 5 next one was probably the 14th; then l 6 there was again one this morning which 7 I just attended very briefly. 6 I don't recall any 9 statement or fact of significance that 10 stands out in my mind being made at any 11 subsequent meeting. 12 Q. Have yo u reviewed the 13 revenue requirement studies relating to 14 this offer of settlement. 15 A. I have not been provided 16 such; no, sir. I 17 C. I am going to show you a 18 copy of the response to question S-10, l 19 that was made in this case by, I 20 believe LP&L, at the request of 21 Lo u i s i a n a Po w e r Service Commission. I 22 ask you to turn to obout the sixth page. 23 Have you ever seen that 24 projection? l 25 A. I don't recall it, sir. If l HUGHES & ASSOCIATES, INC. 1619 Coliseum Smuare o New Orleans o . L o_u _i_O i O @ O 9 @ l2@
113 I so, I would like to suggest that Mr. 2 Mc Le tc hie , who you will be subsequently 3 -deposing, if in fact this was a 4 schedule that was distributed at any 5 board meeting and/or discussed during 6 any negotiating session, that he was 7 involved in such; and he could 8 intelligently respond to questions 9 concerning this exhibit. I really 10 cannot. 11 Q. Do yo u know there is -- I 12 believe there is a case number up there 13 in the left-hand corner, upper 14 left-hand corner? 15 A. I don't see any such 16 reference. 17 MR. ANDERSON: 18 Counsel, are you 19 referring to the letters F.H. with the 20 number 400 behind it? 21 MR. FONTHAM: l 22 Yes. 23 A. Oh, okay, I see that. 24 BY NR. FONTHAM: l 25 c. co yo u know what that is? I HUGHES & ASSOCIATES, INC. A 0$ A A @n R R na arLAsuvut - 1
. . 114 1 A. No, sir.
2 Q. Have there -- do you notice 3 there is an entry under most of those 4 projections for without Reynolds, I
, 5 believe. Do yo u see that?
6 A. Yes, sir. 7 C. Do you know why that was 8 done? 9 A. Sir, I cannot properly 10 respond, because I had nothing to do 11 with these documents. And virtually, 12 if not totally, am seeing them for the 13 first time. 14 Anything I said would be a 15 pure guesstimate. I think your 16 questions deserve a better answer than 17 I could give. 18 Mr. Mc Le tc hie p r 'o b a b l y is 19 quite familiar with this, and can l . I 20 intelligently respond. I 21 Q. Have there been any other 22 discussions in the staff meetings, or 23 any other' meetings that you have had, 24 concerning the importance to the system 25 of Reynolds Aluminum? l 1 huGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Louisiana 70130
c-115 1 A. None other than the general 2 reference I made to you earlier.
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3 Q. When that general reference 4 was made, was there a discussion of why 5 it was that they were talking about 6 Reynolds Aluminum being dependent on 7 this offer of settlement? i 8 A. No , sir. 9 Q. Do yo u know of any filing
. 10 by Middle South to accomplish a spin-off 11 of part of System Fuels, Inc. with the 12 SEC?
13 A. Very generally, I believe 14 that several months ago, there was such 15 a filing; but again, the particulars, I 16 think you are deposing Mr. Lupberger, 17 who is the president of Electec 18 sometime -- 19 Q. What does Electec have to 20 do with it? 21 A. The transaction which you 22 referred to as the spin-off, and I am 23 not sure if that is the correct 24 terminology or not, involved a pro po sed 25 transfer of some, I believe potential HUGHES & ASSOCIATES, INC. 1619 Coliseum Square,-New Orleans, Lo ui s i a n a 70130
116 i 1 assets of SFI to Electac. i 2 But other than that, Mr. 3 Fontham, I don't know m uc h else I could 4 add. And if you wish to pursue that, I 5 would respectfully request you. pursue 6 it with Mr. Lupberger, who certainly is 7 far better qualified than I am to 8 address the specifics of it. 9 Q. have you heard of a 10 videotape movie involving Mr. L e w f. s and 11 Mr. Lupberger that relates to this 12 offer of settlement. 13 A. Yes, sir. 14 Q. Have you seen such a movie? 15 A. Yes, sir. 16 Q. When -- 17 A. As my understanding, have 18 probably hundreds of people, as I 19 believe most, if not all of the Middle 20 South Service employes, it is my 21 understanding, excuse me, that copies 22 of the tape are being made avellable to 23 each of the operating com pa n ie s , who I 24 believe have already, or are about to 25 start showing it to their em pl o ye s . HUGHES & ASSOCIATES, INC.
O 117 1 So I say a significant 2 number of system employes have seen the 3 tape. 4 Q. hhen did you see it? 5 A. One day last week. 6 Q. Who did you see it with? 7 A. As I recall, it was members 8 of Mr. Cain's staff. 9 I don't believe everyone 10 was there. I think it was something 11 that the tape was brought over, and 12 whoever wa s available at that time was 13 invited to view the tape. 14 0 Did Mr. Cain say why he 15 wanted people to view the tape? 16 A. I don't recall whether he 17 addressed that issue. If he did, I la think it was of a general nature that 19 this tape is being shown to Middle 20 South Service em pl o ye s ; what do y'all 21 tnink of showing it to the system 22 em pl o ye s , or should we prepare another 23 tape that wo uld build upon or perhaps 24 add to po in t s raised in the other tape. 25 C. What is the content of the l 11 U G il E S & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo ui s i a n a 70130
118 I tape? 2 A. I think the overall 3 objective of the tape is for Mr. Lewis 4 and Lupberger to have a forum of 5 conveying to employes throughout the ; 6 Middle So uth System the advantages of 7 the offer of settlement. 8 Q. Is this a question and.
> 9 answer tape?
10 A. Yes, sir. 11 Q. Who asks the questions; do 12 you know? 13 A. There were various Middle 14 South Service employes, in a small 15 studio type setting, that asked 16 questions. 17 Q. Do yo u know how the 18 questions were prepared? 19 A. Iv o , sir, I do not. 20 C. Does Mr. Lewis address the 21 question of whether the c om pa n i e s were 22 forced to accept the offer of 23 settlement on this tape? 24 A. I believe there was a 25 question addressed to him of the vein l HUGHES & ASSOCIATES, INC. 1619_ Coliseum @et u o e o n mow @RRon
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. .. l 119 I of some em pl o ye s have heard that the 1
2 operating companies were forced to j l 3 accept this; would you comment on that, 4 or somethin~g of a general nature like 5 that. Not an accusation, but more a 6 statement of can you give us an answer 7 we can give to those people that are 8 making such a statement. l 9 Q. And what is his answer? -- 10 can you paraphrase it? 11 A. I don't recall the entire 12 answer. I believe it was in response 13 to that question, that Mr. Le wi s 14 indicated that as chairman and CEO of 15 Middle So u t h Utilities, he felt it was 16 his proper responsibility to contact 17 the hiddle South utilities' board 18 members and advise them of the impact 19 on the system and on the shareholders , 20 of the deficiency in revenue 21 requirements that the system would be 22 giving up by entering into such an 23 offer of settlement. 24 Q. Does he address the 25 question of whether he forced any of i t i HUGHES & ASSOCIATES, INC. l .
. j 120 I the co m pa n i e s to accept this?
2 A. I don't recall a specific , 3 answer, but I certainly got the 4 impression that Mr. Le wi s left, you 5 know, the viewer with the understanding 6 that in essence he was neutral. 7 Q. That he was neutral? 8 A. Sir, I cannot comment with 9 specifically that he made that 10 statement in response to that question 11 or not. I was left with the impression i 12 that his overall, the overall gist of 13 his answer was that no, I did not force 14 the operating companies to accept the 15 offer of settlement. 16 The specific words he 17 mentioned, I don't think anyone could 18 recall simply by viewing the tape one 19 time. 20 C. has there any comment about 21 this tape, after you saw it, by the 22 staff members? 23 A. Mr. Cain asked if the 24 people _ present thought it would be i 25 appropriate to show to the employes of HUGHES & ASSOCIATES, INC.
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i 1 LPsL and NOPSI, and in essence, there 2 was a general agreement that it would l 3 be advantageous to show it. l l 4 Q. Did you view this tape as 5 representing the truth? 6 MR. ANDERSON: 7 Let me object to the 8 form of the question. I don't know 9 what that means. The truth with 10 respect to what? 1 11 MR. LONTHAM: 1 12 I will rephrase it. 13 MR. ANDERSON: 14 Thank you. 15 BY MR. FONTHAM: 16 Q. Did you view this tape as 17 accurately po r t ra ying what occurred in 18 -the companies going along with the 19 offer of settlement? 20 A. Sir, in my opinion, tne J 21 board of directors of the companies are 22 the ones who voted on the act of, the 1 i 23 offer of settlement. And in my view, I
- 24 was not at the meetings, so I cannot 25 say what was discussed, you know,
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122 I within the meetings, as to whether what 2 was'said on the tape accurately 3 reflected what happened the day of the 4 board meetings. 5 Q. Did anyone in this staff 6 meeting make the statement that Mr. 7 Lewis' representations weren't accurate? 8 A. I am not sure if anyone 9 said it was not accurate, so much as a 10 different perspective was received from
. 11 the tape as com pa red with some of the 12 statements made by Mr. Cain.
13 Q. Who made that statement? 14 A. Sir, I believe it was made 15 by Mr. Aurlowski. 16 Q. Let's stop for just a 17 second while I look this over. 18 (Brief interruption. ) 19 8Y MR. FONTHAM: 20 Q. Was there a discussion at 21 the staff meeting this morning of this 22 deposition, or the ongoing depositions? 23 A. Not during the time period 24 I was there; no, sir. I was there from 25 about 8:30 to 8:40; there was no HUGHES & ASSOCIATES, INC.
123 1 mention whatsoever made. 2 Well, other than the fact, 3 as a general comment, Mr. Mc Le nd o n ' 4 thought Mr. Cunningham was going to be 5 up first today, and I mentioned to him 6 I was. But other than that comment, no 7 mention whatsoever made. 8 Q. Okay. I am finished, at 9 least for no w. 10 So I tender the witness to 11 the next lawyer. 12 MR. ANDERSON: 13 Let the record 14 reflect that Messrs. Fontham, Zimmering 15 and Darce are out of the room at 16 present, but they have authorized us to 17 proceed. The problem has been cured. 13 They are no w present. 19 MR. MORROW: 20 Let the record also 21 reflect this is a continuation of the 22 deposition of Mr. John Chavanne. My 1 23 name is Robert Morrow, and I am i 24 representing Occidental Chemical 25 C o r p o. r a t i o n . 1 huGHES & ASSOCIATES, INC. 1619 Coliseum @auor(o o J3on @ g A n n a r1n__fter m A n n a mNR __ _
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124 1 BY MR. MORROW: 2 Q. I just had a couple of 3 questions of clarification, Mr. 4 Chavanne, concerning the January 2nd 5 meeting at which the offer of 6 settlement which was filed on January 7 4th was discussed. 8 Was there any discussion at 9 that meeting on January 2nd of not 10 contacting the Lo ui s ia na Public Service 11 Commission, prior to the filing of the 12 offer of settlement? 13 A. Yes, sir. As I recall. 14 There was a general discussion that the 15 CEOs nad ag r e ed that no one would be 16 contacted prior to the filing date of 17 the offer of settlement, which was 18 January 4th, 1985. 19 Q. Was there any specific 20 reference to not contacting Louisiana 21 Public Service Commission? 22 A. To my recollection, Mr. 23 Cain indicated that no CEO was to 24 contact any state Public Service l 25 Commission member prior to the January l HUGhES & ASSOCIATES, INC. j _ _ ___ 3 6i A O C A A A n n h r9 i
125 1 4th filing date. That, in essence, all 2 companies would initiate their contacts 3 at the same time, on the same day. 4 Q. Not to belabor the point, 5 but you are saying that then Mr. Cain 6 made no specific reference to the 7 Lo u i s i a n a Public Service Commission, in 8 particular, as opposed to the other 9 state commissions? 10 A. It is my recollection, Mr. 11 Morrow, that the statement was that no 12 one, at any company in the Middle South 13 System, would contact any Public 14 Service Commission member prior to the 15 same time on the same date, including 16 Arkansas, Mississiopi, and Lo u i s i a na . 17 Q. At the January 2nd meeting, 18 was there any discussion of the 19 likelihood of the FERC reversing the 20 initial decision of the administrative i 21 law j udg e in the Grand Gulf proceeding? 22 A. No, sir. 23 Q. Turning to the basic 24 concept of the offer of settlement, of 25 the offer of settlement itself as it HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, __ New Orleans, Lo u i s i a n a 70130
12v 1 I relates to the allocation of Grand Gulf 2 I, is it fair to say that taking into 3 account the fact that Middle So u t h 4 Utilities, or MSE, may absorb a portion 5 of the cost of that unit, that the 6 result of the offer of the settlement 7 is an allocation of 27.84 percent of 8 Grand Gulf I to LP&L, with certain 9 costs associated with that allocation 10 of 27.84 percent deferred to be 11 collected beginning in 1991? 12 A. The question is so long, 13 Mr. Morrow, I am not sure I followed 14 oli the steps. I wonder if you could 15 please break it down into smaller 16 components, please, j 17 Q. The basic question is is l 18 not the concept of allocation of Grand 19 Gulf I under the offer of settlement, 20 LP&L getting 27.84 percent, with 21 certain costs associated with that 22 27.84 percent, being deferred, not to 23 be collected until 1991? 24 A. It is my understanding, sir, 25 that there are certain costs which will HUGHES & ASSOCIATES, INC. j 1619 Coliseum Squarep NeW _ Orleans a Lo u i s i a n a 7013@ '
127 1 bu deferred into infinity, and never l 2 collected from LP&L, or the other 3 com pa n ie s . With that proviso, that it ; 4 is my understanding, as I have 5 mentioned before, I have not been given 6 access to the particular data, and had 7 the opportunity to review it ia y s e l f ; S but I have no doubt but that Mr. 9 Mc Le t c hi e , and others you talked to, 10 including Mr. Lupberger, would be able 11 to produce documentation showing that 12 there is truly $50,000,000.00 a year 13 r ed uc tio n in net income fo r the Middle 14 South Utility system during each of the i 15 annual periods that Grand Gulf I would 16 be in commercial operation up to 1991. 1 17 Q. I had that original caveat 18 in my first question initially, and yo u 19 asked me to try to shorten the question; 20 and with that caveat, is the resulting 21 allocation one of 27.84 percent to LP&L, 22 with certain costs associated with that 23 percentage deferred and not to be 24 collected until 1991? 25 A. Sir, I am not trying to HUGHES & ASSOCIATES, INC. A ($ A 6 @n R A no mra m m Ta n n
128 1 evade the quastion, but I really 'd o n ' t 2 feel competent to answer the specifica 3 that the question deserves and think 4 that Mr. Mc Le tc hie , who you will be 5 deposing this afternoon, and Mr. 6 Lupberger are better qualified than I 7 am. 8 I am not trying to skirt 9 the answer, but -- 10 C. What I am trying to get at, 11 Mr. Chavanne, is your understanding of 12 what im pa c t the offer of settlement 13 will have. 14 MR. ANCERSON: 15 And he has testifiea 16 twice that ne really doesn't feel 17 comfortable addressing that because he 18 was no t involved in the development of 19 it, and he has given you the names of 20 other deponents wno will be here who 21 may be able to do that. 22 SY MR. MGRROWs 23 Q. I guess my only question 24 would be then you don't have an . 25 understanding of what p'e r c e n t a g e would i HUGhES & ASSOCIATES, INC. t 1619 Coliseum S6uare o New Orlea@On R@@iOOOOO FB ARR --
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129 1 be allocated to the operating companies, 2 in particular LP6L, under the offer of 3 settlement? 4 A. At what point in time, sir? 5 I think I can understand -- I can 6 ex pl a in my understanding of it in 7 certain time frames, such as commencing S with the commercial operation date of 9 Grand Gulf I. 10 C. okay. Please ex pl a in your 11 understanding. t 12 A. My understanding -- subject 13 to verification by hessrs. Mc Le tc hie 14 and Lupberger -- that if one were to l 15 take the initial entitlement allocation 16 percentages contained in the offer of 17 settlement, namely LP&L's 14 percent, 18 divide that by the sum of all company's 19 initial entitled percentages, 67.1 l 40 percent, one gets a particular 21 percentage relationship. 22 If you take that percentage 23 relationship times, as I recall, the 24 total annual revenue requirements for l 25 MSE's operation expenses, maintenance i HUGHES & . ASSOC I ATES , INC. A@A6 @oRARnmo
130 1 expenses, decommissioning expenses, and 2 taxes, other than income tax expenses, 3 that is the first calculation that 4 would be made during the initial 5 billing of the unit. 6 The difference between the 7 sum of those four co m po n e n t s , operation, 8 maintenance, decommissioning, taxes 9 other than income, subtract it from 10 $540,915,000.00, which is the annual 11 MSE revenue requirements, excluding 12 fuel, one geta a remainder. 13 If you take the, it is my 14 understanding, absolute percent, namely 15 17 percent by LPsL times that remainder, 16 one gets a sum that should be adoed to 17 the other calculation to get the amount 18 of revenue requirements for LP&L from 19 the commercial operation date of drand l 20 Gulf Unit One until 1991. l 21 From 1991 on, one would l 22 then take the additional entitlement l 23 percentages, which as you indicated, I 24 believe, is 27 plus percent for LP&L, 25 times the total annual MSE annual HUGHES & ASSOCIATES, INC. n flfL _
, 131 i
t i 1 revenue requirements, which will be 2 somewhat less than $940,915,000.00 to 3 get the company's 1991 annual revenue l 4 requirements. Si Q. Just for clarification, I 6 believe you referred to LP&L having a 7 17 percent allocation initially? 8 A. I stand corrected. It was 9 14 percent. 10 Q. Beg inning in 1991, at the 11 27.84 percent of the total revenue 12 requirement associated with Grand Gulf 13 1, that total revenue requirement woula 14 include, under yo u r understanding, the 15 costs which were to be deferred during 16 the initial period, in with the 17 commercial operation data througn 18 December 31, 1990? 19 A. I am unclear as to that 20 point. There certainly is a recovery 21 provision. Whether it will be added to 22 the annual revenue requirements, or 23 pernaps amortized over the life of the 24 unit, I am not certain. I think again 25 Mr. Mc Le tchie or Lupberger could answer i HUGHES & ASSOCIATES, INC.
