ML20137V201
| ML20137V201 | |
| Person / Time | |
|---|---|
| Site: | Wolf Creek  |
| Issue date: | 10/23/1985 |
| From: | Cadman W KANSAS GAS & ELECTRIC CO. |
| To: | Dircks W NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| Shared Package | |
| ML20137V177 | List: |
| References | |
| KMLNRC-85-237, NUDOCS 8512090492 | |
| Download: ML20137V201 (63) | |
Text
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l KANSAS GAS AND ELECTRIC COMPANY TM ELECTR8C CC]MPANY October 23, 1985 WILSON N CADMAN c . .. ., c, . .. . . . .~ o . .m s ,
Mr W J Dircks Executive Director-0perations U S Nuclear Regulatory Commission c/o Maryland National Bank Building 7735 Old Georgetown Road Bethesda, Maryland 20555 KMLNRC 85-237 Re: Docket #STN 50-482
Subject:
Rate Order Effect on Wolf Creek
Dear Bill:
We received a very disappointing rate order from the Kansas Corporation Commission concerning the Wolf Creek nuclear station on September 27, 1985. I am quite sure you are aware of this development due to the attendant national publicity. The purpose of this letter is to assure your office that Kansas Gas and Electric Company, as the licensee of the plant, fully understands its responsibilities to operate the plant in a safe and responsible way and in accordance with all NRC requirements.
While it will be necessary for us to reduce expenditure levels, such reductions will not be done in a manner that affects the safe operation of Wolf Creek. We will continue to maintain a staff of outstanding pro-1essionals and provide all resources necessary for operation there. I have attached for your information, and highlighted, several pages of the 15,000 page Wolf Creek rate case transcript and would call your attention to the highlighting on page 3,016. Before being dismissed from the stand you will note that one of the Commissioners (Henley) asked me for specific comments on the effects which could occur as a result of cuts to the rate request.
Please note my statement, "It would be necessary to cut back on all programs with one exception, we would divert our ent. ire resources to Wolf Creek to ensure absolute safe operation there. We can cut no corners at Wolf Creek."
I have also attached several pages from the rate order and would call to your attention page 99, highlighted, and page 137, highlighted.
Any budgetary cuts at the plant have been placed in categories where economies can be achieved without affecting overall plant safety. Our nuclear staff will be pleased to discuss these activities with you should you so desire.
8512090492 851129 PDR ADOCK 0500 2 EDO --- 001128 201 N. Market - Wochita, Kansas - Mail Address: PO. Box 208 I Wchita, Kansas 67201 - Telephone: A ea Code (316) 2616381
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. l Mr W J Dircks XMLNRC 85-237 October 23, 1985 As further assurance of our resolve, Bill, I would advise you of the following. We filed for re-hearing of the case on Monday, October 7, copy attached. You will observe we have pointed out 73 areas of deficiency in the order. The Commission has up to 70 days to act. In the event it would act unfavorably, we could take up to 30 days to prepare an appeal to the Kansas Court of Appeals. The actual time, of course, would be less.
The Kansas Court of Appeals has 90 days to make a decision. Therefore, the maximum time for final review of the order would be 190 days, the minimum 110.
This assumes the KCC would not require additional hearings.
During the week of October 7, along with members of our finance department and corporate planning group, I met personally with 74 seccrity analysts and to a great extent on a one-to-one basis. During the week of October 13, we met with Duff & Phelps, a rating agency in Chicago, followed by three days in New York meeting with our investment bankers, commercial '
bankers, Standard & Poors, and others that have been involved in financing not only the Wolf Creek project, but other KG&E projects. We have instigated these sessions in order to share with them our financial projections and to assure them that while the KCC has left us with a challenging task, it is one that can be managed. I am pleased to report that the reaction from the investment community after numerous bours of discussion has been positive.
I hope I have left with you a definite impression that one, our resources are available and committed to the safe operation of Wolf Creek, and two, our financial situation, while challenging, is one that our studies and analyses indicate is manageable. I hope this explanation of our completed and proposed actions provides you with an insight into our plans and ability to cope with the actions of the Kansas Corporation Commission's order.
Please do not hesitate to contact me for anything additional you need.
Sincerely, WKC/jh ,
attachments
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,e-3015 f Their plants ure dead. dolf Creek is alive.
1 One final question, has KG&E had any i C.
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previous management experience in building an electric generation facility of any type?
4 5
MR. HAINES: That's been asked and i g
answered.
' CHAIRMAN LENNEN: Yes, it has. Sustain 7
g the objection.
9, MR. ANDERSON: No further questions.
i, 10 THE WITNESS: Thank you, Mr. Anderson. j, li 11 CHAIRMAN LENNEN: Do you anticipate ,lI ,
l extensive redirect? 1:
13 ' 8 ll 13 MR. HAINES: I have no redirect. l ,
I CHAIRMAN LENNEN: Commissioner Henley has 14 l l
l 1 l 15 a question he wishes to pose. .j i COMMISSIONER HENLEY: Mr. Cadman, in Mr.
l !.
l 16 jj 17 l Haines' opening statement, he made a statement to pl lg i A l 18 the effect, something to the effect that to adopt l 5
I l 19 the Staff proposal in this case would put the lJ l' l 20 company on the edge of bankruptcy. I'm not i l l'
al giving the exact words there, something to that ,
22 effect. I'm wondering if you share that opinion, q
23 that if we were to adopt -- if this Commission ,
I 24 were to adopt the Staff's proposal in this case, [
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35 if you feel it would bankrupt your company? l\
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3016 1 1 THE WITNESS: Yes, I do share that l
2 opini n, Commissioner Henley.
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3 COMMISSIONER HENLEY: And from reading l I
4 i' your testimony, I gather, then, that you think l l
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anything short of --
you referred to it as the l
6i bear bones, the barest bones proposal, anything 7 short of that would have a similar effect.
i 8l THE WITNESS: Yes, I believe that is a 9 correct representation of my testimony.
i 10 COMMISSIONER HENLEY: If this Commission l 12
,11 were to adopt the Staff proposal, what would be j l ,
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!12 your first action as Chairman of KG&E? IL Ij f13 4 THE WITNESS: After starting for the t' ll l l
,14 courthouse? I 'l ll l
15 COMMISSIONER HENLEY: Yes, that's a given, (
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16 l THE WITNESS: That might have been
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I 17 started, you know, in advance of that. Well, '
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18 . Commissioner, it would --
it would require a
! i 19 cceplete reassessment of what we are doing, what p;
!I i 20 ve would be able to do, what we could do to l21 fulfill our requirements under our certificate of U j l '
i l22 convenience and necessity, what we could do with .
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,23 the 100 plus cities and towns that we serve ,
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24 through franchises. It would be necessary to cut !
25 ' back on all programs with one exception, we would uc ,
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l divert our entire resources to Wolf Creek to I
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ensure absolute safe operation there. We can cut l I
l i! no corners at Wolf Creek. All cuts would be made l I
I in personnel, in our ability to respond to storms, l l
i in our ability to be --
to provide reliable service, Wichita continues to be a good growth ;
1 i area. You know, I see reports that the 1
l population is not growing there as rapidly, say, 1
'! as in Johnson County. I'm amazed at the level of l
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i l construction and the necessity of our ability to l jli '
be able to build into that, to supply new I' !. i l l transmi;sion facilities within the city. We j I ,
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<i would have to cut that to an absolute bear bone. ! '
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,i Service.would suffer; our customers would suffer. g '! b I
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,! It would cause large layoffs. That would not --
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J that would be counter productive because that J,
! would .ausa a further deterioration of our l l'
ability to meet our obligations to the state and --
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l and to customers. It would be -- it would be --
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l I it would create a very, very serious problem on l
\ l the economic well-being of Southeast Kansas, its ; I i ?
, future, and it would have an impact on the State l
j of Kansas. 'l p ,
I l COMMISSIONER HENLEY: If I were sitting ! ,
l ! l out among the counsel table, I think your counsel l i -
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i 3018 l I would probably say it was asked and answered, but I
g I want to make certain that I understand you l l
3 correctly and that is whether you're saying if l I
4 . this Commission were to adopt this Staff's l l I 5I proposal, you feel certain that KG&E would go l i
I 6i into bankruptcy as a result of that or it's a 7 { possibility ~
l 8 T ITNESS: It would probably, saying l
9 bankruptcy, I'm sure you mean some form of i
10 reorganization under Chapter 11 as a beginning I I
11 ,
and there are no precedents for that and -- and lll {
12 I'm just not sure what the --
what the result ,
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13 i might be there. I --
I do know that under -- and II'l
, ll 14 I'm not a lawyer except in this business these l '
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15 . days, you have to become a sea lawyer, as I used lI
! i 16 to recall from the Navy, it would probably 17 require considerable rate increase simply to 18 satisfy the amount of lawyers that would be ,
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- 19 required to put together the Chapter 11 l fd i
20 receivership, to ensure the debt of that l l 31 receivership, that would be his first .
I i-22 responsibility, as I understand it, to ensure and 23 protect the interests of the --
of the -- of 24 nonequity bond holders. I believe that would be ,
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25 the first step and without being completely !
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qualified on the subject, I think it would i
j 2 require a -- 1 -
I a considerable rate increase just to ;
3 i simply comply with the requirements of going into l
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4l a Chapter 11 proceeding.
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COMMISSIONER HENLEY: Thank you, Mr. l 6 i Cadman.
7 i THE WITNESS: Yes, sir.
}8 CHAIRMAN LENNEN: I have just a couple of 9l questions. My first one also would be 0
objectionable if asked by counsel, and simply is ,
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in response to a comment regarding KG&E's l l
- 2 l residential rates which were properly l '] '
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- 3 i l l characterized as being below the national average, I l l,! l
!4 l I i the same is also true or has been, at least, l '
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since 1979, has it not, with respect to KG&E's l[
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5 industrial rates? I say that looking at an I '
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, exhibit that was introduced on behalf of KG&E. l i
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1 i THE WITNESS: May I look at--(pause) l l 1 I CHAIRMAN LENNEN: Certainly, it's KG&E !
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[ I Roen Schedule 2. l !
j1 THE WITNESS: If I may, sir, I think I l have one that I can--(pause) !
CHAIRMAN L E N ki E N : Exhibit V-10.
I THE WITNESS: The years again, please, l ! ,
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f is proposing the external fund method be employed by all the tf Creek partners.
- 13. The NRC has suggested five criteria for evaluating alternative financing mechanisms for nuclear decommissioning (a) degree of assurance that the funds will actually be available at the time of decommissioning, (b) cost (c) intergenerational equity - that the cost of decommissioning be spread equitably to all ratepayers throughout the life of the f acility, (d) flexibility - responsiveness to changen in the basic assumptions, s ,
~ (e) adaptability -
ability of the plan \ to adopt to different ownership and jurisdictional arrange-ments. See Wood, " Assuring the Availability of Funds for Decommissioning Nuclear Facilities,"
NRC Report, March, 1983.
- 14. In determining the appropriate funding mechanism to be employed, the testimony of the witnesses must be viewed in the context of the NRC critoria.
- 15. Applicant KG&E is, therefore, ordered to file tariffs to begin collecting its proportionate share of $140 million over a 30-year time frame for the purpose of physical decommissioning of the Wolf Creek Generating Station.
- 16. Applicant KG5E proposed, and staff agreed, that an external funding mechanism be created to manage and invest the decommissioning funds. Applicant KG&E is directed to immediately seek proposal, for an external funding mechanism and to submit a plan for Commission approval as soon as possible.
- 17. Consistent with testimony from the witnesses, the Commission will review the decommissioning component of this Order at least every three years. '
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VIII. WOLF CREEK O & M EXPENSE
- 1. Included in the application in this matter was applicant's share of the $64.9 million in -operations and a
Maintenance expenses projected for Wolf Creek, not including o ,
nuclear fuel expenses. In the common hearing portion of these proceedings, staff proposed two adjustments. The first was to S 98 l
I
e $202,989 in EEI assessments for TMI cleanup costs. The er adjustment was to adjust out the salary and f ringe benefits f the Project Director who no longer works on the Wolf Creek
- t. i t e . The two adjustments totaled $588,564.
- 2. Applicant did not contest staff's adjustment and no specific adjustments were proposed by-the parties. The Commission finds these adjustments appropriate and reasonable and accordingly adopts them. Applicant's share of these adjustments is
$260,439. The Commission would expect staff to evaluate the actual OEM expenses in the permanent case to determine their reasonableness.
- 3. The Commission would make one additional observation with regard to operational and maintenance expenses of the Wolf Creek Generating Station. We have accepted the operating partner's estimate of these costs based on testimony that those sums are necessary and reasonable to' insure the reliable and safe operation of the plant. We recognize that the decisions made today will place financial stress on the owners and particularly the operating partner KGEE. Under questioning by a Commissioner, Mr. Cadman stated that even under such an eventuality, no cutbacks would be made on the expenses which could affect the safe operation of Wolf Creek. The Commission agrees with Mr. Cadman that safe reliable operation of this nuclear plant is of utmost importance. We do not espect KGEE or the other owners to take any action which would raise concerns in this regard.
IX. WOLF CREEK DEPRECIATION RATE
- 1. Applicants in this case orignally requested a depreciation rate of 3.53 percent based on a forty-year life. The Applicants' witness, James Alkman, noted that remaining life depreciation was more appropriate than straight line rates but at the beginning of the assets life, there was no dif ference in the resulting rates. Staff recommended a straig ht line depreciation rate of 1.44 percent. As sponsored by witness Melinda Mosher, 99
W service.
In addition to minimizing its construction budget and gene ral other expenses and rescheduling debt obligations, the Commission believes that certain specific actions are appropriate. These include elimination of its expe ns ive television advertising campaign which appears to be primarily aimed at generating good will but seems to have the opposite effect, and reduction of its executive salaries. These items, while not substantial expenses in themselves, give an indication that company management does not recognize the seriousness of its i
financial condition.
Elimination and reduction of these expenses would no doubt engender more goodwill han the advertising campaign itself and would indicate willingness to take necessary measures.
We would emphasize, however, that reductions in these and other expenses should not affect the quality of service which j the company provides. RG4R has in the past provided good service to its customers.
In particular, the Commission would commend KG&E's of forts with its Project
, Deserve program and hopes that it will continue to promote and encourage participation in the program.
Since we have made no significant adjustments to the company's requested levels for all of the system's operations and maintenance expenses, we espect good service to continue .
IT IS, THEREFORE, BY THE COMMISSION ORIERED THAT:
1.
Applicant is a public utility subject to the jurisdiction of this Commission under K.S.A.66-117, which j empowers the Commission to pe rmit and authorize changes in Applicant's rates, charges and conditions of providing retail sale of electricity:
2.
Applicant's existing rates for its electric service applicable to its Kansas jurisdictional operations will not applicant m per it to earn a fair and reasonable return on its investment devoted to such servicer 3.
Each specific finding of fact made above is here by
, adopted as an ultimate finding and conclusion of law by this i Commissions 137 I
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CONTROL NUMBER: [h// N NRR RECEIVED: M[2 i!f8 ACTION: hdi. j d eijfdd I
j PLEASE NOTE THE ATTACHED GREEN TICKIT IS FOR
, APPROPRIATE ACTION. PLEASE REVIEW THIS ITEM AND DETERMINE WHETHER OR NOT YOUR DIVISION WILL TAKE ACTION. IF ACTION H GOING TO BE TAKIN WHAT IS AN APPROPRIATE DUE DATE7 RETURN ONLY THIS COMPLETED COVER SHEET TO THE NRR MAILROOM, P-428 BY O*0 B./8/3d.
I I
g C NO ACTION hECESSARY f
- YES. ACTION
,' DUE DATE: / /,!? du T Yky a k i*
ROUTING: DEETON/EISENHUT PPAS t owne,wMCreek PH b
3E70RE TME CO2? ORA!!03 COMMISSION l 07 IANSAS i
I In the matter of a general invas:igation )
by the Commission o. :he proj ec:ed cos:s ) Socket :fo.
and related matters et the Wolf Crees ) 120,924.U ;
Nuclear Generation Tacili:7 at ) t 3 arlington, Kansas )
In the matter of the application of i
)
Kansas Gas and Electric Company ) Docket No.
requesting proposed changes in its ) 84 KG&E-197-R charges for electric service ) 1-2,098-U A??t!CA!!CN FOR REMEA3ING i
CCMIS NOW Kansas Gas and Electric Ccapany (X0&E), and l
applies for a rehearir.g. pursuant to K.S.A. 66-1133 and K.A.R. !
