ML20148K368
| ML20148K368 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 03/24/1988 |
| From: | Wooldridge R WORSHAM, FORSYTHE, SAMPELS & WOOLRIDGE (FORMERLY |
| To: | Bloch P, Jordan W, Mccollom K Atomic Safety and Licensing Board Panel |
| References | |
| CON-#188-5953 OL, NUDOCS 8803310107 | |
| Download: ML20148K368 (9) | |
Text
_ - - _ _ _. _ _ _ _ _ _ _ _ _
'NN A
s WORS HAM, FOaSYTH E, SAMPELS & Y(Cf15LT16StIDGE THIRTY TWO HUNOREQ,2001 BRY AN TOWER DAM.AS, TaxAs 75201
- 88 MR 28 P 4 'Al TELEPMONE (24) 979 3000
" ' ' *.1"'"
"ati'"%o--t
- "I."-<'.' % ;'
n m et or m N"* w.
his D ANCCasoN MARER W&SEM Q{%( } lb) /e L'
kom o M A$$
a$t=T*[LIcY or cova.Sc6 J CAN DOaANNaN CNov wACn5CN 84Uhtm VCS *R'ON *CaSM AM (AmL A romsvTmt TRAwS E VAhogn*006 wotACArS 4CHARDL. DAMS A TER W TE DAWD C (Q4tRGAN L SCOTT AUSTim TELEcop gm (3 4; setoone noMAS L LARD S( C4 6 KCRMAM
- CetRT n wiSC TRACT COMSS FLANsGAN T:MCTMY A MACE March 24,1988 Peter B. Bloch, Esquire Dr. Kenneth A. McCollom Chairman Administrative Judge Atomic Safety and Licensing Board 1107 West Knapp U.S. Nuclear Regulatory Commission Stillwater, Oklahoma 74075 Washington, D.C. 20555 Dr. Walter H. Jerdan Eilzabeth B. Johnson Administrative Judge Oak Ridge National Laboratory 881 West Outer Drive P. O. Box X, Building 3500 Oak Ridge, Tennessee 37830 Oak Ridge, Tennessee 37830 Re: Texas Utilities Electric Company, et al (Comanche Peak Steam Electric Station, Units 1 & 2h Docket Nos. 50-445-OL, 50-446-OL, and 50-445-CPA
Dear Administrative Judges:
For your information, I am enclosing an excerpt from the Form 10-K filed yesterday by Texas Utilities Electric Company with the Securities and Exchange Commission in Washington. The excerpt contains financial disclosures relating to the Comanche Peak Nuclear Project.
This information is provided in order to keep the Board apprised of matters relating to Comanche Peak.
Resp lly submitted, r T-I r r Q
Robert A. Wooldridp RAW /kiw Enclosure cc:
Service List see E **Slhe G
$0 3
SECURITIES AND EXCHANGE COMMISSION WASlilNGTON, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31,1987 Commission File Number 011442 l
Texas Utilities Electric Company (Esset new of rreistrent as specified la its ebener)
A Texas I.R.S. Employer Corporation No. 75-1837355 2001 Bryan Tower, Dallas, Texas 75201 Telephone Number (214) 812-4600 l
Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Preferred Stock, without par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant wu required to file such reports), and (2) has been subject to such filleg requirements for the past 90 days.
l Yo /
No Aggregate anarket value of Common Stock on February 29,1988 held by non affiliates: None Common Stock outstanding at February 29, 1988: 112,150,000 shares, without par value DOCUME.VIS INCORPORATED BY REFERENCE None
COMANCHE PEAK NUCLEAR GENERATING STATION Operatin License Appliestion The Company is subject to the jurisdiction of the NRC with respect to nuclear power plants.
NRC regulations govern the granting oflicenses for the constructior, and operation of nuclear power plants and subject such power plants to continuing review and regulation. Pursuant to such regula-tions, a review is being conducted by the NRC of the Company's application for licenses to operate the Comanche Peak units. As a part of that review, a proceeding was initiated before an Atomic Safety and Licensing Board (ASLB) and proceedings on various issues have been ongoing since December 1981. After corupletion of such proceeding, the ASLB will make recommendations to the NRC regarding the issuance of operating licenses for the Comanche Peak units. An intervenor is actively involved in this ASLB proceeding.