. 1619 Coliseum Square, New Orleans, Lo ui s i a n a 70130
1 132 1 I that specifically. 2 Q. Is it your understanding 3 that LP&L would be responsible fo r 4 27.84 percent of those deferred costa? 5 hR. ANDERSON: 6 When? 7 MR. MORROW 8 Beginning in January 9 1991. 10 A. Sir, I truly have no 11 understanding. Logic would tell me 12 that I believe so, but I have to say 13 again, I cannot answer that 14 specifically, other than to say the 15 logic holds. But again, I defer to 16 Messrs. McLetchie and Lupberger. 17 MR. MORROW: i 18 Thank you. That's 19 all the questions I have. 20 MR. ORTMAN: 21 Let the record 22 reflect we have resumed with Mr. 23 Chavanne's deposition. 24 BY MR. ORTMAN: 1 25 Q. My name is Glen Ortman and HUGhES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 7 013 0 g
133 1 I represent the City of Now Orleans, 2 and I have a few questions for you. I 3 Could you tell me when ' 4 normally the senior staff that you 5 referred to before meets? 6 A. To my knowledge, there is 7 no specific time schedule. I think 8 whenever Mr. Cain wishes to seek their 9 advice. I think it is on a purely 10 intermittent basis, at his pleasure. 11 C. Is there a schedule for 12 executive staff meetings? 13 A. Yes, sir. 14 Q. What is that schedule? 15 A. Generally 8:00 every Monday 16 morning, except the week of the I 17 LP&L-NOPSI board meeting, in which case 18 it is 8:00 Wednesday of that week. 19 Q. Mr. Chavanne, with respect 20 to the January 2nd meetings that you 21 referred to , the staff meetings, was 22 there a written adjenda prepared? 23 A. There is never a written l l 24 acjenda prepared; no, sir. i l l 25 Q. Yo u indicated previously l \ HUGHES & ASSOCIATES, INC. L 1610 C e l i c e sEn Mem o rt o n man I
134 1 1 that yo u were informed, I believe, that ! 2 the total revenue reduction, that there 3 would be a to ta l revenue red uc tio n of 4 approximately $200,000,000.00 a year 5 from the date of the commercial 6 operation of the unit until 1991. 7 Can you tell me who gave 8' you that information? 9 A. I believe, sir, that 10 Messrs. Cain and possibly Mc Le tc hie and 11 Hurstell, either one or all of them in 12 briefing, on the January 2nd meeting, I 13 believe, the first time I heard that 14 f ig u r e . 15 Q. has this part of the 16 information that was awaiting you on 17 your dusk when you returned trom your 18 vacation? 19 A. I he*e ne way of knowing, 20 sir, I never 5, w rat data; I never 21 asked for it. 22 Q. Mr. Chavanne, are you 23 familiar with NOPSI's recent financing i 24 plan, for 1985, that was filed with the ' 25 Securities and Exchange Commission? l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
135 1 A. Generally. I was not 2 directly involved in preparing it. But 3 I know that we need external sources of 4 funds in 1985. 5 c. Do you know when that 6 filing was made with the Securities and 7 Exchange Commission? 8 A. 'No, sir; I really don't. 9 Q. Mr. Chavanne, if the cash 10 that you had been expecting to receive 11 from AP&L during that first week in 12 January had been received, in 13 connection with the advance payments, 14 would tnat have affected NOPSI's 15 financing plans for 19857 16 A. I don't think it would have, 17 sir. I think it could nave affected 18 the timing. 19 As I recall from my s 20 calculation, I think it was in the 21 neighborhood of seven and a half to 22 $8,000,000.00 fig ure ; and that 23 certainly would not have precluded most, 24 if not all, of the external financing 25 that we filed for. HUGHES & ASSOCIATES, INC. ' l 1619 coliseum Square, Now Orleans, Lo u i s i a n a 70130
. . ~ * ' l 136 '
1 Q. Is it your understanding 2 that some of the proceeds from that 3 financing will go to pay NOPSI's advance 4 payments to Middle South Ene rg y? 5 A. I think, sir, again it 6 depends on ciming assumptions one makes, 7 such as if Grand Gulf Unit One comes on 8 line in March 1985, my answer to that 9 would be no. We only have one more 10 month of advance purchase power to make. 11 So again, I was not 12 involved in the documentation that was 13 filed with SEC; and I do not think it 14 necessarily had any material impact on 15 the financing requirements. 16 Q. Mr. Chavanne, did you have 17 a back-up or substitute during yo ur 1 18 absence from the office in late 19 December of 19847 20 A. Only in a general way. No 21 one who would come up to my office and 22 sign paperwork or anything to that 23 nature. 24 Q. With respect to the meeting 25 on the 3rd of January, following the l 1 i hUGHES & ASSOCIATES, INC. l R(3R9) @eAioomo @Mlaeon [3O w @RioO@On fle e i D 0 0 0i) O . T @ 3 3 (9 . .I
l 137 l I board meetings of that morning, can yo u 2 tell me who was to contact the City 3 Council? 4 A. To my recollection, all I 5 recall specifically was that Richard 6 Guthrie, who is the principal contact 7 with the City Council, was to initiate 8 contacts. Ehether he was to make all 9 the contacts, or whether some of his 10 associates were, I really don't recall. 11 but he was the principal contact, as I 12 recall. 13 No w John Cordaro may have 14 taken some councilmen himself. 15 Q. has there any discussion on 16 January 7th about the reaction of the 17 City Co un c il members to the offer of 18 settlement? l 19 A. As I recall, there was 20 general discussion of various reactions, 21 of various constituencies; I don't 22 recall any particular reaction of 23 someone saying that councilmen said so 24 and so, or reacted so and so as such. 25 That does not mean to imply that HUGHES & ASSOCIATES, INC. 1619 Coliseum ScquaRon FJ o c7 @Rinnnn h
136 1 somebody doesn't say something. I j us t 2 don't recall anything said of that 3 nature. 4 Q. Was there any impression 5 you took away from that meeting as to 6 the general reaction of the council? 7 A. Sir, I wouldn't have needed 8 to have heard anybody brief me to have 9 known, simply by watching television 10 over the weekend. So I can't 11 truthfully say I walked out of that 12 meeting with any different impression 13 than I walked into it. 14 C. Mr. Chavanne, what is yo u r 15 understanding of what happens if there 15 is a tie vote on the NOPSI board? l 17 MR. ANDERSON: 16 Wait a minute. Let I 19 me object to that question. The man 20 had said that he doesn't attend the 21 board meetings, and he has -- unless l 22 you can lay some predicate that he l 23 would have some way of knowing, or have 24 some basis for knowiedge, I think it i s-25 unfair to ask him to speculate as to hUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo ui si a n a 70130
139 I what might happen. 2 MR. ORTMAN 3 I will ask one more 4 question. 5 BY MR. ORTMAN: 6 Q. Mr. Chavanne, previously, 7 to Mr. Mc Le tc h i e 's appointment, did you 8 attend NOPSI board meetings? 9 A. Yes, sir, I did. 10 Q. Can yo u tell me what your 11 understanding is of the result, if 12 there is a tie vote, on the board of 13 NOPSI? 14 A. There had never been a tie 15 vote. So any statement I made would be 16 s i m pl y an opinion which may or may not 17 be of any validity. 18 Q. Could you give me what your 19 opinion is on that basis? 20 NR. ANDERSON: 21 No. I am not going 22 to let him do that. I am not going to 23 let the man guess as to what might i 24 h a p p e r. . He already said it hasn't ) 25 happened to his recollection. He has l l HUGHES & ASSOCIATES, INC. 1619 Coliseum . Square, New Orleans o L o u i s i a n o 7 @ A_S @_ _ _ _ _
140 1 no basis to give an opinion on that. 2 BY MR. ORTMAN: 3 Q. The answer is you don't 4 know, Mr. Chavanne? 5 MR. ANDERSON: 6 No, the answer is I 7 am telling yo u not to answer that 8 question. 9 8Y MR. ORTMAN: 10 Q. Do you have any 11 understandings, Mr. Chavanne, as to 12 what happens if there is a tie vote on 13 the LP&L board of directors? 14 MR. ANDERSON: 15 1 am giving him the 16 same instruction on that question. 17 8Y MR. CRTMAN: 18 Q. Mr. Chavanne, can you tell 19 me if there is a witness who will be 20 deposed this week who could give me the i 21 answers to those two questions? 22 A. I -- I would believe that 23 Mr. Cain would be the best witness to 24 address that question to. 25 Q. Thank you. HUGHES & ASSOCIATES, INC. . 1619 Coliseum S q u a r e_ o . New .Orleansa Lo ui s i ana 7.@830
o .. . 141 D 1 In the course of these 2 discussions in January, in which you 3 were involved, Mr. Chavanne, was there 4 any discussion as to the timing as to 5 when the FERC might issue an order in 6 the Grand Gulf case? 7 A. I rec'll no discussion of 8 any prognostication as to when Federal 9 Energy Re g ul a to r y Commission would 10 render a decision in the Grand Gulf 11 case. 12 Q. has there any discussion, 13 during these meetings that you attended 14 in January, as to when Judge head might 15 issue his recommendations in the system 16 agreement case? 17 A. I recall the opinion being 18 voiced that there was some belief that 19 Judge Head's decision may be imminent; 20 but I hasten to add, as I indicated a 21 earlier, .that some of us had heard that 22 statement for some, from some people 23 for months and months and months. So I 24 have no basis for the personal 25 knowledge that that prognostication was
~
HUGHES & ASSOCIATES, INC. 1619_ Coliseum Squarep. New __O r l e a n s a Lo ui s i a n a 70130
142 1 anymore accurate than the one that said 2 we would get the decision in October. 3 Q. Was that prognostication l 4 from Mr. Merriman in Washington? 5 A. I certainly have never 6 talked to Mr. Merriman in months and 7 months. I certainly did hear, and 8 don't recall anyone mentioning-Mr. I 9 Merriman's name as saying that such a 10 decision was imminent. 11 Q. With respect to the tape 12 that we were referring to, ao you know 13 if any NOPSI board members have seen 14 that tape? 15 A. I have no knowledge 16 whatsoever, sir. 17 Q. Do you have any knowledge 18 if any LP&L board members have seen 19 that tape, and I am referring to the 20 hiddle South Services tape, prepared , 21 with Mr. Le wi s and Mr. Lupberger? 22 A. If I could modify my answer l 23 to the previous question, obviously two 24 directors of both companies have seen 25 it, namely Mr. Le wi s and Mr. Cain. But HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
143 O l 1 for that, I have no personal knowledge 2 that any other director of either LPEL 3 or NOPSI have seen the tapes. 4 Q. Mr. Chavanne, I have one 5 last question. 6 If Grand Gulf II is 7 decertified, do yo u have a personal 8 opinion or belief as to how it's sunk 9 costs should be treated? . 10 A. No . 11 MR. ANDERSON: 12 Let me -- go ahead, 13 hr. Chavanne. Let me j us t object to 14 the form of this question. Asking this 15 man to speculate on something like that, 15 that no one can tell what is going to 17 happen on, and is entirely outside of 18 his area, is completely unfair to him. 19 MR. ORTMAN: 20 I didn't ask him to 21 predict. I asked if he had a personal 22 opinion as to how those costs should be 23 treated. 24 ER. ANDERSON: + 25 I don't know wnat tne HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, Now Orleans, Lo ui s i a n a 70130
144 ; 1 o l l 1 difference is. Subject to my objection, 2 Mr. Chavanne, answer if you can. 3 A. The answer is no. 4 BY MR. ORTMAN: ) 5 Q. Thank you, Mr. Chavanne. I 6 am finished with my questions. 7 (Whereupon the taking of 8 the testimony of the witness was 9 concluded. ). 10 MR. ORTMAN: 11 I have been informed 12 tnat no other attorneys have any 13 questions of Mr. Chavanne, and that 14 this, therefore, concludes his 15 deposition. 16 thank you, Mr. Chavanne. 17 le 19 20 l 21 22 23 24 l 25 i l HUGHES & ASSOCIATES, INC. 1619 Coliseum Square, New Orleans, Lo ui s i a n a 70130
. r a
145 e 1 ____________EIf2EIEEIS_C332131C323 2 3 I, Mary Virginia Hughes, 4 Certified Shorthand Reporter, in and 5 for the State of Lo ui s i a n a , do hereby 6 certify that the within witness, after 7 being first duly sworn to testify to 8 the truth, the whole truth, and nothing 9 but the truth, did testify as 10 hereinbefore set forth, in the 11 foregoing pa g e s ; 12 That the testimony was 13 reported by me in shorthand and 14 transcribed under my personal direction 15 and supervision, and is a true and 16 correct transcript, to the best of my 17 ability and understanding; la That I am not of counsel, 19 and in no way interested in the outcome 20 of this event. 21 22 23 "
~~~~~~EIRY~ViiGi5iI~55G555~~~~~~~~
I 24 Certified Shorthand Reporter 25 HUGHES & ASSOCIATES, INC. i 1619 Coliseum Square, New Orleans, Lo u i s i a n a 70130
. o . .
g' . A46 1 ____________hl125ssis_y55355555595 2
, 3 I, JOHN H. CHAVANNE, do hereby veri fy 4 that I have read the above and foregoing 5 deposition, consisting of 145 6 pages; and that the testimony containec 7 therein is true and correct, to the best i >f 8 my ability and understanding.
')
10 11 12 _____________________ 13 ________ 14 J O h N. h. CHAVANNE 15 16 17 IS 19 20 21 22 i 23 24 l 25 1 l hUGhES & ASSOCIATES, INC. L
, '. w -,$ p [w . M 7h 72 6 l
Exhibit 2 l l
- etter to LP.it (0:i/2424 ( , y i
\
6 *pril 2, 1334, tha' staff n ;aa ar. inta:tsive .m e eff , cesi.;ned to
- r:cotiy m;1ete these issues recessary for the staff tc reach its I! censing decisian on Naterford Jr:it 3. These issues courec a nabar of areas incistin; a!!c;at ons i cf '. cec:er cor.struction practices at the facility. . As j
, wa indicated to you, ;r.e v.Aff wat.ld peceptly notify you of issues that could ~
l potentially affect tne safe osaration of the plant.
'de nave racently iden:.ified seteral items listed in the enclcsure that have potential safety feplicctions. Itshouldbenotedthattneya'r7being pr vided to your befcce the :140 staff has ccepleted its final assessment of the significance of these concerns. The issues in the enclcsure represent a lir.ited staff audit of information related to the plant. This audit ,
indicates, htwever, tha: if the potential problems are r. ore pervasive, the overal* safety of the facility could be brought into questions. , L
~
As a result, you are reques. to propese a program and schedule for a cetailed A and thorough assessment of n #:ancerns. This progr mA will be evaluated by the staff bafore consica ation of issuance of an operati g license for Inis preg rgsnouliaddress the cause of ae ;ctential problems
/ haterford 3.
i identified, the generic implications of the concern on other safety-related
# systars, gregraes or areas and tna proposed LD&L aItion to assure that such
[ crociars will be preciuced fen occurring in the future. L in order to assure that an objective and cop;rehensive asse$t%nt is perforted, tne staff strongly rec 2.xenos that tnis review be carried out by an independent third party not currantly involved in the design or construction cf 'interfor Unit 3. 4 - ts . Sincerely, / A d.
/ U g
h,V Carrei; G. Eisenhut, Director L 0:vtstor. of 1. iter. sing - L4 i .
,,) 2T 0ffice of Nuclear Reactor Regt14 tion
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.- OUICOING r, TRANSHISSION SERVICE REQUEST -
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# - Exhibit 3 7/kf(
% COPY No, 1
f,fo ff a e 9D p5 ,: U-y gt2 i
SUMMARY
AND CURRENT STATUS OF LICENSING ACTIONS AT WATERFORD 3 l l AUGUST 1, 1984 F0lA-14-42c/yV1 C./ 45(. C9
1
- y COPY NO.
~I~
&#de 1
MARCH 12, 1984 -
/?!c EDO DIRECTIVE CENTRALIZING RESPONSIBILITY FOR MANAGEMENT OF ISSUES NEEDING RESOLUTION PRIOR TO LICENSING DECISION ISSUES NEEDING RESOLUTION PRIOR TO LICENSING DECISION FSAR REVIEW i -
REGIONAL INSPECTIONS BASEMAT ALLEGATIONS INCLUDING INQUIRY TEAM REPORT i e f e i . _ . - . - _ - - . - . _ . _ - _ _ _ . _ _.
, COPY NO.
FASR REVIEW AND REGIONAL INSPECTIONS FSAR REVIEW i, SER AND SIx SUPPLEMENTS HAVE BEEN PUBLISHED hgf t '
/
/ \
SUDPLEMENT 8 WILL ADDRESS REMAINING FSAR ISSUES ,. ENVIRONMENTAL QUALIFICATION AUXILIARY PRESSURIZER SPRAY SYSTEM OPERATING PROCEDURES LEAKAGE REDUCTION PROGRAM *
- FIRE PROTECTION LIQUID AND SOLID RADWASTE SYSTEM INITIAL TEST PROGRAM l
EXPECTED PUBLICATION DATE OF SSER IS EARLY AUGUST l 197 i p&d'E REGIONAL INSPECTIONS 6M , & l
/ sm INSPECTION EFFORT ENHANCED WITH RESOURCES FROM OTHER REGIO 0FFICES AND CONSULTANTS TO ASSURE TIMELY COMPLETION OF ALL INSPECTIONS l
FINAL INSPECTION REPORTS AND FOLLOW ACTIONS ARE BEING COMPL
T COPY NO. BASEMAT CRACKS BASEMAT IS ALMOST 300 FT WIDE BY 400 FT LONG BY 12 FT THICK CRACKS AND WATER SEEPAGE FIRST DISCOVERED IN SURFACE OF BASEMAT IN 1977 (4 4 + doid(dWI /f 6 MOTION TO REOPEN HEARINGS ON SUBJECT OF CRACKED BASEMATS INTEGRITY - FILED DECEMBER 1983 TWO NRC GROUPS EVALUATING TECHNICAL ISSUE CONSTRUCTION ACCEPTABILITY NRC HEADQUARTERS AND REIGONAL STAFF ALONG WITH*A CONSULTANT HAVE EXAMIN$D CONSTRUCTION RECORDS AND CONCLUDED THAT CONSTRUCTION WAS ADEQUATELY PERFORMED DESIGN ADEQUACY NRR AND ITS CONSULTANTS FROM BROOKHAVEN HAVE REVIEWED ORIGINAL DESIGN AND INTEGRITY IN LIGHT OF CRACKS DISCOVERED AND CONCLUDE DESIGN IS ADEQUATE LPat HAS NDE TESTING UNDERWAY OF BASEMAT STAFF HAS DISCUSSED PRELIMINARY FINDINGS WITH LPal WITH MOST OF THE MAT TESTED - NO DIAGONAL TENSION CRACKS DISCOVERED, STAFF'S FINAL ASSESSMENT TO BE PUBLISHED ON AUGUST 7, 1984 l i
q COPY NO. 4-ALLEGATIONS ALLEGATIONS AROSE FROM QA PERSONNEL WORKING ON SITE AND CONCERNS ABOUT THE: i - FUNCTIONING OF THE QA PROGRAM CONTROL OF DESIGN AND FIELD CHANGES DISPOSITION OF NONCONFORMANCES AND DISCREPANCIES 1 REPORTABILITY OF ITEMS TO NRC GENERAL ALLEGATIONS ABOUT POOR CONSTRUCTION APPEARED IN l GAMBIT DURING LATE 1983 BY LATE MARCH 1984, MEMBERS 0F THE TECHNICAL AND INVESTIGATIVE STAFFS' IDENTIFIED APPROXIMATELY 350 SPECIFIC ALLEGATIONS d i g ,.1 A MOST ALLEGATIONS DEVELOPED FROM_, i _, HERE PRINCIPALLY AGAINST fjASCO,1< '5 TOMPKINS-BECKWITH (PIPING AND, MECHANICAL) AND MERCURY (INSTRUMENTATION AND CONTROL) J t
COPY NO.
