ML20136D012

Forwards Newspaper Clippings to Support Contention That Util Is Financially Incapable of Constructing Plant

ML20136D012
Person / Time
Site:	Allens Creek File:Houston Lighting and Power Company icon.png
Issue date:	09/29/1979
From:	Baker B AFFILIATION NOT ASSIGNED
To:
References
NUDOCS 7910190057
Download: ML20136D012 (6)

Text

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HL&P says Brozm & Root report

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nade'.tf Maeta=ce la sworn testimony before a only a $63 mihn rate hike, and the city of Hous-

{ I.3,.[* Mud.. Tamas Public Utility Commission examiner as a By FILED BONAVITA

- ton approved a $44 mihn increase within its Pest Aussia Barena public hearing opened into the utility's appilca.

jurisdiction. A PUC official said the staff recom-l n st ; i...a pn mended only e percent of CWIP be included in AUSTIN-De president of Houston Lighting &

tion for a $178.3 mima rate increase.

Power Co. said here nursday that Brown & Root De hearings, which are espected to last more. the rate base.

.3 Inc. gave his firm mMag information on the ' 1 than two weeks, were punctuated Thursday by Jordan said the staff's recommendation was status of engineering work on the tmobled South some 200 chanting Houston-area residents who. Inadequate and would hurt the company in at-Texas Nuclear Project, which has cost'oN' protested'the rate-Increase' request,'saying the tracting investment capital, selling bonds or sell-a nounting to hundreds of millions of dollars.

poor would be forced to choose between heating Ing its stock, which already is going for less thar i Can D. Jordan said Brown a. Root officials as-their homes and cooking their meals this winter if book value. He said HL&P has a construction pro-sured HL&P and its three partners in the, ' theirelectric billswere raised.

A gram of about 33 billion planned for 1990-82, and 4

multibihn. dollar project that engmeering work The status of the STNP was a major point of most of the projects cannot be delayed it.the firm cas 60 percent completed in March 1976,.wben the - interest among H1AP's opponents on the rate in-is to meet demand.

9.

tirst sack of concrete was poured. '.

" crease issue, since the company is askog the But Nancy Leshikar, a PUC attorney, quizzed But, Jmian said, HL&P later discovered the PUC to include all of the 3690 million in " con-Jordan at length about the cost overrune of the engineering worte at that point was "something 'struction work in progress" - or CWIP - In its STNP, their impact on HL&P's rate base, the in less than 10 petrent actually completed by the ~ rate base. One ' opponent charged CWIP alone ac-. volvement of Brown & Root in the matter and architect. engineer (Brown & Root) at ther time osunted for$3 million of the requested rate hike, what HL&P was doing about the situation. '

• w It was diariamad late last month-that STNP tw Jordan, who also is chief esecutive'oitteer d'q. tdie another said HIM wants its customers in-" stead of investors

" ' '. '"*i' W E. aPlease see HL&P/pase 13A construction started.".

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.e HIAIF, widch is the managmg parmer in 31'NPi

~ The PUC staff has recommended HL&P get

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1 sulting ftrm by the spring of ITI to oversee the' ' president who has had direct dealings with STNP, s,a wor $i. rrom first to inst, he. aid, the consuitants-

.toch the witness stand isie nursday and echoed much of Jordan's testimony about the engineering run into another cost overrun - this one at least '3. reporta said "the engineering work was certainly " worte being at least pa

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$400 million - that threatens to at least double. c But the HIAP'pnsident would not go beyond. ' delays.But he also blamed soll conditions and the the original $1 billion cost of the project and delay that point when be was crossexamined a short need to buy more steel use at least until1984. H1AP's sham at costs in time later by attorney Miko Shirley, repnsenting In protesting the rate increase request, mem.

the nurname. powered, electric generating plant in t'a====ity Public Service Co., and declined to bars of the Houston chapter d the Amanciation of Matagorda County south of Bay Cityis part of the"charactertse Ert,*u & Root's actions as'either '\\' Community Organizat s

plained poor persons in HL&P's service area 4,. misrepr====tation or a mistake.