The one remaining Contention before the ASLB in the operating license proceeding relates to the Company's quality assurance / quality control (QA/QC) program for the plant. In December 1983, the ASLB issued a memorandum questioning the QA program for design of certain portions of the plant and requested that the Company offer additional proof of adequate design and design review procedures. The ASLB is also reviewing several other related issues and has indicated its intent to review the results of the NRC's Technical Review Team (TRT) insestigation discussed below, in July 1984, a separate ASLB, including two of the three members of the original ASLB, was convened to receive testimony on allegations that QC inspectors at the plant had been subjected to an atmo-sphere of harassment and intimidation which is alleged to have affected the implementation of the Company's QA program. In January 1986, this separate ASLB was disestablished with all issues thereafter to be resolved by the original ASLB.
As a separate part of the NRC's review of the Company's operating license application, in March 1984, the NRC established a task force to consolidate and carry out the various reviews necessary for the NRC Staff to reach its decision regarding the operating licenses. This effort involved the estab-lishment of the TRT, which began an intensive onsite investigation in July 1984 and subsequently has issued reports requesting additional information from the Company with respect to several func-tional areas of the plant's construction program. The Company then formed a special team, the Comanche Peak Response Team (CPRT), which includes a number of independent experts in each area addressed by the TRT, and submitted a Program Plan (Plan) to respond to the questions raised.
Such Plan, which is described further below, is presently being implemented and has been expanded to address the design and other ASLB issues described herein.
7 h-
Item 1.
Bt 'SINESS (Continued).
In January 1985, the TRT issued a report on its review of the QA/QC programs at Comanche Peak. The report stated that although the QA program documentation met NRC requirements, the implementation of the QA program demonstrated that the Company had lacked the commitment to aggressively implement an effective QA/QC program in several areas. The TRT indicated that it had found evidence of faulty construction and inetTective QA and QC inspections. Questions were also raised concerning the training and quali6 cation of QC personnel and in the reporting of de6ciencies.
The TRT further found that prior to July 1984 problems had existed in the control of documenta-tion. In addition, de6ciencies in several other areas were described. The Company was requested to submit to the NRC a program and schedule for completing a detailed and thorough assessment of these QA/QC issues presented by the TRT. The Company also was asked to consider the use of management personnel with a fresh perspectise to evaluate the TRT Gndings and implement corrective action, and to consider the use of an independent consultant to oversee the corrective action program.
In June 1985, the Company 6;ed with the NRC and the ASLB a revision to the Plan which is being utilized by the CPRT to address all outstanding design and construction concerns. This Plan, which was substantially resised and reissued in January 1986, and further resised in July 1987, provides for a cornplete design review of virtually all safety related systems in the plant, and for the developrnent of a corrective action program as required. In August 1985, the ASLB issued a Memo-randum which described areas of the Plan that concerned the ASLB. The Memorandum indicated, however, that if the Plan were revised to address the ASLB's concerns and ifit were appropriately implemented, the Plan may demonstrate the quality of the plant,in May 1986, the StalTof the NRC issued a Supplemental Safety Evaluation Report (SSER) containing an evaluation of the Plan as it existed at that time. The SSER concluded that the Plan provided an overall structure and process for addressing and resolving all existing construction and design issues and any future issues that may be identi6ed from further evaluations. In June 1986, the ASLB issued a Memorandum which addressed "Board Concerns' about the adequacy of the CPRT program. The Memorandum stated that, based upon the ASLB's current knowledge of the program, after having reviewed the first results reports and the SSER on the Plan, the ASLB continued to have the concerns expressed in the earlier memorandum described abose. The ASLB also raised additional concerns about how findings in one area of the reinspection effort rnay afr t the Cornpany's program in other areas, whether suf6cient ec attention is being paid to problems of quality assurance and quality control regarding design, the adequacy of the CPRT sampling program, and perceived oversights in one of the results reports that had been issued. The Company is addressing these concerns. In November 1987, the ASLB estab-lished a schedule for resolution of allissues remaining in the operating license proceeding. In January 1988, the Staff of the NRC, after further review and analysis, approved the Plan and correctise action program as the basis to resolve outstanding issues. At the end of February 1988, the CPRT completed the publication of its final reports. In March 1988, the Staffissued an SSER approvirg the design of piping and pipe supports at Comanche Peak, which had been a major issue in the operating license proceeding, and concluded that the Plan provides an effective means to ensure proper imple-mentation of corrective action in this regard. Delivery of this report sets into motion a prehearing schedule adopted by the ASLB which should result in the resumption of hearings on issuance of the operating licenses in the late summer of 1988. Meanwhile, implernentation of the corrective action program continues.