82-1-235(c)(2), (3) (except IG4E does not reques: gral :
argum ent) , and (4); with re.sard :o the September 27. 1935, Order entered herein (Order) . i Specifically, KG&E contends the Order is unreasonable 1 l and unlawful for the following reasons.
- 1. THE COMMISSION'S FINDINGS OT IM?RU:ENCE A! PARACRAPH 3. PAGE 32: PARAGRA?H 11, ;
PAGE 37; PA2AGRAPH 12 PAGE 38: AND PARAGRAPH S. PAGE 42, ARE UNLAWF"' '
A. The Commission has not defined tha standard used to detecnine whether KG&E's actions were imprudent. KG43 has !
the right to know the standard under which it is being judged. I A1: hough the Commission indicated that it must constjer the factors listed in K.S. A. 66-123g, these fac: ors do no: define prudence or set forth the standard to be used; they are merely tools that aid in the determination of prudence. f
- 3. The Cermission's findings do not comport with the
- ommonly accepted definition of prudence. See, e.t., Ne4 Entland ?cuer Co. , 31 FI2C 161047 at 61034 ( 1'9 9 5 ) , The Commission failed to evaluate IG&E's actions based on vnac IG&E i
knew or should have kncwn at the time decisions were made; failed to presume good faith on the part of KGSE: failed to ,
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. _ . _ _ _ ~ _ _ . _ _ . - _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ . .-. . _ _ ._ _
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) and failed to focus its inquiry on avoid the use of hindsight; d result.
the decision process rather than the en r
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, 2. THE COMMISSICN'S?ARAGRAP.i PINDINGS 11 OF IM?RODENCE AT PARAGRAPH 3. PAGE J2: AND PAGE 373 PARAGRA?H 12. PAGE 3S:
PARAGRAPH 8. PAGE 42. ARE AR31TRARY AND CAPRICIOUS AND. T3ERZ70RE, UNREASON-ABLE.
A.
The Commission's findings are not based on any The Commissica serely stated articulated standard of prudence.
J in,dicating how it f that KG&E's actions were imprudent without 1
1 - came to that decision. --
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- 3. THE COMMISSION'S TINDINGS AT PARAGRAPH f
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- 5. PAGE 19 AND PARAGRAPH 5. PA KG&E WAS INETTICIENT. INITTECTI7E AND r
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' INAPPROPRIATE ARE AR31TRARY AND CAPRICIOUS AND THIREFORE. UNREA-SONA3LE.
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A.
The Consission's findings are inconsistent with r fo r.
other findings by the Ceemission that the management pe d f
sance in the initial stages of the proj ect was reasonable ors an I
] appropriate and that the Owners' selection of sajor contract (Order at 13)
) including Bechtel and Daniel, was appropriate.
- s '
3.
The Cummission's findings fail to cotsider that selecting experience d j evidence at Tr. Vol. X%2, 9015-20
! contractors and relying on thee is appropriates that preplan-J ning and mobilization were effective and timely; and that the j first two years of construction were accomplished with good 1
! cost and schedule performance.
4
- 4. THE COMMISSION'S PINDINGS AT PARAGRAPH S , PAGE 19 AND PARAGRAPHS 5 AND 6, PAGE !~
! 25 THAT KG&E'S " MONITORING ROLE" i CONTRIBUTED TO POOR CONTRACTOR i
PERT 0RMANCE DURING CERTAIN PHASES OF
' THE PROJECT. LIMITED KG&E'S A31LITY 70 CONTROL COSTS, RESULTID IN PCOR :
1 PROCUCTIVITY, SCHEDULE DELAY AND l INCREASED COSTS ARE AR3ITRARY AND ;
4 f
CAPRICIOUS AND. THERETORE. UN2EA-SONA3LE.
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A.
There is no substantial competent evidence to support these findings, I
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j 3. There is no substantial competent evidence
- showing a causal link between the "TonitorinS role" and any increases in cost or schedule delays, f
i C. Assuming there is a causal link between the sonitoring role and increased cost and schedule delays. there f is no substantial competent evidence quantifying the amount of increased cost or schedule delays that resulted from the
" monitoring role". The Commission bases its findings on the
' testimony of Messrs. Flaherty and Mitchell (hereinafter Touche Ross). Toucne Ross, however, never quantified the effects of !
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the alleged inappropriate management. Although Dr. Ponce de
] Leon (hereinaf ter PMA) submitted a report recensending disallowance for what he a11eSed were cost overruns, Touche l
Ross did not embrace or express any opinion about PMA's quantification and FMA did.not base its suggested disallowance on the findings of Touche Ross. -
- 5. THE CCMMISSION'S FINDINGS AT PARAGRAPHS j .
5 AND 6. PAGE 25 THAT KG&E* S LEVEL OF CONCERN i.ND COMMITMENT WAS NOT I SUFFICIENT TO ADMINISTER A COST-PLUS 1 l CONTRACT AND THAT THE IACK OF MANAGE-1 MENT ATTENTION RESULTED IN SCHEDULE
- DELAfS AND INCREASED COSTS ARE
< AR31TRARY AND CAPRICIOUS AND,
, THERE70RE, CNREi.50RA3LE.
A. There is no substantial competent evidence to 1
support these findir.gs.
] 3. There is no subst.ntial competent evidence that establishes a, causal link between any lack of concern or
{ acconcton and a finding of increased costs or schedule delays.
- C. Assuming a causal link between the alleged lack of concern or attention and schedule delays and increased costs
- exists, there is no substantial competent evidence quantifying the resulIing schedule delays and increased costs.
- 6. THE COMMISSION' S FINDINGS AT PARAGRAPH
- 11. PAGES 37-33 TRAT $17.3a1.553 0F 4
DIRECT AND INDIRECT COSTS SHOCLD 3E ,
EXCLUDED FRCM A RETURN ON AND RECOVIRY
) OF INVESTMENT IN WOLF CREEK ARE AR3ITRARY AND CAPRICIOUS AND. ,
THEREFORE. UNREASONABLE.
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A. The Commission failed to consider evidence of cost savings achieved by KGSE in constructin5 Volf Creek. KG&I presented evidence in Exhibit G-KGE-1 (CLH-1) at 10, 179, 215, i
227, 273, 239, showing that substantial cost savings totalling 4
approximately $369,672,000 were achieved in the construction of t
'l the plant. Such actions as participation in SNUPPS. the use of i
merit shop labor, the safety program, use of praassamblies, 1
expedited start-up procedures, and shared spare parts resulted.
in cost savings. The Commission in its . analysis of the cest of Wolf Creek did not attempt to quantify the amount of savic.3s or 1
give KGSE credit for the savings achieved.
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- 3. The Commission's analysis of individual areas of cost increase at Wolf Creek is inconsistent with its failure to consider individual cost savings,
- 7. THE COMMISSION'S FINDING AT PARAGRAPH
- 3. PAGE 32 THAT THE 0'RIERS ACTED -
IMPRUDCITLY IN NOT CE7ILOPING A':D UTILIZING A COST TRACKING SYSTEi THAT WOULD PROVIDE DATA TO CCC1."MCiT AND QUANTIFY THE CAUSES OF COST INCREASES
- IS A131TRARY AND CAPRICIOUS AND, THEREFORE.UNRIASONA3LE.
A. The Commission failed to consider evidence that no such cost system exists. Staf f witness Flaherty testified that cost accounting systess are not intended to provide the 4
I type of inforzacion desired by the Commission. (Tr. XVII, a 4980) Witnesses for both KG&E and the Staff agreed that no a
I proj ect in the country has ever had such a cost systes. (Tr.
%:27, 10513 X7II, 4931 II, 261) Staff witness Flaherty also l
stated that no project in the country has a better cost system than the one at Wolf Creek. (Tr. XVII, 4985) Therefore, it is improper to penalize KGEE for not having such a system in placa.-
- 3. There is no substantial competent evidence that >
the lack of the type of cost system described by the Commission l
in any way increased the cost of constructing Wolf Creek.
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- 8. THE COMMISSION' S FINDING AT PARAGRAPH k 3, PAGE 32 THAT THE FAILURE TO HAVE A i
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COST SYSTIM TPl! WILL CCCt?.ENT THI CAUSIS OF COST INCREASIS I.9 IFJR"0ENT IS UNLAWF"L.
The Commission's finding is based on a standard that improperly utill es hindsight to evaluate X;&I's actions. It is impossible to anticipate all potential causes of cost increases. KG&E could not have foreseen the myriad regulatory changes that resulted from s4ch occurrences as the incident at
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IMI. KG&E could not have had in place a cost system to gather the type of data that would quantify the effect of every
. regulatory change that affected the proj ect. The perceived necessity to track and quantity changes resulting from
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, regulatory change h'as arisen only recently. A finding that i
X;&E should have been tracking costs at the level of detail now described by the Ccamission is a retroactive requirement that involves the use of hindsight.
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- 9. THE COMMISSICN'S FINDING AT PARAGRA?H
- 11. PAGE 37 THAT A TOIAL OF 1.823.252 DIRECT MANHOURS WERE IMPRUDENTLY INCURRED IS AR3ITRARY AND CAPRICIOUS AND. THEREFORE. UNREASONA3LE.
The Commission failed to consider the effect that regulatory change had on the cost of Wolf Creek. No witness in the proceedings challenged,the fact that changes in the Nuclear Regulatory. Ccmaission's regulations governing construction of 1
the plant caused costs to increase significantly. KOS E presented evidence that regulatory change accounted for 58% of i
the cost increase. (Tr. I.156) Intervenor witness Iemanoff testified that 60% of the increase in cost was due to regula-cory change. ( Tr. XXXIV . 10046-49) The Comm..asion did not discuss the impact on costs of regulatory change anywhere in i
its Order.
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- 10. THECOMMISSION'SFINDINGSATP1RAGRAPH ;
- 10. PAGE 35 THAT PMA USED SCUND ME 3000 LOGY IN ITS ANALTSIS OF THE COST, INCREASES AT WOLy CREEK AND T*IAT PMA* S i
SUGGESTED DISALLOWANCES ARE REASCNA3LE.
PROPER AND SUPPORTABLE ARE A13ITRARY AND CAPRICIOUS AND. THEREFORE. UNREA- '
SONABLE.
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The Commission's findings are inconsistent with its
- rej ec
- ion of over 45 of :he manhours PMA recensended be disallowed because the Commission found :ha: ?MA's analysis
, contained numerous errors. The Commission. La its Order.
detailed c... ae pages of mistakes by PMA. totalling S44.609.000.
i This represents almost one-half of PMA's :stal suggested disallowance. It is unreasonable for the Commission to accept PMA's analysis when it has found that analysis so seriously flawed.
- 11. THE COMMISSICN'S TINDING AT PARAGRAPH
- 11. PAGE 37 THAT PMA' S SUGGISTI3
^ DISALLOVANCE SHOULD BE REOUCID 37 CNLY
$44.602.200 IS AR3ITRARY AND CAPRICICUS AND. THr.2170RE. UNRIASONA3LE.
The Commission failed to consider evidence of nunerous additional mistakqq zade by PMA. The Co= mission did not 4 -
consider:
- 1. PMA's reversal of the unit rate for the installation of seismic and non-seismic pipe hangers that resulted in a disallowance of
' $4.8 million. (Tr. XIX. 5347 to 49, 5356 to 60, G-KGE-186 (CEL-4) a: 9 to 11)
- 11. PMA's Osproper disallowance of $1.06 million -
for manhours related to the time required to p,erform inspections mandated by the 37 section of the ASME Code. (G-KGE-8 3 ; G-KGE-246; G-KGE-180 (CEL-4) at 15 to 17) .
iii. PMA's failure to reconcile manhours related to increased tolerance requirements totalling S4.98 million because it was confused by KG&E's reconciliation effort.
(Tr. XIX. 5432 to 33. G-KGE-180 (CEL-4) at 24 to 27) iv. PMA erroneously disallowed manhours for material handling because PMA failed to recognize that the additional sacerial required by regulatory change must be handled. Ihis caused FMA to recommend disallowing manhours for this activity totalling $3.3 million. (Tr. XIX. 5439 to 44; G-KGE-180 (CEL-4) at 21 to 23)
- v. PMA's failure to consider the increased
' complexity of the cable tray suoports due to regulatory. change that required more manhours for installation of the cable trav. As a result PMA recommended disallowance of S4.2 million. (!r. XIX.
5473 to 79; G-KGE-180 (CEL-4) at 94 to 97)
. - - ~_ - -
- 12. THE COMMISSION'S FINDING AT ?ARAGRA?H 1, PAGE 31 THAT STATISTICAL DATA DO NOT PROVIDE PRCOT OF THE QUALITY OF MANAGEMENT AT WOLF CRIEX IS C'ILAWFUL.
The Com=ission' t finding is in contravencion of K.S. A.
' 66-123g. In determining prudence. K.S. A. 66-1233 requires the e
Commission to consider
- a. A conparison of the cost of . . . (Wolf Creek) with the cost of other facilities ,
constructed within a reasonable time before or af ter . . . (Wolf Creek] .
?
- b. A comparison of the cost overruns a:
. . . [ Wolf Creek) with cost overruns at other facilities constructed within a reasonable cime before or af ter . . . (Wolf Creek].
It is unlawful for the Commission to rej ect such comparisons presented by KG&E as evidence of its prudence.
- 13. THE COMMISSION'S FINDING AT PARAGRAPH 11 PAGES 37-38 THAT A TOTAL OF 2 1,828,262 MANHCURS WERE IM?ROUCI'LY INCURRED AND ACCORDINGLY THAT
$17.841.858 SHOULD BE EXCLUDED FROM A RETURN ON AND RECOVERY CF KG5E'S INVESTMENT IN WOLF CREEK IS AR31TRARY AND CAPRICIOUS AND THEREFORE,
- UNREASONASLE.
The Commission failed to consider evidence of KG5E's favorable performance in achieving a cost that is below the average cost of comparable plancs t- the industry. There is an overwhelming amount of evidence in this 5ase that Wolf Creek's cost is below the average for the industry. KG5E presenced a survey of nuclear plants by Charles L. Huscon (G-KGE-1 ( CLM- 1 and 2) 7 to 11, 9 to 29) that shows Wolf Creek's cost is 18%
less than average; a comparative analysis by Cresap McCornick and Paget ( G-KGE-21) shows that Wolf Creek is 10.3 percene less than the average of the plants it analyzed (Tr. I XII. 9766 to 57); and a statistical analysis by Dr. Fair:hild (G-KGE-177) that shows Wolf Creek's cost is 11 to 13 percent less chan would be expected considering the characteriscies of the 43 suelear plancs he studied. Staff witness Flaherty cescified !
that if four plants chac have 3ERs are added to the comparison
[
- 1 -
I i
(Tr.
he performed. Wolf Creek's cost is less than average.
I7II, AS96) Finall7. Intervenor witness Icoanof f performed a is 2 to 3 statistical comparison that shows Wolf Creek's cost percent less than would be expected based on a sanple of 29 contemporaneous nuuclear plants. It is unreasonable for the Commission to ignore the vast amount of evidence clearly showing a better than average cost performance at *Jolf Creek.
- 14. THE COMMISSION' S TINDINGS AT PARAGRAPH
- 6. PAGE 33; PARAGRAPH 9. PAGE 34:
4.
PARAGRAPH 11. PAGE 37 THAT KOSE FAILED
- TO RELIABLY AND ACCURATELY ASSESS THE ~
CAUSES FOR COST INCREASES ARE AR3ITRARY AND CAPRICICUS AND, THER!yCRI.
UNREASONA3LE.
A.