. l WATERFORD 3 TASK FORCE THE WATERFORD 3 TASK FORCE WAS ORGANIZED TO CARRYOUT ED0'S DIRECTIVE, INCLUDING EVALUATION OF ALLEGATIONS TASK FORCE WAS COMPOSED OF ABOUT 40 TECHNICAL SPECIALISTS FROM NRC HEADQUARTERS, REGIONAL OFFICES, AND CONSULTANTS FROM NATIONAL LABS AND PRIVATE FIRMS j
TASK FORCE WAS DIVIDED INTO TEAMS THAT LOOKED INTO THE AREAS OF: i i - CIVIL / STRUCTURAL AND PIPING MECHANICAL INSTRUMENTATION AND CON'TR'OL QUALITY ASSURANCE AND QUALITY CONTROL A FOURTH GROUP, THE INQUIRY TEAM - PREVIOUSLY INVESTIGATED CONCERNS RAISED IN MAY 1983 ' ISSUED A REPORT IDENTIFYING OA CONCERNS AND LPal'S FOLLOWUP LP8L RESPONDED IN SEPTEMBER 1983 AND FEBRUARY 1984 INQUIRY TEAM JOINED TASK FORCE TO EVALUATE ADEQUACY OF LPal'S RESPONSE INSPECTION REPORT ISSUED JULY 20, 1984 l
i
' COPY NO. t ALLEGATION EVALUATION EVALUATION TECHNIQUE GENERALLY FOLLOWED DIABLO CANYON APPROACH APPROACH UTILIZED INCLUDED:
DEVELOPMENT OF REVIEW PLAN GATHER RELEVANT DOCUMENTS OBSERVE FIELD INSTALLATION 4 GATHER INFORMATION FROM UTILITY AND CONTRACTORS 4 SPECIAL CONSULTANTS EVALUATE ISSUES I - VALIDITY OF CONCERN . GENERIC IMPLICATIONS ON OTHER SYSTEMS OR VENDORS SAFETY SIGNIFICANCE MANAGEMENT IMPLICATIONS , DOCUMENTED RESULTS OF ISSUES EVALUATED 6 5,76 ~ l -- l I TASK FORCE REPORT BEING FINAllZED AND EXPECT IT TO BE ISSUED IN MID-AUGUST 1984, l
.. ~ -
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l 1c-jds SPECIAL CONSULTANTS 5
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COPY NO.
-g-TASK FORCE ACTIONS COMPOSITION OF TEAMS (NUMBER OF ALLEGATIONS EVALUATED)
CIVIL / STRUCTURAL TEAM (87) 8 MEMBERS FROM NRR, RES, IE, R-IV AND INCLUDED CONSULTANT. TEAM HAS 150 YEARS OF
' ENGINEERING EXPERIENCE. THE ADDED BASEMAT CONSULTANT HAD 38 YEARS EXPERIENCE.
PIPING / MECHANICAL TEAM (42) 7 MEMBERS FROM NRR, R-IV AND A NATIONAL LABORATORY AND A CONSULTANT. TEAM HAS 149 YEARS OF EXPERIENCE. INSTRUMENTATION AND CONTROL TEAM (7) 4 TEAM MEMBERS FROM NRR, IE AND CONSULTANTS. TE'AM HAS OVER 50 YEARS OF EXPERIENCE. - QUALITY ASSURANCE TEAM (217) 19 TEAM MEMBERS FROM NRR, R-III, R-IV AND NATIONAL LABORATORY. TEAM HAS OVER 300 YEARS OF EXPERIENCE, i 9
- -- - - m _
54'
, COPY NO.
9-CONCERNS IDENTIFIED BY TASK FORCE IN JUNE 13, 1984 LETTER TO LPaL CIVIL / STRUCTURAL CONCERNS IDENTIFIED 7 INSTRUMENTATION AND CONTROL CONCERNS IDENTIFIED 2 QUALITY ASSURANCE AND QUALITY CONTROL CONCERNS 10 IDENTIFIED INQUIRY TEAM CONCERNS IDENTIFIED 2 TOTAL 23 LPal PROPOSED PLAN TO ADDRESS NRC CONCERNS - JUNE 28, 1984
'~
UNDER REVIEW BY STAFF STAFF WILL REVISIT SITE TO $ VALUATE ADEQUACY OF LP8L'S FINAL RESOLUTION OF CONCERNS NO CURRENT LICENSING DATE REQUESTED BY LP&L 4 l l p
jo, - COPY NO. TASK FORCE FINDINGS SOME ALLEGATIONS WERE VALID BUT CHANGES MADE ONSITE TO ADDRESS ISSUES SOME ALLEGATIONS WERE VALID BUT OF LITTLE OR NO SAFETY SIGNIFICANCE SOME ALLEGATIONS WERE NOT VALID ; i SOME ALLEGATIONS WERE VALID AND THE STAFF REQUESTED ADDITIONAL INFORMATION IN 23 AREAS THAT HAVE POTENTIAL SAFETY IMPLICATIONS (SOME FOR FUEL LOAD AND SOME FOR POWER OPERATIONS)
COPY NO. SCHEDULE OF FUTURE ACTIONS AUGUST 7, 1984 - PUBLISH FINAL RESULTS OF BASEMAT ASSESSMENT MID-AUGUST - FINISH ROUTINE INSPECTION FOLLOWUP ISSUE REPORT OF TASK FORCE REVIEW RESPONSE OF UTILITY TO 23 AREAS (WHEN RECEIVED) AND DOCUMENT FINDINGS l ISSUE FSAR SSER COVERNING REMAINING OPEN ITEMS I I ABOVE ITEMS MUST BE COMPLETED BEFDFT STAFF WILL CONSIDER ISSUING A LICENSE FOR FUEL LOADING AND LOW POWER,
- SEPTEMBER -
EVALUATE APRIL 27, 1984 UTILITY RESPONSE FOR POTENTIAL MATERIAL FALSE STATEMENTS l f l
--- . _ _ _ . _ _ . _ _ _ _ _ .__ - . - - ~ ~ ~ -
- f. t COPY NO.
D CHRON0LONG 0F MAJOR EVENTS MARCH 12, 1984 - EDO DIRECTIVE CENTRALIZES MANAGEMENT AND INITIATES EFFORTS ON WATERFORD AND COMANCHE PEAK APRIL 2, 1984 - WATERFORD TEAM BEGINS ONSITE ACTIONS 39 TECHNICAL ALLEGATIONS SENT TO UTILITY APRIL 27, 1984 - LPal RESPONSE TO 39 ALLEGATIONS MAY 25, 1984 - SITE WORK FINISHED 4 = JUNE 8, 1984 - MEETING WITH LP8L TO DISCUSS 23* AREAS WHERE STAFF NEEDS ADDITIONAL INFORMATION JUNE 13, 1984 - EISENHUT TO CAIN LETTER TRANSMITTING 23 AREAS JUNE 28, 1984 - UTILITY RESPONSE WITH PRELIMINARY PROGRAM PLAN RESPONDING TO 23 AREAS l
Exhibit 4 l ,
, w
_I f Revision 0 5/23/84 (TSK2) SSER i l Task: Allegation A-01 Reference Number: 4-83-A-48/1 i Characterization: The allegation is that the employment records for quality assurance (QA) personnel of the Mercury Construction Company have not been verifiec' and that the implications of this alleged practice may apply to all Mercury employees. Assessmsrt of Allecation: The implied significante of this allegation is that unqualifiec quailty control (QC) inspectors may have performed inspections, making the validity of the inspections questionable and the quality of the work indeterminant. j The NRC staff reviewed Mercury's procedure for qualification of inspection, examinatien and test personnel, inspector certification records, and personnel training and resume packages against Regulatory Guide 1.58, Rev.1, as required by HRC Generic Letter 81-01, ANSI h45.2.6, 1978, and IE Circular 80-22. ' The NRC staff san;1ed 30% of the inspector certifications of QC personnel; the results reveale:' that no verification of past employment was documented. Ar additional staff exanination of inspector cualification for Allegation A-02 has indicated a generic problem of improperly certified inspectors. Mercury inspectors have perforned inspections on safety-related systems. The , NRC staff believes this allegation has implied safety significance and should l be resolved prior to fuel loac. I Actions Reouired: Prior t fuel loadi , LP&L shall:
- 1. Verify the professiona - = als of 1001 of the QA/QC personnel, incluoing supervisors and managers.
- 2. Re-inspect the work performed by inspectors found unqualified.
References:
- 1. IE Circular No. 80-22, Confirmation of Employee Qualifications
- 2. LP&L letter W3P83-3704, Re: Confirmation of Employee Qualifications
- 3. See documentation of Allegation A-02 for certification packages reviewed.
t 2
\4 4 Regulatory Guide 1.58, Revision 1.
- 5. Generic Letter 81-01.
- 6. -ANSI ff45.2.6, 1978.
Statement Prepared By: R. A. Westberg Date Reviewed By: Team Leader Date
+-
Reviewed By: Site Team Leader (s) Date Approved By: *- Task Management Date (- i e I
- 4 4
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Revision 0 5/23/84 (TSK2) SSER Task: Allegation A-01 Reference Number: 4-83-A-48/1 Characterization: The allegation is that the employment records for quality assurance (QA) personnel of the Mercury Construction Company have not been verified and that the implications of this alleged practice may apply to all Mercury employees. . Assessment of Alleaation: The implied significance of this allegation is that unqualified quality control (QC) inspectors may have performed inspections, making the validity of the inspections questionable and the quality of the work indeterminant. The NRC staff reviewed Mercury's procedure for qualification of inspection, examination and test personnel, inspector certification records, and personnel training and resume packages against Regulatory Guide 1.58, Rev.1, as required by NRC Generic Letter 81-01, Ahsl N45.2.6,1978, and IE Circular 80-22. The NRC staff sampled 30% of the inspector certifications of QC personnel; the results revealed that no verification of past employment was documented. An additional staff examination of inspector qualification for Allegation A-02 has indicated a generic problem of improperly certified inspectors. Mercury inspectors have performed inspections on safety-related systems. The NRC staff believes this allegation has implied safety significance and should be resolved prior to fuel load. Actions Required: Prior to fuel loading, LP&L shall:
- 1. Verify the professional credentials of 100% of the QA/QC personnel, including supervisors and managers.
- 2. Re-inspect the work performed by inspectors found unqualified.
References:
- 1. IE Circular No. 80-22, Confirmation of Employee Qualifications
- 2. LP&L letter W3P83-3704, Re: Confirmation of Employee Qualifications l 3. See documentation of Allegation A-02 for certification packages reviewed.
_ _ - ' = = = = i - ^ " g .. .. .,,..._..,._,,,,..,J
t - i , s'
'i 4 Regulatory Guide 1.58, Revision 1.
- 5. Generic Letter 81-01.
- 6. ANSI N45.2.6,'1978.
Statement Prepared By: R. A. Westberg Date I Reviewed By: l Team Leader Date l Reviewed By: Site Team Leader (s) Date Approved By: Task Management Date i s A l c -
DravS 1 / 5/30/84 (TSK4) _ Exhibit 5 I
\
SSER y , x, I. " Task: 111egation A-48, A-60f A-295 _
/ /
Reference No.: 4-83-A-88/2b; 4-83-A-88/12; 4-84-A-06/176 Q g e .u,,,se -*'<. , .c h - g o.uctr.- Characterization: J'A Complete Breakdown in the QA Program between EBASCO and 9 the Mercury, Company, c' L. ~uu (Cuni.oct W2 N Y. 15) r Assessment
.~
of Allecation: The implied;',0f^ty-significance of this allegation
') .*:. L J. . . '
r s.d. T L l * . .' ' \ Wj : 7.<.
- is that,a " complete" QA breakdown-Occw p .ed. That (c .trE
. .G cuatrol quality ,
inspRctors did not de acequate inspections; -Herce ;' pa"nnna',f d 7,c't have- ' N j. '
; Mercury personnel did not have Ahe, freedom to write
, e-; s ./
)Qonconformancefreports~. (NCRs) and,.pbtain effective corrective action; EBASCO g
dnd Mercury did not follbe. say procedure;r QA records did not adequately
~.' % _#
document QA activities; and the Mccr.a
- c and contractors audit prograT.,which w .w c h y .: w ',n prs ~ M , -
N. dai, defense f or identif,y-iijgM,g- [~ _ Z iy i
=ta,d. a Lc.i: 5 2 p M::=.9 This breakdown rct-celly extends to Louisiana so -
C t- '^ = / b1 W aL 4 Power & Light (LP&L)) -f4ese ti,y are the applicant for g license o~A O u t L- e.u -ru ~ ~ ~ - r ~ ;, C C o u k k 9 . @ .. N MA 0^ O*^ '"-
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g Drafu 1 l t ' ' 5/30/84 (T5K4)
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#;' :V R ReysN. No. 50-382/8 ,14 peess=3 C2 describes a small LP&L QA I 4 i
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staff (4*6yetitientha*ftde iieavy reHemte on EBASCO Construction management for kn iteb' 'onstruction QA .' Inturn,EBASCf#AY10auditorsfauditdQA ; f f . programs of'other onsite contractors and,because these auditors had additional f l g3A nasa 8 duties s /ctha iha. cuditia;; 14t limitedhheir effectiveness /1. LP&L's annual of. EBASCo included a review of 143 audits conducted by EBASCO QA dere+rrg 1981. b . The audit m ... W concluded that,EBASCO audit program was adequate but A M. measures should be established by EBASCO tedetermine the effectiveness of the - - cntractokQAprograf.EBASCOSf4:4;n;;didnotaddressthOu-.mari comments; . )., s,,*~ 3, 9 -
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The, report +tferenced e rve stated that in early 1982 EBASCO submitted 7 [* " ECCS systems to LP&L for turnover. LP&L audit of these turnover -' packa,ges . j c,. -D... included QA records review and w walkdown inspection of system;L s , Al l- +-ag, .
-i i systemsp ere rejected). LP&L reported this QA breakdown to the NRC on.
- 4. V chrh May 26, 1982, defe M c48 ;otentiallyReporteleIncicentNo.80.Y,elater
-u. "h
-c a gcc to Siglificant Deficiency Report 57, "Inacequate Instrumentation and Control Installations and Turnover Documentatio g" Because of serious problems with "as-built drawing and deficient installation of I&C systems,*5
.- _~4 - :r n the NRC imposed a civil penalty,itrMRC L;^.^.er CC-Z2 U ?-,no sa+ g December 6, 1982.
l 2 .
ewuv ts- a , 4 5/30/84 (TSK4) r* ^\ Q LP&Y(Letter M I83-0001 and 0015 kdd ed January 4, 1983, and April 8, z -- _ 1983, respectivel gesponded to D e NRC,Ir.:p::ti n e p rt J nohd of
- r. , 'In A Viehi.i v o. They';acknowledy,e( th:- s a partial breakdown in the Waterford 3 QA Program "at the sub-tier levels and involving contractor / ~
subcontractor organizations identified in USNRC Inspection ta ne . ,% .:.. .)1);9 Report 50-382/82-14 p L ,v a y the violation was steted te e caused by: (1) insufficient training of inspectors, QA reviewers, and craftsmen, (2) inadequate staffing,*and (3) inadequate walkdown of completed systems. O b - D. + "' u. 3 8 I: ..
- -t.i : ; . l3. ,;
Papr 'ere , outlined ,tc take,cerrecti ce :: tier, " t%: :-^?? by April 4, 1983; however, the last LP&L letter daud,, April 5, 198 , stated that
" final review of corrective action documentation is scheduled to be completed in late May 1984 The Final Report will be submitted to the NRC on June 15, 1984."
Because of the above quality assurance and enforcement history.tte NRC
. x, ~. -} .:
determined -that th method: M y te felle V this allegation eld Ae-es
.- t felic e (}) c.*hrete-&e " pier:ntatica uf. Mercury,Q^ "regrec, (2) : . :Mte I kr EBASC0p* eg-: , and @ty LP&L QA /rograf by e.elu;tirg. thg, audit /
=
pr ;r;= and resultant corrective actio),vVith_ respect t Q J.e m ent ano cad e PAT M tl 1N.P.* QLthe OA breakdown at & F-^^ , N"^ end " :;ry. 4f adifitional - M .$1 if al, th:n audits of other contractors problemswereidentifiedet"crcug,a(f.'s.fA/)), C"*Id - :9:t;d for similar QA ;wegnem deficiencies. O i 3
JTm.rWhb7M
- 4:2
^
-)).1 h?s@ T ' .' 50% h j
g Ol _ _ . . (, , .y. 5/30/84 (TSK4) M .t, +;f WL Oo".< cv4 heflo r-M Mehew/c?\Merc.u&4udi.tt j- - and-CoreN]The NRC staf f re. ica:d r? evaluated 7AManual(QAM) Sections 1through18;proceduresQCP-3020[3060,
~ ~~~-- 4 -
3 and SP-664;4 audit log;,tumatrix of all construction procedures; 8 auditor i all 1979 through 1983 audits; and kl)<~ qualificationfiles;64inte0ralauditbs+
%n sch .,. s +-a .a a . 3 y Ju -
n B.h QA Annual Repoht July 1981-92A . veral former Mercury employ es and othe
.. s j site personnel having direct kn wiedge of the company.feee [6tervieg The following is a summary of these interviews and evaluations.
f-f k Interviews and Evaluation of Mercury Manacement r _ The Mercury Company was plagued by poor and discontinuous management 3
' t : req-2; .
Ss e
~ ,,,
b ::a l there f were 5 project superintendents, h product engineers and 5x lh T 6,QA site supervisors from mid 1978 % mid 1983. Site QA/QC g.g a ne A personnel received w asupport from corporate QA management and as a resu13manyQCinspectcrsresigned. Several QC inspectors wrote letters of resignation describing these peor conditions and were threatened with immediate dismissal if these letters were not withdrawn. L .'m - QA/QC personnel ^consi.antly w$f overridden by cost and schedule concerns c te jwh .M Q C w. ,. rod becauseEBASCOandMercurymanagementwerej"inbedtogether"andran "roughXshod"overQC. There was a high tu never among QC inspectors. EEASCO management was aware of these problems shortly after Mercury came on site. More than one source stated that LP&L and EBASCO did I not properly control and alsure that Mercury QA records were retained I w~, + \ onsite but allowed them to " haul" away Waterford Project records that ; A 4
LfrTu"tOJ { 5/30/84 (T5K4) should have remained on site. NRC staff members also found that LP&L WHL wese still unsure as to exactly what records were on site and what j records.should be on site. EBASCO and LP&L management 4-ir.ellf became c." * . fully aware of serious Mercury proble.ts in 1981g1982 g almos reg g
- a. < :/ sir years af ter t, hey ca/me on site and after almost 80% of the wor x 1g ey
*t gg p g(, ap E.ba.sec, w e =S & t SwvPb +A e d N et w s=W'ed 3 cr.- 9g& arently assumed that it was too late to obtain corrective ac n or 42/4 4 gb,g.irtpos sible 4sc ,
aw _ . fj o l l h,,Rpti'ayAS'EvaluationofCorporateAnnualReport
- f. f r
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, ..c.
