ML20140B960
| ML20140B960 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 06/04/1997 |
| From: | Charnoff G AFFILIATION NOT ASSIGNED, SHAW, PITTMAN, POTTS & TROWBRIDGE |
| To: | NRC COMMISSION (OCM) |
| Shared Package | |
| ML19317C343 | List: |
| References | |
| NUDOCS 9706090045 | |
| Download: ML20140B960 (22) | |
Text
{{#Wiki_filter:-_ _ __ . _ _ _ _ __ _ __ . _ .. _ __ 1 I' UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION l J In the Matter of )
)
North Atlantic Energy Service Corporation and ) Great Bay Power Corporation ) Docket No. 50-443
) (License No. NPF-86)
(Seabrook Station, Unit No.1) )
)
SUPPLEMENT TO GREAT B AY POWER CORPORATION'S PETITION FOR PARTIAL RECONSIDERATION OF EXEMPTION ORDER TO SUBMIT REQUESTED COST DATA AND TO REQUEST, IN THE ALTERNATIVE, A FURTHER EXEMPTION Great Bay Power Corporation (" Great Bay") hereby files this Supplement to its February 21,1997, Petition (the " Petition") with the Nuclear Regulatory Commission's ("NRC") l l O l () Office of Nuclear Reactor Regulation (hereinafter referred to as " Staff'). This Supplement is in i l response to the Staffs letter in the above-captioned matter," which offered Great Bay an i opportunity to submit additional information that would demonstrate its ability to recover its cost of generating electricity at Seabrook Station. It also requests a further exemption as an 1 i alternative to the Staffs reconsideration ofits previous determination that Great Bay is not an l
" electric utility." j I. Great Bay Has The Ability To Recover Its Costs of Gmeratine Electricity at I Seabrook Statien and Is An Electric Utility i l Attached hereto as Exhibit 1 is a Cash Statement of Great Bay Power Corporation l
l l reflecting actual, budget and forecast revenues from the sale of electricity, and cash outlays for i l u Letter dated May 15, 1997 from Mr. Albert W. De Agazio, Senior Project Manager in the Office of Nuclear 4 Reactor Regulation to Mr. Ted C. Feigenbaum, Executive Vice President and Chief Nuclear Officer, North Atlantic f)% ( Energy Service Corporat on. l l 9706090045 970604 i PDR ADOCK 05000443 1 0 PDR
1 l I the' cost of generating electricity, for the years 19% through 2001.L' This exhibit conclusively demonstrates that Great Bay is and will be able to recover its cost of generating electricity at Seabrook Station.
- As shown on page 1 of Exhibit 1, in 1996, Great Bay experienced cash revenues in excess ;
, I l of its total cost of generating electricity (including its required Decommissioning Trust Fund l payment) in excess of $900,000. The same page shows that Great Bay has budgeted and is L
- projecting that its revenues from the sale of electricity will exceed its cash costs of generating l
that electricity during calendar years 1997 through 2001 by approximately $25 million. l Page 4 of Exhibit 1 sets out the conservative average price assumptions for spot market
- sales and for Seabrook capacity factors for the relevant calendar years. The market price i
assumptions are conservative and are significantly below the market price projections offered by Richard Lacapra, the expert for the New Hampshire Public Utilities Commission, in the New Hampshire Statewide Electric Utility Restructuring proceeding, Docket No. 96-150. i i Pages 2 and 3 of Exhibit I present relevant projections of BayCorp Holdings' (Great j Bay's parent) Income Statement and Statement of Cash Flows. As the NRC is aware, Great Bay. through the end of calendar year 1996, had already accumulated $6.2 million in the Seabrook Decommissioning Trust Fund. Together with interest, < l that amount, as of April 30,1997, was $6.7 million. Page 1 of Exhibit I shows that from 1997 through 2001, Great Bay will contribute an additional $6.6 million, and interest income on those
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'# ' A redacted version of the Exhibit is attached to this document deleting sensitive commercial and financial information. The unredacted version is being filed separately together with an affidavit of Frank W. Getman, Jr., ;
ie Vice President and Chief Operating Officer for Great Bay, requesting that the NRC maintain the sensitive I ( commercial and financial information contained in Exhibit 1 in confidence under 10 C.F.R. i 2.790. ! l
I 1 amounts will total an additional $2.5 million as of the end of 2001. Accordingly, by the end of 2001, Great Bay will have over $15 million in the Deconunissioning Trust Fund? These amounts will continue to increase during the life of operation of the Seabrook unit, whose license expires in 2026. I The Great Bay Petition dated February 21,1997, demonstrated that Great Bay's rates are l
" established by a separate regulatory authority," 11, the Federal Energy Regulatory Commission.
This Supplement to the Petition shows that, under the rates filed with FERC, Great Bay recovers the cost of the electricity it generates. For these reasons, Great Bay satisfies the NRC's definition of'" electric utility" and again requests that the NRC reconsider its January 22,1997, Exemption i Order and determine that Great Bay is not subject to the decommissioning funding requirements l l of 10 CFR { 50.75 (e) 2. In the unlikely event that the NRC staff declines to make the finding requested above by Great Bay, Great Bay again respectfully requests an opportunity to orally argue this matter before the NRC. II. Great Bav's Resnonse to NRC's Exemntion Order In response to the NRC's Exemption Order, dated January 22,1997, Great Bay initiated an effort to determine the extent to which it could obtain a surety bond or other allowable decommissioning funding assurance mechanism. Great Bay asked Alexander and Alexander, a leading insurance brokerage service, and now owned by AON Risk Services ("AON"), to consider the development of such a surety bond or an alternative decommissioning funding l j ( [ E The Commission is also aware that Great Bay possesses from Eastern Utilities Associates, the former parent of Great Bay, a guarantee in the amount of $10 million for decommissioning the Seabrook Station. 3-
l l l* C assurance mechanism. In response, AON has initiated a program to try to obtain traditional l and/or non-traditional insurance or surety products to fund Great -Bay's decommissioning I l l obligation. AON's underwriting specifications, which it has issued to the insurance marketplace, I are set forth in Exhibit 2, attached hereto. Great Bay will keep the NRC informed of responses, l if any, to the AON underwriting specifications. Of course, in the absence of a pool of utilities requiring such financial assurance mechanisms such as a surety, it is not unlikely that the cost of a single surety would be so high that it would unduly prejudice a single electricity generator in today's increasingly competitive marketplace.E This, of course, remains to be determined, and itself provides a basis for the exemption requested in the next section. l III. Reauest For Exemntion The current exemption granted by the NRC's Exemption Order issued on January 22, i 1997, expires on July 22,1997. Recognizing that the NRC might require additional time to (a) evaluate the Petition as supplemented by this submittal, (b) consider its ongoing proposed j l rulemaking to determine whether the decommissioning funding requirements for the electric I otility industry should be modified in view of the ongoing restructuring and deregulation of the l 1 utility industry, and (c) evaluate the responses to the AON surety market survey, if any, Great l Bay respectfully submits that an additional exemption would be appropriate as an altemative to reconsideration of the January 22,1997 Exemption Order. An additional exemption, for a period l l of five years, as provided in 10 CFR { 50.12 (a) (1), would not present an undue risk to the i
- Indeed, as shown on Exhibit 3, in November 19%, Alexander & Alexander advised Great Bay that there were "no economically feasible alternatives" then available.
1
- e l
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- public health and safety and would be consistent with the common defense and security,2 and l
\'
would allow time to implement the new requirements, if any, which .would ensue from
- completion of the proposed rulemaking. ;
i I The "special circumstances" requirement of Q 50.12 (a) (2) is satisfied in this case. A five-year exemption would be consistent with the data shown in Exhibit I which demonstrates that the Seabrook Station will generate sufficient funds to Great Bay to cover its share of operating costs including its payments into the decommissioning fund. Therefore, the underlying i purpose of the decommissioning rule would not be affected by a five-year exemption (Q 50.12 (a) (2)(ii)). Moreover, any imposition of a specific surety obligation on Great Bay would only i impose on Great Bay an additional cost. While the magnitude of that incremental cost has not l yet been determined by the AON work, it surely would prejudice the ability of Great Bay to l l N - compete successfully in the competitive electricity sales market now prevailing in New England l and the rest of the United States. This would subject Great Bay to costs significantly in excess of j those incurred by other utilities owning interests in nuclear power plants (Q 50.12 (a) (2) (iii)). A five-year exemption would permit the NRC to complete its proposed decommissioning rule j making and would provide Great Bay only temporary relief from the requirements of @ 50.75 L (e)(2). Finally, the AON activities in response to Great Bay's urging demonstrates Great Bay's good faith efforts to comply with 50.75 (e) (2) (Q 50.12 (a) (2) (v)). For these reasons, a five-year exemption under 10 CFR Q 50.12 would be appropriate in , this instance. f E in its Exemption, dated January 22,1997, the NRC found that " Great Bay has demonstrated that it possesses or ! has reasonable assurance of obtaining the funds necessary to cover estimated operations costs for the period of the license as required by 10 CFR 50.33 (fX2)." (pp. 3-4) l l
IV. Conclusion i O In conclusion, Great Bay respectfully requests that the NRC find that:
]
i (a) Great Bay is an " electric utility" as defined in 10 CFR { 50.2; or that (b) in the alternative, a five-year exemption from the decommissioning funding requirements of 10 CFR 50.75 (e)(2) should be granted to Great Bay. Respectfully submitted, GREAT B Y POWER CORPORATION i By: /uY) A )( ' G,erald Cfd nT>ff Shaw, Pittman, Potts & Trowbridge g 2300 N Street, N.W. Washington, D.C. 20037 i (202) 663-8032 l June 4,1997 44776344 I DOCSDCI l.