The Commission's findings imply that KO&E is f responsible for proving the prudence of every manhour expended f regardless of whether the manhours were challenged by the j
I .,
Staff. The Commiss' ion's findings ignore the presumption of prudence accorded utility expenditures and place the burden on KG&E to prove the prudence of those expenditures without a challenge by any party. The only witness in the case who
~
specifically challenged KG&E's construction costs was PMA; and PMA did not challenge the prudence of all the manhours it recessended be disallowed. Of the total 4,036,723 manhours for which PMA reconsended disallowance, only 320,797 were alleged to have been due to Laprudence. A denomination by PMA that manhours were controllable or unreconciled does not constitute In the a challenge to the prudence of the costs incurred.
absence of a challenge, KG&E only has the burden of proving the prudence of costs above 200% of the definisive estimate 4
pursuant to K.S. A. 66-123g(2) .
- 3. The Commission's findings also Osply that the i
I only method of proof that is acceptable is a detailed KG&E presented evidence in the reconciliation of manhours.
- Management Performance Evaluation (G-KGE-1 (OL31 and 2)) using d
three related approaches to determining the reasonableness of
- 8 - ,
b 1
1 ?
__ . . . . . _ . _ , . _ _ _ . _ . . . . ~..,,,.__r.._ , - _ _ ,_ , , _ _ _ , _ _ _ . . , . . _ . , . . _ . , . , , , . ~ _ . . , . _ . _ _ ,
1
, i I
\
l costs incurred in constructing Wolf Creek to prove the prudence of costs incurred.
- 15. THI COMMISSION'S F:NDING AT PAAAORAPH
- 8. PAGI 42 THAT THE COSTS ASSOCIATID WITH I4.5 . MONTHS OF THE SCHEOULI SLIPPAGE SHOULD BE EXCL"DED AS IMPRUDENT IS AR31TRARY AND CA?RICICUS AND, THIRIFORE, UN2IASONA3LI.
4 A. There is no substantial competent-evidence that 4
PMA found that the schedule the delays were due to Laprudence.
" Controllable" is not equivalent delays were " controllable."
to " imprudent". --
- 3. There is no substantial competent evidence of any he specific imprudent management actions' that caused delay on t proj ect.
C.
There is no substantial competent evidence nt ,
establishing a causal link between any imprudeat manageme h
actions that may have occurred and the resulting delay on t e proj ect.
D. The Commission erroneously interpreted the h dule testimony of Staf f regarding the method of determining sc e delays and failed to consider evidence showing that the entire ^
schedule delay was justified. The Ccamission states that controllable slippage was disallowed after it was offset by PMA, however, did not use mitigation or gains. (Order at 40)
PMA calculated that method to determine the schedule penalty.
the schedule penalty by subtracting the largest amount of uncontrollable delay on any system from the total delay of the if the proj ect. Staff witness Ponce de Leon stated that uncontrollable delay on any system was greater than 14.5 months. the schedule penalty would have been less.
(Tt. IX.
5706)
He further stated that if the uncontrollable delay had been equal to the total schedule delay that he calculated, he
.would have proposed no penalty. (Tr. II. 5705) IO&I presented evidence that the entire delay ,was caused by uncontrollable regulatory changes. (Tr. XIXI 9296 to 9302, G-KGE-175)
Therefore, no schedule penalty is appropriate.
- 9 -
7 J
I.
The Connission erroneously interpre:ed the cescinony of Staff witness Ponce de Lacn regarding quan:ifi-f ca: ion of the schedule delay and failed to consider evidence o a gain in the schedule during the start-up and power ascension phase of the project. The Commission stated that PMA found a l of fuel "27 month difference in schedule dura:Lon to the poin:
load." (Order at 39) The Commission calculated the con- '
4 crollable and uncontrollable porcions of the 27 month delay as
^
"14.5 months were unconcrollable, 37 months controll- !
~
follows: l able, I month unreconciled, and 23.5 months were it:igated."
The Comnission applied the 23.5 non:h gain as an f
(Order at 40) of fset to the 38 month controllable and unreconciled delay and Id. The f4.5 f cane up wi:h a 14.5 month controllable delay. !
month controllable delay and the 14.5 nonch uncontrollable i delay found by the Commission together total 29 months, 3o3 27 The Commission failed to'give KG7I credic for che 2 months.
months gain PMA calculated for the power ascension phase of the As PMA noted, power proj ect. (PMN Schedule Report at 47, 48) j ascensio:. was originally expected to take 6 months and the j
4 nonths.
expected duration in the February 1984 schedule was .
jd.
The additional two month gain should be subtracted from the 1. 5 monch uncontrollable schedule delay found by the Commission for which KGLE was penalized.
Correction of this error reduces the penalty Laposed by the Commission by S22,922.620.
- 7. The Commission's finding does not support the Kansas Power & Light v.
machod of determining a fair return.
ice, 5 Kan. App. 514. 528 (1981). In finding that Wolf Creek's schedule (one of the shortest in the industry) was 14.5 months longer than necessary the Commission has imposed on KG&I a scandard of perfection rather than one of prudence. As Staff's witness admitted, no comparable plant has loaded fuel as in the quickly as 'Jolf Creek actually did, and certainly not (Tr.
77.5 month schedule that he recommended for the planc.
II, 5686) If the Commission had used the scandard of reason.
- 10 -
i ableness that is proper in determining a fair return, no schedule penalty would have been imposed.
G. The Commission ignored evidence of the effect of regulatory change on Wolf Creek's schedule and erroneously concluded that regulatory change did not extend the schedule at I Wolf Creek. KG&E presented evidence that design changes
- mandated by regulatory change prevented fuel load from occurring at Wolf Creek any earlier than it did. (G-KGE-175)
- The Commission, however concluded that the exhibit does not
~
l show that the activities listed thereon were necessary for fuel -
1 load or that the activities could not' have been complaced by October 1984. (Order at 41) This finding is clearly in error. The exhibit shows that some of the design changes could f not have been completed prior to March 1935. ( G-KOI-175)
- H. There as 22 substantial competent evidence to support the Commission's finding that consttuccion on the design changes could have been completed 14.5 months sooner than October 1984 as FMA suggested. "here is no evidence showing this because the design changes could not have been
, completed 14.5 months sooner than October 1984 The Commis-
. sion's failure to recognize the effect on the schedule of l design changes due to regulatory change is unreasonable.
I. The Commission relied on the erroneous conclusion at paragraph 4, page 40 that multiplying both 1980 and 1985 I
quantities by the same unit rate reasonably accounts for ?
increases in the complexity of the installation of piping.
relculation of the additional time required to install additional quantities in the reactor coolant systes using the saae unit rate for both 1980 and 1985 quantities is incorrect.
The calculation is based on the erroneous assumption that the t unit rate to install the system remained constant over tLae. i s
As regulatory changes are made, however, the time required to install pipe increases dramatically. Such things as more complex configurations, rework and less space in which to work
- cause the tLae required for installation to increase. KO& E
- - 11 -
1 l i
. . _ . , , , . ., . -- - . . . _ , _ . . - - - - . , -,.,m., - - -. - , . _ . , _ . _ _ , , _ , , , , - . _ _ , .
4 presented evidence of the effect on the unit race of ragulatory changes. (Tr. XXII, 9302 to 05; Tr. XXX. 9132 to 33)
J. The Commission was inconsisten in its refusal to consider industry statistica for overall schedule performance but finding at paragraph 4, page 40 that the use of industry average unit races to assess productivity is reasonable.
K. The Commission failed to adjust the maount of schedule delay for the number of manhours it reduced FMA's recommended disallowance in the piping area. PMA's computation of the controllable portion of the schedule was based on an analysis of the productivity experienced in the installation of the reactor coolant system piping. (G-Staff-77, Schedule Report at 32) PMA's calculation of the recemmended disallow-a=ce of costs in the piping area was based on what it allegsd was an excessive number of manhours expended. PMA recommended J 'that 2,005,000 or 37% of the total 5,341,;00 nanhours be disallowed in the piping area. (G-Staff-77, Cost Report at II.
- 52) The Commission, however, reduced this disallowance by 1,309.651 manhours, allowing an additional 25% of the man-hours. (order at 35) This additional allowance should also be reflected in the calculation of the schedule penalty.
L. The Commission erroneously' relied on a flawed analysis of schedule delays. PMA's analysis was perferned by an inexperienced person and is mechanical, theoretical and i
unsupported by the facts.
- 16. THE COMMISSICN'S FINDING AT PARAGRAPH
- 7. PAGE 41 THAT THERI IS 30 SU3STANTIAL EVIDCICE THAT PMA FAILID TO CCNSIDER ALL ACTIVITIES THAT AFFICTID THE CRITICAL PATH IS AR3ITRARY AND CAPRICIOUS AND, THIRITORE. UNREASON-AELE.
The Commission's finding is clearly erroneous. IOSI presented evidence that PMA failed to consider all activities that affected the critical path. (Tr. IIII, 9300 to 02; G-KGI-175 (CLH-5, 6, and 7))
4 12 -
1 i 17. THE COMMISSION'S FINDING AT PARAGRAPH S. PAGE 42 TEAT THE CDSTS ASSOCIATID WITH 14.5 McNT33 07 SCHED'JLE DrLAY SECULD 3E E2CLUDED AS IM?R'J DENT IS j
UNLAWFUL.
The Commission refused to consider the industry comparisons for schedule performance as mandated by K.S. A. 66-1293
- 13. THE COMMISSION'S FINDING AT PARAGRAPH
- 16. PAGE 44 TEAT EXCLUSION OF AFUDC i
ASSOCIATED WITH THE CONTROLLABLE DELAY IS A REASONA3LE METHOD OF QUANTIFYING
, . THE COST OF DELAY IS UNLAWFUL.
. There is no basis in K.S. A.66-123 for ' disallowing costs associated with delay prior to the date of a finding of imprudence. K.S.A. 66-12Se provides that the Commission may
- exclude carrying or finance charges incurred after the date of j its finding of imprudence. - The statute does not, however, l provide for exclusion of such costs incurred prior to a finding
- of inprudence.
I
- 19. THE COMMISSION'S FINDING AT PARAGRAPH 16, PAGE 44 THAT 'iXCI,USION OF AFUDC ON INVESTMENT IN WOLF CREEK FOL'ND TO BE j PRUDENT IS A PROPER REMEDY FOR DELAY IN CONSTRUCTION IS AR31TRARY AND CAPRI-CIOUS AND. THEREFORE, UNREASONA3LE.
! A. Accrual of AFUDC results from the legislatively mandated public policy in Kansas that prohibits rate recogni-tion of the value of CWIP.
l
- 5. There is no evidence that the AFUDC accrued as a result of delay is the result of imprudence. *
- 20. THE COMMISSION'S APPLICATION OF A " FAIR 4
VALUE" VALUATION .MDOLCGY TO ONLY WOLF CREEZ AT PAGES 62 AND 87 THROUGH 93 AND IN APPENDIX C IS UNLAWFUL t 3ECAUSE IT VIOLATES CONSTITUTIONAL DUE PROCESS REQUIRIMENTS.
- i. A. Although KG&E agrees with the Commission that despite the Commission's long-standing use of " original cos " '
rate saking it is free to adopt a new approach to determine the reasonable value of utility property, the Commission's arbitrary application of its proposed " fair value" valuation 1
f f
y,-, e +> s n--- ,+ , n - <, ---n, -,-,v,n,-, ,-,e- , a , ,.,- e. , ,,-w ,, ,-- cv ,, w, - ,- w --
methodology to only Volf Creek viola:es federal and Kansas cons:itu:Lonal due process requirenents.
- 3. Lack of a fair hearing or an arbitrary resul; are evo of the ways in which consti:utional due process require-men:s can be violated as noted by the Uni:ed 5:a:es Suprene ,
Cour: in federal Power Coemission v. Natur al Gas pioeline Co._,
315 U.S. 575, 586 (1942):
6 The Constitution does not bind ra:e making
" bodies to the service of any single fornula or combination of formulas. Agencies to whom this lesisla:ive power has been delegated are free, within the ambit of their statutory authority. to make the pra5matic adjustments called for byOnce a fair particular circumstances.
hearing has been given, proper findings made and other s:atutory requiremen:s sa:isfied, the courts cannot intervene in the absence of a clear showing that the limi:s of due ,
If the process have been overstepoed. Commission's order, as
, before it and viewed in its en:irety, produces no arbitrary result, our inquiry is at an end KG&E has been deprived of a fair hearing as to the valuation methodology adopted by the Cocaission in that no party to the proceeding presented testimony or other evidence supporting th use of the per kilowatt cost of a coal plan:, adjus:ed for the lower operating costs of Wolf Creek, for determining the value In addition, the Commission's Order reaches the of Wolf Creek.
arbitrdry result of applying Les " fair value" sethidology to Such accion is unpreceden:ed and unfair.
Volf Creek alone.
Nct only has the Commission failed to apply its " fair value" methodology to KG&E's other generating f acilities , it Wolf Creek as arbitrarily and without explanation singled ou:
to 1:s the only current addi: ion to KGSE* s rate base subj ect "f air value" methodology.
C. The ar3uments put forward by the Commission to jus:ify its applica: ion of a " fair value" valuation ie hodology to only Wolf Creek fail :o overcome the conscicutional deficiencies of its actions:
- 1. Even if I.S. A. 1934 Supp. 66-12Sg(a) were interpreted in accordance with the Commission's argument at pages 62, 63 and 87 of its Order, nothing in that statutory provision directs or authorizes the Cosmission to analyze only the " fair value" of additions to a utility's generating facilities.
- 11. The Commission is not constrained, as it suggests at page 87, by its past reliance on " original cost" valuation. The Commission is directed by K.S. A.1984 Supp.66-123 to determine the reasonable value of all property used and required to be used in a utility's service to the pus 11e in Kansas. There is no statutory Itaitation preventing the Casmission from changing valuation iethodologies for all utility assets. But if K.S. A.1934 Supp.66-123 does bind the Commission to apply " original cost" valuation to the assets so ,
valued in fhe past, then it also binds the Cc: mission to follow
" original cost" valuation for ea h addition to utility property. Moreover, the Commission's perceived inability to apply consistent valuation methodologies for all of KG&E's generating facilities, does little to explain the Commiasion's
, inconsistent use of " fair value" for Wolf Creek and " original cost" for other additions to rate base included in KG&E's request for race relief.
iii. The fact that no evidence was presented as to the
" fair value" of KG&E's other generating facilities does not justify the Commission's arbitrary application of a " fair value" valuation methodology to only Wolf Creek. KO& E was reasonably entitled to assume that the " original cost" valuation sechodology employed by the Commission for at least the last 40 years would continue to be applied to all of KC&E's utility property, including Wolf Creek. Thus , tha lack of evidence from KG&E is understandable and should serve only to provide the Castission with a basis for requesting the presentation of " fair value" evidence from KG&E and those advocating te change in valuation methodologies. Furthermore.
15 -
KO&E was reasonably enti: led to assume tha: if :he valuation i
me:hodology for 1:s asse:s was going to be changed. that K0G E would be given notice of : hat change and tha: :he valuation me:hodology adopted would be applied uniformly to all of K05E's utility property, consis:ent with past Commission practice and regula:ory practice across the country. No such notice was forthcoming from the Commission. In fact, the only suggestions of an alternative valuation methodology came in the form of proposals from witnesses Rosen and Komanoff that the Commission
~
adopt life-cycle comparative economics to value Wolf Creek.
The Commission properly rej ected that proposed methodology.
Finally, it is in'onsistent c and unfair for the Commission on the one hand to adopt a valuation me:hadoloSy for Wblf Creek for which there is no evidenciary record and then decline to j use that same valuation iethodology for IO&E's other generating l f acilities, claiming a lack of evidence.
- 21. THE CCMMISSION'S APPLICATION OF A " FAIR VALUE" VALUATION METHODOLOGY TO ONLY WOLF CREEK AT PAGES 62 AND 87 THRCUGH 93 AND IN APPENDIX C IS UNLAWFUL BECAUSE IT VIOLATES CONSTIT m 0NAL EQUAL PROTECTION REQUIREMENTS.
The Constitution requires a rational relationship between the regulation imposed and a leS i tima:e state in-terest. See, e.g., Railvav Expres s A2 enev v. New York, 336 U.S. 106 (1949). Suen a rational relationship is lacking for the Commission's valaation of Wolf Creek on a basis different frem KOSE's other assets and on a basis different from the assets of other utilities operating in Kansas.
