ML20127B401

Requests Ltr Clarifying Two Recent Instances Where NRC Evaluation Findings Taken Out of Context & Misused Re Potential Impact of State Economic Regulation of Safe Operation of Nuclear Power Plants

ML20127B401
Person / Time
Site:	Palo Verde
Issue date:	05/22/1990
From:	Conway W ARIZONA PUBLIC SERVICE CO. (FORMERLY ARIZONA NUCLEAR
To:	Taylor J NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO)
Shared Package
ML20126G704	List: ML20126G700 ML20127B396 ML20127B401 ML20127B457
References
FOIA-92-88 161-03239-WFC, 161-3239-WFC, NUDOCS 9007190071
Download: ML20127B401 (4)

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O Arizona Pubuc Service Company RECENED P o 908 63999

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MAY 29199) wwau r. coNWAY 161-03239-WTC i' ecog.gpi one May 22, 1990 J.M. LEVINE Docket Hos. 50 528/529/530 o Hr. Jaess M. Taylor Executive Director for operations U. 5. Huolear Regulatory comission One White Flint Horth 11555 Rockville Pike Rockville, Haryland 20852

Subject:

State Re5ulatory Use of NRC Reports rile: 90 056 026 As you know, the HRC Staff has recently had .Wyeral meetin6s with the Corunission, in which the Commission har expressed concern about the potential impact of state economic regulation on the safe operation of nuclear power plants ind, in particular, t.he misuse of comission evaluations of licenseo performance by state Public Utility commissions. The purpose of this letter is to bring to your attention two such recent instances where Corunission evaluation findin&s have been taken out of context and riisused, and to request your assistance in obtaining a clarifying letter froin the NRC. (Both matters, incidentally, have received extensive media cover *58.)

The Palo Ve'rde facility is the subject of a recent Diagnostic Evaluation by the HRc Staff and its consultants. The Diagnostic Evaluation Report (DER) contains constructive criticism and notes opportunities for improvement which Arirona Public Service (APS) is addressin5 The DER, however, also includes .

retrospective observations re5arding APS' preparation for- and readiness to undertake commercial operation, as veil as observations about the effects of the decline in the stock of APS' parent, Pinnacle Vest capital Corporation (Pinnacle West), on the stability of Palo Verde's work force and or5anization.

As to the former, the DER's language concernin5 APS' preparation for and readiness to undertake commercial operation has already been neized upon by the Arizona corporation cornstasion (ACC), which will be considering the prudence of Palo Verde construction later this year (see enclosed article frois Arirena Reoubliet March 21, 1990), and has been referred to in proceedings before the Texas PUC involving one of Palo Verde's co owners, El Paso Rien cio Company.

In addition, the ACC has used observations in the DER about the effects of the declining Pinnacle Vest stock on Palo Verde in a complaint filed with the Securities and Exchange Commission (see enclosed excerpts from he Arhaat GarparallqILC,pmmi s s ion! p C omol a i n t . PetiMon for Revocation or Modifiestion _of I'innsele Vest esp 11ALCar,rgration's. Exemotion. Request for Hearing and Fetition to Intervene, May 1, 1990).

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Conaissioner 161-03239-WC U. S. Nuclear Regulatory Cottaission May 22, 1990 .

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no DER's observations regardin6 the preoperational period are reflected throughout, but the essential observations are captured in the DER cover letter, whleh purports to connect the root causes and alleged problems in the preopers.tional era to ,

(1) Insufficies.t. technical and management depth to support startup and operation of a three unit facility, [and)

(2) durin5 startup, management and technical resources were focused on the next unit to go on line at the expense of the operational units resulting in a backlog of technical and programmatic issues.

I was not with APS during this early period but, being aware of the excellent reputation enjoyed by the project throughout this era and the Commission's deliberative process in considering the issuance of operating licenses, I was nurprised at these observations and somewhat skeptical, particularly because the DER does not cite supporting facts.

Because of our concern re&ardin5 these retrospective observations and their potentially dams 51 ng effect in pending state proceedings, APS undertook a comprehensive review cf contemporaneous analyses and conclusione by the Cormission, the NRC Staff and the ACP.S regarding the readiness of APS to operate the Palo Verde units. The record shows that palo Verde was subject to intensive scrutiny by the Cormission, the Staff and the ACRS as clearly reflected in the transcripts of numerous Cormission and ACRS nestings, operational readiness inspections, safety evaluation reports and related documents. On the basta of these reviews, the Corni s sion , the Staff and the ACRS reached judgments concernine the very issues which are the subject of the DER's observations retarding the preoperational era.

The underlying record of the NRC findings, taken as a whole, fairly reflects: *

(1) ApS senior management was deeply involved in virtually every phas6 of preparations for commercial operation, (2) ApS demonstrated substantial organizational depth and experience in support of operations.