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3 GREAT BAY POWER CORPORATION $ Cash Statement . Revenues from the Sale of Electricity and Costs of Generating Electricity (000's) M j E 4 M femast i n 1 2000 m Actual ; Budget h Foman z femast femast REVENUE ( ) { ; Sales $30,269.6 *g Other Revenues 54.6 Total Operating Revenues 30,324.2 i COSTS OF GENERATING ELECTRICITY
- Production 12,775.1 Nuclear Fuel 5,143.8 ,
Transmission 880.1 ) Plant Admia & General 4,240.4 j i Capital Espenditures 1,486.1 j Tases Other than Income - 4,206.1 { Decommissioning Trust Fund Payments 993.7 l Decommissioning Trust Fund Interest (328.0)d ( Total Cost of Generating Electricity 29,397.3 1 i Total Cash Generatedfrom the i Sale ofElectricity $926.9 ' 1 s I i
- n. ; . . ,
TNs Statement does not include BayCorp or Great Bay corporate administrative costs, marketing expenses, corporate office depreciation or payroG taxes on corporate sal aries _ 2 31PM 548S7
1 i i l l BAYCORP HOLDINGS, LTD. INCOME STATEMENT (000's) i l l 1996 , L991 i 12!8 3 L92! ! 2000 ; 2ool Anual , Baded hncan hncan kncan ; kncan REVENUE j l .; , 3 ! Sales $30,269.6 l Other Revenues 54.6 Total Operating Revenues 30,324.2 l l l OPERATING EXPENSES l l Production 12,775.1 l t i Nuclear Fuel Amortization 4,366.0 Transmission 880.1 Administration & General 6,864.6 l 4 l Plant Depreciation 3,450.8 l Taxes Other than Income 4,226.7 Total Operating Expenses 32,543.3 } l Operating income (2,239.1) j i l Other Income ( Expenses ) Interest Expense (6.3)l l Interest income 1,600.9 l l Decommissioning Accretion (2,260.8) } ! Other Income (Deductions) 7,005.0 l Total Otherincome/(Expense) 6,338.8 k income Before Taxes 4,099.7 f 4 Income Tax 0.2 Net income 54,099.5 i g- ,.;, .
' ~ ~
I 2.35 Fht 5/28/97 i
i ! b\ BAYCORP HOLDINGS, LTD. l (' STATEMENT OF CASH FLOWS (000's) M 1 E M 1999 2000 , E
.eamat ; a=4a ruuaa reann renan rauaa i
CASH FLOWS FROM OPERATING ACTIVITES: e i i Net locome ( Loss) S4,099.5 l l Adjustments to reconcile Net Income To i Net Cash provided by Operating Activities: l Depreciation & Amortization 3.450.8 : Nuclear Fuel Amortization 4M.0 i I Deferred Taxes 0.0 ! Asset Write Downs 0.0 Decommissioning Trust Accretion 2,260.8 Decommissioning Trust Interest (356.6) Gain on Sale of Assets Change in Assets / Liabilities (7,061.0) } (Increase) Decrease in: { Accounts Receivable (1,391.6) ' Materials & Supplies (70.4)! Prepayments & Deferred Debits 818.4 ; Increase (Decrease)in: Accounts Payable (107.0) . Taxes Accrued
- 211.2 !
Other 3,165.2 ; e Net Cash Provided(Used in) Operating Activites 9,384.3
\ \J CASH FLOWS FROM INVESTMENT ACTIVITIES:
Gross Additions to Utility Plant (1,486.1) Gross Additions to Nuclear Fuel (5,143.8)l Decommissioning Fund Payments (993.7)! Proceeds from Sale of Fixed Assets lloiding Gain / Loss 7,061.0 43.4 '! Decrease /(Increase) in ST Investments (4,724.5)I Net Cash l>ovided from (Used in) Invesanent Activities (5,243.7) } CASH FLOWS FROM FINANCING ACTIVITIES. Reacquired CapitalStock Common (632.8)j Warrants Exercise 4.073.6 i Nn Cash Provided From (Usedin) Financing Activides 3,440.8 NET INCRE (DECR)IN: CASH AND EQUIVALENTS 7,581.4 ! SilORT TERM INVESTMENTS 4,724.5 TOTAL CASH & INVESTMENTS 12J05.9 i TOTAL CASH AT BEGINNING OF PERIOD 16.468.7 TOTAL CASH AT END OF OF PERIOD S28.774.6 1
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10 I 5/2s/97 2.35 PM
l ) (~ ( l GREAT BAY POWER CORPORATION Spot and Short Term Market Sale Price and Capacity Factor Assumptions Underlying Net Income and Cash Flow Projections YEAR AVERAGE PRlCE FOR SPOTMARKETSALES SEABROOK CAPACITYFACTOR 1996 S23.16/MWh 96.5 % 1997 1998 1999 2000 I 'Q 2001
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l i h, f 5/28/97 2:35 PM l', l l
1 O GREAT BAY POWER CORPORATION 7adte of Gmetesaa Pages
- 1. Executive Summary and Overview 1
- 11. Cash Flow Considerations 3 O iii. socieer seguietory Commission sequiremente 4 1 IV. Traditional and Non-Traditional Insurance 5 Marketplace Alternatives V. Conclusion 7 l
VI. Appendix 1996 Annual Report and 10-K
. First Quarter 199710-Q e Joint Ownership Agreement 4
O Aon Risk Services l
l > l l
- GREAT BAY POWER CORPORATION !
!] 1. Executive Summary and Overview We are pleased to enclose underwrit ng specifications applicable to Great Bay Power Corporation's (hereinafter referred to as Great Bay) decommissioning liability. There are three groups who's interests must be met in order to successfully develop an insurance /non-insurance product for the decommissioning of the Seabrook Nuclear i Facility. These three groups are:
)
+ Great Bay
+ Nuclear Regulatory Commission ("NRC")
+ Insurance Marketplace (traditionalinsurance and non-insurance)
Recent Developments On January 27, 1997, the NRC issued a temporary six month exemption related to Great Bay's status as an " electric utility". In the exemption, the NRC staff stated that it believes that Great Bay does not currently satisfy the definition of an " electric utility". If Great Bay is an " electric utility", then the NRC decommissioning requirements are (j satisfied by Great Bay making monthly payments into the decommissioning trust fund. If Great Bay is not an " electric utility", the NRC can require that Great Bay provide a surety bond or other allowable decommissioning funding mechanisms. The NRC has i defined financial assurance as follows:
. Prepayment
. External sinking fund
. Surety Bond
. Insurance or other guarantee method Each group stated above has unique concerns which must be met to adequately fund for the decommissioning of Seabrook. The following are various concems addressed in this submission:
. Smooth out Great Bay's cash outflow for the decommissioning costs associated with Seabrook.
. Satisfy NRC's requirements associated with the decommissioning of Seabrook.
. Design a product which the market place can respond too.
l l [ l
'Page
l l l GREAT BAY POWER CORPORATION
,O V We are interested in securing a traditional and/or non-traditional insurance or surety l product. This could be accomplished by the following: i l .
Pooling of similar entities to develop a ratable insurance product. l Create a wholly owned captive, or rent-a-captive for Great Bay. Develop a stand alone insurance product by ascertaining the appropriate self- ! insured retention (SIR) level and limit of liability (i.e. a $10 MM SIR w/ a $43.0MM l limit of liability at a discounted premium which equal the limits of liability over ; time.) .
. Fund the $53MM to an insurer at $92,000/mo. for 30 years. )
Pyramid renewable policy limits at $8.83MM at a monthly discounted premium. 1 Ascertain a Surety Bond in the amount of the decommissioning liability which l declines as payments are made to the decommissioning trust fund, l O l l lO l BON $k OTT U$
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1 GREAT BAY POWER CORPORATION m II. Cash Flow Considerations V l Smooth out Great Bay's cash outflow for the decommissioning costs associated with Seabrook. l The current estimated cost to decommission Seabrook, based on a study performed in 1996 for the lead owner of the Plant, is approximately $439MM in 1996 dollars and future value of $2.3B in 2026 dollars, assuming a 30-year life for the facility and a 5.0% escalation rate. Based on this estimate and the current value of Great Bay's (Great Bay) share of this value in 1996 dollars is approximately $53.2MM. Great Bay is currently under a sixth month exemption with respect to its status as an
" electric utility". Great Bay rneets its current decommissioning obligation by monthly funding into a decommissioning trust at a level of approximately $92,000/ month.
The enclosed Exhibit 1, outlines the cumulative value of funding $92,000/ month over 30 years at four interest rates of 4.5%, 6.0%, 8.0% and 10.0%. Over 30 years the cumulative value of each fund would equal the following: (4.5%) $70,124,191 (6.0%) $92,874,704 (8.0%) $138,020,494
) (10.0%) $209,682,847 Exhibits 2a,2b,2c,2d, and 2e identify the equilibrium points of each payment stream over a 30 year funding period and the point where the cumulative fund equals a '
pledged limit. Every five years, a limit of $8.83MM will be pledged until the anticipated obligation or limit of $53.0MM, is reached. These results could lead to the following alternatives: i ! . Establish a baseline internal rate of return perhaps at 4.5%. At 4.5%, the estimated obligation of $53.0MM would be satisfied in year 2019.. 4
. Great Bay would fund the decommissioning liability throug.i a third party assuming the third party can guarantee rates of return greater than 4.5%.
. If we assume investment return spreads of 1.5% (4.5% to 6.0%),2.0% (6.0% to 8.0%) and 2.0% (8.0% to 10.0%) the equilibrium points of each alternative materially change from 2019 to 2014 to 2010 to 2008, respectively.
. The potential investment income spread could represent an opportunity for a third party insurer to guarantee and participate in certain levels of increased investment income, thereby increasing their level of interest in the project. This 9 forecasted investment income stream could be the basis of a traditional (O insurance product or non-insurance finite product.