- 22. THE COMMISSION'S CONCLUSION AT PAGE 119 AND IN APPENDIX C THAT KG&E'S RT/E'TUE DEFICIENCY AMOUNTS TO ONLY $166.613.!.63 IS UNLAWFUL BECAUSE IT IS A TAKING OF PRIVATE PROPERTY TOR PUBLIC USE 'JITHOUT JUST COMPENSATION.
A. The Fifth Asan3 ment to the Uni:ed States Constitution prohibits the taking of private proper:y for public use without j ust compensation:
- 16 -
4 l
1 l
No person shall be . . . deprived of life, liberty. or property without due process of laws nor sha.1 private proper:y be :aken for public use, wi:hou: jus: compensa: ion.
The requirements of the Fif:h Aoendmen: have been applied to the states through the Fourteenth Amendment.
B. Economic regulation of the rates charged by public utilities resulting in confiscation of private property devoted to public service is prohibited. See, e.g , Permian Basin Area Race cases, 390 U.S. 747, 769 (1968): Bluefield Water Works & Imorovement Co. v. Public Servic e Co mis sion of West virzinia, 262 U.S. 679, 692 (1923) .
C. The District of Columbia Circui: Court of Appeals recently reaffirmed that a utility's consti:u:ional right tha:
property not be taken without just cespensacion is secured through the "end result" test set out by the Supreme Court:
Af ter re-examining the issue, we are now .
persuaded that the end result test applies to both the calculation of the rate of return on invested assets and to the calculation of the proper rate base. As Judge Baselon explained in Washington Gas Light Co. v. Baker, 133 F.2c l i( 0.c. cir. 1930) , cer:. cented. 340 U.S. 952, 71 S.Ct. 572, 95 L. Lo. odo (1951),
"the Commission say adopt any method of valuation for rate base purposes so lona as the end result of the rate order 'cannot ~se said to be unfuse and un r e a s o n as i e . Id8 F.2d at 15 (espnasts adoso) , cuccing Ro oo Natural Cas, 320 U.S. at 602, 6. s.cc. ac 257. Ihus, no matter how the rate base is determined, "the ' total effect', 'Lapact' or
'and result' of the race order" sust sa:isfy the requirements of Mooe Natural Gas. 138 F.2d at 14. Those requirements in curn demand that there be a " reasonable" balancing of consumer and investor interests.
Jersev Central Power & Liaht Co. v. Federal Enertv Regulatorv Commission, 768 F.2d 1500,1502 to 03 (D.C. Cir.1985) .
D. The Commission's Order fails to pass suster under the "and resu1*c" cast since the race relief granted falls outside the sone of reasonableness established by the Suprese
, Court . jee, Federal Power Comm. v. Natural Gas Pioeline Co. ,
315 U.S. 575, 585 (1942): Persian Basin Area Race Cases, 39C
. 17
.- . . .- . _ - ~ .. - _ -
i U.S. 747, 770 (1968). The Supreme Court stated in Federal Power Ccsmission v. Rose Natural Gas Co. , 320 U.S. 591. 603 i
(1944) :
1 (T]be return of the equity owner should be commensurate with returns on investments in l other enterprises having corresponding risks. That return, moreover, should be sufficient to assure confidence in the '
financial integrity of the enterprise, so as to maintain its credit and to attract capital.
Appendix C to the Commission's Order recognizes a revenue '
requirement deficiency of 5166,653,000 based on required net t operating income of $119.346,000 which produces an overall rate of return of only 5.878 percent on KGSE funds invested to serve i
che public of $ 2,030,344,000. After payment of interest on
)
f first mortgage bonds, bank loans, and other .ontractually established credit agreements, as well as, preferred stock i
dividends, that 5.878 overall rate of return translates into a return on conson equity of at most 1 percent based on Schedule C-1 of the exhibit sponsored by Staf f's witness Wess (B. Staff-i 20). A 1 percent or less return on common equity is confis-i -
catory.
i j E. Even if recognition is given to the Commission's 1
allowance, at page 94, of "some carrying costs associated with 4
the debt and preferred stock" (estimated to be $14.468,769) and to all of the Staff adjustments to rate base accepted by the Cmmeission in Appen'ix d C, the return on common equity authorized by the Commission is still confiscatory.
' 23. THE COMMISSION'S CONCLUSION AT FACE 119 AND IN APPENDIX C THAT KG&E* S REVENUE a
DEFICIENCY AMOUNTS TO ONLY S166,653,463 .
IS UNIAkTUL AND CONTISCATORY BECAUSE IT !
FAILS TO ALLOW KG&E TO FU!.LY RECOVER
} ITS PRUDENT INVESTMENT IN PUBLIC UTILITY FROPERTY.
A. A fundamental precept of public utility regula-tion is that utilities should fully recover their prudent expen'ditures through the rate making process. Seg, West Ohio
(
- 18 -
s Gas Co. v. Public Utiliev Commission, 294 U.S. 63, 73 (1973);
Missouri ex rel. Southwestern Bell Teleehone Co. v. Public Service Coe,ission. 262 U.S. 276, 2S9 (1923) . AlthouSh the C snission would allow KGEE to recover, over Wolf Creek's life, depreciation charges based on its finding of KO&E's prudent investment in Wolf Creek. the Commission based its tevenue deficiency calculation in Appendix C on its view of KGSE's prudent investment in rate base, minus $909.618.000 related to ,
Wolf Creek. Because of inflation and the time value of money, the net result of the Commission's action concerning Wolf Creek is to prevent KG&E from fully recovering its prudent investment in Wolf Creek. In other words, because the Commission has failed to allow KGSE a full return on its full investment in Wolf Creek. the net present value of future revenue require-ments to Wolf Creek will be inadequate for KO&E to -fully recover its prudent investment.
B. The fact that KG&E say be allowed a return on its entire prudent invesezent in Wolf Creek at some future time is not justification for the Commission's current illegal actions.
24 THE COMMISSION' S FINDINGS AND CONCLU.
SIONS AS TO THE " ECONOMICS OF WOLT CREEK" AT PAGES 84 THROUGH 94 ARE .
UNLAWTUL AND CONFISCATCRT BECAUSE THE COMMISSION KAS FAILED TO ADEQUATELY a CONSIDER THE INTERESTS OF KG&E'S S RAREHOLD ERS.
2he requirements of Hope Mater:1 Cas " demand that there be a ' reasonable' balancing of consumer and investor interests." Jersey Central Power & Lithe Co. v. Federal Enertv Regulatory Commission, 768 F.2d 1500,1503 (D.C. Cir.1985) .
As explained by Justice Douglas in Hooe Natural Gas, 320 U.S.
at 603, regulatory and judicial protection of the investor interests is important because the investor interest has a legitimate concern with the financial integrity of the company whose rates are being regulated.
Fros, the investor or company point of view
. 19 -
e e it is important that there be enough revenue 4 not only for operating expenses but also for the capital costs of the business. These include service on the debt and dividends on the stock.
4 The Commission's findings and conclusions as to the " Economics of Wolf Creek" at pages 84 through 94 are devoid of a balanced consideration of the interests of KG&E's shareholders. That failure undermines the legality of those findings and con-clusions.
i 25. THE COMMISSION'S FINDINGS AND CONCLU-j SIONS AT PAGES 39 THROUGH 73 LIMITING
' THE REASONA3LE VALUE OF WOLF CREII TO ONLY $1290 PER KILO *4ATT ARE UNLX47UL AND AR3ITRARY AND CAPRICIOUS AND.
THEREFORE, UNRZASONA3LE BECAUSE THEY ARE UNSUPPORTED BY SU3STANTIAL COMPETENT EVIDENCE.
A. While there are a variety of coal cost estimates .
in the record for consideration by the Commission, there is no evidence supporting the appropriateness of employing any per kilowatt cost of a coal unit as a surrogate for the cost of Wolf Creek. In addition, there is no evidence supporting the particular level of costs ultimately eeployed by the Ccamission.
B. Similarly, while there is evidence in the record concerning the 1984 costs of coal generation for KG&I, there is no evidence concerning the appropriate methodology for computing the differential costs of coal and nuclear genera-l tion, ' here t is no evidence concerning the appropriate method-ology for translating those differential costs into a per kilowatt value and there is no evidence concerning the appropriate costs to be used in such a calculation.
- 26. THE COMMISSION'S APPLICATION OF A " FAIR VALUE" VALUATION ME HODOLOGY T0 ONLY WOLF CREEK AT PACTS 62 AND 87 THROUGH -
93 AND IN APPENDIX C IS UNIX 4FUL AND =
i l
AR3ITRARY AND CAPRICICUS AND, THEREFORE, UNREASONA3LE BECAUSE THE 4
i COMMISSION JUSTIFIED ITS ACTIONS, AT PAGES 62 THROUGH 63 AND $7. BASED ON A MISTAKEN INTERPRETATION OF K.S. A. 198/.
SUPP. 66-1283 t
20 -
~y - --- - - w<w-y--- c- -- w ------w-v- --y=-r - -- ,- - -,-
m - -+ r +, , - , - - - + - - - - - - -y-.+--wygi. 9*=
A. De Commission's assertion at page 52 of its Order, that K.S.A. 1934 Supp. 66-1233 sets out factors for the Ccemission to consider to determine " prudence d the reason-able value of electric generating property" is inco,rrect.
(Emphasis added.) De Commission's assertion. at page 63, that I K.S. A.1954 Supp. 66-1233 "ecupels consideration of the economics of a plant in determining the reasonable value of a-rate base addition and also provides notice to the utilities of the general standards to be used" is also incorrect. D e plain language of K.S. A.1984 Supp. 66-1233 taken together with the statutory framework created by the other provisio as of I.S. A.66-129 refute the Commission's attempt to justify its " fair value" valuation methodology based on K.S. A. 1934 Supp, 66-1283
- 3. For the purposes of " determining the reasonable value" of utility property under K.S. A.66-123, the provisions o f K. S. A. 1984 Supp. 66-12Sc per sit the Commission "to exclude all or a portion of those costs of acquisition,' construction or operation from the revenue requested by the utility" when those costs were incurred due to a lack of prudence, ne factors enumerated in K.S.A. 1984 Supp. 66-12Sg are properly inter-preted as providing guidelines for ebe Commission's prudence determination, not as setting up yet another methodology for valuing utility property. nis interpretation is supported by K.S.A. 1954 Supp. 66-128g(a) r ne factors which shall be considered by the commission in making the deter:sination of
" prudence" or lack thereof in deter sining the reasonable value of electric generating property. . . .
Nothing in K.S. A.1934 Supp. 66-12Sg or the other provisions of K.S.A.66-123 suggests that the enuserated prudence factors suchorize " fair value"' rate :aaking. De Comisission's adoption of " fair value" race making in reliance on those fact:,rs is thus unlawful.
- 21 -
- 27. THE COMMISSION'S APPLICATION OF A " FAIR VALUE" VALUATICN METH000LCGY TO ONLY
'40L7 CREZI AT PAGES 62 AND 87 THROUGH 93 AND IN APPENDII C IS UNIX 4TJL KID AR3ITRARY AND CA?RICIOUS AND.
THEREFORI. UNREASONA3LE BECAUSE IT IS FOUNDED ON AN INCONSISTINT. DISTORUD A.% FACTUALLY UNSUPPORTED CHARACTERI:ATION OF T'4E NATURE OF RETURNS TO INVESTORS IN REGULATED UTILITIES.
The Commission, at page 87, erroneously equates the ~
return authorized for investors with a " reward". The return
. authorizwd should be the level of earnings adequate to maintain the financial integrity of the utility, to enable the utility to attract any needed capital inves:sent and to provide a return on common equity commensurate with the returns on investments in other companies of corresponding risk. It therefore mischaracterizes the objec:ives of ra:e regula: ion to equate the proper rate of return wi:h a,.." reward". That mischaracterization by the Commission further evidences the Commission's failure .co properly balance the interests of investors and ratepayers.
I i
- 28. THE COMMISSION'S APPLICATION OF A " FAIR VALUE" VALUATION METHODOLOGY TO ONLY WOLF CREEK AT PAGES 62 AND 87 THROUGH 93 AND IN APPENDII C IS UNLA'wTUL AND I
AR3ITRARY AND CAPRICIOUS AND.
THEREFORE, UNRZASONABLE BECAUSE THE -
COMMISSION'S RATIONALI FOR TREATING WOLF CREEK DISSIMILARLY FROM OTHER 4
GENERATING FACILITIES IS LACKING IN FUNDAMENTAL FAIRNESS AND IS INCON.
SISTENT WITH ITS OTHER FINDINGS.
A. The Commission, at page 87, argues that 1: would not be proper to value KG&E's assets other than *4olf Creek above their book value under its view of " fair value" rate making. The arbitrariness and unfairness that results is self-evident. 'ntere the Commission's " fair value" methodology '
results in a valuation of less than original cost, it would-apply its sechodology. But, it would not apply its methodology where a valuation in excess of original cost would resul:. i Such a "what's eine is mine, what's yours we'll negotiate" approach to regulation is, in addition to being unfair, bad regulatory policy.
22
. - - -- n -, , ---.-.7 -
I
- 3. The Commission, at page 33, likewise notes that it "canno t envision that value (of Wolf Creek] as being 3reater than historical costs." This is inconsistent with its rationale for claiming book value marks the ceiling on valuation for KG&E's other generating facilities. The Commission, at page 87, explained its rationale as follows:
1 If, as occurs in the unregulated industries, the utility assumed all risks that the "value" of a facility was less than
. historical costs, it might be appropriate for the rewards associated with a greater
- value to accrue to the utility.
The Commission's Wolf Creek valuation methodology treats Wolf Creek as a speculative investaant and places the risk of loss accendant to speculative investments on KG&E.without holding out an equivalent opportunity for speculative profits on Wolf
^
Creek. At the same time, the Commission treats the balance of KGSE's utility property as secure, non-speculative investments i -- subj ect neither to speculative loss nor gain -- which will be permitted to earn only the market return for secure and non-speculative invesezents.
- 29. THE COMMISSION'S APPLICATION OF A " FAIR VALUE" VALUATION METHODCLOGY TO ONLY WOLF CREEK AT PAGES 52 AND 87 THROUGH 93 AND IN APPENDIX C IS AR3ITRARY AND CAPRICIOUS AND THERITORE UNREASONA3LE BECAUSE THE COMMISSION ERR 0NEQUSLY ANALTIED PAST RATE MAKING TREATMENT OF KG&E'S GENERATING FACILITIES OTHER THAN i WCLF CREEK AND ITS CONCLUSIONS ARE UNSUPPORTED 3Y SU3STANTIAL COMPE m !
E7IDENCE.
1-The Commission, at page 87, argues that KG&E's "other assets already included in race base at original cost have, of course, already received a return which did not include risk sharing." The Commission fails to note, however, that the past limitation on the risk of loss was balanced against the denial of an opportunity to ears returns in excess of those calculated on the basis of an original cost race base. In other words, for the Commission to Lapliedly argue that KGSE would have 6
23 -
1
I 1
l earned something less in the past under " risk sharing" and that i
since KG&E was protected frote that risk, the Cosnission need not now apply " fair value" rate making to all of KG&E's facilities, is unsupported and completely ignores the possibility that KG&E would have earned more in the past under
" fair value" race making and that a change to that methodology ;
now for all of KG&E's assets only belatedly recognizes KCSE's suppressed earnings potential.
- 30. THE C0tHISSION'S FINDING AT PARAGRAPH 16 ON PAGES 90 AND 91 THAT THE APPROPRIATI RANGE OF VALUE FOR '4CL7 CREEK, 3EFORE ADJUSTMENT FOR LO'4ER i OPERATING COSTS. IS ONLY $1T50 TO S1250
, PER KILOWATT IS UNLAWTUL AND AR3ITRARY j AND CAPRICIOUS AND. THEREFORE.
i UNREASONA3LE BECAUSE IT IS INCONSISTENT
! WITH THE CCMMISSION'S FINDING AT PAGE i 56 THAT 327 MEGA'4ATTS OF KGiE'S l
OWNERSHIP INTIREST IN '40LF CREEI IS
- IXCESS CAPACITY AND BECAUSI IT RESULTS IN A TAKING OF PRIVATE PRCPER;"I FCR PUBLIC USE '4ITHCU'r JUST CCMPENSATION.