CWIP tt wants passed on to its customers noen ddaad by Shirley what HIAP intended to doJ esuld not afford another increase in their electric through this rate increase.

Asked by IAshikar how much of the SINP engl. p about the situation, Jordan replied, "What we in.

service.

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neering work had been completed when construc-tend to do is get that project built as quickly as. -

" ACORN members want justice," one of them tion work began, Jordan replied, "We got that " we can get it built and at the lowest cost." -

testified. "We want to be able to best our homes ~

construction permit in December of 1975 or ~~

Is there anything going to be done by HIAP and cook our meals. Do we heat or do we eat!"

November or December of IM5.... We went leto _ to see that the people rispensible for the delays Emily IAwis of Houston told the hearing: "No the field on that project... (Brown & Root indi ' ' bear the cost of the delayst," Shirley asked.

sawumt of charitable contributions wi!! ever erase

...e ested) there was 60 percent of the @ wing "You are assuming that we !!nd fault.. i,"

HIAP's reputation of taking from the poor and completed. and the project was kicked off and the f Jordan said. "We obviously are not going to

" givir J to the rich."

fint concrete was poured in March of IMtL t waive any of our rights, but we are not in a post.

Glenar Van Slyke of Houston, representing

... I understand that subsequent reports tion to say whether we have any recourse at this

' ACORN. said the twason HIAP wants 100 perrent have been given to us that there was not 60 per..,. time.".

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.. ~~. _.,.._..- _. of its CWIP included in the rate base is that the cent of the engineering completed at the time that- '

Jordan also said Brown & Root got the archi..

Three Mile Island nuclear power plant scared the pmiset started. rad that them was =a aarMag. tectural, engineering and construction contract, banks and other lenders from lending money on less man 10 percent actually completed..."

through negotiations with HIAP and other build.

. nuclear-powered prejcets.

Jordan said HL&P caught on in a very short ers and not through competitive bidding.

"So HL&P is turning to the PUC and demand-thne that something was amiss and hired a goe..

George W. Oprea Jr., HL&P executive vice Ing that the people pay foe it," he chargede x

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.M BY RIC11ARD FISil I Chronicle Austia Bureau I

• "" PUC' lawyer Nancy teshikar said the

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i CI plaining the rate hike request, the AUSTIN - A bearing on the request or agency staff is interested because its Houston Lighting and Power Co. for a recommendation for a rate order by the 14, company said the need for new power

• #8 8178.4 mdllon rate increase turned into an

, three member regulatory commission the l

examination of the company's manage-

"probably wdl say that we need to take a area is a main factor in the rate request.

coi ment practices.

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closer look at HL&P from a management Jordan said Thursday "I think the coun-i 5"

try clearly is going to be looking at an The statY of the Public Utility Commis-

_ point of view."

1 ston recommended Thursday that HIAP Oprea'said HL&P already is takmg a inflated economy over the next several que receive only a $63 million annual in -

closer look at Brown & Root's perform-years. The pnce of everythmg is going to crease, or about ontKhird of what the.

ance on STNP, and has inpled the num-T go up substantially for every delay.

4 erof HL&P support staff and inspectors Prut.That's why we're trymg to build as much-hugo utility is seekmg.

b The mam difference in the pro is,' '

'. looking over their (Brown & Root's>

accu. stuiT as possible as quickly as possible."

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said a PUC staff attorney. is that H -Pis s

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uking that all of some $690 million worth k

" ' Oprea said he sensed two years ago that

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- 6 of construc' ion work in progress be count-4'

'a more sinngent audit of the plant con-j Thun f

l ed m determming its allowable rate of struction was required.

nation return.

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7 "Sometime in 1977 I had that little tug, at the pit of my stomach that we ought to protect c The PUC staff recommended including-w and e do something about taimg a closer look,"

only 45 percent of current construction.

The utility commission's staff also (J0prea said.

1 3

wenat recommended that a management review (*

Power company management also were Speak

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.quizaed by consumer group attorneys, tion,,Va oflEAP be conducted.