Aon Risk Services
i Great Bay Power Corporation Finite Limit of Liability at Various IROR t Exhibit 1 3250,000.000 , l ECumulative Finite UmR @ 10% i D Cumuistrve Finne Umt @ 8% SM000,000 0 Cumulative Finne Umt @ 6% J i
. 5 Cumulative FinRe UmR @ 4.5% '
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- 6.316 721 7.737 148 82230'S 10 778 001 12 406 2no ' 14105 549 16 885 044
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- S3 074 523 88 ese ese 84 283 Ole 34 M .4710,410 l 37.446 40.297.229 Stf 80.377 m- v u2 . 29 m:n u m .= M2 eumm u . 04 . M M0F : oam , = = F4079, m se 30,.7 m,400 a m.a. 27 e27 m = = 417 nam = = = n Gilm 3.M 7 m.141 003 .n g.1 .0 m a e u - m7 M7.2M n,2. . 04. M 9m.i Oft .M.087 . 20. e PS $20 tre 27 021 062 30.223 358 22.753 les 35 3es 648 e 3014e ete 41.sae 350 44 04s tel 47 20t 338 50 301040 e 63 e62 333 57.981 177 81.337 857 45.200 Dat et 417 647 e tSJ0s.231 28 020 547 30 4N Dee 32 050.739 38 814 801
- 30 302.013 41.27B ene 44 M4 000 47 470 ese 60 782 784
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- 43.332.4?4 4F 144 013 81.184 004 SS 492.064 80.056 201 e se See sed 70 0413t3 75 503 SF7 51.301 443 0F 454 445
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- 33 91414F 37 852.633 41 175 282 48 SJ3 m 51873 298 [ BF 331.732 33 243 321 80 645 815 75 57% 087 M 008143 92 220 447 101.027 727 tio.See 008 120 898 set 132.083 298 l M 232. A$4 38 227 193 42.863 001 4F 237 573 82 311 F31e $7 900 50s 83 F57 857 70.202 432 77.182 228 M Fet 444 e 92 027 e63 101 793 958 til 395 720 121.794 548 133 OM 484 e M B63 687 M 574 066 42 029 301 4F 945 608 52 753 0s9 e $$ 2M 890 64 275.220 70.F83 081 F7.789 MS 95 au 900 s 03 $30 Be6 102 SSE OBS 112 230 000 82189P 125 134 038121 e M 870.888 30 924 432 43 aus 170 es 056 7te 531sF.3ee e 68 7st.F?e M F90 336 71 327 420 75 400 See 86 000 830 e M 358 875 103 M1478 113 071 798 123 000 732 135 022.308 e 34 2D1.782 33 275 M2 43 Set 800 48 464 Tot 53 644 S$28 60 230 tot 86 320 924 F1806 6W 79 916 es3 es F2i191 ' BS 078 534 104 123 036 113 tis 226 124 620 410 = Dil 070 '
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O O O Great Bay Power Corporation , Summary of Payments Made vs. Limits Assuming a 4.5% IROR Exhibit 2a .
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O O O Great Bay Power Corporation Summary of Payments Made vs. Limits Equilibrium of Payments to Limits at Various IROR Exhibit 2e Cumulative Cumulative TotalPay-in Year Total Limit 4.5% l 6.0% l 8.0% l 10.0% 1997 8,833,000 1,130,924 1,140,060 1,152,369 1,164,826 1998 8,833,000 2,314,162 2,350,923 2,401,045 2,452,464 1999 8,833,000 3,551,758 3,636,469 3,753,359 3,874,935 2000 8,833,000 4,846,208 5,001,304 5,217,915 5,446,357 2001 8,833,000 6,200,126 6,450,320 6,804,029 7,182,328 5 yrs 2002 17,666,000 7,616,242 7,988,707 8,521,789 9,100,078 2003 17,666,000 9,097,414 9,621,979 10,382,122 11,218,640 2004 17,666,000 10,646,631 11,355,988 12,396,863 13,559,045 2005 17,666,000 12,267,019 13,196,947 14,578,825 16,144,520 2006 17,666,000 13,961.848 15,151,452 16,941,890 19.000,728 fo yrs 2007 26,499,000 15,734,536 17,226,506 19,501,087 22,156,018 2008 26,499,000 17.588,661 19,429,545 22,272,697 l 25,641,708 2009 26,e99,000 19,527,965 21,768,463 25,274,349 29,492,396 2010 26,499,000 21,556,359 24,251,641 l 28,525,137 l 33,746,301 2011 26,499,000 23.677,938 26,887,975 32,045,738 38,445,646 75 yrs. 2012 35,332,000 25,896,982 29,686,912 35,858,548 43,637,073 2013 35,332,000 28,217,969 32,658,482 39,987,819 49,372.111 2014 35,332,000 30,645,581 l 35,813,332 l 44,459,817 l 55,707,682 2015 35,332,000 33,184,717 39,162,766 49,302,989 62,706,670 2016 35.332,000 35,840,500 42,718,786 l 54,548,142 l 70,438,544 20 yrs. 2017 44,165,000 38,618,290 46,494,133 60,228,640 78,980,046 2018 44,165,000 41,523,691 50,502.336 66,380,617 88,415,955 2019 44,165,000 44,562,566 l 54,757,756 l 73,043,205 98,839,926 2020 44,165,000 47,741,046 59,275,640 80,258,784 110,355,424 2021 44,165,000 51,065,545 64,072,178 88,073,252 123,076,745 25 yrs. 2022 52,998,000 54,542,770 l 69,164,556 96,536,318 137,130,154 2023 52,998,000 58,179,739 74,571,021 105,701,814 152,655,139 2024 52,998,000 61,983,790 80,310,944 115,628,041 169,805,793 2025 52,998,000 65,962,598 86,404,893 126,378,141 188,752,344 2026 52,998,000 70.124,191 92,874,704 138,020,494 209,682,847 so yrs.
GREAT BAY POWER CORPORATION I tr 1\'~) lli. Nuclear Regulatory Commission Requirements 1 Satisfy the NRC's requirements associated with the decommissioning of Seabrook . There are a number of risks that could affect the existing funding mechanism as follows: While the joint ownership agreement provides for pro-rata liability among the owners, the NRC could try to impose joint and several liability among co-owners of nuclear facilities. i If a co-owner was not able to make its monthly payments, Great Bay might be required to pay a greater portion of Seabrook expenses. l . If Great Bay loses its status as an " electric utility", it could result in greater decommissioning expenses due to the need to provide additional financial assurance.
. The NRC could require the owners of Seabrook to close the plant prior to its planned closure in 2026.
. A change in the NRC's requirements or technology could increase or decrease decommissioning costs.
I
. The result of the above actions in whole or part could result in a change or I decrease in the funding of Great Bay's decommissioning liability.
. Deregulation could cause Seabrook to be an uncompetitive power supply alternative.
l These points are underwriting considerations which should be an integral part of a third party insurer evaluation. l h V Page 4 Aon Risk Senrices
l SHAw, PITTMAN, PoTTs & TROWBRIDGE a pant =aase i> *=cLuciao amortasc=ai. compomations 2300 N STRE'T. N. W. ![ f
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(202 e 63 e o f GC AALO CHARNOFF. P C_ February 21,1997 NRC Oeenein I icense No. NPF-86 Doelcet No. 50-443 NYN-96031 l United States Nuclear Regulatory Commission Attention: Document Control Desk Washington, D.C. 20555 Re: Seabrook Station, Unit No.1 Petition of Great Bay Power Corporation l For Partial Reconsideration of Exemption Order Gentlemen: I am enclosing on behalf of Great Bay Power Corporation (" Great Bay") a petition for (] V partial reconsideration of the Exemption Order issued on January 22,1997 by the Office of Nuclear Reactor Regulation with respect to Great Bay. In the enclosed petition, Great Bay seeks reconsideration of the Staffs preliminary finding that Great Bay is not an " electric utility" as defined in 10 C.F.R. { 50.2 and that Great Bay mu:;t therefore meet the l decommissioning funding requirements for nonSelectric utilities in 10 C.F.R. { 50.75(e)(2). As set forth in the enclosed petition, Great Bay believes that it is an " electric utility" under 10 l C.F.R. { 50.2 and therefore is not subject to the decommissioning funding requirements of 10 l C.F.R. { 50.75(e)(2). Si cerely, l 4 , Y l
< Gerald Chamoff
/
Attachment ! cc: Frank J. Miraglia, Jr. Acting Director Office of Nuclear Reactor Regulation ' n M@MEWM' .V FER 2 61997 o
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U T United States Nuclear Regulatory Cornmission February 21,1997 Page 2 Dr. Shirley Ann Jackson, Chairman Office of the Chainnan Nils J. Diaz, Commissioner Office of the Commissioners ( I Greta J. Dicus, Commissioner . j Office of the Commissioners Edward McGaffigan, Jr., Commissioner Office of the Commissioners Kenneth C. Rogers, Commissioner Office of the Commissioners O Mr. Hubert J. Miller Regional Administrator, NRC Region 1 Mr. Albert W. DeAgazio j Senior NRC Project Manager ! Mr. John B. MacDonald j Senior NRC Resident Inspector i Steven R. Hom, Esq. : NRC OfYice of General Counsel l Mr. Robert S. Wood NRC Office of Nuclear Reactor Regulation j i I e 4 i I iO - i i
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l I Q UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of )
)
North Atlantic Energy Service Corporation and )
) Docket No. 50-443 l
! Great Bay Power Corporation !
) (License No. NPF-86) !