~
- The Consission rejected the $1500 per kilowatt cost of I Sunflower Electric Cooperative's Holcoob plant as a surrogate for the original cost of Wolf Creek because "Holcomb did not
{ ,
benefit from the economies a larger unit would produce." This
- rationale'is inconsistent with the Commission's penalization of l KG&E through an excess capacity adjustment for Wolf Creek being too big. Certainly, if Wolf Creek is to be treated as if it were a esaller unit for rate making purposes, the Commission I
i should be consistent and value Wolf Creek on the basis of a
- smaller unit. To do otherwise unfairly gives ratepayers the benefits of Wolf Creek's econceies of scale without compen.
4 sacing the shareholders of KG&E who have invested in that economy of scale. ,
t 1
- 31. THE COMMISSION'S ORDER, IN ITS ENTIRETY. IS UNLAWFUL AND AR3ITRARY AND CAPRICIOUS AND, THEREFORE. UNRZASCNA3LE j BECAUSE IT MAKES NO LEGALLY SUFFICIENT l FINDING THAT THE TOTAL EFTICT OR END f RESULT OF THE ORDER WILL ALLOW KG&E i
REVENUE SUFFICIENT TO RECOVER OPERATING
, AND CAPITAL EEPENSES AND THERE IS No a
SUBSTANTIAL COMPETENT EVIDENCE IN THE j RECORD TO SUPPORT SUCH A FINDING.
4 4
9
- 24 -
L
-,.-.nn.. , . .- .-.. . . - _ .- . . . , , . - - , . - - . . - , . n . . . . ,, ._ , .. ,, - , . . ~ . . - , , _ . ~ ,
m
- 32. THE COMMISSION'S CONCLUSION AT ? AGE 119 AND IN A??CIDIX C TF.47 K04E'S RT/EiUI DETICIntCY AMCUNTS *O CNLY 3165,633,I.63 IS UNIX 470L BECAUSE IT TAILS TO SATIS 7Y THE REQUIREMCIT FOR JUST AND REASON 43LE
- RATES IN K.S.A.66-107, 110, 111, 113, AND 118d.
A. Pursuant to K.S.A.66-107, 110, 111, 113, and 118d, KG&E's rates must be just and reasonable. As discussed elsewhere, the revenue deficiency recsgnized by the Commissio'n results in confiscatory rates which fail, by definition, to be just and reasonable. But even if the revenue deficiency recognized by the Commission did not result in confiscatory races, the resultant rates still fail to satisfy the statutory "just and reasonable" standard. The Kansas Court of Appeals in Kansas-Nebraska Natural Gas Co. v. Kansas Corooratio9 Comm i s-sion, 4 Kan. App.2d 674, 673, 610 P.2d 121 (1930), recognized that the standard of " reasonable
- rates calls for races higher than those measured solely against the constitutional prohibition against " confiscatory" rates:
The statutory standard of K.S. A.1979 Supp.
66-118d requiring " reasonable" utility rates is higher than the constitutional standard for due process. In other words, a race cannot be confiscatory if it is reasonable.
- 3. By failing to provide KG&E with a return on its investments consensurate with returns on investments in other companies facing similar risks and by severely limiting KG&E's ability to pay a dividend to its equity owners and to maintain its credit and attract capital, the Commission's finding of a revenue deficiency of only $166,653,463 fails to result in reasonable races,
- 33. THE COMMISSION'S FINDINGS AND CONCLU-SIONS AT PAGES 13J AND 133 'JITH RESPECT TO KG&E' S ENERGY COST ADJUST! CIT CI.AUSE (ICA) ARE UNIAWFUL AND UNREASONA3LE BECAUSE THEY RESULT IN A TAKING OF PRIVATI PROPERTT FOR PUBLIC USE '41THOUT JUST COMPENSATION AND BECAUSE THEY ARE INCONSISTENT WITH THE COMMISSION' S RATE BASE TRIADfENT OF WOLy CREEK.
- 25 -
1 .
r 1
KO&E's ECA tariff includes the full fuel savings associated with generation from KG5E's entire share of Wolf Creek. The Commission, at page 131, adopted I;&I's ECA tariff, as proposed. And, the rates put in effect by the Commission at page 133 recognize that there will be a reduction for the fuel savings associated with Wolf Creek. The Commission's itadings with respect to the value of Wolf Creek and the portion of Wolf Creek which is used and required to be used do not support the i Commission's determination that 100 percent of the fuel savings due to the operation of Wolf Creek should be passed on to ratepayers. Moreover, the Commission's adjustment to the value of the portion of Wolf Creek allowed in race base is inadequate to obviate the inconsistency and unjust result of its determination with respect to the fuel savings from Wolf
. Creek.
34 THE COMMISSION'S FINDINGS AND CONCLU.
J.
SIONS AT PAGES 84 AND $6 AS TO WOLF CREEK'S RELATIVE COST AND AT PAGE 92 AS TO THE USE OF ONLY $1290 PER KILOWATT i . TO VALUE WOLF CAEEK ARE UNLAWFUL BECAUSE TEEY CREATE AN CBSTACLE TO THE OBJECTIVES OF NUCLEAR SAFETY MANOATID BY CONGRESS AND IMPLEMENTED BY THE NUCLEAR REGULATORY COMMISSION AND ARE THUS PREEMPTED.
A. The Supreme Court, in Hinea v. Davidowitz, 312 U.S. 52, 67 (1940), considered the validity of a state law in light of federal law touching the same subj ect and found that a '
state law which " stands as an obstacle to the accosplishment and execution of the full purposes and obj ectives of Congress" 3
would be invalid.
- 3. Since all of the evidence indicates that $8 to 60 percent of the cost increases of Wolf Creek relate to compli-ance with Nuclear Regulatory Coseission sandated changes, the i
Commission's reduction of Wolf Creek's valuatien from its 4
original cost to only 31290 per kilowatt and its related i scacements that Wolf Creek is " extraordinarily expensive", that Wolf Creek has " exorbitant capital costs" and that it
" represents unreasonably high capital costs" all serve to i .
t i
4
. ' 26 -
_ _ _ _ _ _.._.m___ _ _ ___ ___.___________.____._.__.______
j . . :
i 4
create a chilling effect on the future capital expenditures l
- necessary to fully comply with Nuclear Regulatory Cassission f f
I requiresents. This type of state action creates an obstruction i j to the accomplishment of Congress' objective of nuclose safety i
! and intrudes in an area which is under the exclusive juris-diction of the United States Nuclear ReSulatory Cossission and :
l 1s thus preespcod by federal law. [
l
- 35. THE C0 Pet!SSION'S ADOFTION OF " RISK
- ! SHARING" FRINCIPLES AT PAGES 46 AND 80 l
". AND ITS AFFLICATION OF ." RISK SHARING" i AT PARAGRAPH 7 ON PAGES 51 AND $2 AND
. THROUGHOUT ITS FINDINGS AND CONCI,USIONS i i
' AT FAGES 84 THROUGH 94 ARE UNIX 4FI. [
} BECAUSE " RISK SHARING" IS NOT FROVIDED i i
FOR IN THE STATUTORY FR0 VISIONS 'a'HICH i i DE7INE THE SCOPE OF THE COMMISSION'S !
j AUTHCRITY AND SECAUSE THE CC.tISSION J N0'a*HERE DEFINES THE STANDARDS FOR ITS i j AFFLICATION OF " RISK SKARING." ;
A. The Commission, .at page 81. cites only K.S. A.
)
j
- 1934 Supp/ 66-12Sg(a)(11) as statutory support for its adoption of " risk sharing". That statutory provision does not empower the Coesission to employ " risk sharing" to lower the appro-priate reserve margin for the EG&E system (page 52) . to allow a f 4
return of Wolf Creek's costs through depreciation but no return f I
on a substantial portion of KG&E's prudent investment (page i
- , 86), or to authorise a sharing of the econoste consequences of [
Wolf Creek by valuing Wolf Creek at only $1290 per kilowatt i
f (pages 87 ' through 94) . Rather. K.S.A. 66-1283(a)(11) empowers the Commission only to consider the risks accepted during construction as part of its evaluation of prudence i
1 I ( a) The factors which shall be considered by the commission in making the determina-
' tion of " prudence" or Lack thereof in determining the reasonable value of electric
}
~
generatingproperty{chliettaciontheas act shall include w contemplated by this
- following
- -
i (11) whether the of the construction utility the acce$
facil tycod whichrisks in were ;
1 inappropriate to the general puolic interest to Ransas. . . . l
[
i i
- 1, . .
l 1
_ . _ . , , _ _ . _ _ . - _ . , _ _ _ , _ , _ . _ . _ _ _ - _ _ . _ _ _ _ . . ~ . . _ _ _ _ . _ . _ . - . _ . _ . _ _
The Commission's reliance on K.S. A. 1954 Sapp. 66 12Sg(a)(11) as support for " risk sharing" as applied in its Order is thus unlawful.
B. The other reasons put forward by the Commission to justify its adoption and application of " risk sharing" fail to overcome the Coesission's lack of statutory authority. Fo r example. the Coastssion. at page 30. cites the testimony of Staff's witness Rosen as supporting " risk sharing". Dr. Rosen cannot. of' course. confer the lacking statutory authority on the Commission. -
- 36. THE COMMIS$10N'S CONCLUSION AT PARAGRAPH 9 ON PAGE de AS To SRARE-HOLDER " ASSUMPTION OF THE RISIS* 15 AR31TRARY AND CAPRICICUS AND.
THERETORE. UNREASONA3LE BECAUSE THE
. COMMISSION FAILID TO RECOGN!!! AND CONSIDER IN ITS DISCUSSICN THE EVIDENCE PRCSENTED RICARDING THE RISXS AND COSTS OF NOT PROCEEDING WITH OLF CREEX AS PART OF KG4E'S ET70RTS TO DI7ERSITY FUEL SOURCES. #
A. Although the Coesission notes the statutorily mandated obligation of utilities to provide service in its discussion and rejection of the competitive market analogy proposed by Drs. Sturgeon and Rosen. the Consission fails to sention the obligation to serve in its discussion of " risk sharing" beginning at paragraph 5 on page 30.and concluding at paragraph 9 on page 34 The obligation to serve brings with it the duty to evaluate and balance the risks of continuing with the construction of a generating facility and the risks of i
failing to do so or of choosing an altsrnative source of power. The Commission's discussion is almost entirely devoted I
to the risks of continuing Wolf Creek construction with no
( attention paid to the evidence of the counterbalancing risks associated with other courses of action.
- 3. At pages 57 to 38 and 63 to 64 of its Order.
KG&E's concerns about natural gas and fuel oil availability are recognised by the Commission. The Commission. however, failed j to consider those concerns in its discussion of the risks of i
continuing with the construction of Wolf Creek.
I i
i L
t t
t I
l i
. h C. Similarly, the risk of fuel price stability and J
escalation for oil. gas and coal sust be considered by the f Coesission in evaluating the risks associated with continuing f the construction of Wolf Creek. ( M . n . C-XGE-21 (GIR-1) .
111-41. IV-43. IV-5 7. IV-6 3. IV-67 to 6 9.) l
) D. Significantly, the Cossission's Order nowhere !
}
mentions KG&E's need to reduce its reliance on aged generating !
i facilities. That need played a key role in KG4E's gmeration !
, planning and the risks associated with a failure to reduce l i !
- reliance on aged generating facilities must be considered to [
t I properly evaluate KG&E's decision to continue with and corsplete j l
the construction of Wolf Creek. (jee, e n . Lucas. Tr. XII. ,
I 3104: Cadman. Tr. IX. 2537. Tr. XI 2943: Roen. Tr. VII, 1906 ;
to 07: In the Matter of tansas Cas and Electric Cs., Xansas k City Power & L1the Co. , $ NRO 301. 351 (1977).) [
. t l E. ,KG&E presented evidence which graphically depicts [
l the potential impact on l'.C&E's ability to meet its obligation f 4
to serve from an inability to utilise gas generation and a l failure to diversify fuel sources. ( $ge C-KGE-21 (GIR-1) . IV- [
t j 70 to 71. Ess. IV 29. 30, 31, 32, 33.) That evidence was not !
t discussed in the Coesission's evaluation of the risks of [
a
- continuing construction of Wolf Creek. !
3 , -
I i
e
- 37. THE COMMISSION'S CONCLUSION AT PACE 81 I
{ THAT KG4E "DID NOT AFFEAR TO SERIOUSLY r i
CONSIDER THE P033131LITY OF CANCELLA- i l
TION" 0F WOLT CREZX IS ARSITRARY AOID t CAPRICIOUS A ID. THEREFORE UNREASONA3LE I BECAUSE IT CONTLICTS WITH THE 503- ;
STANTIAL WEIGHT OF TME EVIDCICE r
- FRESENTED. j l
In response to questioning by Consissioner Wright and l t
l i
others Mr. Wilson Cadean testified estensively as to KG5E's ;
deciaton process and its evaluation of the option to cancel f i
Wolf Creek. (jgg. Tr. IX, 2648 to 49: see also. Tr. X 2793 to 98 Tr. X1, 2962 to 90.) the Coesission cites no contrary 4 evidence in support of its conclusion.
l l l t
l i
I I t
. 29 I l
I f
i
, l
- 35. THE COMMISSION'S CONCLUSION AT PAGE 74 TRAT RATES RISULTING FROM TH TOTAL I INCLUSION OT WOLF CRIIX IN RATI BASZ
'400LD BE UNRIA50NA3LY HIGH IS UNLX.7UL [
AND A131TAARY AND CAFRICICUS AND.
THIREFORE, UNRIASONA3LZ BICAUSE IT IS .
INCONSISTETT WITM EG&E'S REQUESTID RA!! !
! RZLIEF WHICH WOULD FRASE-IN CVER Fiv!
YEARS THE RE7ENUE DEFICIENCY ASSOCIATID L
- WITH THE TOTAL INCLUSION OF WOLF CRIEX '
1 IN TKZ RA!! 3ASE AND 3ECAUSE THIY ARI UNSUFFORTED BY SU3STANTIAL COMPETINT EVIDCICE.
1 '
- 39. THE COMMISSION'S CONCLUSION AT FACE 75
- UTILITIES AND WITH NATIONAL AVERAGES IS UNLAWFUL AND A131TRARY ANO CAPRICIOUS i AND, THEREFORE, UNRIASONA3LE BICAUSZ IT KAS No BEARING ON WHITHER KG&E'S RATIS ARE REASONABLE, THE LEGAL STANDARD IN KANSAS.
l The Commission, at page 73, concludes that EG&E's
] rates would be "above average" for Eansas and the nation.
! Staply finding that rates are or will be "above average" is not
- legally equivalent to determining whether those rates are '
j unreasonable from the recepayers' point of view any more than it was legally equivalent to datermining, from the share-
] hold 4rs' point of view, that rates were unreasonable during all of the years when EGEE's rates were below the national average and the lowest in Eansas.
- I
- 40. THE COMMISSION'S FINDINGS AND CONCLU. !
! SIONS IN PARAGRAPH 3 ON PAGES 75 AND 76 ARE AR$1TRARY AND CAFRICIOUS AND.
THEREFORE, UNREASONAELE BECAUSE THET
)
ARE BASED ON THE ERR 0NEOUS ASSUMPTION AT PAGE 75 THAT THE SCIMAR10 CONSIDERED
" APPEARS TO RECOGNIZE 30 NEID FOR ADDITIONAL CAPACITY WITHOUT WOLF CRIZK UNTIL 1989."
The analysis presented by Mr. Andrews assumes EG5E would be required to purchase substantial amounts of power prior to the on line date of the hypothetical coal unit in
,! (989, More Laportantly, however, the 1989 on-line date for the ,
, hypothetical. cool unit is not representative of a lack of need i
for this capacity, but rather represents the lead time
$ necessery to build that plant. ,
l I
i 1 !