Mercury Internal Audit No.1-9-80 (January 8,1980)-finding No.1,2
< ...J .I documented that ik: Mercury raanagement,'revie/of the QA program h;d b;cn w2 .
xdeae since September 1978;(when-the k p c; : ' ph::ntatier -;s-gett4eg j underweyF. ~. The audit log showed this finding to be closed the same date y, ef; % aadh '.> d , ' perf - d 1 + SPg however, EBASCO Audit CBB/AEZ-83-2-3 determined that the audit was not signed off as closed and' only one annual review.or r-spoet-hed-beet -ecccmp'i;hed-end thWwas for the pe.-icd July 81 82. M nkt 7- : F > 't
\
, s uA*t. .,4. ,
The NRC staff found,no additional annual reviews and"the one review
'ge, j.~t , u s awg
, referenced was neither ah, acceptable nor adequate rc. ic.- re fe. med . r wn w t' - = ::::pte'e n:r deg :t: evi et- cf the status and adequacy of the Mercury site QA program. d The staff further concludeg that this failure to perform effective QA program reviews has significantly contributed to all the Mercury conditions identified as adverse to 1 ! 5 l
' LMNtas 5/30/84 (TSK4) w q / hen Co^ bs toss em W y
quality, ,d :: efailures, malfunctions, deficiencies, deviations, I defective material and equipment3and other nonconformances that were not promptly identified and corrected)3ASCC and L"'t :=;;=nt har direct responIibility for not accuei"" that ' Ustem n impiementeo w w nrg ~ 4A tir such QA program breakdowns 40-the-ettention-ef-fB*C and Lf4L. mas.egement at-the appropriate level todnsure-eer-rective acti^a Although-ttris . M' Tr4 cow 34(mificant ccnctructicr def444+nsy was identifiedraf early as January 1980, EBASCO audits did not identify the same problem until February 28, huuw 198 . c..cecrfther significant and similar problems,were id'entified in 9 EBASCO Audits tie-79-9-4, NB-80-8-3, and SW-82-E-1,which should have alerted management to these problems as early as September 1979 j but not Yy later than June 7, 1982. Not only was this deficiency never specifically reported,but it was never corrected. 2 [. Reciepr.a<if Evaluation of Mercury Internal Audits r l' MercuryInternalAuditNo.211-80s& tad.hanuary11,198 documented l . ca g . ,:ri *1 F that 3internal audit on QAM Sections 10 acc m -a w p' '.;j,' f,' n: p 2,,%. 0]' ' : - c ' mbk 1 k \A .rOI 11, 14, 15,lc; andwa 17 wen not, done at least once er year.)in 1979 as e p -ei , Internal Audit
/* dp A*
No. 5-11-82 riaMMay 11,198 documented that(Sections 2, 7, 12, _ 13,14, and 15 Nnot beee-audited during 1981. p t- Corrective Action-Request (CAR) wakinitiated as a result of the 1980 audit but CAR No. 44 was issued May 11, 1982, more than two years after the same I finding in Internal Audit No. 1-11-80 p u pei am agh C t, low (-
Draft 1 5/30/84 (TSK4) stI*INj
- 1. .
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- ' v,n w;yt-' p",,
The NRC staff d '
/
" "" Section
~/
5 Procurement,was 3 nauer audi+ed by Wrcury- from 1978 through 1983 because they stategtd they2N purchase.dnomaterialsjgowever,MercuryLettersWQ-1216and1225 dagd(D'ecember 15, 1982, and January 4,198
~
discuss Mercury's issuance of a purchase order to Welders Testing Laboratory in late
- p. -
1978g remain g in effect as of January 1983. LP&L acknowledged this finding and ther 2 Ped 4'
- ther servi;ee arc purchned stated that I* '
i v.11' '
., C, )~ '
t calibration services verc purchc d. The NRC staff ee..Les reviewed u i:t hgjTiles t Mercurylanc determined that QAM Sections 5, 12, 17, and 18 were not audited in 1980. The failure to audit Section 12
" Nonconforming Items and Corrective Action',' is significant because
., ' t o:nv>) . ~
c{-1-) lWe apparent failure to take corrective actionL..c regarding Wre 7( 6 Y..e,s. tucA
' and :: r management reviews andrinternal ~
k icI d ..audits.
.' Jyxi, n^t p:-'r---@0
) l}$(2) thi Section 12 was not audited in 1981. QAM Sections 5, 14, and 16 were 141.)E1 !
not audited in 1981. QAM Sections 5, 11, 12, 13, 14, 15, and 16 were not audited in 1983.s I l r b
.\ 9 -
fesponse letters to audit findings describing corrective action were Yt'- feed in the file for calendar year (CY) 1979, but responses were et t found for CY 1980-1983. . i l l 7
5/30/84 (TSK4)
- s. W 41
-A , d i c e"E F e d 4 - p;regr;ph 2 %e thissigfdf4eent cu.mtru; deficiencif i a , partial QA program breakdown [has never specifically been reported even though a tll;;;ntvo iei identified the deficiency in Januar'y 1980 and EBASCO identified the problem in June 1982. Even more --
-t% LL 40 serious. Mercury fever correctdit the problem after it was identified by Mercury and EBASCO.
Review of Auditor QualificatiortA , H
.1:.q P' ',:.clJ .; J ~,a '? g .pc Although auditer resumes ,pM-ef adequate qualificatiori,squalification uu .ld-?
, M.1 pA 0 J' * -
methods were inconsistent / as some.were
given written exams, others veel :~.c,
. t . 'd - r , . /d *
- exams, and in one case ewn the oral exam was waive.d. The fb'llowing eekl}'.
1 i.
/ .J. .1 **, cv:.
acministrative or procedural,v. defi,ciencies of r'ncr ;etere be they p;inrM m e.; c.i*o poor record keeping (: & 4 c- Mi OF- F ^ M *"4 *
,) , ' ) .* .!' { r.J. .' T
. - . Q;&,7g, 4 &
,l. d.
.. ar @
fperformed as,, lead auditor on December 19,1978, kt i auditor 4ualihr.ation -pre;e;;rms-ne i,. glow w.,;l June--ee,
~ ' '
M 24. Rece-d: "d4::t: he wasj.,l- r' .i ualified as lead auditor en W R January 22, 1979, a month after he performed the audit. ih: -e Mgi .1; ader ";b..awc.. 4 be(ded 20 int," L~ t on.r-
. G nc1-: . s
. s , . end . e.
M n. /is eye examinati'cn r was { dated January 16, 1979, well after his first audit. I I I 8 1
J. ~;. 'D $ .i.u.*0'
- 0N ac -
h if. A oc W e documentation to show that he had
- tt. + 1) received orien GUJr.,d:*c:my t g ;.: . . ~ king kn:Aedge ind u W :t:ndin; or ANSI N45.2 and N45.2.12; 10 CFR 50, Appendix 8; Ce di W W ASME g III, NCA 3000 and 4000; Mercury QA Manual; and Mercury Audit Procedure QCP-3020.
R '/) Nl .*.* u'. . .IK. ~
;3 g didnothaveeyeexamination,ecNIttion-in ile for 1981.
' tw> bs) dh t n cu <4v ..< L b d
( was not examined tTr-escc-denc ith paragraph 6.6 of
- e- = -' ;
*~
f
- s. --- a A: C
,, g.,. . -
8, QCf3060. '.4r: w: n; eye exam for 1980,g u . c"and did not receive O, r- q ia 4.
-enci'ied training.
gu y . 1 . .k ' i 6 ) g. 3 Audit Participation ,_n Log was not available in the QA record files par. M
^
Wigin e paragraph 7.4ofAQCP-3060.
< "' . .- .uk , 2 e /
fiE Pe'ifV~Md Evaluation o' Hercuey Audits of Im:lementino Procedures The NRC Staff review of Mercury QA, (onstruction, and special process Q cle -
, r,.0;.-j . -
procedures showed that Mercurysnsu e audited the following, procedures P ~ . (. p e F -f u 4 1 during the, project: MCP-2140, 2170, 2175; SP-650, 651, 652, 653, 654, 655, 656, 657, 658, 661, 662, 663, 668, 670, 672; WPS-B, P, G; BP-1; and l WPS-W3-4. / \ a EBASCOAuditNo.SW-82-6-1dal.a4Qune7,198p?tt: ":- h documented S' iinding that Mercury implementing procedures had not been audited. 9 i
. 5/30/84 (TSK4)
The NRC staff finding that many implementing procedures were not audited is particularly significant since it makes [ a corrective actio$ 2 g was n. ./h'a..-) h'.w ' . r%' -W.Md .:/l parent
~ i, ~h,0that
[ effective ot'taken.I P ik cleMeportcr.t 'tc siatt-that many L tJ :) :) documen~tation ge and hardware deficiencies thet -;re identified were rel'ated .-
/
to t % procedures whie uc M not audited / I'# I,I''-(* TC L Mercury Procedure L. Q ,r f, 020, 3050, 3060, 3110.1, 3110.4, 3110.5,,, g e 5 ,j; ,- 3110. 6; SP-659, 664, 665, 666, and 667 were audited only.6ye*M-
), r,a af- ? / . . - - d O_a-j- G N &
d" t t M pr-i % 1979 1983. 4 These implementing procedures wire ihr _a. =. c ' - ** ) E. .~. .C~a'ud'iting, qualification of inspection / test and audit personnel, pipe and tubing inspection, welding inspection, installed equipment inspection, material receiving, nonconformance and corrective action, installation of seismic expansion anchors j and control of "as built" information. Special orsupplementalauditsshouldhavebeenperformedinadditiontoannual f ;1. - audits of these areas because of c ;:titiw. vi nonconformances, ceficiencies , and audi t findings. -i .. Urrs+-. areas. The NRC staff considers this failure to audit implementing procedu'res a breakdown in the Mercury QA n) program, ;O ,L 'T itmL should have been identified in the corrective. action response to the pfc73erly ident4'id "I civil y v.;. .i-) ~'? N i T w co n. , penaltyA&cu: Ad cbcet:-and r~epresents inadequate corrective action. 10
twunn 5/30/84 (TSK4)
..r**.. *
.).
Ceoccr CLc n cs: (%F"~+ f h R5dgaq Evaluation of (ARs)
/t The NRC, staff reviewed 143 CARS issued by Mercury Company from
. 3. -)):At:.1 December 19, 1978 through August 9, 1983, All CARS relating to audits;;
q .k is J ' we:A ^; & sted g Tue CAR iww was reviewed ivi audit finding trends oud -i t 7 r g, ' : w / . X4 6 m data % ed that 3 EBASCO should have been aware of adverse trends 97M e concerning audits fas early as December 19, 1978 but certainly by CAR 3 gr.o :. No. 18j initiated August 6, 1979. Ottler CASs (046-0591 were isg edsidOb d% ). ' '. i * / y;,.&, # ; 'y ./; May 24,1982:,and CAR 089 conce c.in;; oud i ts. EBASCO QA management and 1,c _ . . f- er -n.c C (A CS /).: n< 0sA. _- auditors should have reviewed, tMs loggrecognized the trends, and advised LP&L management. Other trends which should have been recognized
- t. s Ebtw '
and investigated (are a; iviivwn N> CARS 019,024,025,.026,028,033 n .
~nsuedbetweenMarch1980andApril1982 kid;ntifi5dredline"asbuilt" '
drawing control and installation problemsM, fg ' CARS -019,020,021,022[ l
.024,,025, 026, and 030 issued p one construction supervisorh^* -- "-
=ms setts ideu 4 tmd-;thatiraftpersonnelwerenotfollowing procedures; and-(IE)]rCARS 020, 027, 034, 061, 069, 074, and 08F -
~ ' ~ ~ # i;;;cd 5 ' , - : r
@) Ins .->
f QC :nd w aituvecween F.ar s 1550 and Jwl,7 3C,1032, idi..u im -failure to ft*'.m. d A j:a wun sh inspect welds because of-craft / ignoring hold pointtand QC failure to ! I- s. st
- inspect weld joint fit-ups..These ) trends are only examples
- : th:r: we r: .
cg J.4-t- , f.+4 Lb s.s ec err %. othpre , adverse conditions wttith-were identified xearly j but.,effectiv'e ^' -.- >J' ' \ y, 'JM c eLLs as Corrective action was not :Zured by tr.e ::rt. .T. @ Mercur orLP&Lp m l l l 11 l
. Draft 1 5/30/84 (TSK4)
( Review of Mercury Auditino. Nonconformance and Corrective Action Procedures _ qM t.n.'ji 3+'.' . -ANr (C.'p) 3. "M ) 0.'Y . NL .5f. ) _ j _ M 'g
. 6.uditino SwbeW1 Eudits of vendor 4;rfeQ services, such as MMM Tewde. red L e m s r g d.. ie .
s e e m-d: cd by Welder's Testino Laboratory of Metarie, 74-weae ,
. - s j not4 scribed jam 5M 4ec_t_ic J. C v. .Qgf j ?3 Th QAi y id not
( 8 pw incorporate the requirements of ANSI N45.2.12 Draft 3 Rev. 4, d._lM f,n.~,uf - g.- j(tFebruary 22, 1974 L h
- N[;g , w followup action when CAR
' is not 'ssued and references to other applicable standards.as
, R,. Paa .4--<.
l spec}fied-in paragraph 1.5" Referenced Documents." Ttis dei '-Et didj
'~
Q C E -1 : L f .: . n. d ~~ W require a pre-audit conference.czie the ANSI standard stated thataconference"shallbeconductedN V
@' Nonconformancet and. Corrective Action / QAM Section 12 and SPP-664, Revisions 4, e ;tcted, p.a
,. .. - o . :.; c ww.
n.- p % "When the suspected nonconforming
/
, material, iters, and services are determined by the QA Manager-er .
' I.
3 his-desic Em to be nonconforming,,a)-Q" "ca r- W a c S port -
,V, p s s -
(Exhibit hv. 27;a win:ratedpd e i.ccmunivi mouve numbei abell be I' taken free the-NoMsMor ence lag *=4-tein:d 5, QA (Exinou. no. 4) and :h:1' be 'ndi;aico on the NonconTormance 4 cr d The NRC Staff determinedthatdraft/onconformance ports (NCRs submittedby27 , g,q 4e t.c f- 46 inoiviu al er dge-t ent the g QA canager could s reject'Mosra fi-NC-R y* e te mE c p ~% i c' uw G) , e.h c'u *, r" "hal d be accegiJ.lenhowever,itwas[foundthatdraft)NCRs bLA9*A+~m' O M were not m-%e QA records. Therefore, the disposition W o' o, p i i c i justification for rejection was not auditable because the draft NCRs 12 i l
, Draft 1 5/30/84 (TSK4) were destroyed. The NRC staff interviewed former Mercury pcr: rn:N and other site personnel who had direct knowledge of the NCR system.
They acknowledged that such a '.ystem may have impeded project - W personnelAprocessing NCRs. An LF&L QA engineer stated that LP&L had L ECm addressed this problem when Mercury management was supplemented,i'n p-1932. Mercury personnel were 3encouraged to write NCRs and as a , l#* result the number increased from several hundred to more then 3000.! ,. y,4c, .c This happened at-about 80% ec p'atier of :%e Mercurygiebg w , owever, the NRC staff commented that this,would not necessari}y solve the q t:~d '. 4 problem of failure to process or document rejection,of draft NRC's e d C td c.1 that were submitted by personnel who lef t the site prior to WYsibHrt-
- L' ~ . Jfr$' * ~,=. $ U.g /
- 11 .
aM -
- Q ,) . y s,lf . t - ) } f_.sf )
g' ' g /, & Gf 'f
$ Review o' EBASCO Audits and CorIective Act n- he NRC stafj_ # ,.;-
42 ,, .it ;da um' % k i
^
n ,, y
.J
[" reviewed . ESASCO audits of all QA recor(p en :E;se.imd b~,
,/ -f?: 2 -- JT -; ,
l' Q;' f . resenw% EBASCO 'Rn Force Account,fQA Records Department, QA s q
; ,..n t wn J .:
~ cl % '-
&y**}' . ,
- r. I RecordsHVAC,GhAs;Rx,)TomrHnc-Beckwith, ^
-Qincluded
.. B&B.; Ccaps iy, GEO
, ,\ ..
i s EBASCO Service,7nc.l IFeview rf th::: ?? rdith review 1f( R. , f - 4 (a j A
] l audit findings and responses for{4 audits which contained findings.
lt [All1982 i d sofFishchbachMoore(19) r [NISCO(20) and t w c' d, jb Tompkins-Beckwith (23) were reviewed for areas audited, findings,
'n c s and responses in file. Eight EBASCO auditor qualification files re e ewed. .,.g,r1 4 g,O A 6
- 9. g, _
l, ,- y M. A. D.. n ..- . J r R2 ~ .. _ V A 4L Fi =
m -
*. l l
l
~ -1 2/N e
a
. e ,, w .. - ...>a,..z:;isp.en a. np rc o. - : p., !:
t p %.w s . i&a w+s J.s . . d -
't .. '
.. lT '
,, .a.,
,j
,:s-I.,,-.
,a ji -
l -
'l
{ e, . f r*
- 8, "!/ .
"'l- , ,
. t -
,w l-
.. , , -l t
,a v. -
3 ,,. j .,.,. 7a .. ; .., 14
Draft 1 5/30/84 (TSK4) F
-1LL. LJLC &h= & & -IdD fpEBASCO audits of the Mercury Company (+H-performed dm4*g 'F*'-
1978 982 wer re.it;;:d :nd : = Lated to determine if breakdowns in the QA program between Mercury and EBASCO existed. The following is _ a summary of W h.# rui + - ;
'I4EA*
,,hl,ManagementBreakdown J.**.(5*b.. .i. L f breakdown between EBASCO and Mercury management,' i .Judios -f.,
A e y - t -- - s _QA r-:d * - -- i b : d O c . : rder. paragraph 1 of .erar[t. ~9 - ' ',
. T e-re dt:M LP&L and EBASCd o supplement Mercury management with EBASCO management to complete the project.
i
., Audit Program Breakdown
-fu .)e!
. .' ?:.a: . p.9 :n
,ESASCO audit and corrective action systems tn - ' "^'e-dawn I h t n-ccu EEAn,inthat!EEASCOauditsNS-79-9-4 NE-80-8-3, o d g,, i .; . -- . - ..
