ML20136E311
| ML20136E311 | |
| Person / Time | |
|---|---|
| Site: | Millstone, Seabrook  |
| Issue date: | 01/21/1997 |
| From: | Blanch P AFFILIATION NOT ASSIGNED |
| To: | Diane Screnci, Zwolinski J NRC (Affiliation Not Assigned), NRC OFFICE OF INSPECTION & ENFORCEMENT (IE REGION I) |
| Shared Package | |
| ML20136C110 | List:
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| References | |
| NUDOCS 9703130172 | |
| Download: ML20136E311 (7) | |
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-l iFrom PAUL BLANCH <PMBLANCH91x.netcom.com>
To 1-WND2.WNP3(jaz),KPD1.KPP2(dps)
Dates
- 1/21/97:4:29am subject:
Today's News I
=AO NU warns itsLNH utils could face. bankruptcy Source: Reuters NEW YORK, Reuters via Individual Inc. : Northeast Utilities (NU) said -Monday plans by New Hampshireito deregulate its electricity industry could force it to write off up to $800 million in stranded costs and ' push its two local units into bankruptcy.
"We would no longer be able to bill those significant costs as =
- assets, our books wouldn't balance," said Martin Murray, a spokesman for =
Public Service Co of New Hampshire (PSNH).
PSNH is one of two.NU subsidiaries operating in the state and the biggest, with some 400,000- customers. The other is North Atlantic Energy Corp, which operates the 1,150 megawatt Seabrook nuclear power. plant.= and sells the power to PSNH.-
The deregulation plan, handed January 3 to New Hampshire's Public p
Utilities Commission by consultants LaCapra Associates, would leave =
PSNH: with liabilities exceeding its assets.
Creditors eventually would demand repayment of debt, meaning =
bankruptcy for the company, Murray said.
The herat of the problem lies in how PSNH, under the proposal, would account for stranded costs -- those earlier investments in l
assets = such' as power plants that would be uneconomical in a deregulated = environment.
But nothing is set in stone. The state utilities commission will not rule on an interim stranded cost recovery program for local utilities until February 28.
New Hampshire's move toward a deregulated electricity industry is in step with other states seeking cheaper power for consumers by E
= dropping regulated pricing mechanisms in favor of open market competition.
NU's chief financial officer John Forsgren, at a hearing Friday,
= warned the New Hampshire Public Utilities Commission of the
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potential for bankruptcy facing PSNH and North Atlantic Energy Corp if the current deregulation plan were adopted.
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The hearing was aimed at determining a stranded cost recovery charge, =-or. the amount PSNH'would be allowed to recover for j
past investments and public policies.
Togethe'r, PSNH and North Atlantic account for revenues of about i
j
$1 billion a year, or 25 percent of NU's total revenue.
'"They would have to writefoff a large portion of their assats, i
and = they would have virtually no equity," said Northeast spokesman Jeff =
Kotkin, a spokesman at NU's corporate headquarters in Berlin, Conn.
4
" Undermining PSNH's financial standing would jeopardize the goals of lowering electic rates in the near-term and introducing competition,"
PSNH president William Frain said in a separate statement.
Analysts said PSNH's problems, not surprisingly, are linked to its = high power production costs.
Barry Abrahamsen, senior utilities analyst at Prudential Securities, said PSNH's residential power rates are three times the national average, which he partly blames on the Seabrook project, one of New England's biggest power plants.
Seabrook started commercial operation in 1990.
But he called backruptcy for either PSNH or North Atlantic Energy Corp a remote possibility, despite NU's warnings.
"This not'close to happening. It depends on the final deregulation (plan) that New Hampshire adopts," he said.
j Nor is it the first time PSNH has found itself in hot water. It =
sought chapter 11 protection in January 1988 and was eventually acquired by Northeast Utilities in June, 1992.
"(New Hampshire) seems to be the first state that is seriously considering a deregulation plan that does not allow full recovery of stranded cost," Abrahamsen said.
" People in New Hampshire have gone through the experience of seeing their largest utility in Chapter 11. Service was not =
interrupted...They are not afraid of the threat," he added.
((--New York Power Desk +1 212 859 1627))
[01-20-97 at 15:44 EST, Copyright 1997, Reuters America Inc.)
]
NU EXPECTS FOURTH-QUARTER RESULTS TO REFLECT HIGHER REPLACEMENT u
\\
POWER COSTS, NUCLEAR OEM RESERVES, STORM RESTORATION COSTS
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HARTFORD, Connecticut, January 20, 1997-A late-year surge.in oil prices, a damaging December snowstorm, and increased reserves to = cover future nuclear operation and maintenance costs are j
expected to significantly reduce =
t Northeast Utilities' fourth-quarter financial results, the l
company stated today.
i NU is scheduled to report year-end 1996 earnings on January 28,
=
1997.