)
(Seabrook Station Unit No.1)
) )'
! l i PETITION OF GREAT BAY POWER CORPORATION l l FOR PARTIAL RECONSIDERATION OF EXEMPTION ORDER l l i Great Bay Power Corporation (" Great Bay") hereby petitions the Nuclear Regulatory l Commission's ("NRC") Office of Nuclear Reactor Regulation (hereinafter referred to as " Staff") !O 22,1997 in the C/ for partial reconsideration of its Exemption Order issued on January above-captioned proceeding (" Exemption Order"). Specifically, Great Bay seeks reconsideratio ! of the Staffs preliminary finding that Great Bay is not an " electric utility" as defined by the NRC in 10 C.F.R. s 50.2, and therefore Great Bay must meet the NRC's decommissioning funding requirements contained in 10 C.F. R. Q 50.75(e)(2). The Exemption Order's conclusion is based on a supposed distinction between long-term L and short-term rates. In fact, all of Great Bay's rates -- including those for long-term sales and l
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spot market sales at market-oased prices -- are " established by . . . a separate regulatory authority" -- the Federal Energy Regulatory Commission ("FERC" or " Commission"). As set forth fully below, no distinction can be drawn between FERC's establishment of long term a short-term rates for Great Bay. Both are equally subject to FERC jurisdiction and regulation. {
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l l I l i l l Great Bay, therefore, is an " electric utility" under 10 C.F.R. { 50.2, and is not subject to the decommissioning funding requirements of 10 C.F.R. @ 50.75(e)(2). l I.ARGUMENl A. Prior To The Exemption Order, The NRC Had Recognized Great Bay To Be An Electric Utility Under Its Current Regulations. Great Bay is currently an investor-owned public utility organized under the laws of New Hampshire? It owns an undivided 12.13240 percent ownership interest in the Seabrook Station l l l (equivalent to approximately 140 megawatts of capacity). It sells its share of the electrical output , of Seabrook at wholesale as a public utility subject to the jurisdiction and regulation of the l FERC, as desenbed below. Prior to its reorganization under bankruptcy, Great Bay held the e license for its 12.13240 percent ownership interest in Seabrook as EUA Power Corporation i( l t ! ("EUA Power") and was similarly organized as a New Hampshire public utility. l Prior to the January 22,1997 Exemption Order, the NRC had always recognized Great l l Bay and its predecessor, EUA Power, as an electric utility. The Seabrook Operating License issued March 15,1990 identified EUA Power as one of the Seabrook licensees and referred to the licensees for the plant as " utilities." Similarly, the NRC's " Safety Evaluation . . . Supporting L' The New Hampshire statutes define an electric "public utility" as follows: 362:2 Public Utility. The term "public utility" shall include every corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receivers appointed by any court, except municipal corporations and county corporations operating within their corporate limits, i owning, operating or managing any plant or equipment or any part of the same for . . . the generation, transmission or sale of electricity ultimately sold to the l public . . . . N H.R.S.A. 362:2. Great Bay falls within this definition. 4 l 2-l
\ Amendment No.10 To (The Seabrook) Operatir.g License" of May 29,1992 describes Seabrook j
l i as "being operated on behalf of the licensees, a gros of investor-oned and municical i utilities."E After EUA Power was reorganized and renamed as Great Bay, the Seabrook license . was amended to delete EUA Power and to add Great Bay as one of the Seabrook licensees. The ; l license as amended continued to refer to Great Bay and the other Seabrook licensees (except for l l North Atlantic Service Company) as " utilities."2 l B. The Staff's Ruling That Great Bay Is No Longer An " Electric Utility" Is Incorrect As A Matter Of Fact And Of Law And Persisting In It Would Be Arbitrary And Capricious. l 1 According to the Exemption Order, at the time the NRC approved Great Bay's plan for ! emergence from bankruptcy in 1993 the NRC believed that: i I ( l (j\ Great Bay would continue to be an electric utility based upon its status as such prior to bankruptcy and upon the expectation that the i reorganized entity would be successful with obtaining long term contracts for the sale of most of its share of pov.er from Seabrook. l Exemption Order at 2. The Exemption Order goes on to find, however, that Great Bay "no l 50.2 of the NRC's longer" meets the definition of " electric utility" set forth in 10 C.F.R. regulations. Id. at 3.' Accordirq to the Exemption Order: I "Srfety Evaluation By ne OfYice Of Nuclear Reactor Regulation Supporting Amendment No.10 To Faci Operating License No. NPF 86, Public Service Company Of New Hampshire, Seabrook Station, Unit N No. 50-443," May 29,1992 (emphasis added). L' Amendment No. 23 to Facility Operating License No. NPF-86, for the Seabrook Station Unit No.1, August 16, 1993. L in pertinent part, the relevant statute provides: Electrie utility means any entity that generates or distributes electricity and
,Q which recovers the cost of this electricity, either directly or indirectly through
() rates .. established by a separate regulatory authority. (emphasis in original). Investor-owned utilities . are included within the meaning of
- electric utility."
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l l l ! G ! bl Great Bay has successfully entered into one long term contract, which is for 10MWe, Great Bay sells its remaining 130MWe share of Seabrook power on the spot wholesale market, which by definition is subject to market-set rates. The staff believes that i although FERC may exercise general regulatory oversight over ! spot market rates, such rates cannot be considered to be " rates established by . . . a separate regulatory authority." f M. (emphasis in original). The Staffs attempt to distinguish between long-term and short-term sales and its characterization of FERC's establishment of such rates simply is incorrect. As set forth in detail below, Great Bay's market-based rates for spot market sales were established by a separate ! regulatory authority -- the FERC - in its May 17, 1996 letter order in FERC Docket Nos. ER96-726 000, ER96-728-000 and ER96-1204 000 ("May 17 Order").u FERC's jurisdictional o authority and the rate-setting standard it must apply are precisely the same for long-term an lly short term transactions. All of Great Bay's sales are pursuant to rates established by FERC. Given that the Staff has not " articulate [d] a satisfactory explanation" for its finding, nor has it set forth "a rational connection between the facts found and the choice made," its conclusion that Great Bay is not an " electric utility" under 10 C.F.R. f 50.2 i:: arbitrary end capricious and must be reconsidered. Su Motor Vehicle Mfrs. Ass'n v. State Farm Mut. InL,463 U.S. 29,43 (1983); Burlington Truck Lines. Inc. v. United States,371 U.S.156,168 (1962). 1 l l The Staffs observation that Great Bay "no longer" meets the definition of " electric l utility" set forth in 10 C.F.R. j 50.2 is also at odds with the final sentence of Q 50.2, w 7 explicitly provides that "{i]nvestor-owned utilities . . are included within the meaning (V E Appendix 1 of this Petition contains a copy of the FERC's May J7 Order. l l
' electric utility.'" Without consideration of this inclusive statement in the regulato y definition, l
the Staffs position is patently arbitrary and capricious, for there surely is no dispute that Great f i Bay is an investor-owned utility. C. The FERC Has Jurisdiction Over Great Bay's Rates For Both Long-Term And Short-Term Market-Based Sales To Assure Just And Reasonable Rates. Pursuant to Section 201 of the Federal Power Act ("FPA"), the FERC has jurisdiction
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l 1 over (1) the transmission of electric energy in interstate commerce; (2) sales of electric energy at wholesale in interstate commerce; and (3) all facilities used for such transmission or sales. 16 1 i U.S.C. 824(b)(1). The FPA defines "public utility" as any person who owns or operates facilities subject to the FERC's jurisdiction.16 U.S.C. { 824(e). Because Great Bay sells its l l share of the electric output from Seabrook at wholesale in interstate commerce and owns and lp iV operates facilities used for such sales, Great Bay is a public utility subject to the FERC's FPA jurisdiction. l Section 205 of the FPA grants FERC jurisdiction over "[alll rates and charges made, L l demanded, or received by any public utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission . . . ." 16 U.S.C. { 824d(a) (emphasis added). Nothing in this jurisdictional statement of FERC's authority and responsibility.over interstate wholesale rates creates a distinction between spot marke long-term wholesale sales. Rather, as the FPA states, "all" sales of electricity at whole interstate commerce are subject to FERC's rate jurisdiction. i e , ( _ _ _ _ _ _ _ _ _ _ _ .
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k Section 3(4) of the FPA defines " person" as an individual or corporation.16 U.S.C. i 796(4). j l ; l
i O Under Section 205 of the FPA, the FERC is required to ensure that a public utility's rates ! for the sale of electricity at wholesale are "just and reasonable." nrough this Section, " Congress 1 I delegated ratemaking authority to FERC in broad terms." Farmers Union Cent. Exch.. Inc. v. l FERC,734 F.2d 1486,1501 (D.C. Cir.), cert denied,469 U.S.1034 (1984). Thus, in arriving at a "just and reasonable" rate "no single method need be followed." Wisconsin v. FPC,373 U.S. 294,309 (1963). Indeed, the United States Supreme Court "has repeatedly held that the just and reasonable standard does not compel the Commission to use any single pricing formul?. . . . ." Mobil Oil Exnicration v. United Distribution Co ,498 U.S. 211,224 (1991). Traditionally, the FERC has set just and reasonable rates through cost-of service i regulation. Nevertheless, the Supreme Court consistently has recognized that the FERC is not O V required "to adhere ' rigidly to a cost based determination of rates . . . .'" FERC v. Pennzoil Producine Co.,439 U.S. 508,517 (1979), ouotme, Mobil Oil Com v. FPC,417 U.S. 283,308 (1974). In fact, courts have specifically found that when there is a competitive market, FERC may rely upon market-based prices to assure just and reasonable rates. Elizabethtown Gas Co FERC,10 F.3d 866,870 (D.C. Cir.1993); see also Teias Power Corn. v. FERC,908 F.2d 998, 1004 (D.C. Cir.1990); Farmers Union,734 F.2d at 1510. De rationale behirid these findings is that market based rates will assure that consumers are not being charged monopolistic prices. In Elizabethtown Gas Co v. FERC, for example, the U.S. Court of Appeals for the D.C. Circuit upheld FERC's authorization of market-based rates for natural gas sales under the "jus and reasonable standard" contained in Section 4 of the Natural Gas Act ("NGA"), which is ! n 6-
i l l lO I (m) analogous to Section 205 of the FPA.L' In that case, the D.C. Circuit held that the FERC's authorization of market-based rates satisfied its statutory obligation to ensure just t rates. Importantly, the Elimbethtown court also rejected petitioners' contentions b d l those implied by the NRC in the Exemption Order -- that FERC's approval of ma l l ! l pricing constituted " virtual deregulation" of natural gas sales rates. E1in! ! l l l 870. Similarly, the FERC itself has specifically rejected challenges to its authority market-based rates for sales of electricity. Thus, the FERC has found that "the FP i require the Commission to use any particular methodology in determini rate satisfies the statutory standards of section 205". Enron Power Enteroris If% Co. of Indiana, 5.1 FERC $ 61,367 (1990), ld l 61,193, 61,709 (1990); see also Public Serv The FERC also has l l Commonwealth Atlantic Ltd. Partnershio, 51 FERC $ 61,368 (1990). l concluded that authorizing the use of non-cost factors in setting rates is co l obligations to ensure that electric utilities charge "just and reasonable" r :
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I 61,709 10; Public Serv. Co., 31 FERC at 62,221-23; Commonwealth Atla t l 62.246-47. I in fact, the FERC, like the courts, has rejected contentions that accepti utility's market-based rates "is tantamount to deregulation of wholesal I i Pubhc Serv. Co.,51 FERC $ 62,220. As these court and FERC preceden i
- It is well. established that "[p)tecedents interpretingSprthern Section Natural 205 of FPA are Gas Co..