In December 1987, the Company entered into an agreement to settle potential claims against Gibbs & Hill, Inc. (Gibbs & Hill), the onginal architect-engineer for Comanche Peak, relating to engineering and design services performed by Gibbs & Hill for Comanche Peak. Under the terms of this settlement, the owners of Comanche Peak will receive a total of 525 million in cash, deferred payments and future engineering services which will be prosided to the Company on non-nuclear projects.
8
Item 1, BUSINESS (Condnued).
The Company has made a number of key management changes in the nuclear program for Comanche Peak, including the addition of several new ofncers who bring substantial nuclear experi-ence to the Company. This new management team is responsible for oversight and implementation of the reinspection and corrective action program.
The NRC has created an OfRce of Special Projects to manage all aspects of the NRC's licensing and inspection efforts for Comanche Peak and certain other nuclear power plants.
Construction Permit Extensions in January 1986, the Company fded an application with the NRC for an extension of the con-struction permit for Unit I to reDect a new "latest date for completion" of August 1,1988, presiously such date had been August I,1985. In the application, the Company stated that the reason the request for extension of the construction permit was not Gled at an earlier time was administrative oversight. In February 1986, the NRC issued an order extending the "latest date for completion" of Unit I to August 1,1988. Subsequently, the intervenor involved in the ASLB operating license proceeding Gled with the NRC a request to stay the elTectiveness of the construction permit exten.
sion and to require the Company to Gle a new application for a construction permit for Unit I or to order that hearings be held prior to any decision on whether to grant the construction permit exten-sion. The request for a stay was denied by the NRC and the question of whether to hold such hearings was remanded to an ASLB, the members of which are the same as the ASLB for the oper-ating license. In November 1986, the ASLB issued a Memorandum and Order in which it cecepted for litigation a new Contention, raised by two intervenors, which alleges that the delay in completing Comanche Peak, which has occurred and has necessitated the extension of the construction permit by the NRC, was the result of dilatory action on the part of the Company and that, therefore, good cause did not exist for the extension of such permit. No schedule for hearings on this Contention has been adopted by the ASLB at this time. The Company has also applied to the NRC for an extension of the construction permit for Unit 2. Such application is presently under review by the StalT of the NRC. In early March 1988, the Company filed with the ASLB a motion to consolidate proceedings in the operating license and construction permit proceedings. (See item 2, Properties - Construc-tion Program.)
Civil Penalties in April and June 1986, the Company paid civil penalties to the NRC, each in the amount of 540,000, relating to allegations of harassment and intimidation at Comanche Peak. The June 1986 penalty was part of an aggregate of $120.000 in civil penalties previcasly proposed by the StafTof the NRC. The Company requested the Staff to revisit the other alleged violations to determine whether they did in fact occur and to consider mitigating the amount of the penalties, and in August 1987, the StafT decided not to assess the remaining $80,000 in proposed civil penalties. In August 1986, the Company paid a civil penalty of $200,000 previously proposed by t' e StafT of the NRC relating to the hndings of the TRT, described above. In addition, the Company has paid another civil penalty of $50,000 relating to two alleged violations in the Company's reinspection and corrective action effort.
lavestigation Regarding NRC Region IV in December 1986, a portion of a report was released by the Office of Inspector and Auditor of the NRC (OIA Report) containing the results ofits investigation of allegations of misconduct by the management of Region IV of the NRC with respect to Comanche Peak. The OIA Report espressed concern about allegations of harassment and intimidation by Region IV management to pressure 9
\\
Item I, BUSINESS (Continued).