A significant fourth-quarter loss is e>pected.
In 1995, NU's =
j fourth-quarter earnings were $64.2 million, or 50 cents a share.
l' John H.
Forsgren, NU executive vice president and chief i
financial officer, said NU expects to increase significantly the i
amount it is = reserving to cover a portion of higher expected operation and maintenance costs = at Millstone Station in 1997.
NU had reserved $40 million as of September i
30,
=
l 1996, but Forsgren said that sum will increase as the company develops firmer = estimates of the work that must be done to return the units to service.
Y No power has been generated by Millstone Station since the end of =
March 1996.
Each of the three units at the site will remain shut down 4
= until the Nuclear Regulatory Commission formally votes to I
allow a restart.
The'= cost of replacing the power normally generated by the three nuclear units at =
i Millstone Station in Waterford, Connecticut, has risen from approximately $80 = million in the second quarter of 1996 to an estimated $110 million in the fourth = quarter of 1996, Forsgren said.
Forsgren attributed the increase in large part to the rapid increase = in the price of oil in the fourth quarter.
Residual oil delivered to =
NU's Middletown Station in Middletown, Connecticut, which is required by = state environmental regulation to burn a very low sulfur product, rose by = about 25 percent, from around $19 a barrel in late spring to approximately,$24 = a barrel early this winter before falling significantly to below $20 a barrel = in mid-January.
Middletown Station is NU's largest fossil generating =' station.
NU expects to convert two of Middletown Station's four units to burn = natural gas, as well as oil, but that conversion is not expected to be complete-= until July 1997.
The NU system normally receives as much as 2,300 megawatts of power from the Millstone site.
The units are owned primarily by two of NU's operating' subsidiaries, The Connecticut Light and
Power Company =
(CL&P), which owns about 1,840 megawatts of Millstone capacity, and Western Massachusetts =
Electric Company (WMECO), which owns about 425 megawatts at Millstone.
As a = result, CL&P is bearing most of the negative financial' impact of the outages. =
NU's Other major-operating subsidiary, Public Service Company of New Hampshire, only~ owns 33 megawatts of capacity at Millstone and = receives very little of its power from the site and thus is relatively unaffected = by the Millstone outages.
CL&P and WMECO are expected to incur significant replacement l
power costs until the Millstone units return to service.
At this time, NU = expects at least one unit to return to service in the second half of 1997.
Currently, =
CL&P and WMECO are absorbing the full cost of replacement power.
State = utility regulators ultimately will determine what portion of those costs can = be passed through to customers.
NU has previously stated that it will not seek = recovery of the costs resulting from not meeting industry standards.
Forsgren said NU now projects that higher nuclear-related operation = and maintenance costs and higher replacement power l
costs will continue = well into 1997.
In addition'co the higher costs related to the Millstone plant = outages, NU's fourth quarter 1996 results will also be hurt by a severe =
l snowstorm that hit New England in early December and at its peak i
knocked out power = to approximately 350,000 customers on the NU system.
Costs are expected = to total around $25 million.
NU's catastrophic storm insurance will pay up to =
$15 million, after NU pays a $10 million deductible.
=A0 You Knew Intranets Paid Off, But ROI's Of 1500%? Get The Hard Facts.
Bankruptcy Not only Alternative For PSNH, Says Fitch - Fitch =
Financial Wire Source: PR Newswire j
NEW YORK, Jan. 20 /PRNewswire/ via Individual Inc. -- On Friday, Northeast Utilities' CFO John H.
Forsgren set off an alarm in the utilities industry in his testimony before the New Hamp= hire Public Utilities Commission. Forsgren said that a report by the commission's consultant recommends market pricing of electricity l
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l' and threatens to' cause the bankruptcy of Public Service Company
- of New Hampshire =
L (PSNH) and North Atlantic Energy Corp.
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In deregulation, Northeaut Utilities will'most likely be able to j
= recover - at least a po: tion of its $800 million'in assets under j;
review by the commission, Fitch says.fFailure-to allow recovery i
would set New Hampshire apart from every other state that has j
addressed the issue = of deregulation,-asset ~ recovery and the cost of electric service.
Previously, Fitch has hypothesized an industry recovery average
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nof-between 70% and 90%. In New Hampshire, recover may fall in
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the low = and of that average, because regulators fear adding i
recovery' costs to the state's electric rates, which rose j
considerably after the 1987' bankruptcy of PSNH. PSNH emerged from bankruptcy in 1991 and was acquired by Northeast Utilities L
in 1992. SOURCE Fitch Investors =
i Services
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l
/ CONTACT: Ellen Lapson of Fitch Investors Service, 212-908-0504/
j.