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and vice versa." Tenneuce Gas Pireliat_C2. 77 FERC 161, 1971) cert denied. 405 U.S. 989 (1972). . 7-l l
can fulfill its FPA Section 205 statutory obligation to establish "just and reasonable" rates for wholesale sales of electricity -- both long-term and shon-term -- by authorizing electric utilities 9 to charge market based rates, without compromising its obligation under FPC v. Hoce Gas Co. 320 U.S. 591, 605 (1944), to establish rate which " enable the company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investo for the risks assumed".5' D. FERC Has " Established" Great Bay's Rates For Both Long-Term And Spot Market Sales. l As set forth above, under the plain language of the FPA, Great Bay, as a "public utility, was required to seek FERC's prior mte authorization to sell at wholesale its share of electricity generated at Seabrook, regardless of whether those sales would be made purs long-term or spot market contracts. Consistent with this requirement, by letters dat 29,1995, February 28,1996 and March 15,1996, Great Bay submitted for filing with FER power sales tariff and related service agreements that provide for wholesale ' s rates or electricity generated at Seabrook. The request for market-based rates was appl h , r hoih Great Bay's long term and short-term sale of electricity. Upon its review of Grea filings, the FERC on May 17,1996 issued a letter order accepting and making eff Bay's tariff, including the market based rates to be charged thereunder for both I short term sales. L in setting rates, FERC has followed the Supreme Coun's decision in Bluenetd Waterwor 2 v Public Service Comm'n. 262 U.S. 679,692 (1923) by accepting rates which permit i a utility to to that on " investments in other business undertakings which are attended by corresponding
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G As the court has recognized in Farmers Union and Elimbethtown, and as the FERC has found in Enron and Public Service Co. ofIndiana; by accepting and making effective Great Bay's market based rates, the FERC fulfilled its statutory obligation to ensure that those rates would satisfy the ratemaking standard set out in the FPA for all rates established by FERC.t Thus, in the May 17 Order the FERC " established" Great Bay's rates under the same legal standard it previously applied to " establish" rates based on long-term sales contracts. Indeed, by Order of April 30,1993 in FERC Docket No. ER93-495-000, the FERC similarly accepted a long-term power purchase agreement between Great Bay and UNITIL Power Corp.,8 which the NRC has correctly accepted as being established by FERC.W The conclusion that the FERC " established" Great Bay's wholesale rates is further p
- supported by the fact that the rates accepted on May 17-- including the rates Great Bay may 1 charge for spot market sales -- remain subject to FERC's jurisdiction. For example, the rates, terms and conditions for all of Great Bay's wholesale sales in interstate commerce must be 2' One procedural aspect of the FERC's review of Great Bay's inte filings at FERC should be noted. Great Bay filed its rates pursuant to Section 205 of the FPA, as does every electric utility subject to FERC jurisdiction. Here, there being no opposition to Great Bay's rate filing, the Commission permitted the filed rates to go into effect without suspension or hearing. It need not have done so. Nor is its practice with regard to suspending a rate prior its becoming effective in any way related to whether the rate is short term or long term or to whether the rate is market-based or cost-of service. It is, rather, an exercise of the Commission's discretion as to whether the rate as filed appears to be just and reasonable and whether any party has raised questions conceming it. The cruci with regard to the Exemption Order's analysis is that, under Section 205, these rates, upon acceptance Any for G established as Great Bay's lawful rates, and remain such until changed by Commission action.
Commission initiated action to change them would have prospective effect only.
- Appendix 2 of this Petition contains a copy of the April 30,1993 Order.
- Both the April 30,1993 and May 17,1996 Orders contain language which states "[t]his acceptance for filing does not constitute approval of any service, rate, charge classification, or any rule, regulation, contract, or pracice affecting such rate or service provided for in the filed documents; . . . ." April 30 Order at 2; May 17 Order at Given that the FERC maintains the right to initiate its own investigation of the rates, or to investigate the rates ba O upon the complaint of a third party, FERC traditionally " accepts" but does not " approve" rate filings. The FERC accepted these filings and made them effective after review demonstrates that FERC established these rate even if they are subject to subsequent review or reconsideration by FERC.
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consistent with the tariff accepted by the FERC's May 17 Order. 16 U.S.C. 824d(c). In , 1 addition, the FERC, on its own initiative or upon complaint by a third party, may conduct a new proceeding at any time to determine whether any cf Great Bay's rates are just and reasonable or unduly discriminatory. 16 U.S.C. Q 824e(a). Furthermore, if Great Bay desires to change its rates, Great Bay cannot do so without seeking prior authorization frem the FERC, upon proper notice and hearing.16 U.S.C. { 824d(d)f(e).C ) The FERC's prior review, acceptance and placing into effect, of Great Bay's spot market t rates in the May 17 Order, coupled with the FERC's ongoing obligation to comprehensively regulate those rates, clearly amounts to more than the " general regulatory oversight over spot market rates" which the Exemption Order apparently assumes. Exemption Order at 3. Rather, Q,m FERC has " established" Great Bay's rates, including rates for both long term and spot market I sales, as required by 10 C.F.R. 50.2.2 ) E. Denial Of This Petition Would Constitute An Improper Departure From Past NRC Practice Without Sufficient Explanation. ! It is well-established that an administrative agency bears the burden of explaining the 4 reasonableness of any departure from a long-standing practice, and any facts underlying its G Section 1.5 of Great Bay's FERC Electric Tariff Original Volume No.1, First Revised Sheet No. 3, explicitly states that Great Bay has the right 'to unilaterally make application to the Commission for a change in rates or in any term or condition under Section 205 of the Federal Power Act . . . " 2 The only distinction the FERC has made between Great Bay's long term and short-term sales relates to re requirements. According to the May 17 Order, if Great Bay enters into long term service agreements at market based rates, such agreements must be filed with the FERC within 30 days of service commencement. For short term transactions, Great Bay may file " umbrella service agreements" within 30 days of service commencement and quanerly transaction reports. May 17 Order at 1. This distinction was developed by the FER q for administrative convenience,ifJ! Southern Co Servt Inc. 75 FERC 161.130 (1996), and has no impact on the (d t rates to be charged for such transactions. Therefore, this distinction has no bearing on the question of whether FERC has " established" Great Bay's spot market rates. , l l G U explanation must be supported by substantial evidence. Public Service Comm'n v. FERC,813 F.2d 448, 451 (D.C. Cir.1987); Columbia Gas Transmission Coro. v. FERC, 628 F.2d 578, 585-86 (D.C. Cir.1979). The Staffs denial of Great Bay's Petition for partial reconsideration l l would violate these principles. The January 22 Exemption Order is the only NRC or Staff decision of which Great Bay is i aware in which the NRC has found that rates accepted and made effective by the FERC are not
" established . . . by a separate regulatory authority" for purposes of 10 C.F.R. ( 50.2. FERC's jurisdictional authority under the FPA over sales of electricity at wholesale in interstate l
commerce, its statutory obligation to set rates based on a statutory standard, and its procedure for . t l accepting and making effective rates through a tariff filing and subsequent orders, are exactly the same for every other entity which the NRC considers to be an " electric utility." Nevertheless, the ( Staff has singled out Great Bay for disparate treatment. This abrupt departure from past NRC practice is not only the result of an incorrect interpretation of the FERC's jurisdictional authority, but the fact that it is unsupported by substantial evidence also contravenes basic principles of administrative law. Furthermore, given the lack of substantial evidence supporting the Exemption Order's finding, it is arbitrary and capricious for the Staff to use this proceeding as a vehicle for modifying its decommissioning funding requirements. The Staff cannot arbitrarily impose different decommissioning funding requirements on Great Bay alone, when Great Bay's rates are
" established" pursuant to the same regulatory scheme as other electric utilities. Such an action would be particularly egregious in view of the fact that Great Bay is fully meeting its obligations
and is committed to put aside sufficient fund's on an annual basis to cover the decommissioning costs for its ownership share of the Seabrook Station. The NRC has been following electric utility deregulation and restructuring for several l I years. Last spring, the NRC issued an Advance Notice of Proposed Ruleinaking to obtain comments on whether decommissioning funding requirements for electric utilities should be 1 modified in view of the ongoing restructuring and deregulation of the utility industry. If the NRC wishes to modify the decommissioning funding requirements for electric utilities in light of j ' ) ! industry restructuring, this modification should be considered in the context of the Proposed i Rulemaking, not in this proceeding. To do otherwise,11, to persist in this ad hac ruling based l on a patently incorrect characterization of FERC's jurisdictional authority and ratemaking procedures, will cause confusion and uncertainty among nuclear generating utilities as they shape their strategies for responding to the current thrust toward restructuring the electric industry. Great Bay, of course, would be obliged to comply with any modified rule to the extent j it would be applicable. l l l I l l pn iU . l l i I
l III. CONCLUSION Wherefore, for the foregoing reasons, Great Bay respectfully requests that the Staff l l- reconsider the challenged portion of its January 22, 1997 Exemption Order issued in the , ! above captioned proceeding, and issue a finding that Great Bay is an " electric utility" pursuant to 10 C.F.R. Q 50.2 which is not subject to the decommissioning funding requirements of 10 C.F.R. L Q 50.75(e)(2). In the alternative, Great Bay respectfully requests an opportunity to orally argue this matter before the Nuclear Regulatory Commission. Respectfully submitted, GREATj3AY POWER CORPORATION O I? e n( f By: l Gerald Warnoff l
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Shaw, Pittman, Potts & Trowbridge Q 2300 N Street, N.W. Washington, D.C. 20037 4 (202) 663 8032 February 21,1997 410$37 01 I f l
l L! CENSING SERVICE 5 ID: JAN 24'97 8: 43 NC.001 F.C. f%q l # k2 UNTITO STATES 1 .[ NUCLEAR MEOULATORY COMMISSION wAmmatou, o.c. seasset
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\.....l Mr. Ted C. Feigenbaum i Executive Vice President and Chief Nuclear officer Northeast Utilitiet Service Company c/o Mr. Terry L. Harpster
) Director - Nuclear Licencing services i P.O. Box 128 j l Waterfnrd. CT 06385 j SUR.1ECT: TDp0RARY EXDPTION FROM CERTAIN REQUIRDiENTS Ut 10 CFR 50.75: oJ ' REPORTING AND RECORDKEEPING FOR DECOMMISSIONING PLANNING - SEABROCK j STATION, UNIT 1 (TAC NO. M95476)
- Daar Mr. Feigenbaum
By letter dated May 8,1996, North Atlantic Energy Service Corporation (North i
- Atlantic) requested approval for the indirect transfer of control of Great Bay 1 l Power Corporation's (Great Bay) interest in the Seabrook Station, Unit 1. The j indirect transfer would result from a proposed corporate restructuring of
- Great Bay that, would result in the creation of a holding comany named Great Bay Holdings Corporation of which Great Bay would become a wielly-owned subsidiary. The staff has not completed action on that request because it
, appears that Great Bay does not meet the definition of electric utility as 1 provided in 10 CFR 50.2. As a non-electric utility, Great Bay must meet the !- f i requirements offunding. decommlisioning 10 CFRCurrent 50.75(e)(2?;y,or additional assurance forGreat Bay does not requirements. It is our understanding that the proposed holding company, if approved, could seek business opportun' tiss in electricity markets that Great Bay is prohibited from enterina because of its atatus as an exoset wholesale
. generator. Thus, delaying action on Great Bay's request limits Great Bay's financial opportunities, which ultimately could have an adverse effect on protecting public health and safety. Therefore, so that the staff may act upon the.May 8,1996 request without further delay, the enclosed temporary exemption from the requirements of 10 CFR 50.75(e)(2) has been issued. The exemption is effective for a period of 6 months from the date of issue. We find that granting the temporary Exemption from the requirements of 10 CFR 50.75(e)(2) is authorized by law, will not present an undue risk to public health and safety, is consistent with the common defense and security, and meets the special circumstances described in 10 CFR 50.12.