, i
9
- 41. THE CCMMISSION'S CONCLUSION I
- i PARAGRAPH 4 CN PAGI 76 AS TO KOSI'S A31LITY TO COMPITI IN THI '4HOLISALI MARKIT IS A33ITRA3Y AND CA?RICICUS AND, THIRITORI. CN3IASCNA3LI 3ICAUSE IT FAILS TO CO?! SIDER r/IDE:iCI 07 THI IMPACT OF GOVII:MrtTAL ACTIONS ON KGSE'S PAST IF70RTS AND r/IDCICI IILATIVE TO PAST'4HOLESALE A'ID PARTICIPATION PCWIR TRANSACTIONS.
A. Evidence has been presented regarding the negative impact that actions by the Comnission (C-KGE-21 ( G I R'-
- 1) , IV-84 to 85. 98) and the Rural Electrification Administra-
, tion (1d. 80 to 83, 97) have had on KG&E's efforts to se!1 j portions of its interest in 'Jolf Creek. No sention of those governmental actions is made in the Co=ntssion's discussion of KG&E's ability to sell power on the whalesale tarket.
- 3. Evidence was also presented as to KG&I's past success in sellins in participation power froi its units once they are in operation. (See, e.g., id. 78 to 79: see also, Roen. Tr. VIII. 2110 to 11.) The Commission fails to discuss these past transactions as they relate to KG&E's future ability to sell participation power from Wolf Creek.
- 42. THE COMMISSION'S FINDING IN PARAGRAPH 6 ON PAGES 76 AND 77 AS TO THE SCOPE OF THE ECONOMIC ANALYSIS PRISINTID BY KG4 E REGARDING THE ECONCMIC IMPACT OF WOL7 CRIII IS AR3IT3ARY A ID CAPRICIOUS AND, THERITORE, CNREASONA3LE BECAUSE IT FAILS TO CONSIDER EVIDCICE THAT THE AREA STUDIED IN THE ANALYSIS ACCCCITS FOR A SIGNIFICANT PORTION OF KG&E'S SALES.
The Commission notes, at page 77, thet t (T]he analyste contained in the CMP Report is limited to a sna11 portion of the Kansas economy. The Wichita area economy is used
, as a surrogate for the KG&E service area.
Little, if any, meaningful analysis of the impact on the agricultural sector is undertaken.
This discussion fails to consider the evidence presented that the Wichita area secounts for a significant portion of KG4E's sales (see, G-KGE-21 (312-2), V-1) in terms of both kilowatt-hours (66 percent) and revenues (68 percent) .
31 -
- 43. THE CCMMISSICN'S FINDING AND CONCLUSION IN PARAGRA?H 6 ON PAGES 76 AND 77 AS TO THE G1t0WTH RATE EM?LOYID IN THE ECONOMIC ANALYSIS PRESCITED 3Y KGSI RE0AROING THE ECONOMIC IM?ACT OF WCLF "CREIX IS AR31TRA?tY AND CAPRICIOUS AND.
THEREFORE. UNRIASONA3LE BECAUSE IT FAILS TO CONSIDER THE EVIDCTCE PRESCITED SUPPORTING THE GROWTH RATE EMPLOYED IN THE ANALYSIS.
The economic impact analysis presented by KO&E employs an 8.9 percent growth race for the Wichita e:enomy. That growth rate is based on the recent 9.6 percent growth in a Kansas manufacturing index. (Andrews, Tr. VIII, 2300) The C::=issi;n iakas no fin'ing as to the reasonsoleness oc the growth rate employed in light of that underlying data.
44 THE COMMISSION'S CONCLUSION AT PARAGRAPH 11 ON PAGE 75 AS TO THE ECO ;0MIC IMPACT OF WOLF CREEK IS
. AR31TRART AND CAPRICIOUS AND, THEREFORE. UNRIA30NA3LE BECAUSE THE DISCUSSION, AT PAGES 74 TERCUGH 73.
UNDERLYING THAT CONCLUSION FAILS TO CONSIDER THE E71DCICE PR.!SCITED ON BEHALF 0F KG4E BY MR. ANDREWS (TR. B-8, 2777 to 2816; B-KGE-55) AND DR.
CLEMCITE (TR. 5-8, 2515 to 32; 3-KGE-51).
- 45. THE CCMMISSION'S ADCPTION, AT PAGE 92.
OF ONLY $1290 PER KILOWATT AS THE VALUE OF WOLF CREEK IS UNIAWFUL AND AR31TRARY AND CAPRICIOUS AND THEREFORE.
UNREASONABLE BECAUSE IT AMOUNTS TO HINDSIGHT REGULATION.
A. A judgnent based on hindsight is neither appropriate, fair nor legally sound. Obviously, knowled5e gained from subsequent events was not available at the time of the utility management's decisions and thus should not be the basis for judging those decisions. See, Wisconsin Teleehone
& v. Public Service Comnission, 232 Visc. 274, 287 N.W.2d 122, 167 (1937): cert. denied 309 U.S. 657 (1940).
- 3. Under the guise of " valuing" Wolf Creek, the Commission has improperly employed hindsight regulation. This is evident from the Commission's discussion, at pages 58 through 94, of the economics of Wolf Creek. The Commission's primary focus and method of inquiry looks at Wolf Creek from
- 32 -
the perspective of what is known today in analyzing e:onomic a
impacts. rate comparisons, risks and valuation. The testimony of Dr. Charles F. Phillips discussed the inadequacies of the use of hindsight with regard to the testimony of Drs. Rosen and S turg eon. (Tr. XXVII, 7916 to 18) That discussion has equal applicability to the course of action followed by the i
Commission in its Order.
- 46. THE COMMISSION'S ADOPTION. AT PAGE 92 OF ONLY $1290 PER KILOWATT AS THI VALUE
- OF WOLF CREEK IS UNLAWFUL BECAUSE IT VIOLATES THE DEFINITION OF " EXCESS CAPACITY" FOUND IN K.S.A. 1934 SUPP.
- 66-129c.
A. " Excess capacity" is defined in K.S. A.1934 Supp.
, 66-123c as follows:
,. For the gurposes of this ace. _ " excess capacity means any capacity in excess of the amount used and required to be used to provide adequate and reliable service to the l public within the state of Kansas as determined by the cosmission.
l The definition of " excess capacity" does not encompass the
" economic excess capacity" inquiry conducted by the Cmenis-sion.
- 3. That the Comeission considers its valuation of Wolf Creek at $1290 per kilowatt as as " economic excess t
' capacity" adj ustment is evident from the Commission's statement in paragraph 24 on page 94:
.me physical and economic excess capacity excluslons are, however, ineligible for a return on invescaent.
(See also paragraph 2 on page 61.)
l
- 47. THE COMMISSION'S PHASE-IN OF THE
$166.653,463 REVENUE DEFICIENCY. AS ADOPTED IN PARAGRAPHS 7 AND 8 ON PAGES 133 AND 134 IS UNLAWFUL SECAUSE IT VIDIATES THE STATUTORT AUTHORI2ATION FOR PHASE-INS FOUND IN K.S. A.1984 SUPP. 66-12Sb.
K.S.A. 9984 Supp. 66-123b, authorizes only the phase-in of "the reasonable value of property determined not i
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currently used and required to be used. . . ." The total revenue deficiency of $165.653,463 found by the Cennission relates to property it has found to be currently "used and j required to be used." By virtue of the fact that KOSE has volunteered to phase-in the portion of its revenue requirement above $144,912,250, the Consission is authorized to phase-in amounts above that level. Therefore, the total revenue ,
deficiency, or, at a minimum the $144,912,250 requested by
~
KG&E, should be recognized in current races.
- 48. THE COMMISSION'S CONCL"SIONS AT PAGE 46 ACCEPTING DR. ROSEN'S CONCLUSION "THAT WOLF CREEK REPRESENTS EXCESSIVELY EXPENSIVE CAPACITY" AND AT PAGE $4 AS I TO THE RELATIVE COST OF WOLF CREEK ARE
.J' ARBITRARY AND CAPRICIOUS AND.
THEREFORE. UNREASONA3LE SECAUSE THEY ARE BASED ON INCONSISTINT TINDINGS AND BECAUSE THE COMMISSION RAS TAILED TO CONSIDER THE EVIDENCE 3EFORE IT.
A. The Commission,'-at pages 46 and 47, explicitly rej ects life-cycle cost analyses as the basis for its deci-sion. Stailarly, the Commission, at pages 61 and 62, spect-fically rejects the analyses presented by Dr. Rosen as the basis for valuing Wolf Creek. But, at the sane time, the Commission inconsistently finds, at pages 61 and 62, that Dr.
Rosen's analysis is adequate to evaluate the overall economics of Wolf Creek. There is no explanation of why an analysis which, at page 46 of its Order, is subject to such a degree of uncertainty that the Commission chooses to rej ect it, becomes
- beneficial", at page 61 of its Order, and adequate to evaluate the overall economics of Wolf Creek, at page 62 of its Order.
B. Without discussion of the evidence showing the errors and unreliable nature of Dr. Rosen's assumptions and without discussion of the relative serit of the analyses put forward by witnesses' for KG&E, the Cossission' found, at page 62, that "Dr. Rosen's assumptions for these various inputs were more reasonable and realistic chan applicant's witnesses."
This finding is unsupported by the evidence presented, proper consideration of each of the deficiencies in Dr. Rosen's
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analysis, as set out in IO&I's 3rtef a: pages 7 22 o V-39, can lead to only one conclusion -- Or. Resen's analysis is unac:eptable for any purpose. yurthernere Dr. Ro sen's
":onsistency," which the C:snission, e page 62, evidently perceives as sufficient reason for accepting Dr. Rosen's analysis, arsuably means lic:le more than Or. Rosen's assumptions are consistently in error. .
- 49. THE CCMMISSICN'S FINDING AT PAGI 56 "THAT 327 MIGAWATTS CF KG&I'S INTERIST IN WCLF CRIII Al! NOT RIQUIKID T3 3I USED IN ITS SERVICI To THI PC3LIC WITHIN THI STATI C7 IANSAS* IS A23IT3A2Y AND CA?IICICUS A33 THIRIFCRI. L71EASCNA3LI 3ICAUSI IT IS INCCNSISTINT WITH ITS FINOIN05, AT PA0Z 43, AND THE SC3STANTIAL I7IDIMCI PRESINTZ3 AS TO THI CP!2A!!CN CF IOSI's SYSTIM WITH THZ ADDITION OF WCLT CRIII.
A. A: page 43, the Cozaission found Wolf Creek :o be "used" on the ' basis of the following fac:s:
With the ex:ection of certain older tes
] unt:s, esca generating tactitty on cae KO&I systee, including Wolf Creek, will be 4 employed in the near ters to serve KG&I system energy requirements. (Imphasis ad d ed .)
. In addi: ion, the uncontroverted testimony of Mr. Lucas, KO&I's Manager of System Cperations, points out that because of 1:s low incremental operating cost, Wolf Creek will be the first unit committed to meet KG&I's system energy requirements. (Tr.
III, 3110) The Commission's findings set out above and the evidence presented by Mr. Lucas are therefore inconsis:ent wi:h the Commission's finding that Wolf Creek represents 327 segawatts of excess capacity. If there is any excess capacity on the IO&I system, it is represented by those "certain older 4
gas units" referred to by the Commission, not Wolf Creek.
- j. 3. The Cassission, at pages 57 :o ja and 63 :o 64, notes the fuel supply constraints which prospeed KC&I's involvement in Wolf Creek. Since Wolf Creek was planned and constructed to replace the gas and oil-fired facilities'subj ect to those fuel constraints, it is those uni:s which comprise any excess capacity which may asiet on the KG&E system.
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, n e v. - ~. e, un s ---- -- v
Y 4
1 1
C. Likewise. KG&E was also concerned with the need
- to replace aged facilities through its construction of '4olf Creek. (Lucas. Tr. XII 3104; cadman, Tr. IX. 2357. Tr. XI.
4
~
1 2943) Therefore, it is KG&E's aged facilities (which are also some of KG&E's gas and oil-fired facilities) which comprise any excess capacity which say exist on the KG&E system.
- 50. THE COMMISSION'S FINDING AT PAGE 56 "THAT 327 MEGAWATTS OF KG&E'S INTEREST IN WOLF CREEK ARE NOT REQUIRED TO BE USED IN ITS SERVICE TO THE PUBLIC WITHIN THE STATE OF KANSAS" IS AR3ITRART AND CAPRICIOUS AND.
THEREFORE. UNREASONA3LE BECAUSE ~HE COMMISSION FAILED TO CONSIDER THI EVIDENCE PRESENTED AS TO THE AGE OF i CERTAIN OF KG&E'S GENERATING FACILITIES
! IN THE DETERMINATION OF KG4E*S AVAILABLE CAPACITY IN 1990.
J .
By the year 1990 (the reference year employed by the Commission to, evaluate the existence any excess capacity on 1 KG&E's system) , 503 segawatts of KG&E's present accredited j
capacity will be over 30 years old and 297 segawatts of that capacity will be over 35 years old. ( h , Lucas, Tr. XII, .
j 3104.) Other than the' 46 megawatt adjustment to reflect the announced retirement of KG&E's Ripley station (a deduction of one-half of Ripley's capacity racing), the Commission's I
determination of available capacity unrealistically failed to consider or make any other allowance for the advanced age of a j
large portion of KG&E's generating capacity.
'i 51. THE COMMISSION'S FINDING AT PAGE 56 "THAT 327 MEGAWATTS OF KG&E'S INTIREST IN WOLF CREEK ARE NOT REQUIRED TO BE USED IN ITS SERVICE TO THE PU3LIC WITHIN THE STATE OF KANSAS" IS ARBITRART AND CAPRICIOUS AND.
] THEREFORI. UNREASONABLE BECAUSE THE COMMISSION ADOPTED A 20 PERCENT RESERVE REQUIREMENT WITHOUT CONSIDERING THE EVIDENCE PRESENTED IN SUPPORT OF A 22.5 l
PERCENT RESERVE REQUIREMENT AND. 3ECAUSE THE COMMISSION'S USE OF A 20 PERCENT i
RESERVE REQUIREMENT IS INCONSISTENT
} WITH ITS OTHER FINDINGS.
A. . In one sentence, at page 51, the Commi'ssion notes 9
that IG&E presented evidence supporting a 22.5 percent reserve
{ sargin. The Commission then discusses Dr. Rosen's proposed I e t
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. . . . , . . . - _ . m- ~..- _ _ . _ - , ,. . . _ . _ - _ _ _ ~ - - , . . , , . . , . . . . _ _ . . _ _ . ..,._--,~.,m. .._.
reserve margin without mentioning why Dr. Rosen's proposal is accepted or why KG&E's evidence is rej ected and without any discussion of the validity of Dr. Rosen's reserve margin analysis in light of the inadequacies pointed out by Mr. Limmer in his rebuttal testimony. (See. KG&E's Brief at pages V-36 to 33.)
B. The Commission, at pase 54. finds that a reserve requirement in excess of 20 percent should be justified from an economic perspective. The Commission, at paSe 92, values all of KG&E's interest in Wolf Creek at only $1290 per kilowatt, j =
thereby economically justifying a reserve requirement greater than that used by the Commission in determining the level of
" excess capacity" on the KG&E system.
- 52. THE COMMISSION'S LIMITATION OF ITS FINDING AT PAGE 58 "THAT FRCM AN EARLY TO MID-1970's PERSPECTIVE LEGITIMATE
. CONCERNS ABOUT CAS AND OIL FUEL AVAILABILITY REASONABLY AND APPRO-PRIATELY PROMPTED THE CONSTRUCTION BY KG&E OF ADDITIONAL GENERATING FACIL-d ITIES" IS ARBITRARY AND CAPRICIOUS AND, THEREFORE. UNREASONABLE BECAUSE IT FAILS TO PROPERLY RECOGNIZE THE UNREBUTTED EVIDENCE OF KG&E'S CONCE.US i ABOUT FUEL AVAILABILITY BETCND THE MID-1970's AND THE UNRIBUTTED EVIDENCE OF KG&E'S COMCERNS ABOUT FUEL PRICE STABILITY.
