ML20141C008

Safety Evaluation Approving Merger Agreement Between Centerior Energy Corp & Ohio Edison Co Affecting NPF-58

ML20141C008
Person / Time
Site:	Perry
Issue date:	06/19/1997
From:	NRC (Affiliation Not Assigned)
To:
Shared Package
ML20141C011	List: ML20141C008
References
NUDOCS 9706240265
Download: ML20141C008 (3)

Text

s Ett UNITED STATES s

j NUCLEAR REGULATORY COMMISSION WASHINGTON D.C. 20066 4 001 4

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SAFETY EVALUATION BY THE OFFICE OF NUCLEAR REACTOR REGULATION RELATED TO THE INDIRECT TRANSFERS OF CONTROL OF LICENSE NO. NPF-58 FOR THE PERRY NUCLEAR POWER PLANT DOCKET NO. 50-440

1.0 BACKGROUND

On December 13. 1996. The Cleveland Electric Illuminating Company (CEI).

Centerior Service Company (CSC). Toledo Edison Company (TE) Ohio Edison i

Company (0E). Pennsylvania Power Company (Penn Power), and OES Nuclear. Inc.

(0ES). submitted an application for approval under 10 CFR 50.80 in connection with a proposed merger between the Centerior Energ.s Corporation (Centerior) and OE. Subsequent to interim organizational changes, the new company resulting from this merger will be named FirstEnergy Corno/ation (FirstEnergy).

CEI. CSC and TE are now wholly owned Edusidiaries of Centerior and will become wholly owned subsidiaries of FirstEnergy as a result of the merger.

Centerior will cease to exist as a result of the merger. OE will also become a wholly owned subsidiary of FirstEnergy as a result of the merger.

Penn Power and OES are now wholly owned subsidiaries of OE and will remain so after the merger.

Upon consummation of the restructuring, current stockholders of Centerior and OE would become stockholders of FirstEnergy pursuant to a formula stipulated in the merger agreement.

CEI is a 31.11-percent owner of the Perry Nuclear Power Plant (PNPP). TE is a 1

19.91-percent owner. OE and OES together own or lease a 30-percent interest, and Penn Power is a 5.24-percent owner.

CSC is a service company and holds no ownership interest in the )lant.

Duquesne Light Company owns the remaining 13.74-percent interest in )NPP. and the proposed merger does not involve Duquesne Light. CEI and CSC are the licensed operators of PNPP. The NRC staff believes that the proposed merger will result in the indirect transfers of control of the interests held by the licensees (except for Duquesne Light) in the PNPP o)erating license to the new holding company. FirstEnergy.

(See letter from CEI and CSC dated December 13. 1996. pp. 1-2 of the enclosure.)

Accordingly, under the provisions of 10 CFR 50.80. Commission approval is required.

I In the enclosure to the application for a) proval. dated December 13, 1996. CEI indicated that Centerior and OE believe tlat the merger offers significant

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benefits, stating on page 18:

The purpose of the merger is to achieve benefits for Ohio Edison's and Centerior's shareholders, customers and communities that would not be achievable if they were to remain separate companies. The 4

expected savings related to the merger are approximately

$1 billion over the first ten years. The savings will come from the elimination of duplicate activities, improved operating j

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- efficiencies, lower capital costs, and the combination of the companies' work forces.

2.0 FINANCIAL AND TECHNICAL QUALIFICATIONS Based on the information provided in the application, the staff finds that there will be no near-term substantive change in the financial ability of CEI, TE. OE. OES. or Penn Power to contribute appropriately to the operations and decommissioning of the PNPP facility as a result of the proposed merger.

CEI.

TE. OE DES, and Penn Power each is, and would remain after the merger, an

" electric utility" as defined in 10 CFR 50.2 engaged in the generation, transmission, and distribution of electric energy for wholesale and retail sale, the cost of which electricity is recovered through the rate regulation oi the Public Utilities Commission of Ohio and the Federal Energy Regulatory Commission, with respect to CEI. TE. OES and OE and the rate regulation of i

the Pennsylvania Public Utility Commission and the Federal Energy Regulatory Commission with respect to Penn Power. Thus, pursuant to 10 CFR 50.33(f).