NB-81-5-1. performed d d,ing 1979,1980,and198gtatedthat Mercury audited each section of the QA manual despite the fact J that the Mercury CAR Log and two or more audits stated that internal audits were ng conducted annually on each section of the Mercury QA Manual. EBASCOAuditSW-82-6-1datedhune7, 198 finally identified me Mercurg,. failure to audit their QA progragi.:. , "terrP :nd mena;;ement audits-f5ee previcus
- di'cu;sica5 Lade pai os;raphs 2, 3, 4, andTateve-desrehed--
I
, c--'
un- e.ps.:.
. .no
-1 u.u_ wiJ nuuli.s and (,orrective Actrop%
t t l 14 . ! .i
Draft 1 5/30/84 (TSK4) h , Nonconformance and Corrective Action System Breakdown
^
if v,. v ,. :(
,. =y s 4 y b3
. Peregcaph tM Me re "- : 2 ;; Sc . ' -- t==ty a breakdown A / -
in the corrective action system between Mercury and EBASCO
.- W 4
- g. f i{. managementA ware evidensed e -
the inability of either Company to obtaincorrectiveactiof.Bothcompaniesapparentlyfailedto review, recognize, or take action on trends which should have been apparent shortly after Mercury implemented their site QA
. program. It also appears that the Mcrcury nonconformance S, -
systerr impeded the freedom to initiate NCRs which could have A been t w upgraded to CARS as a result of EBASCO - management involvement; thereferc, thi; eggeo., t; b;4 f ~._ _
,Jh.8 %
5 breekJupween the two_cg=pa:LiaC ha , ew T
-) g, p f L Cx L s s t.~ + Ca.. m e Oc n2 ca$
e ' a :# Nal"= tier of LP&L Respcnsiv.i;Ly ant Arrim The
,J.* ! ,
. */
//' .^ ,Y' NRC staff revi,ewed the LP&L Audit Program requirements,
* ~*" -
I
' ' procedures,l audits (internal and management),and interviewed j.' '
' -- t r n .<n.
s p pm de and , site QA manager and,,QA engineers involved with
/-
@ v.tv. c.a e nc L4 4 l '7 the audit program.g p te n management and 16 site audits of EBASCO performed bj LP&L .
V LP&L ., e e + ed)im c iy-f;. site surveillance reports were r sie-eeg. /he LP&L site audit J . t 'A l schedule 5+r 1979 through 1984:yn re,ie-ed. Special emphasis
/.
was placed on LP&L responsibility for managemenc of the overall audit program. Since this is a primary and important functiony 15
5/30/84 (TSK4)
"O.M p q l. p. j w > f^^
off LP& L 1 cec e ra ing-pa r-t id pat 4on-i n-the1>rojec-tg i nt c-they-eely heavily on EBASCO for design, construction, procurement,
.. - 1,:
quality assurance, and other functions , t was extremely LPll ,_
.- important for -tmem to review and assess the adequacy of the QA -
program,as required by 10 CFR 50, Appendix B, Criterion II,and b q s establish and implement em comprehensive system of planned and i ti :J L
~
periodic audits to verify compliance with all aspects of the
, s Qs qtreH ty ::w.once program,and to determine the effectiveness p
- - - of program. The following it c 5 wis.g S s .% uv p! NA ##
, A
*- - s* l, j
./. . - - c.
yr; ,,gg ,,
.h.I.Erview of Site Audits Scheduled Versus Audits Performed f -
g C* * , 7, 0 L G The NRC staff reviewed3audits scheduled and performed I - p, A- ,;. r ',- e g 1979,3.5C , 10SI,' 1002, 166%.-and.1984. There
~
- = ,
- ,' ' were 4x auditors in 1979 who were scheduling audits; f
~
./. 2 ;
however, the' number of full time auditors sc eduling I, JA. '~m audits appears to decline'to-3 during much of 1980. The
't number of site auditors appears to rise back to 4 in 19c1 -
or sligh more in 1982. The number scheduling audits s i 983 appears to be about 4. "The ectwai number of w I audi y formed declined from approxi +
, 60, 53, ~
! o .-
- J-d 91, 42, and .4ee d,uring-the respective aum , ,,n ~ 1979,
...~
l 1980, 1981, 1982, 1983, and the first few months of 1984. {a , . . l' U~ - - ihe following p the monthly audits scheduled versus D L
\
audits perfo'med: r 40 pcrfer=d Of -193 cc-heduled, 00 ' e, e __ M 5'f.31 h i. k b A (3 w .-.4. 1979 3q3 go i4t= g
** 3 9
- ]
(s f 5 naj a. g3 vyx 4*". 8 Ki p6
Draf?. 1
. 5/30/84 (TSK4)
C (. LI! .l}1Iy:s!) Yh ')' f !
- L *'D
, m ,C w 4.qu y 4 %'"m 4. M ,;,d
_,m, e _, ,,, n,
..__,_-_,..,-=,...,.....--,.__.mm_ _, ,m, _. , ,
re:pect s 3+eii 1070, 1 c ;' & H 'T4e ion L, lM p, r . ,_od f or : - - ";; n d i t :g ., ' 9-T % "C
..___#N- M _
t
.ie pecti^np r'm _
...d g n:cheduled e ck -. _, p ..w. md,
';US .es.=-5, see t;} s. us e di,t-:y:tg s a. -. . <rgf ic .;, hem A J f s./ ,
existed '^r mo., jeers ud .2: idwt:f;cu in rnooie 5guth .,w ' -
. .'s~2 -
t-N M F3 ~b
$b@7 Aw E
NdNdsN[lE
'2 ' .'7 : 0/21
< D e ~ b e r' (c, Dece -.ke e.'70 and E80-15 (AFR E-122) d.2/;/Z - ,- l? e e tGsl9&op '
42.".0/G0.CCorrective O.CYlenwas apparently not taken andZ' "
~y s. % ,, , ni k , e so Q . ,.: h*
rit appears that auditors
- f gave up as M55 ' Audit Report. , ,'
..+ t D, . 4_ .o L!.. -
A E81-12 reported the conduct of QA Audits and QA , ' 'N , [, m u. a .
..e- .
Construction site audits ' satisfactory'when only 53 of 178 el jhq c Ru.4 t+ Rw.. t f scheduled were perfocmedivewimilarly,E82-15 '^""-+ ^d fD t ece
- s e.- c % Dec embGV' 3 '3 s I % t'1. '). ,: '- .! w . i,.
-12 'c '02-12.' :/C2 con <sidered normal when 91 of 203 w conducted.
- i. rf,.t The ::t_:' wmber performed r<e lit Lvere i.+.e/> o .< M scheduled
, ..o ere
. y; / '
may bc,h since tha M+. figures include reaudits and i.. may' include QA surveillances,which are not to be at. [- considered so auditt per ANSI N45.2.12;, par asi oW.1.2 A "Requis emenu for auditir,g ef QA Progreme im hud wo. Peatr-
.S4ents." This condition was discussed with the LP&L Site
%:. b.Nuv.re.
QA Manager)who did not consider any-ti Ud> t6 be a problem. ; It :ppear: thtLP&Lmanagemen& G1M '1' ell t7hcis chosen to believe,they ) can delegate all responsibility for their QA program to EBASCO. 17
'?
l
e e e e
.. . ./ f9i w
( s. . e
% ** , b 6 '-% . '
.. /a 6 g ,6 ty# ( ' . 4 (w}. r y.anb.R /d:L, 4 -
j.,! . . .-. : .. .: ' i r. k & :1
' ~
. w. > ra l J j _; ., y,j ij . g ;,K pl ,,j-
- V~.- '
g ;;f I* ll .'- jt1l 4 q7
'1,;,.,J.t9ja
. U :) .
/ / ' ., )}h! ,
l-) '.
. t.'t l ') 2/ dit.'V /,'. . } l . [ ,? g .'y f }"-f
' /. ,' '
I Y- w r 4 2 'l/. i '}.; }.. A. . h S ; . / 'd>-
/
rr c1 k& .MT. .. i s'W., .... ! t ' s< /*. : _ ,
? '
- -l ~ 9. /,,m sis.it ,/Jx l:(c. ny,y .jg.,4/ )j,ht .
J 'i.: onik)./sp1;.c.dij,.,a,..o g f .,w;)y;j:'gl .
.e- 147 9 h 14 Rah ss))\ f r w.h.,:) , w g .
, ye.1,9 i
i l I
' f- .
3 . .; . Draft 1 5/30/84 (TSK4) Lt
-f. h f . Review of LP&L Audit of EBASCO OA Procram I
The NRC staff reviewed LP&L audits of EBASCO site activityscL l
>.e f c+" 1981, 1983, and 1984. Nine audits were conducted in checing)>s J f2'$ (.mJ . )*,0 ' -
N *,,,jf] M g . / ' 4',q/. 1981 [ in 1983 pi 4 t ,during the first several months of OpA>hW) 1984. Since LP&L has chosen to delegate the function 96 4 f4 4 p h. wA M
% 3 site contractors e gd design, construction, audit procurement and quality assurance Jn1 . %functions)*
EBASCO should be comprehensive.and ir, (41.;. edit Of thei-
@ ,*M entire qualit a urance manual and implementing procedures.
-ru. %g yhrh rceneg,e d oneAys un c
ign, procurem.s ~ pq t ineen rin.g_.procedQh rt '
' nnual aumdASC(OA.Jr-ogD T+re-S I
to -- andts ia ICol r d 7 .n 1223-40 m appear to be ' -
, -- L \
l r sufficiently comprehensive to meet the requirements of' l I i 10 CFR 50 Appendix B and LP&L QP 19.3, Revision 3; ) / p:r:gr:ph 5. 0, PM, February 8,1976, which states, in part, " Site audits shall verify that safety 'r' elated activities associated with LP&L Nuclear ower Plants are l - performed in accordance with plicable regulatory requirements, specific ons, instructions, procedures, and drawings. Th e audits a're necessary to assess the effactivenes of the Quality Assuranc,e programs of the N Archit Engineer, Construction Manager d contractors at he construction site." ' 18 4
Draft 1 5/30/84 (TSK4) 6-5.camu g l ' (/8 g Manaoement of We, Audit Procram! r :. gr-?/6M
. The NRC staf f reviewed Mercury audithatid dietermined that ~
'g '
A t,% .. pr:gn i failed to audit some key quality control and construction procedures where deficiencies occurred. It yit .# . , . is obvious that, audit of' these procedures dtmittg-the cw p 1978-1983 d have M'hely-prevented these
*f deficienciesat&Mercury 12:. Company.
is ..* .. U rA e resu" c' davelorinc a r=**" cf procedures which had
- -t'.',~. , k ,1 4 peh;
'~or had not.been ="d4% the NRC, rec,ognized several }m
' r &). *.2 '
- 9 4.h n-l ,, ,
and Efintes at documentation, and hardware deficiencies at Mercury Company in addition to several significant break-
;. .u . - .
j downs in the Mercury QA program)ime audit, nonconformance
, ,- /pC.C. t u,H .e t "* + 4 and corrective action system,. ; Tape LP&L management e
. r 's.:I
% h ' asked fer existing matrices, logs, or other documents esw.su d I
which would .4.sw all tf the contractor procedures wMth bd ha audited by LP&L, EBASCO and other site contractors. l The LP&L site QA manager and QA[onstruction engineer stated that they did not know what procedures had been - g -- f. l audited during the constructiorrpf 'OM JIn'the t"Be I n of MercurystJ1e-advantage vf me.mIgements K A
~ing that
(} .- s if
/' Hercury Tompany"h' audited tTe impi ntauon or tne1r
[ ! t rocedures 1fn[d assured proper taff rol of-wo
,19
Draft 1 I
. 5/30/84 (TSK4)
N 7 I obvious. M[,/ Also in this . case _ Mar 4ury cnd "0ASCC cvuld -not
,,,: g ack op-
\
b ,5g/Ac'
, properly apply audit Tesmrftes unless theypAw the e
i,L 6 frequency af_. audit nf the can;trw.Livo end qu i .iy control - y .
. procedures;-.i e.,_nne procedure may ha nuge morH + 9d to the 1
detriment of a nrWcontrolling red line aranings or g-
, we+dtng. LP&L stated that they Awe not managed'the audit u A>)w) function in this manner but simply monitored t6 ew;;t ;?
activities in a broad sense,and,~there' was no requirement
. ./ . .oh .
to know what procedures were audited ' r N y c :- =. . -
. =. = =.;: -
-This/hilosophy is contrary to Criterion II of 10 CFR 50, Appendix B,which states, in part, "This program shall be documented by written policies, procedures, or instructions l
l and shall be carried out throughout plant life in l accordance with those policies, procedures and . -
.1@gpg , . f JA, , ':.!),10 9. A W'"{'",) ^g))^
instructions." To assure-Mdt'the NRC main'tains that ww s+ procedures which control work activitieset be monitored. 1 i 1 j The NRC review of Tompkins-Beckwith, Fishbach and Moore, 5 (E and NISCO audits revealed that,,all procedures had +m4, been audited for these companies. Because many of these audits did not appropriately identify the QA manual sections.a W l procedures,andconstructionprocedure3itbecamealmost
@% M e.
impossible to.a.e*4. what procedure was audited. I 20
Draft 1
, 5/30/84 (TSK4) i hlh<.ReviewofLP&LManagementAuditsofSteQAProoram
, The NRC staff reviewed these audits to determine if LP&L _
had regularly reviewed the status and adequacy of the QA program on site. $ The audits performed at,, site between 1972 and August 7, 1979 7were not comprehensive' ; di B -
~tIJC w amo the wscery-were$r.rsuperficial paper reviews.
Audits after this date were more comprehensive j but still do not appear to be comprehensive enough to cover all j elerrents of the QA Manual and implementing procedures. t ;
/ Q '
/ / also appears that these audits were strictly limited to f %
/
LP&L organizations' ant erefore, the audit would not s extend to EBASCO and their wor h etivities. Under this circumstance it is hard to understa how the.ssuccess of N LP&L site QA can be measured against EBASCO performance. yy,pec WM C* & M %
/ [ { Review of,Manacemert Analysis Comoany (MAC)
- n:?td evaluations . .: .
~
The NRC staff reviewed portions of "*C - MMa .'s & y'_f oLP&L Waterford 3 h;;;;;5t'r#&'arivnspotwf in 1977, I ,,f 5 / '
,. o '. ' ; ;
1979, and 1980. The_ Executive Summary of the 1979 report c- A L outlined many problems which "can critically impact the ,
);.Jd.
w. Waterford 3 Project." gf particular i-t:r;;q.g ; A :. . ?JJ ', I t ;- m um fc"cain; ; pet;; :.a p;.;;; 2, ', 5, 2-d
- 2r:-as follows:
(1) "The long-held policy of Louisiana Power and Light has l t l 21 -
1 Draft 1
; 5/30/84 (TSK4) i been to conduct their business related to engineering, construction, and operation of power plants by utilizing a
-WM'l eanY.
1 very house in- organization lwith almost total (g@dAT ) (AE) ~
/ p reliance on the Architech-Engineerj for engineering and
\/ construction, and heavy use of consultant and outside service organizaticns during plant operations. This policy"~bof ' lean-ness'Yand almost total reliance on the AE.
k/( is, in MAC's opinion, one of the basic root causes of many of the problems associated with Waterford 3 . . . theavy reliance on outside consultant and service organizationsduringtheoperaUonofWaterford3will, in MAC's opinion, caLse additional problems once the plant is in operation . . . . The designated role of the LP&L site project is currently that of liaison and is not sufficiently involved in the planning, monitoring, and control of site activities . . . . The existing LP&L project and site organ-izations are lacking in numbers and in commercial nuclear power plant experience necessary to effectively monitor and control the Waterford 3 project. . . The LP&L Quality Assurance organization has .. recognized basic fundamental problems related to quality but in some cases has not taken sufficient positive action to have problems resolved E he 1979 MAC Report to LP&L L m. gewe-E, pm7ph 2 st.ates, in part, "The QA group F ) 1 1 22 1 1
. Draft 1
! 5/30/84 (TSK4) 1 overall is strong . . . but few in number. . . it is MAC's j recommendation that additional manpower be obtained. LP&L
-. should monitor, audit and watch all of the critical -
activities . . . as they are accomplished at the site . . . Additional QA manpower should be applied to ensure contractor QA records are in auditable and buyable order." The 1980 MAC Report deals mainly with startup and operation; however, the theme of under experienced and inadequate istaffing is a recurring theme and should be evaluated by NRC staff who are responsible for operational startup, testing, etc. NRO\Sta
- g. ~
es M
} 9,. e x. s .J '[Q. /$l S hPf h .* ^ L C C f'1 W ' K '" '~~
Aihere was a significant breakdown in the QA program both at EBASCO and Mercury,and between EBASCO and Mercury 2to the point that EBASCO management was A .ifto supplement Mercury managemen 6Ala A broudow4 0 /-- O g (g pc.. g w e4 av. bu 4 eo -f b ir did not thoroughly evaluate, determine all the causes, and identify ~ theentireextentoftheQAbreakdownatMercuryCompanyevenafterreceivingx.,\C j tiAlt ns civil penalty on j December 6, 1982. This represents a' failure to adequately evaluate the origIr.al Construction' Deficiency Report No. 57 and report the
'wJ}r full extent of the QA program breakdown and represents a failure to take 23
~
Jhm f effective corrective action u m "irg deterrrining the cause of the QA breakdoc at the Mercury Companyj N l
< & l (p') LP&L did not implement a program to increase tML manpower and involvement This failure to implement these MA" recor **
with the Waterford 3 Project. CN d mendations areAthe root cause*of QA problems experienced in the past and present.
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- ons Recui rede.
I
~ ~ '---
y ~_..__ [ N M f onstruction is complete and construction of the overall LP&L and I contractor audit systert is not possible. Audits are a second line
\
') defense for inspections that fail to detect defi N l
. r.ardware and .
l testinc of systems , therefore, if thes'e were adequate the plant can be
~
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adequate despite the fait that there was a QA breakdcwn in the audit and corrective. The prime y cancern c htive *r Fdit: i, te an ure Loaran t MO ef fective operational madit_.sys. tem is octahl.ished and-iepitmee ~ pu,. .-.w j
- 2. LP&L M factnr the a u ve_NRC staf f #4n&gs-into responses to the NRC civil penalty and M to ucti Deficiency Report No. 57 i.e.,
Q< etreview,% valuate, and determine jpg}kt.: P' e full extent of the QA breakdown'at < br. pp ^
. J) .' '
the Mercury Company 'and 'ef fec ive co rective action regardig U,ui ite s_ -
, ffl ~ g'
.'I .. Y l1~ l} ).
/
gg 9)ru }'d'.f
, m - Draft l'
. 5/30/84 (TSK4) ,
o
\.. ,
- 3. li st of Mercury ' person el and contact ap'p opriate )
LP&LI personnel to de should obtain a'\ ies of draft NCR which were
'7 t / rmine \ if they - stiil have cop \ /
, not processed and 5ey consider'to be signific t deficiencieshicVthey w\
thi e not been i entified and correcte . --
~,
,1e f -...