A. At page 64, the Consission notes that KG&E contends that even though the Fuel Use Act was amended in 1981 to remove restrie-tions on existing generation plants, it is still obligated to reduce depesdence on natural ass by 50%.
KG&E's " contention" and its continuing concern over fuel availability are supported by the evidence before the Commis-sion. (ie,e , g , Ro en , Tr. VII , 1947 to 48 : Cadman, Tr. X, 2754; G-KGE-21 (GIR-1) IV-74: G-KGE-156.) Indeed, the Commission itself has recognized a continuing concern over gas supplies. (lee. G-KGE-21 (GIR-1) III-66, citing 49 Fed. Reg.
32,972 ( August 17,1984).) The Consission cites no reason or j evidence justifying the. limitation of its finding to only a ;
t
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4
) .
i l "sid-1970's" perspective. In light of the evidence presented.
i che Commission's finding should be amended to reflect KG5E's a
and the Corsaission's continuinS concern with the availability l
I of gas and oil fuel.
- 3. KG&E's concern over gas and oil is not limited to its availability but extends to the long-cars price of those I fuels. (b. KG&E's Brief at page III-1 to 8.) The evidence.
I presented by KG&E supports those concerns. ( g .. id.) The i
) Consission cites no reason or evidence justifying its failure to include KG&E's concern over fuel prices in its finding. In ;
light of the evidence presented, the Commission's finding i should be amended ~ co reflect KG&E's continuing c'oncern with the long-ters price of gas and oil.
j 53. THE COMMISSION' S CONCLUSIONS IN
- PARAGRAPH 5 ON PAGE 65 AS TO KG&I'S d
1976,1973.1979 AND 1980 ECONCMIC COMPARISONS OF NUCLEAR AND COAL GENERATION AND ITS FINDING IN PARAGRAPH 20 ON PAGE 74 ARE UNIAWFUI. AND
, AR3ITRARY AND CAPRICIOUS AND.
THERETCRE. UNREASONABLE BECAUSE THE COMMISSION IMPROPERLY EMPLOYED l HINDSIGHT IN ITS EVALUATION OF KG&E'S ASSUMPTIONS AND THE CO.9tISSION FAILED TO CONSIDER THE EVIDENCE PRESENTED.
! A. The asetsspelons and methodology employed by KG&E in its economic comparisons of nuclear and coal generation were
{ reasonable in light of contemporaneous standards, as confir:ned j by DASCO in its 1980 report and as again confirmed by Cresap, McCormick and Paget in this proceeding. It is only with the
}
use of hindsight that the Commission can find fault with KG4E's l
. analyses: >
j'
- i. KG&E's use of equivalent operating and l maintenance costs for nuclear and coal generation conforms with the assuspcions employed in the Wolf Creek construction permit P
l proceeding by the Atomic gafety and Licensing Board's Staff and
! was found to be reasonable by E3ASCO. For the coseission to a
l now fault KGEE for that asseption surely involves the use of r i
j hindsight.
l i
i t
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A _ _ _ _ _4 _.r O
- 11. KG&E evaluated a nunber of nuclear and coal capacity factor scenarios, but employed a 67 percent nuclear capacity factor and 60 percent coal capacity factor as its base case in its 1976,1978,1979, and 1980 analyses. Both E3ASco and the Commission confirmed the reasonableness of a 67 percent nuclear capacity factor in 1990. In light of the Comnission's finding in 1980, the Commission's finding in this proceeding as to the nuclear capacity factor employed by KG&E can only be explained by hindsight, iii. KG&E did not " ignore" capital additions in its analyses ,as asscreed by the Commission ac page 65. Rather, KG&E reasonably assumed the capital additions to nuclear and i
coal plants would be essentially equivalent. Therefore, it was unnecessary to include capital additions in the conparative I
analyses. The Commission Staff's vir.ess Rosen confirned that ,
during the time frame of KO&I's analysis, capital additions'
- I ,
were not generally included in the comparative economic studies j performed by utilities. Thus, it is onl'y with hindsight that
- the Camnission can find fault with KO&E's capital additions
, assumption.
iv. KG&E did not " ignore" decommissioning in its l
analyses as asserted by the Consission at page 65 Cecommis-stoning costs were not included in the analyses becaust of uncertainty as to their amount and in light of their immateriality as determined from generic decommissioning e s t ima t e s . In 1990, the Commission a. greed that the cost and method of decommissioning were uncertain. In light of that acknowlegment and the 1980 finding by E3ASCO that KG&E's I
exclusion of decommissioning costs was reasonable, 'the Cassission has improperly applied hindsight to find fault with KG&I's decommissioning assumptions.
- 3. The Commission, at page 65, apparently views the one page format and 50-year time frame of KO&E's 1976, 1973, 1979, and 1980 levelized bus bar cost analyses to be weak-nesses. Such a view is unsupported by the evidence presented.
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The one page format was simply a memorialization of the underlying analysis and study. ( Cadm an Tr. X , 259 5 : Roen Tr.
VI, 1691) Thus, it is improper to draw any conclusions as to the quality of KGSE's analysis merely on the basis of the presentation format. The 10-year time frame is also reason-able. As explained by both Mr. Roen (Tr. VI.1639 to 90, Tr.
VII, 1804) and Mr. Lucas (Tr. XII, 3134 to 39), it was unnecessary to depict a longer period of time since it was reasonable to expect the advantages of Wolf Creek to grow over cine . This concept appears to be accepted by the Commission at pages 75 and 76 of its Order. Therefore. It is* improper and inconsistent for the Cossission to characterite the 10-year ciae frase as a weakness.
- C. The Commission, at page 55, also criticizes KG&E's comparative economic analyses for failing to consider the need for capacity. That criticism is unfounded. As pointed out by Mr. Roen (Tr. VI,1713 to 14), capacity need assessment was not the purpose of those analyses. The need for capacity is a separate concern, evaluated as pata; "of the capacity planning process along with the comparativ. economic
, analyses and other decision inputs. (M. G-KGE-21 (OIR-1),
. 17-50 to 98.) The Commission obviously failed to cons: der Mr.
Roen's testimony.
54 THE COMMISSION'S FINDING AND CONCLUSION AT PAGE 84 THAT "CERTAINLY BY THE END OF 1981. APPLICANTS SHOULD HAVE SEEN ACUTILY AWARE THAT THE CAPITAL COS3 0F WOLT CREEK WERE BECOMING UNREASONA3LY HIGH AND THAT THE OVERALL ECONOMIC BENEFITS WERE SU3 JECT TO SERIOUS QUESTION" IS ARBITMRY AND CAPRICIOUS AND THEREFORE, LNF2ASONAELE BECAUSE THE C0tHISSION PAILED TO CONSIDER THE EVIDENCE PRESENTED AND IT IS INCON.
SISTENT WITH THE COMMISSION'S FINDING AND CONCLUSION AT P GE 86.
A. The Commission, at passa 59 and 60, cites the testimony of Dr. Rosen and Mr. Kosa.noff that Wolf Creek should have been cancelled in 1981 or 1979, respectively. The Commission nowhere considers the testimony and analyses
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i
f presented by Mr. Roen (seg. Tr. XXIX, 8691 to 96: G-KGE-166 (GIR-3)) and Dr. Backus (se3. Tr. XXIX, S762 to 75; G-KGE-167) supporting a contrary conclusion. Likewise, the Cecmission fails to address the testimony of Dr. Backus (id.) pointing out the deficiencies in Dr. Rosen's retrospective analysis; the y
cross-examination of Dr. Rosen pointing out his use of hindsight (see, 3, G-KGE-137; Tr. XXIV. 7101 to 03: Tr. XXV, 7247 to $2); and, the cross-examination of Mr. Komanoff pointing out the unreasonableness of the replacement capacity assumption underlying his analysis. (See, Tr. XXXIV, 10081 to 90.)
- 8. The Commission, at page 36, finds that it could not " conclude with the absolute certainty" necessary to find that Wolf Creek should have been cancelled. Given the 1 Commission's uncertainty on page 86, it was inconsistent and -
~
improper for t'he Commission to find that the costs of Wolf '
Creek were becoming unreasonably high by 1981.
- 55. THE COMMISSION'S FINDING AND CONCLUSION AT PAGE 86 THAT "IN VIEW OF THE FACT THAT THE DECISION TO CONSTRUCT AND BUILD WOLF CREEK WAS NOT SUPPORTED 3Y A NEED FOR PHYSICAL CAPACITY, A PHYSICAL EXCESS CAPACITY ADJUSU.ZNT IS CNDENI-A3LY APPROPRIATE" IS AR3ITARY AND CAPRICIOUS AND, THEREFORE, UNRIASCNA3LE 3
BECAUSE IT FAILS TO CONSIDER THE EVIDENCE PRESENTED AS TO THE PURPOSES FOR WOLF CREEK'S CONSTRUCTION.
I Because of fuel availability and price uncertainty, K;&E's capacity planners had to and did consider the possi-bility that certain KG&E generating facilities would be unavailable to provide energy. (jee, G-KGE-21 (CIR-1) , IV-70 to 71, Exa. IV-29, 30, 31, 32, 33.) The Commission's physical excess capacity finding fails to consider the evidence of j KO&E's concerns over its physical ability to supply energy.
Wolf Creek was constructed to meet KO&E's need to supply energy not just to supply c.apacity. The distinction between'the need to supply energy (the ability to supply generation over a
~
period of time) and the need to supply capacity (the ability to
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t meet peak demand) must de recognized by the Cotsission in order for it to properly evaluate whether Wolf Creek is " required to be used." The Comnission zust also consider the evidence of 1
the increased reliability Wolf Creek brings to the KGSE system (see, e.g., Lucas, Tr. XII, 3106, 3110, 3153) in order to evaluate whether Wolf Creek is " required to be used."
i 56. THE COMMISSION'S FINDING AT PAGE 92
. THAT THE GENERATION COST SAVINGS FROM WOLF CREEK IS ONLY $77 TO $102 PER KILOWATT IS UNIXaTUL AND ARSITRARY AND CAPRICIOUS AND THEREFORE, UNRZASONA3LE BECAUSE THE COMMISSION'S 0ACER DEN!!S T KG&E DUE PROCESS BY FAILING TO DESCRI3I THE METHOD OF CALCULATION, TNE GENERATION COST SAVINGS ARE UNRIASON-4 A3LY LOV AND THE METHOD OF REFLECTING GENERATION COST SAVINGS IS INCONSIS-TENT WITH THE COMMISSION'S TREAIMENT OF THE FUEL SAVINGS TROM WOLF CREIK IN KG&E'S ECA IARIFF.
A. Although the Commission discloses, at pages 91 and 92, the data underlying Les computation of the generation cost savings resultant from Wolf Creek, the methodoloSy employed to compute the generation cost savings adopted by the Consission in valuing Wolf Creek is not apparent from the order 1
and is Lapossible to replicate. Furthermore, despite several requests during the brief period permitted for the preparation of this Application, KG&E has been unable to obtain from the Commission's Staff any assistance in determining how the generation cost savings were derived. As a result, KG&E has been deprived of its right to due process.
- 3. Although KG&E cannot replicata che Commission's computation of Wolf Creek's generation cost savings, it appears from the low dollar amount of the per kilowatt adjustment adopted by the Commission that the Commission is only considering one year of generation cost savings. If this is in 3 fact the case, then the Coesission has grossly undersalued Wolf Creek given tha stated obj ectives of its valuation method.
L ology.
C. Moreover, if the Seneration cost savings
, adjuscaent represents only one year of savings, then the
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Commission's creacment of those savings is inconsistent with the full flow through to ratepayers of Wolf Creek's fuel savings in the ICA tariff since stockholders would recover far less than the full generation cost savings in any given year. >
- 37. THE CC.W ISSION'S ADJUSTMENTS TO RATE BASE IN APPENDIX C FOR " EXCESS CAPACITY" AND " ECONOMIC RE7ALUATION OF NUCLEAR PIANT" ARE UNLA*4FUL AND ARBITRARY AND CAPRICIOUS AND.
THEREFORE. UNREASONABLE BECAUSE THEY ARE INCONSISTENT WITE THE "0RIGINAL COST" DEPRECIATION RESERVE WHICH REDUCES RATE BASE AND THUS LEAD TO UNREASONA3LE RESULTS AND A CONFISCATION 0F KG&E'S PROPERTY WITHOUT JUST
. COMPENSATION. .
Adjustments 9 and 10 on Appendix C. page 3 of 3.
remove a total of $909.618.0C0 from KO&E* s rate base in accordance with the Commission's excess capacity and Wolf Creek valuation findings. The Commission, however, makes no .
adjustment to the " original cost"* depreciation reserve which is included as an offset to rate base for the depreciation of KO&E*s entire, prudent investment in Wolf Creek. The outcome i
of this inconsistency is obvious -- it is only a matter of a few years before the " original cost" depreciation reserve exceeds first the " fair value" rate base of Wolf Creek and ultimately KG&E's to' cal rate base, creating a " negative rate base." Such a result is surely unintended. If, however, the Consission intends for this to occur, it amounts to a confiscation of KG&E's investment in utility property since a
" negative rate base" would deprive EG&E of any return on its ,
inve s tment.
. s.
- 58. THE COMMISSION'S ADOPTION. AT PAGE 92.
OF CNLY S1290 PER KILOWATT AS THE VALUE OF WOLF CREEK IS AR3ITRARY AND CAPRICIOUS AND. THEREFORI. UNREA50NA3LE 3ECAUSE IT IS INCCNSISTENT WITH THE CO.WISSION'S FINDINGS AT PAGE 84 THAT, 4
AT LEAST PRIOR TO 1981. IO&E* S DECISIONS TO BUILD AND CONTINUE WITH THE CONSTRUCTION OF WOLF CREIK WE3E
' PRUDENT SINCE THE $1290 PER KILOWATT SIMPLY ASSUMES WOLF CREEK TURNED INTO A COAL FIRED UNIT WITHOUT RECOGNITION OF THE COSTS INCURRED IN EFFECTUATING THE DECISICH TO CONSTRUCT WOLF CREEK.
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- 59. THE COMMISSION'S ADOPTION, AT PAGE 92, OF ONLY S1290 PER KILOWATT AS THE VALUE OF WOLF CREEI IS A13IT3A3! AND CA?RICIOUS AND, THE2E70RE. L'N2ZASONA3LE BECAUSE IT IS INCONSISTENT WITH THE COMMISSICN' S FINDING OF EXCESS CAPACITY.
Throughout its findings (see, e 12, 2 pages 78 and 84),
the Chemission justifies its use of a " fair value" valuation methodology because the rates resulting from " full inclusion" of Wolf Cr,eek in rate base would, in the Cbumission's view, be
- too high. As a result of its finding that 327 segawatts of KG&E's interest in Wolf Creek represents ex
- ess capacity, Wolf Creek will not be' fully included in' rate base. The Comnission fails to account for its excess capacity finding in its valuation of Wolf Creek.
l 60. THE COMMISSION' DETERMINATION THAT 1
KGSE'S SPACE HEATING 3 ATE SHOULD 33 INCREASED IS UNIAWTUL AND A13ITRARY AND i CAPRICIOUS AND THEREFORE, UNREASONABLE BECAUSE IT IS INCONSISTENT WITH THE COMMISSION'S DECISION NOT TO INCREASE KCPL'S LOWER SPACE HEATING RATE.
On page 128 of its Order the Cousission increased the current electric space heating customet's seasonal energy block
] char'ge of 4.62 cents per kilovatthour by the same proportionate
~ increase as other residential customers, despite KG&E's request i
that it remain the same. In Docket No. 142,099-U, at page 127, the Commission retained KCPL's current space heat rates ranging frse 3.74 cents per kWh to 3.81 cents per kWh. The Staff, whose recommendation the Commission adopted in both instances, recognized that KCPL's existing space heating rate is price competitive with some alternative fuels. (Docket No. 142,099 at page 127) It is unreasonable and inconsistent to raise i
IG&E's space heating race, which is already higher than KC7L's and keep KCFL's the some in light of that information and the i
Commission's determination in both cases that there was no (
- persuasive evidence to support increasing
- the space heating l rate to cover fully embedded costs.
k i
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i
- 61. THE CCMMISSION'S FINDING AND CCNLUSIONS AT PAGE 119 THAT 11.99* IS A FAIR AND REASCNA3LE RATE OF RETURN ARE UNIAWETL AND AR3ITRARY AND CAPRICIOUS AND,
- THEREFORE, UNRIASCNA3LI.