Region IV inspectors to downgrade or delete proposed inspection findings at Comanche Peak. In addition, the OIA Report concluded that it would not be possible to rely on the Region IV QA inspection as evidence of the safe construction of Comanche Peak. Consequentiy, it stated that it will be necessary for the NRC to rely largely on recent detailed technical inspections conducted by the NRC, including the TRT, at Comanche Peak. The OLA Report also indicated that the data contained in an internal NRC report on inspection procedures was insecurate and unreliable due to a lack of understanding by NRC inspectors of the proper method of completing a cettain NRC form. NRC omeials have indicated that a thorough assessment of the results of this investigation will be made; and in addition, certain personnel changes in the Region IV omce have occurred. The O!A Report's findings are restricted to activities in Region SV and do not question other NRC regulatory activities with respect to Comanche Peak, including the detailed technicalinspections conducted by the TRT as discussed above. The intervenor in the operating license proceedings, discussed abose, has indi-cated its intent to file a motion raising the OIA Report's findings as issues to be the subject of hearings in such proceedings.
Cost sad Schedule Estimates For information relating to cost and schedule estimates see Itera 2, Properties - Construc-tion Program.
10
_a
i item 2.
PROPERTIES (Continued).
Comanche Peak Nuclear Generating Station The Company is constructing two nuclear fueled generating units at Comanche Peak, each of which is designed for a capability of 1,150 megawatts. ARer giving effect to the anticipated completion of the 1988 agreement to purchase the 6.2% ownership interest of TMPA in the facility, the Company's share of the net capability in each unit is 1.081 megawatts, or approxi.
mately 94%. The other participants in the facility are Brazos Electric Power Cooperative, Inc.
(BEPC) and Tex La which own 3.8% and 2b6%, respectively. (See item 3, Legal Proceedings -
Cornanche Peak Nuclear Generating Station.)
In March 1988, the Company announced that following its review of the cost and schedule for Comanche Peak, commercial operation of Unit 1 is presently anticipated at the end of 1989.
All Unit I corrective action activities are scheduled for completion to permit fuel loading in mid 1989. The Company also announced the temporary suspension of construction actisities and accrual of allowance for funds used during construction (AFUDC) on Unit 2 beginning in April 1988 for a period of approximately one year. Unit 2 is not expected to be ready for commercial operation until after the 1991 peak season. The delay of Unit 2 was implemented to allow the Company to concentrate its resources on the completion of Unit 1, thereby reducing the duplication of effort that would be required to maintain the previous timing between the two units and strengthen the Company's ability to manage construction and start up activities for both units more efnciently with fewer personnel. Additionally, such delay will allow time to make a more complete determination of any modifications that may be required for Unit 2 based upon the knowledge gained from the reinspection and corrective action program applied to Unit 1. The delay of Unit 2 will also permit the Company time to implement rates for Unit 1 prior to the Gnal completion and operation of Unit 2. Although construction on Unit 2 has been temporarily suspended, there will be some ongoing expenditures required to maintain the unit until construction is resumed. Additionally to the extent the work necessary to place Unit 1 into service alTects vanous common systems, some capital expenditures will be associated with Unit 2.
Based upon this revised schedule, the total cost of the Company's 94% share of the plant, excluding AFUDC, is estimated to be $6.37 billion. The Company's estimated cost of its share, including AFUDC, is 53.54 billion or about $3,950 per kilowatt. Because of the uncertainty regarding the date of commercial operation of Unit 2, ao provision has been included in such amount for reestablishing the accrual of AFUDC on Unit 2 after construction resumes. The total cost of the plant, excluding AFUDC, is estimated to be 56.62 billion. Because of the uncertain-ties regarding payments by the other owners of Comarche Peak of their share of the remaining construction costs, no estimate of the amount c' AFUDC that may be attnbutable to their interests in the plant has been made.
The Company had previously estimated, in November 1986, that commercial operation of Unit I would be achievable in early 1989 and that Unit 2 would not be ready for commercial operation until after the 1989 summer peak season. Based upon such schedule, the total cost, excluding AFUDC, of the Company's 875/6% share of the plant (which excludes the presently anticipated purchase of TMP A's share) was estimated to be $4.63 billion. The Company's esti-mated cost for its 8706% share, including AFUDC, was 56.70 billion or about 53,300 per kilo-watt. The total cost of the plant, excluding AFUDC, was estimated to be 55.27 billion.
3ecause of nutaerous uncertainties in the licensing process, no assurance can be given that the revised estimated schedule can be met or that the estimated completion cost will no be exceeded. Failure to secure timely and favorable regulatory approvals or further delays occa.
sioned by additional tranalysis, reinspection or rework will increase the cost of the plant and will likely increase Gnancing requirements.