-v; N
h &L management b = re th:t th'y he.e ei. wiicucive sys1.em o f iW:n-teterecularlyass\et the status and adequacy oflJ.tlw QA Pr.ogra ~m ,L I !\ wnicn sno
'y f) ;5.&r*.! *.* $ *I.h written poJg,Jrocedures , And.a, h 1.WI 3 "4 M'4 g
adequate manpower to
.Is.b
~ , . G!*. ) 1 1- ,! : n a
, . , ~,_.
implement such a' system.y lL mana\ LPf ent thouJd assure,.NRC j staff that
. ; p = _ . .
,4, . . , ~r~
th0y have such a system demonstrate-#"\' ""m ~ * ^ ' mL & gegees,. _i- n l / . <
,i,y i
,.% . ,-, . 1, -
i.=f_)._ y._ -.-~ References y
- DJ i,'.
.' f
* *'A J'
- 1. LP&L PSAR Quality Assurance requirements.
- 2. LP&L QR 18.0, Revision 2, 10-10-75, Audits.
- 3. LP&L QP 18.3, Revision 3, 2-8-78, Conduct of Site Audits.
- 4. LP&L QP 18.4, Revision 2, 2-17-83, Schedule of Site Audits.
- 5. LP&L QR 2.0, Revision 2, 10-10-78, Table 2-1 LP&L Commitments (Includes Regulatory Guides and ANSI standards) 26
Draft 1 5/30/84 (TSK4)
- 6. EBASCO QAS-1, Revision 4, 6-30-82, Planning QA Activities.
e
- 7. EBASCO.QAS-2, Revision 4, 6-30-82, General Audit Procedure -
- 8. ESASCO Procedure QAS-3, Revision 4, 6-30-82, Processing Audit Repor.ts
- 9. EBASCO QAl-25, Revision 0, 6-22-83, Instruction for Auditing
- 10. EBASCO QAI-7, Re, vision 2, 2-21-84, Instruction for Surveillance /
Corrective Action.
- 11. Mercury QA Manual Sections 1-18, Revisions and Dates Various
- 12. Fischbach and Moore QA Manual Sections 1, 2, 3, 10, 15, 16, 17, and 18, various Revisions 4-1-81.
- 13. Fishbach and Moore QAP-103-W3, Revision 0, 6-10-77, Processing and Controlling Nonconformances.
~
- 14. Fischbach and Moore QAP-106-W3, Revision 0, 6-10-77, Auditing.
- 15. NISCO QA Manual Section 15, Revision C, 6-6-78, Audits.
! ,27 L
~
I Draft I 5/30/84 (TSK4) i
- 16. Tompki.ns-Beckwith QA Manual Section V, 8-1-81, Audits j' j.( '. b }}: c ' ) . '. e ' , e' 3 y , j r. .., i / ' ,
w. Statement Prepared By:
- T. ..u - Date 5 PA.uirs r
am 4
\
Revie.ed By: Team Leader Date Reviewed By: Site Team Leader (s) Date Approved By: Task Management Date
,28 i i -- ,, i .
~_ -
l Uratt l' 5/30/84 (TSK4) SSER l' M - i 'O
~
[,.t,k r' Task: Allegation A-48; A-60; A-295 Reference No.: 4-83-A-88/2b; 4-83-A-88/12; 4-04-A-06/176 Characte'rization: "A Complete Breakdown in the QA Program between EBASCO and - the Mercury Company of Norwood (Contract W3 N.Y.15) Assessment of Allecation: The implied safety significance of this allegation is that a " complete" QA breakdown occurred. That is, quality control inspectors did not do adequate inspections; Mercury personnel did not have the inspections; Mercury personnel did nct have the freedom to weite nonconformance reports (NCRs) and obtain effective corrective action; EBASCO and Mercury did not follow any procedure; QA records did not adequately document QA activities; and the licensee-and contractors audit program which is the last defense for identifying QA/QC problems. This breakdown naturally extends to Louisiana problets. This breakdown naturally extends to Louisiar.a Power & Light (LP&L). Since they are the applicant for a license. F.egion IV MC Report No. 50-382/87.-14 pages 8-12 describes a small LP&L QA staff (4-6 position 1) and a heavy reliance on EBASCO Construction management for "onsite Construction QA". In turn, EBASCO QA (10 auditors) audited QA programs of other onsite cor. tractors and because these auditors had additional duties other thar. auditing that limitec their effectiveness. LP&L's annual of EBASCe included a review of 143 at.cits concucted by EBASCO QA during 1981. The audit sumary concluded that EBASCO audit program was adequate but measures should be established by EBASCO t determine the effectiveness of the contractor's QA program. EBASCO QA response did not address the sumary coments. l l
u- w ai 6 i
, 5/30/84 (TSK4)
The report referenced above stated that in early 1982 EBASCO submitted 4 ECCS systems to LP&L for turnover. LP&L audit of these turnover packages included
, QA records review and or walkdown inspection of systems. All 4 systens were rejected. LP&L reported this OA breakdown to the NRC on May 26, 1982,
Reference:
Potentially Reportable Incident No. 80 (later changed to significant Deficiency Report 57, " Inadequate Instrumentation and Control Installations and Turnover Documentation." Because of serious problems with -
"as built drawing and deficient installation of I&C systems, the NRC imposed a civil penalty in NRC Letter 50-382 EA 82-109 dated December 6,1982.
LP&L Letters (23I83-0001 and 0015) dated January 4,1983, and April 8,1983, respectively responded to the NRC Inspection Report and Notice of Violation. They acknowledged there was a partial breakdown in the Waterford 3 QA F ogram "at the sub-tier levels and involving contractor / subcontractor organizations identified in USNRC Inspection Report 50-382/82-14." The reason for the violation was stated to be caused by: (1) insuffici::nt training of inspectors, 0A reviewers, and craftsmen, (2) inaaequate staffing, and (3) inadequate walkdown of ccepleted systems. Steps were outlined to take corrective action in these areas by April 4,1983; however, the last LP&L letter dated April 5, 1964, stated that: " final review of corrective action documentation is scheduled to be cotpleted in late May 1984. The Final Report will be submitted to the NRC on June 15, 1984." Because of the above quality assurance and enforcement history the NRC deternined that the nethodology to followup this allegation shculd be as follows: (1) evaluate the implementatior, cf Mercury QA Program, (2) evaluate EBASCO QA Program, and (3) evaluate LP&L QA Program by evaluating the audit programs and resultant corrective action with respect to the extent and cause of the QA breakdown at the licensee, EBASCO and Mercury. If additional problems were identified at Mercury, et al, then audits of other contractors would be evalusted for similar QA program deficiencies. l { l j . . l
-e ee w e, s a 5/30/84 (TSK4)
Review of Mercury Audits and Corrective Action - The NRC staff reviewed and evaluated QA Manual (QAM) Sections 1 through IS; procedures QCP-3020; 3060, and SP-664; audit log; matrix of all construction procedures; 8 auditor qualification files; 64 internal audits, all 1979 through 1983 audits; and 1 QA Annual Report July 1981-82. Several former Mercury employees and other site personnel having direct knowledge of the company were interviewed. The - following is a sumary of these interviews, reviews and evaluation.
- 1. Interviews and Eva.uation of Mercury Management The Mercury Company was plagued by poor and discontinuous management because there were 6 project superintendents, 6 product engineers and 6
, CA site supervisors frorn mio 1978 thru mid 1983. Site QA/QC personnel received poor support from corporate QA management and as a result many QC inspectors resigned. Several QC inspectors wrote letters of resignation describing these poor conditions and were threatened with irmediate disrissal if these letters were not withdrawn. QA/QC personnel constantly were overridden by cost and schedule concerns because EBASCO and fiercury management were "in bed together" and ran rough ? shed over 0C. There was a high turnover among QC inspectors. EBASCO management was aware of these problems shortly after Mercury came en site. More ther. ene source stated that LP&L and EBASCO did not properly control and assure tha; 4ercury QA recoros were retaired onsite but allowed them to
" haul" away Waterford Project records that should have remainec on site.
fiRC staff members also founo that LP&L were still unsure as to exactly what records were on site and what records should be on site. EBASCO and LP&L management finally became fully aware of serious Mercury problems in 1981-1982 - almost three years efter they came on site and after almost 80% of the work as they apparently assumed that it was too late to obtain corrective action or impossible. I l _ - - - -
5/30/84 (TSK4)
- 2. Review and Evaluation of Corporate Annual Report Mercury Internal Audit No.1-9-80 (January 8,1980) finding No.1, documented that no Mercury management review of the QA program had been
\ done since Septenber 1978 (when their program implementation was getting underway) . The audit log showed this finding to be closed the same date -
perfonned 1-9-60; however, EBASCO Audit CBS/AEZ-83-2-3 determined that the audit was not signed off as closed and only one annual review or
, report had been accomplished and this was .'or the period July 81-82.
The NRC staff found no additional annual reviews and the one review referenced was neither an acceptable nor adequate review referenced was neither an acceptable nor adequate review of the status and adequacy of the Mercury site 0A program. The staff further concludes that this failure to perforn effective QA prograrr. reviews has significar.tly contributed to all the Mercury conoitions identified as adverse to quality such as failures, malfunctions, deficiencies, deviations, defective material and ecuipment and other nonconformances that were not prorptly identified and corrected EBASCO and LP&L management bear direct responsibility fer not assuring that a system was implemented to bring such QA program breakdowns to the attention of EBASCO and LP&L management at the appropriate level to insure corrective action. Although this significant constructior deficiency was identified as early as Jar.cary 19EC EBASCO aucits did nct identify the same problet until Fetruary 28, 19S3; however, other sigr.ificant ar.c similar problens were identified in EBASCO Audits NB-79-9-4, hB-80-8-3, and SW-82-6-1 which should have alerted management to these problems as early as September 1979 but not later than June 7, 1982. Not only was this deficiency never specifically reported but it was never corrected.
~. . . . . . . . -
i 5/30/84 (TSK4) !
\
~
- 3. Review and Evaluation of Mercury Internal Audits l Mercury Internal Audit No.1-11-80 dated January II,1980 documented that internal audit on QAM Sections 10, 11, 14, 15, and 17 were not done at least once per year in 1979 as required. Internal Audit No; 5-11-82 dated May 11, 1982 docuranted that Stregions 2, 7, 12, 13, 14, and 15 had -
not been audited during 1981. No Corrective Action Request (CAR) was initiated as a result of the 1980 audit but CAR No. 44 was issued May 11,
\ 1982, more than two years af ter the same finding in Internal Audit No.
1-11-80 (see paragraph 6 below). The NRC staff determined that Section 5 Procurement was never audited by Mercury from 1978 through 1983 because they stated that they purchased no materials; however, Mercury Letters WQ-1216 and 1225 dated December 15, 1982, and January 4,1983, discuss Mercury's issuance of a purchase order to Welders Testing Laboratory in late 1978 remaining in effect as of January 1983. LP&L acknowledged this finding and when asked if other services were purchased stated that calibration services were purchased. The NRC staff member reviewec existing files at Mercury and determined that QAM Sectiors 5, 12, 17, and 18 were not audited in 1980. The failure to audit Section 12 " Nonconforming Items and Corrective Action" is significant because: (1) the apparent failure to take ccrrective action regarding Mercury managerent reviews and internal audits rct performed, and (2) this same 3ection 12 was not audited in 1951. QAM Sections 5, 14, and 16 were not audited in 1981. 0AM Sections 5, 11, 12, 13, 14, 15, and 16 were not audited in 1983. Response letters to audit findings describing corrective action were found in the file for calendar year (CY) 1979, but responses were not found for CY 1980-1983.
i
- As discussed in paragraph 2 above this significant constructions deficiency, i.e., partial QA program breakdown, has never specifically been reported even though the contractor identified the deficiency in January 1980 and EBASCO identified the problem in June 1982. Even more serious Mercury never corrected the problem after it was identified by Mercury and ESASCO.
l t i
- 4. Review of Auditor Qualification _
Although auditor resumes shos,d adequate qualification, qualification methods were inconsistent as sor,e were given written exams, other: verbal exans, and in one case even the oral exan was waived. The following are administrative or procedural deficiencies of minor nature but they point t out poor record keeping: t,*- @
- a. performed as lead auditor on Decenber 19, 1976, but l auditor qualification procedure was not in place until June 28,
- 1979. Records indicate he was qualified as lead auditor on January 22, 1979, a m;rth after he performed the audit. He was !
given 2 points under " Management Awarded Points" without any j justification. His eye examination was dated January 16, 1979, well j after his first audit,
- t. ;1c n:t have decurs".taticr in file tc sFow tnat be had receivec orict.tatior tc previde a w:,rkir; knc,,lec;e ar,a uncerstanding of ANSI N45.2 and h45.2.12; 10 CFR 50, Appendix B; l
ASME III, NCA 3000 anc 4000; Mercury QA Manual; and Mercury Audit Procedure QCP-3020. l . I i i j i
i l
- c. documentation in file j for 1981.
- d. aas not examined in accordance with paragraph 6.6 of lCP-3060. There was no eye exam for 1980 and did not receive i specified training.
! e. Audit Participation Log was not available in the QA record files per 1 i paragraph 7.4 of QCP-3060. : i l S. Review ar.d Evaluatier. cf Mercury Aucits of Irplementine Procedures i ! \ ; 1 i The NRC Staff review of Mercury QA, Construction, and special process I l procedures showed that Mercury never audited the following procedures ! i j during the project: MCP-2140, 2170, 2175; SP-650, 651, 652, 653, 654, ( ! 655, 656, 657, 655, 661, 662, 663, 668, 670, 672; WPS-E, P, G; EP-1; and ! , t l WPS-W3-4. EBASCO Audit No. SW-82-6-1 dated June 7, 1982, item No. 7, 1 i documentec a fincing that Mercury ir.;plemer. ting procedures had not been audited. l 1 1 l The NRC sta" finding that many impienenting procedures were not audited is particularly significant since it r.akes it apparent that effective corre:t've actier. was r.ct taker.. It is aise irpcrtant to ncte that ranj i cocurutation arc hardware deficiencie that were icertified were relatec to the procedares which were not audited. l
-,- u,..c r - . 5/30/84 (TSK4) liercury Procedure Nos. QCP-3020, 3050, 3060, 3110.1, 3110.4. 3110.5, !
3110.6; SP-659, 664, 665, 666, and 667 were audited only one year each during the period 1979-1983. These implementing procedures were for auditing, qualification of inspection / test and audit personnel, pipe and tubing inspection, welding inspection, installed equipment inspection, 1 material receiving, nonconformance and corrective action, installation of-seismic expansion anchors and control of "as built" infonnation. Special or supplemental audits should have been performed in addition to annual audits of these areas because of repetition of nonconformances, deficiencies, and audit findings in these areas. The thC staff considers this failure to audit implementing procedures a breakdown in the Mercury QA program. This should have been identified in the corrective action response to the previously identified NRC civil penalty oiscussed aboves and represents inadequate corrective action.
- 6. Review and Evaluation of CARS The NRC staff reviewed 143 CARS issued by Mercury Compary from December 19, 1978 through August 9, 1983. All CARS relating to audits were evaluated. The CAR log was reviewed for audit finding trends and it was determired that EBASCO should have been aware of adverse trends conce ning audits as early as Decerber. 19, 1975 but certairly by CAR No. 01E initiatec August 6, 1979. Other CARS (046-059) were issued May 24, 1962 and CAR 089 concerning audits. EBASCO QA mar.agement and auditors should have revieweo this log, recognized the trends, and advised LP&L management. Other trends which should have been recognized and investigated are as follows: (1) CARS 019,024,025,026,028,033 issued between March 1980 and April 1982 identified red line "as built"
5/30/84 (TSK4) drawing control and installation problems; (2) CARS 019, 020, 021, 022, ' 024, 025, 026, and 030 issued to one construction supervisor between the same dates identified trends that craf t personnel were not following i procedures; and (3) CARS 020, 027, 034, 061, 069, 074, and 088 issued to l QC and craft between March 1980 and July 30, 1982, identified failure to inspect welds because of craft ignoring hold point and QC failure to . inspect weld joint fit up. These trends are only examples as there were other adverse conditions which were identified early but effective corrective action was not assured by the contractor, Mercury or LP&L QA program. o
- 7. Review of Mercury Auditino, Nonconformance and Corrective Action Procedures
- a. Auditing: External audits of vendor performed services, such as the service venacred by Welder's Testing Laboratory of tietarie. LA were not described in QAM Section 15.0 or QCP-3020. The QAM did not incorpcrate the requirements of ANSI N45.2.12 Draf t 3 Rev. 4, February 22, 1974, into Section 15; i.e., followup action when CAR is not issued and references to other applicable standards as specified in paragraph 1.5 Referenced Documents. This document did not require a pre-audit conference while the ANSI standard statec that a confererce "shall be conducted".
- b. Ncnconformances and Corrective Action - QAP Section 12 and SPP-664 Revisions 4. stated, in part, "When the suspected nonconforming material, items, and services are determined by the QA Manager or his designee to be nonconforming, a QC Nonconformance Report
. 5/30/84 (TSK4)
(Exhibit No. 2) is generated and a nonconfomance number shall be taken from the Nonconformance Log maintained by QA (Exhibit No. 4) and shall be indicated on the Nonconformance Report." The NRC Staff determined that draft Nonconformance report (NCRs) submitted by any individual cr department the QA manager could reject the draft NCR
, and this would be acceptable; however, it was found that draf t NCRs ,
were not in the QA records. Therefore, the disposition and justification for rejection was not auditable because the draft liCRs were destroyed. The NRC staff interviewed former Mercury personnel and other site personnel who had direct knowledge of the NCR system. They acknowledged that such a system may have impeded project personnel processin; NCRs. An LP&L QA engineer stated that LP&L had addressed this problem when Mercury management was supplemented in 1982. Mercury personnel were encouraged to write liCRs and as a result the number increased from several hundred to more then 3000. This happened at about 80t completion of the Mercury job. However, the liRC staff commented that this would not necessarily solve the problem of failure to process or document rejection of draft NRC's that were submitted by personnel who lef t the site prior to this LP&L action. Review of EBASCO Audits and Ccrrective Action - The NRC staff reviewed 1953 EBASCO audits of all QA records processing, review and reter. tion by EBASCO Task Force Account, QA Records Dy artment, CA Records HVAC, Torpkins-Beckwith, B&B Company, GE0 Testing, and EBASCO Service, Inc. Review of these 27 audits included review of audit findings and responses for 4 audits which contained findings. All 1982 audits of Fishchbach Moore (19 audits); hlSCO (20); and t
. 5/30/84 (TSK4)
Tompkins-Beckwith (23) were reviewed for areas audited, findings, and responses in file. Eight EBASCO auditor qualification files were reviewed.
- All EBASCO audits of the Mercury Company (51) performed during _
1978-1982 were reviewed and evaluated to determine if breakdowns in the QA program between Mercury and EBASCO existed. The following is a summary.