A. The Commission, at page 118. sisstates the law i relating to the constitutionality of the rate of return by I
deciding the fair and reasonable rate of return based on prudent investment theory and not on the constitutionality mandated "end result" test of Hope, supra.
B. ihe rate of return of 11.991 will cause a l:
7 downgrading in KG&E's bonds from their present rating and will, I as a result, make it impossible for KG&E to attract capita-1 on favorable terms and maintain its financial integrity. (Abrans.
1
! Tr. B-8, 2657)
C. The race of return of 11.99T was admittedly improper unless the full race base valuation requested by KG&E 5 -
for Wolf Creek was allowed and it was not allowed. (Avera, Tr.
3-3, 261 to 262)
+
D. The rate of return of 11.99 was based on a ,
return on equity of 15.5% which was founded on data before KG&E became a riskier investment as a result of both the staff ,
t recommendation and the Commission's Order.
4
- 62. THE COMMISSION'S FINDINGS AND CONCLU. i SIONS AT PAGE 136 AND 137 ARE UNLAWFUL, ARBITRART AND CAPRICIOUS AND, THEREFORE, UNREASONABLE BECAUSE IT ACKNOWLEDGES WEAKNESSES IN $TAFF'S ARGUMENT THAT 5181.000.000 WILL ASSURE KG&E'S VIABILITY AND THEN ACOPTS A LOWER REVENUE REQUIREMENT.
4 i
- 63. THE COMMISSION'S FINDING AT PAGE 56 7 THAT 327 MEGAWATTS OF KG&E'S OWNERSHI? '
INTEREST IN WOLF CREEK REPRESENTS :
" EXCESS CAPACITY" IS UNIXTUL AND !
.AR31TRART AND CAPRICIOUS AND, i THEREFORE. UNREASONABLE BECAUSE IT IS !
IN DIRECT CONFLICT WITH THE ATOMIC SAFETT AND LICENSING BosRD'S FINDINGS '
REGARDING KG&E'S NEED FOR POWER AND IS !
THUS PREEMPTED. i
! \
64 THE' COMMISSION'S FINDING AND CONCLUSION [
e AT PAGE 84 AS TO KG&E'S DECISION TO ;
' l
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., - - - ,o,n , , . _ , ,,. ,,, _ ,. - -,.. - - ,. ,_ , _ ,,,. ,, _ n,, .w.+ , , . , , . , ,.
CONTINUE CONSTRUCTION OF WOLF CREEK AFTER 1981 IS UNLX4FUL MD AR31TRAPY AND CAPRICIOUS AND. THEREFORE.
UNRIASONA3LE BICAUSE IT IS UNSUP?ORTED 3Y SUBSTANTIAL CCMPETENT FIIDCICE AND BECAUSE THE COS.ISSION FAILED TO CONSIDER THE r/IDENCE PRESITJED l CONCERNING KG&E'S DECISION MAKING PROCESS AND THE FACTORS WHICH INFLUENCED KG4E' S DECISIONS. (SEE, KG& E' S BRIEF AT PAGES III-3 to T.T.')
- 65. THE COMMISSION'S FINDINGS AND CONCLU-SIONS AT PAGES 84 THROUGH 94 ARE UN u WFUL AND AR3ITRARY AND CAPRICIOUS AND. THEREFORE. UNREASONA3LE BECAUSE THEY FAIL TO CONTAIN A CONCISE AND SPECIFIC STATEMENT OF THE RELE/ ANT LAW '
AND BASIC FACTS AS REQUIRID SY K.A.R.
82-1-232(a)(3) IN ITS FINDINGS AS TO THE APPROPRIATESS AND RELEVANCE TO KG&E OF THE COMMISSION'S CONSIDERATION.
AT PAGES 66 TO 74. OF r/IDCICE RELATING TO THE CAPACITY PLANNING OF KCPL AND KEPCO.
- 66. THE COMMISSION'S ADOPTION OF " RISK SHARING" PRINCIPLES AT PAGES 46 AND SO AND IYS APPLICATION OF " RISK SHARING" AT PARAGRAPH 7 ON PAGES 51 AND 52 AND THROUGHOUT ITS FDDINGS AND CONCLUSIONS AT PAGES 84 THROUGH 94 ARE AR3ITRARY AND CAPRICIOUS AND. THEREFORE.
UNREASONABLE BECAUSE THE COMMISSION HAS FAILED TO ALLOCATE ANY OF THE " RISK" TO RATEPAYERS.
- 67. THE COMMISSION'S ORDER AT PARAGRAPH 25 ON PAGE 94 ALLOWING THE ACCRUAL OF ONLY DE3T AND PREFERRED STOCK CARRYING CHARGES ON THE PORTION OF WOLF CREEK EXCLUDED FROM KG&E'S RATE BASE AS EECESS CAPACITY WHICH THE COMMISSION VALUES AT ONLY $1290 PER KILOWATT IS UNM WFUL AND AR3ITRARY AND CAPRICIOUS AND. THEREFORE. UNREASONA3LE BECAUSE IT DENIES KG&E THE RECOVERY OF ITS FULL CARRYING COSTS OF DE37 AND PREFERRED STOCK AND A RETURN ON COMMON EQUITY FOR FUNDS PRUDENTLY INVESTED IN PROPERTY
, WHICH THE COMMISSION HAS FOUND TO BE IN PUBLIC USE. THUS RESULTING IN A TAKING OF PROPERTY FOR PUBLIC USE WITHOUT JUST COMPENSATION AND A VIOLATION OF THE '
KANSAS REQUIREMENT OF JUST AND REASONABLE RATES. AND BECAUSE THERE IS NO SUBSTANTIAL COMPETENT r/IDENCE
- SUPPORTING SUCH A LIMITATION.
- 68. THE COMMISSION' S FINDINGS AND CONCLU-SIONS AT PAGES 89 THROUGH 93 TNAT $1290 PER KILOWATT IS A REASONABLE VALUE FOR WOLF CREEK ARE UNLAWFUL AND AR3ITRARY AND CAPRICIOUS AND. THEREFORE.
UNRZASONABLE AS WELL AS CONTRARY TO l
l t l
SOUND PU3LIC POLICY IN THAT SUCH FINDINGS AND CONCLUS!ONS IGNORE THE CONSIDERA3LE IMPACT UPON THE ORIGINAL COST OF WOLF CREEK OF TEE PU3LIC POLICY IN KANSAS WHICH SUBSTANTI.*.LLY DENIES RATE RECOGNITION OF THE VALUE OF CONSTRUCTION WORK IN PROGRISS.
Nearly one-third of KGSE's invesenent in Wolf Creek is due to the capitalization of carrying charges incurred while Wolf Creek was under construction. But for the policy of the' State of Kansas, as first set down in a 1978 amendment to
, K.S.A.1984 Supp.66-128, it would have been within the Commission's discretion to permit race recognition of the value of Wolf Creek while it was dader construction, two interrelated consequences of which would have been the reduction of Wolf Creek's original cost by nearly one-third and an attendant reduction in the one the rate bpact of Wolf Creek. It is unlawful and unreasonable for the Commission to ignore the i: pact.of such state policy on the original cost of Wolf Creek and, further, at least in part on the basis of such impact, to find and conclude that the original cost of Wolf Creek (which includes carrying charges during construction) is excessive and exorbitant and would have an unreasonable bpact upon races.
Such findings and conclusions are particularly unreasonable in view of KG&E's voluntary proposal to phase-in the rate Lnpact of Wolf Creek.
- 69. THE COMMISSICN'S FINDINGS AND CONCLU-SIONS AT PAGES 89 THROUGH 93 THAT $1290 PER KILOWATT IS A REASONA3LE VALUE FOR WOLF CREEK ARE UN RWFUL AND AR3IT3ARY AND CAPRICIOUS AND, THERE70RE.
UNREASONABLE AS WELL AS CONTRARY TO SOUND PUBLIC POLICY IN THAT SUCH FINDINGS AND CONCLUSIONS IGNORE THE CONSIDERABLE IMPACT UPON THE ORIGINAL COST OF WOLF CREEK OF THE COST OF CCNSTRUCTING WOLF CREEK IN COMPLIANCE WITH THE REGU M TIONS AND OT9ER REQUIREMENTS OF THE UNITED STATES NUCLEAR REGU MTORY COMMISSION.
KG&E presented evidence that regulatory change accoun te'd for 58 percent of the cost increase for Wolf Creek.
(Tr. I, 156) Intervenor witness Kosanoff testified that 60 l
B l
i l l t
. . l
. l l
percent of the increase in cost was due to regulatory change.
(Tr. XXXIV. 10046 to 49) There was no evidence suhitted by any party which contradicted KOSE's or Kotaanoff's findings with respect to the cost impact of regulatory change. It is unlawful and unreasonable as well as contrary to sound public policy for the Commission to reduce the value of Wolf Creek to be recognized in rates to the extent that such value is a product of KG&E's compliance with the regulations and require-ments of the United States Nuclear Regulatory Commission. It is fundamentally unfair for one arm of the sovereign to impose a penalty which at least in part is based on the impact of costs which have been imposed by another arn of the sovereigd.
- 70. THE COMMISSION SHOULD GRANT REHIARING TO RECEIVE NT4 FJIDENCE AS TO THE IMPACT OF THE COMMISSION'S ORDER ON
, KG& E' S INVESTOR $. ,
Because there was no way of knowing that the Commission would adopt a completely novel rate making methodolog; sith regard to Wolf Creek, KG&E has been deprived of an opportunity to present evidence that the race making methodology. adopted results in races which are confiscatory and unreasonable.
- 71. THE COMMISSION SHOULD GRANT REHEARING TO RECEIVE NT4 FIIDENCE AS TO THE PROPER RATE OF RETURN TOR KG&E IN LIGHT OF THE INCREASED RISKS RESULTANT TROM THE COMMISSION'S ORDER.
- 72. THE COMMISSION SHOULD GRANT REHEARING TO RECEIVE NEW E7IDENCE OF THE E7FECT ON THE QUANTIFICATION OF THE SCHEDULE DISALLOWANCE OF THE COMMISSION'S REDUCTION OF PMA'S MANHOUR SUGGESTED
- DISALLOWANCE.
As noted above, to be consistent the Commission must adjust its schedule penalty for the reductions in the manhour disallowance suggested by PMA. KG&E could not present evidence of the effect on the schedule penalty of the reduction in manhour disallowance because no adjustment in the suggested aanhour disallowance had been made prior to the Commission's Order.
A8 -
- 73. THE C0:08.ISSION SHOULD GRANT RENTARING TO RECEIVE NEY T/IDENCE OF IG&I' S SCHIOULE PERTOP.MANCE DURING POWER ASCENSION.
KG&E could not present evidence of its spectacular schedule performance during power ascension because power ascension was achieved after the hearings in this case commenced. The Commission must take into account the perfor-mance in achieving commercial operation in a period of time that is one of the shortest ever achieved in the nuclear industry, and should reduce the schedule penalty inposed on KG&E accordingly.
CONCLUSION -
Based on the foregoing, KGSE requests a rehearing, pursuant to K.S. A. 66-113b and K. A.R. 83-1 -235 ( c) (2) , (3)
(except KG5E does not request oral argument) , and (4) , with regard to the Commission's September 27, 1985 Order in Docket No.120,924-U and 84-KG&E-197-R 142,,099-U. Although KG&E does not request an oral argument, KG&E will participate in such argument if the Commission finds such to be of assistance in its dispositon of this Application.
Respectfully submitted, ,
EDGAR M. ROACH, JR. RALPH FOSTER RICHARD D. GARY JAMES HAINES LAURENCE E. SKINNER JONATHAN L. HEI.LER THOMAS E. GRAHAM Kansas Gas & Electric Conpany Hunton & Williams 201 North Market BB&T Btsilding P.O. Box 208 333 Fayetteville Street '41chita, Kansas $7201 P.O. Box 109 (316) 251-6742 Raleigh, North Carolina 27602 (919) 528-9371 y ,
Qsutbus $ -
d Nk ATIORNEYS FOR KANSAS GAS AND ELECTRIC COMPANY 49 -
i
CIRTIFICATI 0F SI27!CE I, the undersigned, hereby certify that a true and correc,e copy of the above and foregoing Application for Rehearing, in the captioned cases was deposited in the United' Scaces mail, postage prepaid, on October 7, 1985, addressed as follows :
Rob ert C. Johnson, Esq.
Thomas M. VanCleave, Jr. , Esq.
Peper, Martin, Jensen, Maichel and Hetlage 720 Olive Street, 24th Floor St. Louis, Missouri 63101 Milo M. Unruh. Esq.
Milo M. Unruh, Jr. , Esq.
Arn, Mullins, Unruh, Kuhn & Wilson 330 R.H. Garvey 31dg., Suite 330 300 West Douglas Wichita, Kansas 67202 John M. Simpson, Esq. ,
Simpson & Johnson 4350 Johnson Drive, Suite 120 .
Fairway, Kansas 66205 John Dekker, Es q.
- City Accorney & Director of Law .
City Hall - 13th Flocr 455 North Main Wichita, Kansas 67202 Robert Vinson Eye, Es q .
Irigonegaray, Eye & Florez 1535 TW 29th Street Topeka, Kansas 66611 Steven M. Dickson, Esq.
Judy A. Pope, Es q .
400 West 8th, Suite 611 Topeka, Kansas 66603 Larry T. McRell, Captain USAF Assistant Staff Judge Advocate McConnell AT3. Kansas 67221 Carl M. Anderson Assistant Accorney General 2nd Floor, Kansas Judicial Center Topeka, KS 66612 '
Karen L. Evens Conoco, Inc.
P.O. Box 1267 Ponca City, OK 74603 Robert M. Partridge, Esq.
Foulston, Siefkin, Powers & Eberhardt 700 Fourth Financial Center Wichica,, Kansas 67202 k
50 -
Donald P. Schnacke, Esq.
Executive Vice President Kansas Independent Oil & Gas Association 718 Merchants National 3ank 31d5 .
Topeka, KS 66612 Richard C. Byrd, Es q .
2nd & Main P.O. Box 7 Ottawa, Kansas 66067 Rodney Peake, Es q .
Peake & Navis 1836 M Street Belleville, Kansas 66935 a
Clifford L. Bertholf, Esq.
' Kassebaum & Johnson 125 N. Market, 15th Floor
~ Wichita, Kansas 67202 Warren B. Wood, Esq.
Kansas City Power & Light Company 8730 Nieman Road Overland Park, Kansas 64141
- Robert Fillmore, Es q . .
Scace Corporation Commission 4th Floor, State Office Bldg.
, Topeka, Kansas 66612 j
Marvin E. Rainey, Esq.
11110 Johnson Drive Shawnee, Kansas 66203 Gerald E. Williams, Esq.
12350 W. 87th Street Parkway P.O. Box 14888 Lenexa, Kansas 66215 C. Edward Pe. terson Perry & Hamill College Elvd. Nat'l Bank Bldg.
4650 College Blvd.
P.O. Box 7533 Overland Park KS .66207 John K. Rosenberg The Kansas Power and Light Company
$13 Kansas Avenue Topeka, Kansas 66601 Patrick Donahue. Es q .
Kansas Legal Services, Inc.
112 West Sixth, Room 202 Topeka, Kansas 66603 Thomas A. Clinstra, Esq.
100 West Santa Fe P.O. Box 768 Clathe, Kansas 66061 Lynn E. Ebel Deputy Director Johnson County Legal Department Johnson County Courthouse Olathe, Kansas 66061 51 -
. w y----- ,y-4, , - , - , - ,.,,,m, +- , .- +,
ae Lewis A. Heaven, Esq.
9000 W. 62nd Terrace Shawnee Mission, Kansas 66202
< wY d /A$k
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.'ena: nan L. Helier W
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