O Awynerb
!.ICENSING SERVICES ID: JAN 24'97 S 4d M 001 F .v 3
- Mr. Ted C. Feigenbaus g A copy of the Exemption is enclosed. The Exemption has been forwarded to the N/ Office of the Federal Register for publication.
Sincerely, M < Albert W De Agszio, reject Manager Project Directorate 1 1 Division of Reactor Projects - I/I! Office of Nuclear Reactor Regulation i Docket No. 50-443 Serial llo. SEA-96-011
Enclosure:
Exemption l cc w/encls: See next page 1 L) l l
1 LICENSING SERVICES ID: JAN 24'97 8: 44 No.001 P.0J ) l I l T. Folgenbaus Seabrook Station, Unit No. 1 l Northeast Util1 ties Service Company cc: l < Lillian M. Cuoco, Esq. Mr. Jack Dolan Senior Nuclear Counsel Federal Emergency Management Agency Northeast Utilities Service Company Region I , P.O. Box 270 J.W. McCormack P.O. & ', Hartford, CT 06141-0270 Courthouse Building. Room 442 - Boston, MA 02109
- Mr. Peter Brann i Assistant Attorney General Mr. David Rodham, Director J State House Station f6 AlTH: James Muckerheide
. Augusta, ME 04333 Massachusetts Civil Defense Agency 400 Worcester Road . Resident Inspector P.O. Box L496 ! U.S. Nuclear Regulatory Coernission Framingham, MA 01701-o317 l Seabrook Nuclear Power Station l P.O. Box 1149 Jof frey Howard, Attorney General ! Seabrook, NH 03874 G. Dana Bisbee, Deputy Attorney i General ! Jane Spector 33 Capitol Street t Federal Enorgy Regulatory Comission Concord, NN 03301 825 North Capital Street, N.E. ! Room 8105 Mr. D. M. Coebel ! Washington, DC 20426 Vice President-Nuclear Oversight Northeast Utilities Service Company i Tern of Exeter P. O. Box 270 i
- 10 Front Street Hartford, CT e6141-o270 Exeter, NH 03823 Mr. J. K. Thayer Mr. George L. Iverson, Director Recovery Officer, Nuclear Engineering New Hampshire office of Emergency and Support Management Northeast utilities Service Company state Office Park South P.O. Box 128 107 Pleasant Street Waterford, CT 06385 concord,Pti 03301 Mr. F. C. Rothen Regional Administrator, Region 1 Vice President - Nuclear Work Services U.S. Nuclear Regulatory Cosmission Northeast Utilities Service Company 475 Allendale Road P.O. Box 128 King of Prussia, PA 19406 Waterford, CT 06385 Office of the Attorney General One AshMrton Place Mr. A. M. Callandrello 20th Floor Licensing Manager - Seabrook Station Boston, MA 02108 North Atlantic Energy Service Corp.
P.O. Box 300 Board of Selectmen Seabrook, NH 03874 Town of Amesbury Town Hall Amesbury, MA 01913
- .ICENSING SERVICES 10: JAN 2d'97 8:d5 NO.001 P.05 rm T. Felgenbause Seabrook Station. Unit No. 1 Northeast Utilities Service Company Cc:
Mr. W. A. O t Pro fi o Nuclear Unit Director . Seabrook Station - North Atlantic Energy Service Corporation P.O. Box 300 Seabrook, NH 03874 l Mr. Frank W. Getaan. Jr. Cocheco Falls M111 works l 100 Main Street, Suite 201 l Dover, NH 03820 Mr. B. D. Kenyon President - Nuclear Group Northeast Utilities Service Group P.O. Box 128 Waterford, CT 06385 Mr. B. L. Drawbridge Executive Director Services 1 Senior Site Officar North Atlantic Energy Service Corp. Seabrook, NH 03874 l l l l i O 4
LICEN3ING-SERVICES ID: JAN 24'97 8:45 No.001 P.06 i 7590-01
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UNITED STATES OF AMERICA ^ NUCLEAR REGULATORY COMMISSION In the Matter of ) ' )
) Docket No. 50- M3 NORTH ATLANTIC ENERGY SERVICE CORPORATION-AND GREAT BAY POWER ) (License No. NPF-86) j CORPORATION ) >
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(Seabrook Station, Unit No. 1) ) ] l i EXEMPTION 1. North Atlantic Energy Service Corporation (North Atlantic or the ' licensee) is a holder of Facility Operating License No. NPF-86, which 1 authorizes operation of Seabrook Station, Unit No. 1 (the facility or ' Seabrook), at a steady-state reactor power level not in excess of 3411 i megawatts thermal. The facility is a pressurized water reactor located at the licensee's site in Rockingham County, New Hampshire. The license provides among other things, that it is subject to all rules, regulations, and orders of the U.S. Nuclear Regulatory Comission (the Coanission or NRC) now or hereafter in effect. II. 2 Great Bay Power Corporation (Great Bay) was established in 1994 as a successor to EUA Power Corporation, which had filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Great Bay is a non-operating. 12.1324 percent co-owner of Seabrook and sells its proportionate share of power from Seabrook on the wholesale slactricity markat. Crnat May is an avampt wholesale generator as defined in the Energy Policy Act of 1992.
i LICEN31NG SERVICES ID: JAN 24'97 8: 46 No.001 P.07 On May 8, 1996. North Atlantic. submitted to the HRC a request on behalf ; of Great Bay for Commission consent to the indirect transfer of control of Great Bay Power's interest in the Operating License. Additional information j relating to this request was submitted on October 18 and December 9,1996. Approval of the indirect transfer of control of Great Bay would allow Great l Bay, through the formation of several subsidiaries and a merger, to become a wholly owned subsidiary of a new holding company, Great Bay Holdings Corporation. The indirect transfer of control of Great Bay's share of Saabrook is subject to NRC approval pursuant to 10 CFR 50.80. In its May 8.1996, submittal. North Atlantic indicated that, after the Indirect transfer of control to the new holding comoany, Great Bay would remain an electric utility as dafined by thn NRC in 10 CFR 50.2. This concluston is based on Great Bay's intended approach to market its share of ( power from Seabrook (approxirsately 140 MWe) through the implenientation of long-term contracts. Great Bay believes that the Federal Energy Regulatory Commiccion (FERC) would have the ultimate regulatory authority to review ratos for these contracts and, thus, Great Bay would meet the definition of
' electric utility."
When the NRC staff approved the plan for Great Bay's emergence free bankruptcy in 1993, it did not explicitly address the issue of whether Great Say met the derinttion or " electric utility." The starr believed, however, that Great Bay would continue to be an electric utility based upon its status as such prior to bankruptcy and upon the expectation that the reorgantzed entity would be successful with obtaining long-tern contracts for the sale of most of its share of power from Seabrook. Notwithstanding the staff's earlier actions with respect to Great Bay's
LICENSING SERVICES ID: JAN 2d'97 8: 46 No.001 P.06 emergence frors bankruptcy, the staff now believes that Great Bay does not meet the definition of " electric utility.' Great Bay has successfully entered only one long-term contract, which is for' 10 MWo. Great Bay sells its remaining 130 We share of Seabrook power on the spot wholesale market, which by definition is subject to market-set rates. The staff believes that, although FERC may exercise general regulatory oversight over spot market rates, such rates cannot be considered to be " rates established by...a separate regulatory authority" (emphasis added). If Great Bay is no longer en electric utility, Great Bay is required to meet the existing financial qualifications review recuirements of 10 CFR 50.33(f)(2), This section reouires that 'the applicant shall submit estimates for the first five years of operation of the facility. The applicant shall also indicate the source (s) of funds to cover these costs." Seabrook has an established operating history and associated costs that are now a matter of record. Based on a review of Great Bay's current financial statomonts tubenitted with its May 8,1996, submittal, and supplacental projections submitted on October le,1996, the staff has concluded that Great Bay has courpiled with the essential requirement of the existing standard, which is to demonstrate reasonable assurance of obtaining its share of Seabrook operating costs. Great Bay has projected operating income and cash flow based on what appear to be reasonable projections of the spot market price of and demand for power from Seabrook for the foreseeable future. Great Bay Indicates that these projections would be the same with or without fannation of the proposed holding company. Thus, Great 6ay has demonstrated that it possesses or has reasonable assurance of obtaining the funds necessary to coyer esti".ated operatton costs for the period of the license as required by 10 CFR
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, LICENSING SERVICES ID: JAN 24'97 8: 47 No.001 P.09 O 50.33(f)(2). The requirements for indicating to the NRC how reasonable assurance will be provided that funds will be available for deconnissioning are identified in 10 CFR 50.75. " Reporting and recordkeeping requirements for decoranissioning planning." Acceptable methods for providing this assurance are described at 10 CFR 50.75(e)(1) and the methods that may be used by non-electric utt11tles are identified at 10 CFR 50.75(e)(2). If Grant fiay is no longue an electric utility, it does not meet the requirements of 10 CFR 50.75(e)(2) in that it does not have a suroty bond or other surety method in place to provide additional assurance fer decomissioning funding. Great Bay, however, does contribute to an external sinking fund, which alone would satisfy the requirements of 10 CFR 50.75 if Great Bay in fact were an electric utility, as it asserts. Great Bay has stated that the current value of Great Bay's share of the decormnissioning liability in 1995 dollars is approximately $50.2 stillion. As of December 31, 1995, its accumulated decomissioning reserve was approximately $5.1 million. Great Bay also has in place $10 million in decosmissioning costs gueruntund by Eastem Utility Associates, Great Bay's former corporate parent. However, Great Day has not provided assurance as
~. _ . ._. _ . . .