- 1. Management Breakdown A breakdowr. between EBASCO and Mercury management, including QA, was described above under paragraph 1 of the Mercury review. The resultant breakdown caused LP&L and EBASCO to supplerer.: Mercury management with ESASCO mar.agement to complete the project.
- 2. Audit Procrar Breakdown EBASCO audit and corrective action systems interface broke down between EBASCO, in that, EBASCO audits NB-79-9-4, NS-80-8-3, NS-81-5-1 performed during 1979, 1980, and 1981 stated that Mercury auditec cach secticr; cf the QA manual despitE the fact that the Mercury CAP Log and twc or more audits stated that internal audits were not conducted annually on each section of the Mercury QA Manual. EBASCO Audit SW-82-6-1 dated June 7, 1982, finally identified the Mercury failure to audit their QA Draft 1
~
)
, i
. j program; i.e., internal and management audits (See previous discussions under paragraphs 2, 3, 4, and 5 above described under " Review of Mercury Audits and Corrective Action."
- 3. Nonconformance and Corrective Action System Breakdown Paragraph 6 of the above Mercury Review documents a breakdown .
in the corrective action system between Mercury and EBASCO management was evidenced the inability of either Company to obtain corrective action. Both companies apparently failed to review, recognize, or take action on trends which should have been apparent shortly after Mercurv implemented their site QA prog ram. It also appears that the Mercury nonconformance syster. impeded the freedom to initiate NCRs which could have been trended and upgraded to CARS as a result of EBASCO rranagerent involvement; therefore, this appears to be a QA breakdown between the two companies.
- Review ar.o Evaluation of LP&L Responsibility and Action - The NRC staff reviewed the LP&L Auoit Program requirements, procedures, audits (internal ar.d management) and interviewed corporate and site QA manager and QA engineers involved with the audit program.
Seventeen managerent and 16 site audits of EBASCO performed by LF&L were reviewed. Ferty-five LF&L site surveillance reports were reviev,ed. The LPil site audit schedule for 1979 through 1984 was reviewed. Special emphasis was placed on LP&L responsibility for management of the overall audit program. Since this is a primary and important function of LP&L concerning participation in the
5/30/84 (TSK4) i l project since they rely heavily on EBASCO for design, construction, procurement, quality assurance, and other functions, it was extremely important for them to review and assess the adequacy of the QA program as required by 10 CFR 50,
. Appendix B, Criterion II and establish and implement an .
comprehensive system of planned and periodic audits to verify compliance with all aspects of the quality assurance program and to determine the effectiveness of the program. The following is a surraary.
- 1. Review of Site Audits Scheduled Versus Audit Performed The NRC staff reviewed audits scheduled and performed during 1979, 1980, 1981, 1982, 1983, and 1984. There were 4 auditors in 1979 who were schedulir>9 audits; however, the number of full time auditors scheduling audits appears to decline to 3 during much cf 1980. The number of site auditors appears to rise back to 4 in 1981 or slightly more in 1982. The number scheduling audits in 1983 appears to be about 4 The actual number of audit, performed declined from approximately 80, 60, 53, 91, 42, and too during the respective audit years 1979, 1980, 1981, 1902, 1983, and the first few months of 1964. The following are the mor.thly audits scheduled versus audits performed: 80 performed cf 193 scheduled, 60 of 181, 53 of 178, 91 cf 203, and 42 of 168 for the respective years 1979, through 1983. The justification for missing audits was unacceptable; for example, NRC inspection performed, unscheduled work activity perfonned, SUS reviews, etc. This audit system deficiency has existed for many years and was identified in Middle South Services (llSS) e
. + , . 5/30/84 (TSK4) l 1
i Audit Nos. E79-6 (AFR E-88) dated 8/27/79-8/31/79 and E80-15 (AFR E-122) dated 12/8/80-12/16/80. Corrective ? was apparently not taken and it appears that auditors gave up as MSS Audit Report Nos E81-12 reported the conduct of QA Audits and QA Construction site audits satisfactory when only 53 of - , , 178 scheduled were performeo and similarly E82-15 conducted 12/6/82-12/22/82 considered if normal when 91 of 203 were conducted. The actual number performed versus scheduled may be less since the i.e. figures include reaudits and may include QA surveillances which are not to be considered an audit per ANSI N45.2.12, paragraph 1.2, " Requirements for Auditing of QA Programs for Nuclear Power Plants." This condition was discussed with the LP&L Site QA Manager who did not consider any of this to be a problem. It appears that LP&L nanagement hes chosem to believe they can delegate all their responsibility for their QA progran to EBASCO.
- 2. Review: of LP&L Audit of EBASCO OA Program The NRC staff reviewed LPSL audits of EBASCO site activity during 1981, 1953, and 1984 Nine audits were conducted in 1981, 7 in 1983 and 0 during the first several months of 1984.
Since LP&L has choser. to delegate the functior. cf auditing site cer.tracters and design, ccr.structice, procurecent and quality assurance functions the audit of EBASCO should be comprehensive and in depth audit of their entire quality assurance manual and implementing procedures. A large percentage of the on site design, procurement, construction, and engineering procedurec l l l
.. . .n. .
5/30/84 (TSL4) should also be a part of the annual audit of the EBASCO Ot. Program. The 9 audits in 1981 and 7 in 1983 do not appear to be sufficiently comprehensive to meet the requirements of 10 CFR 50 Appendix C and LP&L QP 18.3, Revision 3, paragraph 5.0 dated February 8,1978, which states, in part " Site audits shall verify that safety related activities associated with LP&L Nuclear Power Plants are performed in accordance with applicable regulatory requirements, specifications, instructions, procedures, and drawings. These audits are necessary to assess the effectiveness of the Quality Assurance programs of the Architect Engineer, Construction Manager and contracters at the construction site."
- 3. Management of the Auc'it Program The NF.C staff reviewed Mercury audits and determined that their
-program failed to audit some key quality control and construction procedures wher. ieficiencies occurred. It is obvicus that audit of these procedures during the period 1978-1983 would have likely prevented these deficiencies at Mercury Company.
As a result of developing a matri). of procedures which had cr had not beer audited, the NRC recogrized several cause and effects of documentation and hardware deficiencies it Mercury Company in addition to several significant breakdowns in the Mercury QA program i.e., audit, nonconformance and corrective action system. The LP&L management was asked for existing matrices, logs, or other documents which would show all of the b I l
5/30/84 (TSK4) contractor procedures which had been audited by LP&L, EBASCO and other site contractors. The LP&L site QA manager and QA Construction engineer stated that they did not knnw what procedures had been audited during the construction of the plant. In the case of Mercury the advantage of managements'
, knowing that Mercury Company had audited the implementation of ,
their procedures and assured proper control of work activity is obvious. Also in this case Mercury and EBASCO could not properly apply audit resources unless they know the frequency of audit of the construction a'nd quality control procedures; i.e., one procedure may be over audited to the detriment of a
, procedure controlling red line drawings or welding. LP&L stated that they have not managed the audit function in this manner but simply monitored the audit of activities in a broad sense and there was no requirenient to know what procedures were audited.
This Philosophy is contrary to Criterion II of 10 CFR 50 Appendix E which states, in part, "This program shall be documented by written policies, procedures, or instructions and shall be carried out throughout plant life in accordance with those policies, procedures ano instructions." To assure that the NRC maintair.s that procecures which control work activities most be rrritored. The NRC review of Tompkins-Beckwith, Fishbach and Moore, and NISCO audits revealed that all procedures had not been audited for these companies. Because many of these audits did net appropriately identify the QA manual sections and procedures, and construction procedures it became almost impossible to audit what procedure was audited. i
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' 5/30/84 (TSK4) l
\
- 4. Review of LP&L Management Audits of Site QA Program The NRC staff reviewed these audits to determine if LP&L had regularly reviewed the status and adequacy of the QA program on site. The audits performed at site between 1972 and August 27 -
1979, were not comprehensive audits and to the contrary were superficial paper reviews. Audits after this date were more comprehensive but still do not appear to be comprehensive enough to cover all elements of the QA Manual and implementing procedures. It also appears that these audits were strictly limited to LP&L organizations and, therefore, the audit would not extend to ESASCO and their work activities. Under this circumstance it is hard to understand how the success of LP&L site QA can be measured against ESASCO performance.
- 5. Review of Management Analysis Company (MAC)
The NRC staff reviewed portions of MAC consultant evaluations of LP&L Waterford 3 managerent made and reported in 1977, 1979, and 1980. The Executive Summary of the 1979 report outlined many problens which "can critically impact the Waterford 3 Project." Of particular interest are the following quotes on pages 2, 4, 5, ard S are as follows: (1) The long-held policy of Louisiana Power and Light has been tc ccnduct their business related te engineerir'5. construction, and operation of power plants by utilizing a very
" lean" in-house organizations with almost total reliance on the Architech-Engineer for engineering and construction, and heavy use of consultant and outside service organizations during plant i
. 5/30/84 operations. This policy of " lean-ness" and almost total reliance on the A/E is, in MAC's opinion, one of the basic root causes of many of the problems associated with Waterferd 3 . . . heavy reliance on outside consultant and service organizations during the operation of Waterford 3 will, in MAC's opinion, cause additional problems once , the plant is in operation . . . . The designated role of the LP&L ,
site project is currently that of liaison and is not sufficiently involved in the planning, monitoring, and control of site activities
.... The existing LP&L project and site organizations are lacking in numbers and in commercial nuclear power plant experience necessary to effectively monitor and control the Waterford 3 project
... The LP&L Quality Assurance organization has recognized basic fundamental problens related to quality but in some cases has not taken sufficier.t positive action to have problems resolved." The 1979 MAC Report to LP&L on page 2, paragraph 2 states, in part, "The QA grcup overali is strong . . . but few in number. . . it is MAC's recomrendation that additional manpower be obtained. LP&L should monitor, audit and watch all of the critical activities . . . as they are accomplished at the site . . . Additional QA manpower shoulo be applied to ensure contractor QA records are in auditable and buyable order."
The 1980 MAC Report deals mainly with startup and operatior.; hcwever, the theme of uncer-experienced and inadequate staffing is a recurring theme and should be evaluated by fiEC staff who are responsible for operational startup, testing, etc. fiRC Staff Conclusion There was a significant breakdown in the QA program both at EBASCO and Mercury and between EBASCO and Mercury to the point that EBASCO management was supplied to supplement Mercury management.
LP&L did not thoroughly evaluate, determire all the causes, and identify the entire extent of the QA breakdown at Mercury Company
- even af ter receiving civil penalty on December 6,1962. This
, represents a failure to adequately evaluate the original Construction Deficiency Report No. 57 and report the full extent of 1 the QA program breakdown and represents a failure to take effective
, corrective action concerning determining the cause of the QA -
] breakdown at the Mercury Company. !i LP&L did not implement a program to increase LP&L manpower and involvement with the Waterford 3 Project. This failure.to implement these MAC recommendations are the root cause of QA problens experienced in the past and present.
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- 1. Construction is complete and constructic.n of the overall LP&L and ~
contractor aucit system is not possible. Audits are a second line defense for inspections that fail to detect deficier.t hardware and - testir;; of systens, therefore, if these were adf;Uate the plant can be edequete despite the fact that there was a QA breakdown in the audit anc
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corrective. The primary concern relative te aucits is to assure that ar _'s effective operational audit systet i s established and implemented. m
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- 2. LP&L should factor the above NRC staff findings into responses to the NRC civil penalty and their Construction Deficiency Report No. 57 1.e., review, evaluate, and determine the full extent of the QA breakdown at the Mercury Company and effective corrective action regarding these items.
~
- 3. LP&L should obtain a list of Mercury personnel and contact appropriate personnel to determine if they still have copies of draft NCR which were not processed and they consider to be significant deficiencies which they think have not been identified and corrected.
- 4. LP&L manageme .t should assure that they have an effective system implemented to regul6rly assess the status ar.d adequacy of the QA Program which should include written policy, procedures, and adequate manpower to implement such a system. LP&L managenent should assure NRC staff that they have- such a systen demonstrate full support of such a prograr..
References
- 1. LP&L PSAR Quality Assurance requirements.
- 2. LP&L QR 18.0, Revision 2, 10-10-78, Audits.
- 3. LPil QP 18.3, Eevisior: 3, 2-8-78, Conduct of Site Aucits.
- 4. LP&L QP 18.4, Revision 2, 2-17-83, Schedule of Site Audits.
- 5. LP&L QR 2.0, Revision 2,10-10-78, Table 2-1 LP&L Commitments (Includes Regulatory Guides and ANSI standards) k l.
l
5/30/84 (TSK4)
- 6. EBASCO QAS-1, Revision 4, 6-30-82, Planning QA Activities.
- 7. EBASCO QAS-2, Revision 4, 6-30-82, General Audit Procedure
- 8. EBASCO Procedure QAS-3, Revision 4, 6-30-82, Processing Audit l Reports
?
- 9. EBASCO QAl-25, Revision 0, 8-22-8 , Instruction for Auditing
- 10. EBASCO QAl-7, Revision 2, 2-21-84, Instruction for Surveillance / Corrective Action.
- 11. Mercury QA Manual Sections 1-18, Revisions and Dates Various
- 12. Fischbach and Moore QA Manuel Sections 1, 2, 3, 10, 15, 16, 17, and 18, various Revisions 4-1-81.
13. Fishbach and Moore QAP-103-W3, Revision 0, 6-10-77, Processing and Controlling Ncnconformances. 14. Fischbach and Moore QAP-106-W3, Revision 0, 6 '9-77, Auditing.
- 15. HISCO QA Manual Section 15, Revisien C, 6-6-78, Audits.
- 16. Tonpkins-Beckwith QA Manual Section V, 2-1-81, Audits F
.a:
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5/30/84 (TSK4) t Statement Prepared By: i j Name Date ] 1 i Reviewed By: Team Leader Date Reviewed By: Site Team Leader (s) Date Approved By: Task tianagement Date k f 0 i i e 4
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_ Exhibit 6 ,
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. Draft 1 ;
- 4/24/84 (tsk3) 55ER I
g Task No.: A-128d, A-A l2- - _Ref. No.: 4-84-A-06-23d.
- Characterization:
uncersized welas inGambit Mercury's article work.dated 1/14/84 alleged that there were
! I -
b, Assessment of the Allecation:
- r/: L l welo hac been discoverec in Mercury's welding of socket wel This caused i [ .'
the, generation of a'Significant Snstruction Deficiency,(SCD) No. 62f i
; EeResolution (Attach 2), W3-4365 (Kttach of this 3), SCDand W3-4366 was Ebasco controlled NCR's W3-4410 ach 4).
by(AttRev 1 ~ c i The reason ":s-eva,d r r7 rze for the deficient welding welding and inspection was l that
.065 both ratherwere than' based schedule on160 criteria piping forinstalled.
stainless tubing with a wall thickness j ., . had been installing the thinner tubing. A large share of their work
,e ,
The thinner tubing required a 1/8" fillet weld rather than 1/4" fillet required for schedule 160. The SCD and NCR's ulted in a reinspection and rewelding of doubtful welds. E 2.t ;n: l found adequate. a rewelds were reinspec'ted and
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Conclusion:
Based on review of the records and visual inspection of -
*! valid when it was made (1/14/84).ac:essiole portions of 20 systems it 4' .
.s N It may have been valid some time prior to the Si Deficiency No. 62 but normal controlce" .:- ' gnificant Construction
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corrected the problem. s ine,$dequately
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"" Action Recuired: -None F -
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l. Attachments: - Z~. '
- l. Significant Construction Deficiency No. 62. -
- 2. NCR W3-4410.
- 3. NCR W3.-4365.
- 4. NCR W3-4366.
- 5. List of systems inspected.
This statement prepared by u t-i inut D tri t-4]ts /p1 Name ' care Reviewed'by: Team Leacer . Date Reviewed by: - site Team Leacer-Date Approved by: .. lask Management Date G t e __ _ _ '~_- .
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- Task Management Date
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.c I .' DRAFT 1 05/23/84(TSK4)
WATERFORD OPEN ISSUE Task: A-141 Reference"No.: 4-84-A-06-36 ' 4 It has been alleged that a listing of discrepancy notices Characterizatim: (DNs) written during a review of 70 out of 1200 concrete placement packages were listed on a log. It was also alleged that the log was required to be maintained by instruction QAI-9. The alleger has expressed concern as to whether these DNs were considered in the quality review. ' Initial Assessment of Significance: It is not possible to evaluate the . significance of the allegation without knowledge of the types of discrepancies which are noted. . S _. f sp,% Source: Alleged Approach to Resolution:
- 1. Attempt to locate DN legs made during QAIRP on concrete reviews from November 15, 1982 - July 31, 1983.
- 2. Interview Robin Shepard, secretary / clerk who had logs on her desk.
- 3. Interview Peggy Burgard, in whose work trailer the logs were kept.
- 4. Locate DN's and ascertain their disposition / consideration in the subsequent review and generation of NCR's.
- 5. Provide an evaluation of the significance of the DN's.
Status: l Review Lead: L. Shao /QP/A -gy-42.6[W) Support: c/93
~
Estinated Resources: 2 man days -
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0 Estimated Completion: May 25, 1984 CLOSURE:' Se e G l l 1 me f9
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p'M' ys 4 2 DRAFT 1 5/30/84 _SSER 1 Task: Allega. tion A-141 Reference No.: 4-84-A-06-36 Characterization: It has been alleged that a listing of discrepancy notices (DNs) written during a review of 70 out of 1200 concrete placement packages were listed on a log. It wa also alleged that t.ie log was required to be
-1A maintained by instruction The alleger has expressed concern as to whether these DNs (written during March through May of 1983) were considered in the quality review.
./
Assessment of Allecation: I A ne ML staff detemined that ee Ebasco procedde,
] *4 ; T was W d" % e first part of April 1983 by Revis. ion 2,.to
( ' corporate portions of what had been QAI-9A. Both of these documents addre d the- Quality Assurance record review and provided,the instructions for condue the review. The QAI-9A document, which ,was issued as Revision 1 on September 9, C82, contained a fonn entitled " Quad,ty Assurance Engineering, Constru on-InstallationRecord[DeficiencyReport." The same i basic fonn was included in I-9 and was kno0n as Form QAI-9. The form j provided basically a log of eat ocumed and item number noted on the deficiency report which was reviewe tr completeness, accuracy and legibility and the reason for the rejectJoh or defichqcy.