CO:
Northeast Utilities; Public Service Company of New Hampshire ST: JNew Hampshire IN: UTI SU: RTG
.LI -- NYM077 -- 0336 01/20/97 13:06 EST http://www.prnewswire.com i
l (01-20-97 at 12:00 EST, PR Newswire]
l l
January 20, 1997
[
Departing Energy Secretary Says Power Is Underpriced By MATTHEW L. WALD 8
(W) ASHINGTON -- The price of energy is artificially depressed.in this country, Energy Secretary Hazel O' Leary said in i
an interview on'the eve.of her departure from office, and l
Americans;will not be serious about1 conservation or energy independence until the price goes up or there is another shock.
2 Mrs. O' Leary also said members of Congress do not care nearly so much about making the right technology choices in handling nuclear waste = and weapons as they do about jobs in their districts. And no future secretary of energy will undertake trade missions to foreign governments, because of the flak she i
caught for her trip expenses, she said, and as a result, America's competitors will march into countries that want new 4
j
-technology or services and are accustomed to dealing government to government and "go laughing'all the way into the next meeting i
j with the minister."
i
Mrs. O' Leary said she.was exhausted by the last fouryears = and that anyone who stayed longer in the job was"probably-certifiable." =
l She said she would continue working with black organizations, I
especially those concerned with education in science and other fields. President Clinton has nominated Federico Pena to replace her.
In the last few days she has renewed a campaign =
of" openness," announcing that thousands of films of earlynuclear weapons tests would be declassified, and giving information on plutonium left by the =
United States in South Vietnam 20 years ago. Whatever follows, she said, the culture of secrecy has been broken.
Mrs.
O' Leary was interviewed in her seventh-floor office at the Energy Department, with its northern wall of windows giving both a stunning view of the castle-like Smithsonian headquarters and a perpetual chill. She, like her predecessors, uses an energy nc-no to supplement the inadequate central heating system: an electric space heater.
Mrs. O' Leary, who served in the Energy Department in the t
Carter administration and was an executive at the electric company Northern States Power when President Clinton named her secretary of energy, said she did not want another government job.-
l She said that she had tried within the constraints of l
the budget to nurture alternative fuel and energy technologies.
The prevailing view, she said, is that "somehow, miraculously, the market will present itself"for technologies like fuel cells, which make electricity from liquid hydrocarbons, and photovoltaic cells, which = can make electricity from sunlight. But government will have to subsidize these technologies to help lift volumes l
and keep costs down, or let energy prices rise.
"The price of energy is artificially less in the United States," she said. There is no political will to raise prices, she = said.
l Mrs.
O' Leary said that in Germany and Japan, l
governments subsidize purchases of solar cells by utility companies or = individuals.
Referring to American dominance of manufacturing, she said, "We own 47 percent of that market share, and if we're not careful, we're going to lose it," she said.
Referring to dependence on imported oil, she said, "We need = a wake-up call, and I know for a fact that doesn'tcome from the = secretary of energy wandering the land and saying what needs to be done, because it's not nearly as dramatic as a price i
l
shock or some other = dislocation.
"Almost any sho'rt-term dislocation, from a place likeVenezuela, which is in fact our largest source, or from Russia would~get our attention in,tha short tern," she said.
But the reaction'to price shocks, she said, is to try to = sell oil from the Strategic Petroleumsaid, is "a sin, a shame, and it ought-to be stopped."Some oil from the reserve has been sold-in the last few years to pay for improvements in storage equipment, and some members = of Congress have proposed selling more to balance the budget.
The Department's main work is not ener'gy, though, but =
nuclear weapons. Production of weapons materials had mostly ended when'Mrs.
O' Leary took office, but she moved to retire'many cold war-era factories, most sitting on environmental nightmares. She said that in the last four years, her department had cleaned up 700 factories, storage areas, ponds and other sites -- but the total inventory is between 5,000 and 10,000. In contrast, she said, fewer than 80 had = been cleaned up in the previous four years.
Environmental spending runs about $6 billion a year, much of-it for maintenance.
Mrs.
O' Leary said congressional debates over what new equipment was needed for the weapons complex was mostly devoid of discussions about technologies or economics, and instead was based on politics.
"We've built ourselves into a system where we have =
toovercome those expectations and try to do whates best and good for all, as opposed to, take care of 'my district, my state, my constituency,' " she said.
Paul M.
Blanch Energy Consultant 135 Hyde Rd.
. West' Hartford CT 06117 Tel: 860-236-0326 Fax: 860-232-9350
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