required under 10 CFR 50.75(e)(2). In its October 18, 1996, submittal, Great Bay indicated that the projected cash on hand at the end of the current fiscal year would be sufficient to cover most of the 350.2 million that is not j otherwise offset by the 55.1 million reserve and the 510 million guart.ntee. 111 Great Bay currently is a stand-alone entity; that is, it is not itself a subsidiary of another organization and it has no subsidiary organizations
LICENs[hG SERVICES ID: j ;,N 24'97 ::. . . . s. , .- ,. (other than those recently formed to effect the proposed corporate reorganization). Great Bay has requested Cocynission approval of the indirect transfer of control of its interest in the Seabrook Operating License. This approval would pemit Great Bay to become a wholly owned subsidiary of a new entity, Great Bay lioldings Corporation. The current owners of Great Bay would exchange their equity interest in Great Bay for equity interest in the holding corporation; thus, the current owners would own Great Bay indirectly rather than directly. The Great Bay interest in the Seabrook Operating License would ] remain directly with Great Bay. Great Bay indicated that the proposed restructuring would protect Great Bay'_s status as a wholesale electric generator and allow management to develop opportunities in additional abrUtty markets through the holding company, thus potentially improving ! Great Bay's financial position. The staff is, of course, particularly interested in Great Bay's longer-tem financial viability with respect to Great Bay's share of operation and decommissioning costs of Seabrook. The staff believes that Great Ray's financial viability will not be diminished but instead likely will be enhanced by the formation of the holding company. By approving the indirect transfer of control now, the staff believes that Great Bay could be in a stronger posit' ion to meet both the financial qualifications and deconssissioning rules. Thus, to allow the staff to act upon, without further delay, Great Bay's request for approval of Indirect transfer of control of Great Bay, and at the l sanie time afford Great Bay a reasonable opportunity to implement a suitable decommissioning funding assurance method required of a non-electric utility, I the staff is granting Great Bay a 6-month exemption fro:n compliance with the provisions 10 CFR 50.75(e)(2) pertaining to the additional surety arrangements A U
~ .: . ; . - . ;' .2.. ..
I l for decommissioning funding assurance for non-electric utility licensees. If, within the effective period of this exemption, Great Bay has been unable to establish itself as an electric utility as defined in 10 CFR 50.2, Great Bay then must obtain a surety bond or other allowable decomissioning funding assurance mechanism for non-electric utility Itcensees nesting all of the ruutrementsof10CFR50.75(e)(2). t l The Comission has deterhind that pursuant to 10 CFR 50.12(a)(1), this l l exemption is authorized by law, will not present an undue risk to the public l health and safety, and is consistent with the comon defense a u :urity. l The Camission furthe has determined that special circastances as provided i I l in 10 CFR 50.12(a)(2)(ti) and 10 CFR 50.12(a)(2)(v) are present justifying the i exerr.pti on. Under criterion (ii), special circu:: stances exist in that application of the regulniet in this particular circumstance is not l, necessary, for the 6-month parind, to achiave the underlying purpose of the ! \ rule, which it to ensure that funds are available for dacnmissioning at the ; l end of the license term or in the avant of premature shutdown. Here, Great l Bay's projected 1996 cash position is nearly sufficient to cover the unfunded decossissioning costs, and its cash position is not likely to deteriorate substantially during the period of the exereption. Further, under criterton (v), special circumstances exist because the cvesotion provides only temporary relief from the applicable regelation(s), and Great Bay has made a good faith effort to comply with 10 CFR 50.75 by i making pynent inLo an esternel zinking fund based on its good faith belier { ( , l that it is an electric utility. ! Pursuant to 10 CFR 51.3Z, the Comission has deternined that granting this Exemption will not have a significant Impact on the environment l
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LiCEN31NG SERVICE 3 ID: jgn ;g g c. ,,, ,,, . ,, This Examotion is effective upon issuance and shall expire 6 months from the date of issue. FOR THE NUCLEAR REGULATORY COM ISSION I hh l l} , Frank J. aglia, ting Director Office of Muclear Reactor Regulation Dated at Rockville, Maryland, this 22nd day of January 1997 l l l i I I O l I i 1 k
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FEDERAL ENEFGY REGULATCAV CCMMISSION w A5HINGTCN. C. C.20426 j O... . I U $ ~ ER96-728-occ
% MM ll EU U Docket Nos. ERS6-726-000 ER96-1204-000
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fig M ORY Le8ceuf, Lamb, Greene & MacRaa L.L.P. i
}~0MM!$$1GH ATTN:
Sam Bahrends, IV, Esq. jN I 7 g Attorney for Great Say Power Corporation , 1875 Connecticut Avenue, N.W. Washington, DC 20009-5728
Dear Mr. Behrends:
and 1995, and February 28 on MarchBy 15,latters 1996, dated December 29,you suba,ttted for filing iff which with the C ned behalf of Great Bay Power Corporation, a powe thereunder with Fitchburg Gas and Electric L gYou also request Power Corporation, 45andto PECO allow Energy abbreviated Company.filings with respect to l waiver of Part interlocking directorships and authorization for blanketuand, approva of issuance of securities or assumptions of375.308'of i liabilities pu to theSection Director, Division of Applications, under Section37 5. 3 08 (a) (1) [} 204. the Commission's Regulations; pursuant to Sect ondesignated and made: O T the submittal is accepted for filing and is affective as shown on the Enclosure. i
@T r- Notice of the filing was published in the Federal Reg ster' C5%
O _g O with comments, protests, or interventions due on No comments, protests or interventions were filed. or Z m m 4, 199 6. 9mm Your requests for waiver of the Commission's filing 3xjmrequiremente are hereby granted, along with the d requestej h l I m E Zhauthori2ations,subjecttothesameconditionsprovidedinE corn < , 52 TERC 1 61,193 (1990). Inc Please be (_ Southern) , 75 O9a2sy.ar_rntererise "Indvised thate in gggthgen comeany services. henceforth, j file separata
%7o filTERC 1 61,.130 (1994), the Commission stated that, 30 days of' l O public utitities with market-based races need only i
( E service ayraements for long-term transactions vica with nFor s ' service commencement. umbrella service agramments within 30 days of ser Your , i cor.mancament and quarterly transaction reports.to the filing require l transactions are subject f l i southern; ice, / ontract, 7-rate, charge, classification, oridad anyfor rule, in the' reg ecognitier.
- or practice affecting such rata or service prov ting or j filed documents; nor shall such action be deemed as r g J- cf any claimed contractual right or 7bligationisaffec to such service or rata; and such action without l
relating's prejudic to any findings or orders which have been or may VH&& : . . . , a. PUBLIC REFER 3,4CE R00e ,
(FRll05. I7' 36 i7 50/S~. :7 48/N0 255:522' 2 : 2
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i () (." LaBoeuf, Lamb, Greena & MacRae, 2 L.L.P. f haraatter be.made by the commission in any procaading now ps.ndi~n [~ l I or haraafter instituted by or against Great Bay Power ; Corporatten. \ Requests for This order constitutes final agency action. , rahaaring by the commission may be filed within 30 days of the l l data of issuanca of this order, pursuant ,to 16 CFR 385.713. l ER96-728- I This latter terminatas Docket Nes. ER96-726-000, 000, and ER96-1204-000. Sincerely, g_ \ e1! Donald J. Galinas, Jirector Division of Applications ! Enclosura
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. Enclosure O Great Bay Power Corporation Rate Schedule Oasienations ,, e 1
I l e l DesertPtiFn) ! Effective Date l Destenation Deckat No. ER96-726-000 Market Based Pcwer Sales (1) FERC Electric Tariff, Tariff / j Original Volume No. 2 Cacamber 30, 1995 i (Original Sheet Nos. 1 through 6) l (Supersadas FERC Electric Tariff Original Volume No. 1) Occket No. ER96-728-000 Power Sales to Fitchburg ; service Agreement No. 1 (2) under Cas and Electric Light i l FERC Electric Tariff, Company / l original Voluna No. 2 January 1, 1996~~~ Power Sales to UNITIL (3) Service Agreement No. 2 under FERC Electric Tariff, Power Corp./ January 1, 1996
' Criginal Voluma No. 2 O Decket he. ER96-1204-000 Power Sales to PECO Service Agreement No. 3 (4) under Energy Company / .