/ s QAI K-9A was frt y divided into portions d Mdress various areas on disciplines werefeing reviewed. The NRC staff detennine( that the particul r document whic
- ~ was used for the review was QAIRGS No. 48-3huality Assuran e l Installat n Review Group (QAIRG) (Concrete Structure's), Docume tion Revi w Instr ion)which apparently existed in draft form curing the peri 6d of
/
g copernsinceRevision0wasnotissueduntilOctober4,1983. s . . - - - - w J e
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1 i Based on this information the NRC staff attempted to locate, not Deficiency Notices, but Deficiency Reports, issued under the QAIRG.wtid :p;: &t'y -
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om the records, the NRC staff detemined that as of the date of these allegations two QAIRG reviews in the area of Civil Quality Assurance - Concrete Documentation had been performed. A For the first review by QAIRG, a search of records, including contacts with personnel identified by the alleger as having knowledge of the logs resulted in the discovery of no such logs or deficiency reportE The fonner Ebasco project quality assurance manager indicated that the Q/.IRG effort had been to perform a preliminary review of the concrete placement packages under the QAI-9 procedure. Since that effort resulted in the decision to complete a (' 100% review, the NRC staff was told that the recordtgenerated by the QAIRG was we nullified. Additicnal'ly, a quality assurance ~ engineer from Ebasco stated that he had contacted two former Ebasco employees who were part of the QAIRG effort. They stated that to the best of their recollection there had not been any deficiency reports written unde:- QAI-9.2(sg.areape.74,y arr Sr*,424Z42), l For the second review by QAIRG which was stated to have addressed the fuel MX handling building and was to have been documented on Form 9.2 in accordance 4 with QAI-9,the NRC staff was only able to locate a log entitled, Construction j Installation Records Review Transmittal log. This listed activities such as concrete placement numbers and a check off column labelled 9.2, yes or no. The NRC staff does not believe this is the specific log desc{rbed in the allegation buf!4-i. 3 d link some of tg allegefs, areas of concern between concrete placement packages and th 9.2k(a~ssu'm"e'dtobeQAI9.2). When the references for this log to three sample concrete placement packages were checked, no information, data sheets, logs, etc., were found in the placement f . pa e k a ge s /t:lsh/ 4 TM- 7 I - G+I -9A or SAM-
,o =m. ++
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{ (N ?~, ! The NRC staff confimedghat Ebasco performed a complete re-review of the \ concrete placement after the alleger reviewed the first 70 packages. This l f re-evaluation ' included review of all the DNs as well as original placement packages. As a result. NCRs were generated and they were resolved acct,rding i to the procedure. At the time of allegation, the alleger was not aware of Ebasco's re-evaluation of the packages. The NRC staff also reviewed a sample of concrete placement packages. The review included a review of the disposition of DN and NCRs. grb-y,7,the LJ . t!.m o .~ . s NRC staff was unable to identify the concrete placement packages which the QAIRG had reviewed, was unable to locate cny log of deficiencies under a QAI-9 or -9A procedure or instruction, and wasI unable to identify any deficiency reports Ueferred to as deficiency noti by the alleger).ffs a result of these facts it would appear that the [ consideration of any'2eficiencies noted by the QAIRG effort were utili . L to determine if the review sample indicated satisfactory quality records or : not, and in this case the decision was that'it was determined that the records were not adequate and the subsequent 200t review began. i Sase/ en fhe 2bove, .
"' e c d.6 vi 0.::: #2:::
the NRC staff concludes that there is no safety significance or generic implications arising from this allegation based on the current information available to the technical staff. The NRC staff review of a series of concrete placement packages indicated only minor discrepancies and l represented acceptable records (see Allegations A-109, A-112. A-131, and , A-269). \
, oc - f,.%
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~
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(- A Actions Reouired: None,
~
l l .- .
f l- . _ References 1. Interoffice Correspondence of Ebasco from J. D. Davis to M. Burgard, -
" Evaluation of Civil / Structural Documentation stored in the Q Vault," dated December 9,1982 (A-113).
2. Letter from R. S. Leddick of LPAL to D. G. Eisenhut of NRC (Response to Question 2),datedApril 27, 1984 3. Ebasco Interoffice Correspondence, Burgard to Stinson, March 28, 1983 , File Reference W3-QAIRG-409 4
- Extracts from QAI-9, Revision 0, dated October 31, 1979; and Revision 2 dated April 20, 1983. ,
S.
' Extracts from QAI-9A, Revision 0, dated September 21, 1982 6
7 QAl-9A,QAIRGS48-1,EbascoForceAccount(ConcreteStructures). . 3. QAI-9A, QAIRGS 48-2 Ebasco Force Account (Steel Structures). QAI-9, QAIRGS 48-3,QAIRG - Concrete Structures.
~ 9.
/9 Ebasco Interoffice Correspondence. Hill to Czyako, dated June 6,1983 d2A Z=~4, Aew 3 , A n*/ 20,/983 '
Statement Prepared By: - , S. Kim Date Resiewed By: Team Leader
-- Date Reviewed By:
Site Team Leader (s) - Date Approved By: Task Management Date
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DRAFT 1 5/30/84
- i SSER l
Task: Allegation A-141 Reference No.: 4-84-A-06-36 - Characterization: It has been tileged that a listing of discrepancy notices (DNs) written during a review of 70 out of I'200 concrete placement packages were listed on a log. It was also alleged that the log was required to be maintained by instruction OAI-9. The alleger has expressed concern as to whether these DNs (written during March through May of 1983) were considered in the quality review. Assessment of Allegation: The NRC staff determined that the Ebasco procedure QAI-9 was revised during the first part of April 1983 by Revision 2 to -
~
incorporate portions of what had been QAI-9A. Both of these documents addressed the Quality Assurance record review and provided the instructions for conducting the review. The QAI-9A document, which was issued as Revision 1 on : atember 9, 1982, contafned a form entitled " Quality Assurance Engineering, Construction - Installation Records, Deficiency Report." The same , basic form was included in OAI-9 and was known as Form QAI-9. The form provided basically a log of each document and item number noted on the deficiency report which was reviewed for completeness, accuracy and legibility and the reason for the rejection or deficiency. QAI No. 9A was further subdivided into portions to address various areas on disciplines'were being reviewed. The NRC staff determined that the particular document which was used for the review was QAIRGS No. 48-3, Quality Assurance Installation Review Group (QAIRG) (Concrete Structures), Documentation Review Instruction which apparently existed in draft form during the period of concern since Revision 0 was not issued until October 4,1983.
, , , , , , .,, -n . - - - - - ,---,----,.------,---,-w--w -w~ -- - -- ---~ = -' * - ' ~ * * - - - ' ' * - ^ - ~ - - " ^ ^ ' ' ' - ' ' ^ ^ ^ ^ ^
Based on this infomation the NRC staff attempted to locate, not Deficiency Notices, but Deficiency Reports, issued under the QAIRG which apparently _ utilized a ' draft form of QAIRGS No. 48-3. - l 1 From the records,~ the NRC staff detemined that as of the date of these allegations two QAIRG reviews in the area of Civil Quality Assurance (QA) ' Concrete Documentation had been perfomed. For the first review by QAIRG, a search of records, including contacts with personnel identified by the alleger as having knowledge of the logs resulted in the discovery of no such logs or deficiency report. The fomer Ebasco project quality assurance manager indicated that the QAIRG effort had been to perform a preliminary review of the concrete placement packages under the QAI-9 procedure. Since that effort resulted in the decision to complete a ! 100% review, the NRC staff was told that the record generated by the QAIRG was nullified. Additionally, a quality assurance engineer from Ebasco stated that he had contacted two fomer Ebasco employees who were part of the OAIRG effort. They stated that to the best of their recollection _there had not been any deficiency reports written under QAI-9.2. For the second review by QAIRG which was stated to have addressed the fuel handling building and was to have been documented on Fom 9.2 in accordance with QAI-9 the NRC staff was only able to locate a log entitled, Construction l Installation Records Review Transmittal log. This listed activities such as concrete placement numbers and a check off column labelled 9.2, yes or no. The NRC staff does not believe this is the specific log descirbed in the allegation but it did link some of the allegers areas of concern between concrete placement packages and the 9.2 (assumed to be QAI 9.2). When the t s references for this log to three sample concrete placement packages were checked, no infomition, data sheets, logs, etc., were found in the placement packages. I 9 .. l
- -3 The NRC staff confinned that Ebasco performed a complete re-review of the l concrete placement after the alleger reviewed the first 70 packages. This l re-evaluatiin included review of all the DNs as well as original placement
~
packages. As a result, NCRs were generated and they were resolved according l to the procedure. At the time of allegation, the alleger was not aware of Ebasco's re-evaluation of the packages. The NRC staff also reviewed a sample of concrete placement packages. The review included a review of the i disposition of DN and NCRs. - Based on the above the NRC staff was unable to identify the 70 specific concrete placement packages which the QAIRG had reviewed, was unable to locate any log of deficiencies under a QAI-9 or -9A procedure or instruction, and* was unable to identify any deficiency reports (referred to as deficiency notices by the alleger). As a result of these facts it would appear that the consideration of any deficiencies noted by the QAIRG effort were utilized only to determine if the review sample indicated satisfactory quality records or not, and in this case the decision was that it was detennined that the records were not adequate and the subsequent 100% review began. As a result of these facts the NRC staff concludes that there is no safety significance or generic implications arising from this allegatic based on the current information available to the technical staff. The NRC staff review of a series of concrete placement packages indicated only minor discrepancies and representeo acceptable records (see Allegations A-109, A-112, A-131, and A-269).
.'- r. . ra.
~
f,. 5, % ( ' Actions Reouired: None. i
e l l References
- 1. Interoffice Correspondence of Ebasco from J. D. Davis to M. Burgard. -
" Evaluation of Civil / Structural Documentation stored in the QA Record Vault," dated December 9, 1982 (A-113).
- 2. Letter from R. S. Leddick of LP&L to D. G. Eisenhut of NRC (Response to Question 2), dated April 27,'1984.
- 3. Ebasco Interoffice Correspondence, Burgard to Stinson, March 28, 1983, File Reference W3-QAIRG-409. .
- 4. Extracts from QAI-9, Revision 0, dated October 31, 1979; and Revision 2, dated April 20, 1983.
- 5. Extracts from QAI-9A, Revision 0, dated September 21, 1982.
- 6. QAI-9A, QAIRGS 48-1, Ebasco Force Account (Concrete Structures).
- 7. QAI-9A, QAIRGS 48-2, Ebasco Force Account (Steel Structures).
- 8. QAI-9, QAIRGS 48-3,QAIRG - Concrete Structures.
- 9. Ebasco Interoffice Correspondence, Hill to Czyako, dated June 6,1983.
Statement Prepared By: ! S. Kim Date Reviewed By: ( Team Leader Date l Reviewed By: 1 Site Team Leader (s) Date ' 1 Approved By: Task Hansgement Date
-v ' ~~
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~
DRAFT 1 i 5/30/84 ' SSER Task: A11ega, tion A-141 - Reference No.: 4-84-A-06-36 ) Characterization: It has been alleged that a listing of discrepancy notices (DNs) written during a review of 70 out of 1200 concrete placement packages were listed on a los. It alsgallegedthatthelogwasrequiredtobe maintained by instruction The alleger has expressed concern as to whether these DNs (written during March through May of 1983) were considered in the quality review. Assessment of Allegation: - A The riHL staff detemined that ee Ebasco procedure, , M was h d"r M e first part of April 1983 by Revision 2,to' orporate portions of what' had been QAI-9A. Both of these documents addre d the Quality Assurance record review and provided the instructions for conduc
- a the review. The QAI-9A document, which , issued as Revision 1
, on September 9, 82, contained a form entitled "QuaTIty Assurance Engineering, Constru on - Installation Records [ Deficiency Report." The same l basic form was incluc'ed in I-9 and was know/n as Form QAI-9. The form 1
\
, provided basically a log of eac ocumefft end item number noted on the deficiency report which was reviey r completeness, accuracy and legibility and the reason for the rejectJon' or defic cy. 1
/
QAI K-9A was %r:Mr bdivided into portions to dress various areas on disciplines were dgreviewed. The NRC staff detem that the particulkr document whic was used for the review was QAIRGS No. 48-3, uality Assuran e Installation Review Group (QAIRG) (Concrete Structures) Docume ation Revi w ' i Instruedon,whichapparentlyexistedindraftformduringtheperi of i s cof rn f since Revision 0 was not issued until October 4,1983. l . - J
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( . 1 Based on this infomation the NRC staff attempted to locate, not Deficien:y Notices, but Deficiency Reports, issued under the QAIRG.whid :p;: e t'y - utiiit=J e S :'t fam nr nAf W Nn Ag }, _ From the records, the NRC staff detemined that as of the date of these allegations two QAIRG reviews in the area of Civil Quality Assurance - Concrete Documentation had been perfomed. For the first review by QAIRG, a search of records, including contacts with personnel identified by the alleger as having knowledge of the logs resulted in the discovery of no such logs or deficiency report ( The former Ebasco project quality assurance manager indicated that the QAIRG effort had been to perfom a preliminary review of the concrete placement packages under the . QAl-9 procedure. Since that effort resulted in the decision to complete a } 100% review, the NRC staff was told that the recordtgenerated by the QAIRG *w we nullified. Additional'ly, a quality assurance engineer from Ebasco stated that he had contacted two former Ebasco employees who were part of the QAIRG effort. They stated that to the best of their recollection there had not been any deficiency reports written under QAI-9.2(egsewy Mu/y e Mr*, M4h. For the second review by QAIRG which was stated to have addressed the fuel Qk1 handling building and was to have been documented on Form 9.2 in accordance 4 with QAI-9,the NRC staff was only able to locate a log entitled, Construction Installation Records Review Transmittal log. This listed activities such as concrete placement numbers and a check off column labelled 9.2, yes or no. TheNRCstaffdoesnotbelievethisisthespecificlogdesc1rbedinthe allegation bu Mdlinksomeoftheallegerlareasofconcernbetween 3 concrete placement packages and th 2k(assu'mIdtobeQAI9.2). When the references for this log to three sample concrete placement packages were checked, no infomation, data sheets, logs, etc., were found in the placement packagesit/zM N W-W QAr -9A or QAM. Y
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y k% The NRC staff confirmedghat Ebasco perfonned a complete re-review of the concrete placement after the alleger reviewed the first 70 packages. This re-evaluation included review of all the DNs as well as original placement ' packages. As a result, NCRs were generated and they were resolved according l to the procedure. At the time of allegation, the alleger was not aware of Ebasco's re-evaluation of the packages. The NRC staff also reviewed a sample r of concrete placement packages. The review included a review of the < disposition of DN and NCRs.
& sum "jd m lav}e,._
eu thi ei the NRC staff was unable to identify the 70 specific concrete placement packages which the QAIRG had reviewed, was unable to locate i any log of deficiencies under a QAI-9 or -9A procedure or instruction, and was - unable to identify any deficiency reports (referred to as. deficiency notice
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by the alleger).fs a result of these facts it would appear'that the
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consideration of any deficiencies noted by the QAIRG effort were utilized only to determine if the review sample indicated satisfactory quality records or not, and in this case the decision was that it was detennined that the records were not adequate and the subsequent 100% review began. smd- %e akve , .
; Mo nui t vi thne #xt' the NRC staff concludes that there is no safety significance or generic implications arising from this allegat'on based on the
< current infonnation available to the technical staff. The NRC staff review of ' a series of concrete placement packages indicated only minor discrepancies and represented acceptable records (see Allegations A-109, A-112, A-131, and ,A
-269).
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'[-(Potentialfiolations: None]
- Actions Recuired: None. 1
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-f-References
- 1. Interoffice Correspondence of Ebasco from J. D. Davis to M. Burgard, -
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" Evaluation of Civil / Structural Documentation stored in the QA Record Vault," dated December 9,1982 (A-113).
- 2. Letter from R. 5. Leddick of LP&L to D. G. Eisenhut of NRC-(Response to Question 2), dated April 27, 1984
- 3. Ebasco Interoffice Correspondence, Burgard to Stinson, March 28, 1983, File Reference W3-QAIRG-409.
- 4. Extracts from QAI-9, Revision 0, dated October 31, 1979; and Revision 2, dated April 20, 1983.
- 5. Extracts from QAI-9A, Revision 0, dated September 21, 1982.
- 6. QAI-9A, QAIRGS 48-1 Ebasco Force Account (Concrete Structures).
- 7. QAI-9A, QAIRGS 48-2, Ebasco Force Account (Steel Structures).
- 8. QAI-9, QAIRGS 48-3,QAIRG - Concrete Structures.
9.' Ebasco Interoffice Correspondence, Hill to Czyako, dated June 6,.1983.
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42AZ-9, A?w. 2, Api-;/ 2o,19g3 ' Statement Prepared By: S. Kim Date Reviewed By: Team Leader Date Reviewed By: Site Team Leader (s) Date Approved By: Task Management Date
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, UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION Before the Atomic Safety and Licensing Appeal Board In the Matter of )
)
LOUISIANA POWER & LIGHT COMPANY) Docket No. 50-382 OL t< ). } '(Waterford Steam Electric ) 1 Station, Unit 3) ) ! I t i I i I hereby certify that a copy of the. foregoing Joint j Intervenors' Motion for Leave to File Reply to Applicant's Answer'tb Joint Intervenors' Motion for Leave to File I Supplemental Memorandum and Applicant's Response to ^. Supplemental Memorandum has been mailed, postage prepaid, on March 11, 19E5, to the following: }
. Service List i
t Christine N. Kohl, Chairman Sheldon J.'Wolfe, Esq. Chairman'- P Atomic Safety & Licensing Atomic Safety & Licensing, Board-
! Appeal Board U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Comm. Washington, D.C. 20555
! Washington, D.C. 20555
- j. Atomic Safety.& Licensing Board Panel l Dr. W. Reed Johnson U.S. Nuclear Regulatory Commission Atomic Safety & Licensing Washington,.D.C. 20555
' Appeal Board U.~S.ENuclear Regulatory Comm. Docketing and Service Station -(3)
Washington, D.C. 20555 Office of the Secretary U.S. Nuclear Regulatory Commission , Howard A. Wilbur Washington, D.C. 20555 Atomic Safety & Licensing Appeal Board Sherwin Turk, Esq. U.S. Nuclear Regulatory Comm. Office of Executive Legal Director Washington, D.C. 20555 U.S.. Nuclear Regulatory' Commission Atomic Safety & Licensing ! Appeal Board' Panel' Dr. Walter H. Jordan-U.S.-Nuclear Regulatory Comm. s Admini'trative Judge Washington, D.C. 20555 881 West Outer Drive 4 Oak Ridge, TN'37830 ' 1
. . _ _ , __ __ - _ . _ . _ . . . _ .~ . _ . _ _ _ _ , . . . , _ ,
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i l William J. Guste, Jr., Esq. Attorney General for the State of Louisiana 234 Loyola Avenue, 7th Floor New Orleans, LA 70112 . Dr. Harry Foreman, Director Administrative Judge i University of Minnesota Box 395, Mayo Minneapolis, MN 55455 Mr. Gary L. Groesch 302 Walnut Street New Orleans, LA 70118 Carol H. Bernstein, Esq. 445 Walnut Street New Orleans, LA 70118 E. Blake, Esq. B. Churchill, Esq. Shaw, Pittman, Potts & Trowbridge 1800 M Street N.W. Washington, D.C. 20036 i a L'hne Bernabei
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