(3) Testin5, fuel loading and startup of each unit were done in a deliberate, cautious and conservative manner.

(4) Management applied the " lessons learned" from preoperational testing and startup. This operated prospectively and retrospectively; h corrective measures to address problems identified during the testin5 and startup were applied to subsequent unit (s); subsequently identified problems were " fixed" on previously licensed units,

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Commissioner 161-0323 -VFC U. S. Nuclear Regulatory Comission May22,{990 Psge 3 ,

(5) APS staffing of the Palo Verde units with operating personnel exceeded NRC requirements in both numbers and qualifications.

(6)

Operating personnel generally performed well and were complimented froin time to time for their demeanor, professional attitude and adherence to procedures.

(7) Outsgo management was vell organized and several scheduled and unscheduled outages were effectively and efficiently managed.

(6) Operational proceduren vere upgraded as experience was gained from the initial operation of each unit.

(9) Quality assurance activities were emphasized throughout the entire organteation in connection with the testing and initial operation of the Palo Verde units.

Moreover, SA1.P reports and SER: in the 1983 87 period reflect confidence on the part of the NRC, its Staff and the ACRS in the operational readiness of the Palo Verde units and the APS staff.

Excerpts from NRC inspection *eports, SERs, SA1P reports, transcripts of ACRS subcomittee and full committee meetings and reports of HRC " full power" neetings indexed to the foregoin8 arose are enclosed for your consideration.

It was not surprising in the review of this record to find favorable determinations in each of these areas, because positive findings on such matters must be made by the Commission before authorizing operations. What is impressive, however, is that the record reflects that the APS organization and its preparations for operation were not merely minimally adequate but generally ,

regarded by the Comission, its Staff and the. ACRS as especially effective. It does not appear that the DER veighs Palo Verde's past record; indeed, it is not referred to. Althou8h it is not clear why the preoperational period ta Germane to the DER, if it is included, it should fairly reflect-the available record as do other areas of the DER.

The ACC also used,the DER's observations regarding the effects of the decline in Pinnacle Vest stock on the stability of Palo Verde in a request to the SEC for revocation of Pinnacle Vest's status as an exempt holding company. Although APS recognizes that the NRC cannot control the use to which its observations may be put, the use of these observations in the ACC's Complaint la particularly disturbing.

j, DG/091930 13123 US I4RC PrLO VERIE 002 306 2730 P.07 Commissioner 161-03239-VFC U. S. liuelear Regulatory Con. mission Hay 22, 1990 Pa6e 4 APS acknowledges that the decline in the value of Pinnacle West stock may be, or have been, of concern to some errployees, but no evidence exists to show that the decline contributed to instability or insecurity in the Palo Verde work force. Clearly, significant " instability" or " insecurity" would have been manifest in abnormal attrition and/or hiring problems. A review of data during the period of Pinnacle Vest's financial dif ficulties (1988 1990) reveals no abnormal attrition not evidence that Palo Verde personnel lef t the employ of Ars for this reason. Moreover, during this same period APS has, as noted in the DER, hired an extranely well qualified group of officers and senior managers.

The ACC Complaint also quotes the DER to the ef fect that APS' new management team was on board and improvement initiatives were being implemented, but notes that the rate of improvement la inhibited by, among other things, " organizational inetsbility, uncertainty and insecurity." However, the DER made clear that:

the team found ne evidence to suggest that financial difficulties at Pinnacle West or APS appropriation levels had jeopardized safety systems or the safe operation of the units... The resources (money, people, equipment, naterints and facilities) provided to Palo Verde by APs were Senorally adequate to meet needs, s. .

Again, while some individuals may have conveyed insecurity and uncertainty about the organization in the course of their interviews uith 11RC team members, that la to be expected in a period of significant management changa, the comments in the DER appear to have been derived from interviews and not otherwise supported in the DFR. Additionally, they have been presented in a way which allows the.m to be elevated to general conclusions and to be otherwise misused.

APS believes that clarification of the DER, by issuance of a supplemental letter

~from the NRC Staff, is both necessary and appropriate in " the circunstances.

APS is greatly concerned that unless the DER is clarified to reilect the facts ,

outlined in this letter, it will be misunderstood and misused to ponalize APS and its co owners. I believe the !!RC shares this concern, never intended its DER to be used in this manner, and, therefore, I urgently request your assistance in this matter. Should you desire further information in preparing a clarifying letter along the linas discussed above, plasse advise me. In any event, I would appreciate an opportunity to meet with you on this matter at your earliest convenience.

Sincerely,

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Enclosures cet J. B. Hartin, Region V

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