FERC Electric Tariff, February L, 1996 i Original Voluna No. 2
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R _ . . . . ___._____ ._-- - - - - - - - --~~ ~ ~^ ~~~~ ~ - 02/04/97 TUE L2:01 FAl 202 509 4325 REID & PRIEST LLP gao: l P.22<23 j F53 04 'M 10:55 FR MiLas4K T'.gc FGDLEY 222 835 7596 TO 950C4321 l .i i . pgogst gNapGY 8tEGULATCM COMMISSION ! www.oten.c c.amas s Docket Wo. E333-495-000 t i l l APR 301993 4 xilhanx, Tweed, andley e usc'ioy
- Attention: Mr. Michael D. Earnstain .
l 1825 Eye Street, N.W. ! j lith Floor 4 Wasaington, D.C. 20006 i
- Dear Mr. Eernsteint i By letter dated March 26, 1993, you submitted for filing i
with the commission, on behalf of Great Bay Power Corporation (Great Bay), a purchased povar agreement between Great Bay and l UNITTL Power Corp. (UNITIL) Authority to.act on this mattar is i delensted to the Director, Division of Applications, under i Seethon 375.308 of the Commi'asion's Ragolations; pursuant to i section 375.30s(a) (1) , your isubmittal is accepted for. filing and - designated as follows: GraaZ_ Bay Dem,ar careeration )
- i ,! Purchase ~Pover Agreement j
Rata schedule F21c No. LE : j Exhibit A, Scenario 2, ] supplement No. 1 to Rate justifying rate of j Schedule FERC No. 15 112 mills /lom, exclusive , l of fusi, and this f : t l acceptance letter Notice of your filing was published in the Federal Registar with comments, protaats, or laterventions due on or before April 16, 1993. On April 16,1993i, Dami filed a motion to' intervana in support of the filing. Pprsuant to Rate 214(c)(1) of ths Commission's Rulee of Practice and Pr~ =%re (18 CFR 385.214), if no answer in opposition to the motion to intervene is filed within fifteen days after the action is filed, the motion serves to naka the UNITIL a party to this proceeding. Good cauce is shown for: granting waiver of the notice requirements pursuant to Sachen 205(d) of the Federal Power Act and Sectica '.5.11 of the Cosimission's Requistions thereundert 1993, therefore, tne rate schedule l shall become effective May 1, as. raquested. Arti le 3 establishes ah initial rate of 50 kills /kl7h subject 'to escalation to track cartain inflation indices. Article 7 astablishes rates applicehle te any extension of term implemented under the agreaml ant. Please be advised that
02/04/97 TLE 12:02 FA.t 202 508 4325 __ REID & PRIEST LLP ' P. 2343
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- 97 10 55 FR n!Lapw MED HCLEY 222 835 7596 TD 95064321 -
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O.- . 2I Milbank, Tweed, Eadley & Mccioy any rates established under Articles 3 or 7 which exceed the sum of the fuel oest of the Seahyoek Unit and 113 mills /1ert will constitute a change sinletter rate hasrequiring a timely been deslguated as a filing under support. Please note that supplement to the rata schedgle : codifying the filing requirement. This acceptance for fi13.ng does not constitute approval of any service, rate, charge, classification, or any rule, regulatio provided for in the filed documents; nor aball such acceptance he deemed as recognition of anyj olafand contractual right or obligation affecting or relating ta such service or rater andsuc which have been or may hereafter be made by the cW=sion in any proceeding now pending or heksafter !;t.stituted by or 'against Great Bay Power Corporation.g , This order constitutes final agency action. Requests for O rehearinct by the commission any be filed within 30 days of the date of :,asuance of this order, pursuant to 18 CFR 385.713. This acceptance for filing terminatas Decket No. IR93-495-000. sincerely,
!, Af. ,&
donald 3.Galinaa, Director Division of Applications 1 i cci cwrrIL Fower corp. , Attention: Itr. David Foote 216 Epping Road ,
- Exeter, New Hampshire 03033 i
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i GREAT BAY POWER CORPORATION O IV. Traditional and Non-TraditionalInsurance Marketplace Alternatives : Design a product which the marketplace can respond too. We believe that Great Bay's decommissioning liability includes elements that represent an insurable risk. These elements are as follows: The predictability of a defined payment stream. From this defined payment l stream, the potential for interruption exists (refer to section Ill). This presents a l financial or credit risk. ' 1 The NRC requires Great Bay to address its decommissioning liability through l some form of financial assurance mechanism or financial guarantee. In time, the form of the guarantee could change based on Great Bay's status as an " electric utility", and potentially increase Great Bay's decommission funding requirement. Great Bay would consider assuming, if necessary, levels of retention to share risk with a third party insurer during the early years of funds accumulation (refer to exhibit 2a,2b, d,o 2c, 2d, and 2e). In other words, create a declining deductible covering the variance l between the limit pledged and fund balance. We are interested in securing limits of liability to meet Great Bay's potential liability of an estimated $53.0m. This could be accomplished through Great Bay obtain:ng the following alternatives from the traditional or non-traditional marketplace:
. An insurer agrecs to issue a third party guarantee (risk transfer) in the amount of l the proposed liability of $53.0m in consideration of a premium payment (refer to ,
exhibit 3). l l . A third party insurer agrees to issue a finite insurance product that builds in limits j of liability as the proposed obligation date is reached. l
. A sharing relationship is established between Great Bay and the third party I insurer which refiects forecasted investment income and the buildup in limits of l liability, renewable every five years (refer to section ll, exhibits 2a-2e).
At a future date, it may be feasible to pool similar entities to develop a retable
- insurance product. This could lead to the establishment of a captive insurance company or nuclear decommissioning pool.
,' vtg) a Page 5 Aon Risk Smices
GREAT BAY POWER CORPORATION O . Great Bay assumes a self insured retention (for example $10.0m and purchases excess coverage to $53.0m ($43.Orn xs of $10.0m); refer to Exhibit 4. Purchase a surety bond in the amount of the estimated decommissioning liability which would decline annually as payments are made to the decommissioning trust fund (refer to Exhibit 5). The term and cost of the surety guarantee would be subject to negotiation. In the event of default, the obligation owed by the l surety would be reimbursat,le by Great Bay. EA Page 6 Aon Risk Sewias
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O O O Great Bay Power Corporation Discounted Premium at Various Discount Rates and Decommission Schedules Assumes a Limit of Liability of $53MM Exhibit 3 , l Years Until Discount Factor Decommissioning 4.5%l 6.0%l 8.0%j 10.0% 5 42,529,905 39,604,683 36,070,909 32,908.830 10 34,128,167 29,594,923 24,549,255 20,433,794 15 27,386,183 22,115,048 16,707,810 12,687,779 20 21,978,072 16,525,651 11,371,055 7,878,112 25 17,634,722 12,348,927 7,738,949 4,891,688 30 14,151,001 9,227,837 5,266,999 3,037,353 3Disccunt Factor of 45%
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$35,000.000 - lmCWoount Feetorof10%
E j $30,000.000 -
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$20.030.000 -
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n v J m o V Great Bay Power Corporation Discounted XS Premium at Various IROR Assuming a $43MM XS Limit with a $10MM Self-insured Retention Exhibit 4 Years Until Discount Factor Decommissioning 4.5% l 6.0% l 8.0% l 10.0% 5 34,505,395 32,132,101 29,265,077 26,6S'i,617 10 27,688,890 24,010,975 19,917,320 16,578,361 15 22,218,979 17,942,398 13,555,393 10,293,858 20 17,829,643 13,407,603 9,225,573 6,391,676 25 14,307,416 10,018,941 6,278,770 3,964,728 30 11,481,001 7,486,736 4,273,225 2,464,268 360,000,000 5 Excess Lim!t
$50,000,000 D nJ y 696M.Q:SQ9
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U O- U,, Great Bay Power Corporation Estimated Surety Bond Cost Exhibit 5 516,000,000 . We have estimated the surety cost based on a 1% charge for an annual renewable limit of $53MM. This 1
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314,000,000 -- anaty:ts does not take into consideration loss of money i use nor any balance sheet implications associated with a 3R000,000 - - surety bond. Also, the surety limit may be subject to an ,_~_. _ increase. Further, in the event of a default, the fur - surety value would still be owed to the carrier. ,
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E e . E $8,000,000 - - -- -- .--- - -- - -- - g ~ 8 ~ j o-j se,0co,000 54,000,000 ,
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GREAT BAY POWER CORPORATION O V. Conclusion With respect to pricing, we have attempted to forecast future limits of liability based on a defined income stream and investment yield. We understand that the interruption of the defined payment stream, under a finite appre,ach, or a change in the investment yield would materially affect the forecasted result. We look forward to working with you to ascertain if a program can be developed which satisfies the needs and concents of Great Bay, the NRC and your company. O Aon Risk Sm'ias 6 ___)
i !o
- THE APPENDIX ITEMS IN TAB 6 1
l CONSIST OF: ! A. BAY CORP. HOLDINGS, LTD. 4 l 1996 ANNUAL REPORT AND l l 10-K B. BAY CORP. HOLDINGS, LTD. l0 1997 10-Q C. AGREEMENT FOR JOINT l i OWNERSHIP, CONSTRUCTION i l AND OPERATION OF NEW i HAMPSHIRE NUCLEAR UNITS DATED FEBRUARY 1,1990 0 l
ngdr ! Alexander & Alexander,Inc.
/ A Massachusetts Corporation i
One Constitution Plaza
- b' Boston. MA 02129 2025 Telephone 617 2412143 November 20,1996 FAX 617 241-7404 l
William B LaFrance, CPCU I Senior Vice President Mr Frank Getman Vice President Great Bay Power Corporation Cocheco Falls Mill Works 100 Main Street Dover, NH 03820 RE: Availability ofInsurance or Surety to address Decommissioning Expenses at Seabrook
Dear Frank:
We have spent the past two morahs running down possible insurance or surety solutions , to transfer the obligation Great Bay has to set aside funds for the eventual decommissioning of Seabrook. We find there are no economically feasible alternatives 1 [ currently available. The only alternatises we have found would require that Great Bay fully fund or collateralize the insurance company or surety . These arrangements are therefore not really insurance or surety, but are just tantamount to Great Bay prefunding the obligation. Let me know if there is anything I can do to be of further assistance. Best regards,
/,,b'rn )', MW M@E8732 o>
]1avz81998
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