CEI, TE OE. OES, and Penn Power, as electric utilities, are exempt from further financial qualifications review.

However, in view of the NRC's concern that restructuring can lead to a diminution of assets necessary for the safe operation and decommissioning of a licensee's nuclear power plant, the NRC has sought to obtain commitments from its licensees that initiate restructurir.g actions not to transfer significant assets from the licensee without notifying the NRC.

Each licensee that will be affiliated with FirstEnergy has agreed:

to provide the Director of the Office of Nuclear Reactor Regulation a copy of any application, at the time it is filed, to transfer (excluding grants of security interests or liens) from such licensee to its proposed parent, or to any other affiliated company, facilities for the production, transmission or distribution of electric energy having a depreciated book value exceeding 10 percent of such licensee's consolidated net utility plant, as recorded on the utility's books of account.

(See application letter, p. 13 of enclosure.)

The staff believes that this commitment, modified to clarify the abbreviations used in this evaluation and as a condition to the NRC's consent in connection with the proposed restructuring, will enable the NRC to ensure that CEI TE.

OE OES and Penn Power will continue to maintain adequate resources to contribute to the safe operation and decommissioning of the PNPP facility.

With respect to technical qualifications. CEI and CSC will continue to be the licensed operators of the facility.

The technical qualifications of CEI and CSC will be unchanged by the merger.

3.0 ANTITRUST The antitrust provisions of Section 105c of the Atomic Energy Act apply to an application for a license to construct or operate a facility licensed under

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Section 103 of the Act. Although FirstEnergy may become the holding company of the licensees for the PNPP facility, that is, may indirectly acquire control of the license, it will not be 3erforming activities for which a license is needed.

Since approval of t1e instant applicatior would not involve the issuance of a license. the procedures under Section 105c do not 4

a) ply, including the making of any "significant changes" determination.

Tierefore there is no need to conduct any antitrust review at this time.

A full antitrust review was conducted before the issuance of the current operating license. The licensed owners are subject to existing antitrust license conditions imposed as a result of such review, and will remain subject to those conditions following the proposed merger.

The instant application does not seek any change to the existing PNPP antitrust license conditions.

4.0 FOREIGN OWNERSHIP The application from the six companies. CEI. CSC. TE. OE. OES, and Penn Power, states that following the proposed merger, none "will be owned, controlled or i

dominated by any alien, foreign corporation or foreign government." Also, it is stated that none is " acting as an agent or representative of any other person in this request for consent to the indirect transfer of control of the licenses."

(See application letter. ]p. 5-10 of the enclosure.)

In additinn, according to the application, all mem)ers of the First Energy board will be U.S. citizens, while currently all of the directors and principal officers of i

CEI. CSC. TE. OE. OES and Penn Power are U.S. citizens.

The staff does not know or have reason to believe that any of the applicants is owned.

controlled or dominated by any alien, foreign corporation or foreign government.

5.0 CONCLUSION

S In view of the foregoing, the staff concludes that the proposed restructuring of Centerior and OE through a merger to form a new company. FirstEnergy, will not adversely affect the financial qualifications of CEl. TE. OE. OES, and Penn Power with respect to the operation and decommissioning of the PNPP facility. nor will the technical qualifications of CEI and CSC to operate the facility be affected. Also, there do not appear to be any problematic antitrust or foreign ownership issues related to the PNPP license that would result from the proposed merger or the transactions to facilitate the merger.

Thus, the proposed merger will not affect the financial or technical qualifications of CEI. CSC. TE. OES. Penn Power. or OE as holders of the license, and the transfer of control of the license, to the extent effected by the proposed merger, is otherwise consistent with applicable provisions of law, regulations and orders issued by the Commission. Accordingly, the NRC consents to the proposed merger and restructuring.

Principal Contributors:

A. McKeigney H. Davis Date: June 19, 1997 9