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I Questions about the utility's operations and members of 'the Houston-based As-ranged from potnted quenes on the pur ' d

. sociation of Commumty Orgamzation for kase a hon tha

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chase of a luxury motor home to interro-9 t Reform Now (1!1ed the heanng room brigade.

gation about whether the company is q j '.' bnefly for a signcarrying, chanting domg an adecuate job of overseeing con-demonstration.

)

10 struction of the South Texas Nuclear Pro- ' M

't "We are fired up and we can't take it ject near Bay Qty.

anymore," the group of mostly elderly HCC

,g parsons called m umson, then began HMP is project manager for the nu.

. la shouting, "The people umted will never (18.3r

. cles generatmg plant, wtuch is bemg...e', g'r built by Brown & Root of Houston for a ' "

be defeated."

r consortium of utthties that includes the Representatives of the 200-member Houston Qty of Austm, Oty Public Service Board g fY. group read from prepared statements, rose by It in San Antonio and Central Power ad o k. condemamg HL&P for giving approxi-j, increaseI; Light Co. on the Gulf Coast.

'mately $350,000 last year to chanty

'. ry. HCC of George Oprea, HMP operations vice "No amount of chantable contnbutions Dr. Jam, ar.

president, testifled here Thursday that his will erase HIAP's reputation of takmg dust affai g,

company didn't realize how little engi-g, V from the poor and givmg to the rich," one ' meat of 3 jS neenng work had been done on the L,N ACORN member read..

last fall. '

hPO. Carol Barger of Austin, an attorney for nelear plant at the time it received a The bos y ' construction permit from the Nuclear TACORN and the Consumers Umon, ques-the colle*

Regulatory Commission. -

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'ttoned HIAP president Don Jordan about skills be "y

Oprea said the company thought 60 per.

' / the company's purchase earlier this year' presidei cent of the engmeenng and arciutecture., g of a $47,000 luxury motor home.

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work had been done by Brown & Root at

' Jordan said the vehicle is used to trans-Houste ti ext. - port community leaders and city council He the time the project was beensed.

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[ of the engmeenng actually had been com " $

members to major HL&P facilities.

A later audit found that only 8 percent stren.

1 He said. the Executive brand motor provt pleted at the time, y ; home was bought as a " reasonable" way ment Cost overruns and a four year delay in of transportmg the power company's dis-The me, completion of the plant have caused Aus-

' tinguished guests and called it "a legiti-2, the

' der.

tin and San Antonio to demand g ; mate busmess expense."

pegrt independent audits of the project manage-Under Ms. Barger's interrogation, Jor-repair ment as well as the contractor Offletals wer dan also testfled that his company car is a The

.gg in both cities also have raised the possibil '

g ' 2 year-old Lincoln.

. first e ity oflawsuits over the expensive delays.

,,In its own " Rate Facta" publication ex-HISD g.

HIAP's role in STNP was exammed

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. dis evon though the cost of delays is not re-3,,

.p g ibted in the current rate increase re-i ' * '

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quest..

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we HiAP official says mmn au%

nuclear plant cost we

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from NRC inspectors in 1978 that they were not getting cooperation from qual.

y an persomt ad wnat was de By FRED BONAVITA about them. Oprea said he " vaguely p

g remembered some of the complaints -

and that they were handled by " staff"

. AUSTIN - An official of Houston and not by him directly.

L!ghting & Power Co. said here Friday At one point May mxning, Jona.

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the estimated cost of completing South,,

, man Day, apresW a exdum of Texas Nuclear Project has risen to about.

Ind'astries in the Houston area opposing Qg %@ 4

$2.7 biluon and the ject is about,four, l

the rate increase's effects on them, years behind sched e.

-i asned the PUC hearing examiner to cur-George W. Oprea Jr., HIAP executive tail Barger's questions about cost over-vice president, told a Texas Public Utni i power plants when the firm launched its runs and other aspects of the STNP on-ty Commission examiner that when the

. first ventures in the field.

. the grounds the'y did not have a direct >

first sack of concrete was poured in 17l6, "We made no attempt to proselydze bearing on the rate case.

estimates were that the project would people, but we tried to hire people as

- "There is a limit to the relevance of cost $1 billion and be completed in 1980.