14
i i
t w
(tem 3. LEGAL PROCEEDINGS.
I Comanche Peak Nuclear Generating Station The Company, TMPA, BEPC and Tex La have been the owners of 875/6%,6.2%. 3.8% and 21re%
! interests, respectively,in Comanche Peak under the terms of a Joint Ownenhip Agreement (Agree-ment) which provides that the Company is the Project Manager for Comanche Peak. BEPC has failed to make numerous payments ofits ponion of the costs of Comanche Peak. BEPC has been experiencing difficulty in obtaining additional financing for Comanche Peak from the Rural Electri-l fication Administration. In addition, since May 1986, Tex La has failed to make payments to the i
Company for its portion of Comanche Peak and TMPA hu made payments under protest. In May
(
1986. the Company filed suit in the 14th Judicial District Coun of Dallas County. Texas against TMPA, BEPC and Tex La because of controversies which exist under the Agreement with respect to
- the obligations of the parties. The Company asserted that each of the defendants has either claimed that it has no further obligatic,n to pay its share of the remaining costs of construction of Comanche Peak, or has claimed that the Company has failed to properly construct Comanche Peak or otherwise has breached its obligations under the Agreement. The Company sought recovery of damages against Tex La for its anticipatory breach of the Agreement and asked for a declaratory judgment against Tex La BEPC and 'IMPA declaring among other things that they were obligated to pay their share of the remaining costs of construction of Comanche Peak and that the Company has not failed to use prudent utility practices in constructics Comanche Peak in accordance with the Agreement. TMPA.
BEPC and Tex La filed cross actions in such suit against Texas Utilities and the Company asserting various causes of action, including a number of alleged breaches of the Agreement by the Company and violations of the Texas Deceptive Trade Practices Act (DTPA). In September 1986, the Court in the Dallat County suit ruled ir, favor of the Company with regard to a plea of the defendants 17
o Iwm 3. LEGAL PROCEEDINGS (Concluded),
attempting to chaege the venue of such suit. The case is in the discovery phue and trial is currently scheduled for October 1988.
In June 1986, TMPA and Tex La Gled suit ist the 98th Judicial District Court of Travis County, Texas against Texas Utilities and the Company. The petition asserted various causes of action, including a number of alleged breaches of the Agreement by the Company and violaticas of the DTPA. TMPA and Tex La asked for rescission and modi 0 cation of the Agreement and p.) ment for damages, includir.g treble damages based upon violations of the DT?A. The Company and Texas Uttlities intend to vigorously con:est this suit, which has been stayed as a result of the ruling in the Dallas County suit.
In February 1988, the Company entered into an Agreement with TMPA pursuant to which the Company will purchase TMPA's ownership interest in Comanche Peak and all outstanding claims and pending lawsuits between TMPA and the Company will be settled and terminated. Finalization of the agreement is subject to the approval of the NRC and the PUC with respect to the transfer of TMPA's ownership interest. The Cor.mny has Gled applications to obtain such approvals and can-not predict when action with resptet thereto will be taken. (See Note !! to Financial Statements.)
In June 1986, BEPC Gled suit in the Wth 19dicial District Court of Travis County, Tesas against the Company, Texas Utilities, Mining Company and TU Services. BEPC alleges that the defendants have breached the Agreement, certain implied warranties and Sduciary duties, and have been gross negligent, acted with willful misconduct and have violated the DTPA and Texu and federal se a.m'es laws. BEPC asks for an injunction against efforts by the defendants to recover additiona' puna nts. rescission and reformation of'he Agreement and payment for damages trebled pursuant to _. OTPA. BEPC alleges actual damages to that date of at least $216 million. The defendants intend to vigorously contest this suit, which has been stayed as a result of the ruling in
. the Dallas County suit. In March 1987, BEPC Gled a request with the NRC to modify the constrw-
! tion permits and licenses already issued and to impose a prospectise condition to any permits and licenses subsequently issued or renewed to require the Company to assume BEPC's ownership inter-est in Comanche Peak by purchase thereof at its net book cost, and for other unspecined relief. In June 1987, the NRC OfHce of Special Projects denied this request and the Company is unable to predict what further action may be tak.'1.
See item I, Business - Comanche Peak Nuclear Generating Station.
3 l
l i
9 18