,they became available." Oprea told her.

the South Texas project here." warned The latest estimate was $300 million He also told her he did not " sign off"

. Examiner Carolyn Shellman, but i,he al-higher than one made a month ago which l on every engineering specification or

%)

prompted an angry Austin Mayor Carole drawing made in connection with the McClellan to demand an outside audit of

• construction of STNP, although he did HL&P's performance as managing part1 checir the " milestones in the project.

lowed the line of questioning to continue '

ner in STNP. The cities of Austin and,',

,He said he would have needed a staff ofj briefly.

Meanwhile in Houston, a Brown &

San Antonio and Central Power & Light,

700 to check every detail of the work.

Root official acknowledged the construc,

Ce. of Corpus Christi am the other part i

?. Asked how HL&P expected to get an'

• " accurate cost estimate of the projecti tion company had misinformed HL&P in rars in the venture. /

Oprva gave the latest cost !!gures in i

• 'wi'.hout a complete set. of plans, Oprea-March 1776 about the status of engineer-the second day of testimony on HL&P'sl

? 'said he had to rely on Brown & Root's ing work completed on the South Texas application to the. PUC for a $173 million '

/ experience and expertise in the Geld and Nuclear Project.

rate increase. Most of the questioning of I

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'& Root's power division, said the 60 per.

4 Steve Grote, a vice president in Brown company witnc.ses both days centered i

cent estimate was based ori the compa,

on its management practices-wi',

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"'*L v ~m ny's analysis at that time of the scope of j

emphasis on its'handlin UieNchl "8

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. good. faith analysis at that time,,, he.:

I. r uelear powered plan.ts around the!

said, adding that it was checked against SIWP-Opm2, who is the company's represen' Mnun scopes of wwk in ode simi-l tative on a managemem committee that

[ 'ution..

"When I hire a contractor to build a runs the construction program for SINP.

p nouse, I don't give them a cost plus con >

lar nuclear projects.

cn a daily basis, spent most of Priday on-h tract," Hubacker told him. "I get a firm But a later retrospective analysi,s th witness stand being quizzed about

' price, and any change in that price is showed only about 20 percent of the engt-nee.ng work was unished at mat dme, j

how closely he monitored the engtvering due to a specific change order."

4 and architectural work done by Brown a.

"You won't find any contractor that Root Inc. of Houston, the prime contrac,

. win take a nuclear contract on a fixed I

~Mt'e sd1 tar on STNP for those aspects and the

. price basis, mainly because of the con ~

"I know Jordan said 10 percent," he construction.

.. @s stantly changirg regulatory climate,"

added, "but that's not our analysis'?

• He and Dot' D. Jordan HL&P,s presf"

,Oprea shot barn...

Grote said the miscalculation reded dent and chief executive officer, testified; E The HL&P efficial also was unable to from changes in regulatory requirements I

Thursday their !!rm had been led to be-tell Carol Barger, attorney for consumer '

' and project design changt's that greatly i

lieve by Brown & Root the engineering

' groups opposing the full rate increase, increased the amount of enginegrijig work was 60 percent completed in March'

.what the costs were to correct 24 viola-i i work required.

"c.

I 1776 when construction work was begun l tions of Nuclear Regulatory Commission :

."The scope of this job has increased,

but later learned it was only between.8 N regulations found at STNP by inspectors, by about 19 percent a year compounded and 10 percent complete then. Engineer.

. although he said he would get the figures.

annually," he said. "That compares ing work has only recently reached 63

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.g. y t.o. g g,. ;,.m favorably with other nuclear projsets.^

l pareent of completion, both men i._"

' Grote said he does not feel the engf-i k

testified.

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neering situation caused any can'ttsel a

Harriet E. Hubacker, attorney for the 3

tion delays. "The jgb was just' big (er city of Houston in opposition to the rate than originally perceived."

'#M increase, asked Oprea whether HLAR He declined to estimate the pe@nt.

had attempted to " bring anyone in wh age of engineering wotk currentlMorn; had had some experience in nuclear',

pieted, sayIng that is aow4efrri

N.TMwrm. N analyzed. He did say it is now "past A

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. company officials testifled here, the first generating umt t

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Now completion is estimated for 1984, and HIAP is I O t

projecting a cost of $2J billion for the project.

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La Ne i e President Jordan was asked if.HL&P would ask rate.

payers to bear the additional cost of the project.,"That's i a:'

.-D i. n y - ( ".W, f.

correct," he said..-

,J BY RICHARD FISH

'i D ' ;.; m Q e,.i '

The Houston power company is the managmg partner -

Chronicle Austin Bureau.

r idWsl of the STNP and will receive the bulk ofits power output..

,.q.c cr, d.m r.;

cF Other partners in the STNP consortium are the city of AUSTIN - The South Texas Nuclear Projectilts. cost l Central Power and Light Co. Austin. San Antonio's City Pub and delays - again was the target of sharp questions by participants in a public hearing on Houston Lighting and Austin attorney Carol Barger. representing several Power Co.'s request for a $178 million rite increase, consumer groups and an anti-nuclear organization, enti.

Harriet Hubacker, asststant Houston city attorney,.

cized what she called the " incredible overruns in the.

cost" of the STNP.

Fnday asked HL&P Vice President George Oprea why the company wasn't aware earher of factors that could, "Ratepayers shouldn't be absorbing all the ' costs of their poor plannmg," she said of HL&P.

cause delan m completion of the nuclear plant:

i Oprea and HL&P President Don Jordanf testifled Jordan was asked on the o

'ng day of the hearmg

. Thursday that they thought 60 percent of the engmeering.

Thursday if anything could dane "to see that the work on the project had been completed by Brcwn &.

People msponsible for the delays are held responsible for

. the cost.

Root Inc. of Houston at the time the plant received a construction permit from the Nuclear Regulatory Com.

"Now, four years away from completion. we're not in a position to say whether we have any recourse or any; mission.

cause. Jordan said.

They said they found out after a later investigation-that.only 8 percent of the engineering was done at the "What we're interested in doing is to get that project built as quickly and'ef.eaply as we can considering the time the project was pernutted.

. When I hire a contractor to build a hom,e, I expect to positie we am presentlyin " he said: m: y-1 see a plan before I start building. How can there be such HL&P says the need for construction funds is a major -

factor in this rate mcrease request, and company offi.

cials said they expect to return regularly to the PUC a dispanty between thinking you're 60 percent done and find!ng you're only 8 percent," Ms. Hubacker asked.

further rate requests to allow them to keep pace with ;

l

$nen you see your house plans, you don't see con-i struction plans, you see a general layout " Oprea said.

Houston. area gw.h..

s;;

.q "You don't see all the details, the nails, the placement of-The power or.pany is seeking to have 100 percent of conduits, the location of switch boxes and trusses.

$690 2milhon WMh'of construction work in progress *

• "You depend on the expertise of the house builder," he.

iCWIP) meluded.in the rate base.That base is one factor.

said.."Likewise, with a nuclear power plant, you get an, frotn which the utility's permissible rate of return, and.,

A&lC ( Architecture and Engineermg) ccatractor who has -

any rate increase. will tp computed.

De PUC'stafT percent of CWIP.has recommended including only 45-built a number of plants."

1 n,

d'._

In the rate base, and has-proposed:

l The lawyer for Houston. which is intervening in the-rata case, also questioned the cost.plus manner of pay,

allowing HIAP only a 383 million rate increase.

trient of Brown & Root for the power plant Work. "When I The beanng is expected to take at least two more weeks, A final decision on any increase will be made by hire a contractor to build my house, I don't gtve.them a.

.he three appointed PUC commissioners after they have cost.plus contract," she said. '

.c i "You: won't find any contractor to take a nuclear reviewed the testimony and evidenc.e from the,heanag.

pmject on a fixed-fee basis, mainly because of the chang-

% u., gh.g, ]. w. g~.

,g *.., ', - !i ing regulatory climate" which can require unexpected,

~l

'8 expenditures,Oprea said.'

a

.....4

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