ML20148P136
| ML20148P136 | |
| Person / Time | |
|---|---|
| Site: | Midland |
| Issue date: | 11/14/1978 |
| From: | Hood D Office of Nuclear Reactor Regulation |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 7811280127 | |
| Download: ML20148P136 (15) | |
Text
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1 MEETING SIMMRY DISTRIBUTION NOV 141978
( hQ R Local PDR TIC NRR Reading thR #4 File E. Case R. Boyd D. Vassallo W. Gammill J. Stolz R. Baer
- 0. Parr S. Varga C. Heltemes L. Crocker D. Crutchfield F. Williams R. Mattson R. DeYoung Project Manager: D. Hood Attorney, ELD M. Service IE (3)
ACRS (16)
, L. Dreher L. Rubenstein R. Denise
Participants:
W. Lovelace
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[9*Etuq^ UNITED STAT ES NUCLEAR REGULATORY COMMISSION f* n j g E WASHINGTON, D. C. 20555 l 0 '
- 4 NOV 141978 Docket Nos: 50-329' 50-330 l
LICENSEE: Consumers Power Company FACILITY: Midland Plant, Units 1 6 2
SUBJECT:
SUMMARY
OF NOVEMBER 6, 1978 MEETING ON STAFF REQUESTS FOR ADDITIONAL INFORMATION REGARDING EXTENSION OF CONSTRUCTION COMPLETION DATES FOR MIDLAND PLANT, UNITS 1 6 2 On November 6, 1978, the NRC staff met with Consumers Power Company (CPCO) in Bethesda, Maryland. Attendees are listed in Enclosure 1.
The purpose of the meeting was to discuss. requests for additional information by the NRC staff regarding the CPC0 request of August 29, 1977, that Construction Permits CPPR-81 and CPPR-82 be amended to change the dates for completion of construction of Midland Plants, Units t 5 2.
The reasons for the CPC0 request were set forth in Appendix E to the General Information volume submitted with the application for operating licenses.
CPC0 reviewed draft responses to the staff requests as shown in Enclosure 2. The moeting revealed a need for supplementation of the factors identified in Appendix E which contributed to the delay to include changes in the planned date for remobilization of the architect-engineer.
The staff also felt that some changes to clarify the figure presented for the target schedule milestones were needed.
CPC0 stated that changes resulting from the meeting would be incorporated into the responses and submitted for staff review.
L =x n Hep Darl Hood, Project Manager Light Water Reactors Branch No. 4 Division of Project Management
Enclosure:
As stated cc: See next page 7811289till
t,onsumers Power Company ccs: NOV 141978 ,
Michael I. Miller, Esq.
Isham, Lincoln & Beale Suite 4200 One First National Plaza Chicago, Illinois 60670 Judd L. Bacon, Esq.
Consumers Power Company 212 West Michigan Avenue Jackson, Michigan 49201 Mr. Paul A. Perry Secretary Consumers Power Company 212 W. Michigan Avenue Jackson, Michigan 49201 Myron M. Cherry, Esq.
One IBM Plaza Chicago, Illinois 60611 Mary Sinclair 5711 Summerset Drive Midland, Michigan 48640 Frank J. Kelley, Esq.
Attorney General State of Michigan Environmental Protection Division 720 Law Building Lansing, Michigan 48913 Mr. Windell Marshall Route 10 '
Midland, Michigan 48640 Mr. S. H. Howell Vice President Consumers Pov- Company 212 West Mi.c nyan Avenue Jackson, Michig 49201 t
ENCLOSURE 1 ATTENDEES November 6, 1978 NRC D. Ilood 'l*
W. Lovelace Consumers Power Company e i
J. Zabritski R. Bauman K. K1ine G. Sc huass B. Pech ,
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h RESPONSE TO ENCLOSURE 2 QUESTIONS (Reference S A Varga Letter to S H Howell, dated 10/27/78)
Dockets No 50-329 and 50-330 Questions
- 1. Appendix E states that construction time was reevaluated to include
" changing project scope" which resulted " principally because of changed design and construction criteria for safety-related systems and struc-tures." During our meeting of March 21 and 22, 1978, you identified the more si6nificant examples of changing project scope which influenced schedules. Cf these examples stated (as listed in our meeting summary dated March 27, 1978), specify the pacing items which contributed to the schedule delay, and specify the relative significances of the various examples specified in terms of the schedule. Provide a general chronology (by dates) for those items of changed project scope which had a pacing effect on the Midland schedule and showing overlaps of schedule influence between contributing events.
- 2. Appendix E states that construction time was reevaluated to include ex-perience from the industry which indicated that more time was needed to design and construct Midland Plant Units 1 and 2. Identify and describe the specific design and construction areas for Midland Plant Units 1 and 2 for which you found the schedule to be in need of revision and the specific
" industry experience" you used for the reevaluation of each such Midland area.
Response to Questions 1 and 2 The seven specific items referenced in the March 27, 1978 meeting summary have not been individually evaluated to assess their impact on the Project schedule.
However, collectively these items when considered as a group does impact the schedule through additional quantities and productivity (unit / rates) adjustments and will be discussed further below.
A chronology by dates for the individual items has not been developed, but the seven items specified were added to the Project's Technical Scope during the period of job suspension (December 1970 to February 1973) and were not considered part of the Project's scheduling requirements in 1970 (October 1970 Definitive DMFT
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l Estimate Schedule) and ; effort was made to consider these items in the schedule requirements until the scheduling effort which took place in September 1972.
It should be noted that limited Project activities, except for licensing support, was performed during job suspension (December 1970 to February 1973) due to the Dov/ Consumers Contract requirements limiting nonrecoverable costs (cost which could not be recovered at a different site) to a designated figure or ceiling prior to the receipt of the Construction Permit.
Because of the above noncoverable costs restraint, little scheduling work occurred during job suspension until Consumers requested Bechtel in July 1972 to provide a preliminary budget and schedule based on the assumptions of remobilization in September 1972, receipt of the Construction Permit in February 1973 and Unit 1 fuel load in January 1978. This schedule is summarized in Exhibit 1 as the preliminary August 28, 1972 schedule and provided the basis for the Construction Permit (CPPR-81) completion dates (earliest date December 1, 1977 and latest date December 1, 1978).
In early September 1972, Consumers under the nonrecoverable costs limitation felt that remobilization could not occur until January 1973 and directed Bechtel to revise the August 28, 1972 schedule taking into consideration a delay of four months in remobilization and a delay of five months due to increased Project scope and changing productivity (unit / rates) resulting in a delay in fuel load of 9 monthc. This revicion is cunnarized in Exhibit 1 as the Revision B September lb, 1972 schedule.
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h The five-month delay in the September IL,1972 schedule critical path occurred .
in the completion of the auxiliary buildirc civil / structural activities to ele-vation 61h' and start of auxiliary building large pipe and in the bulk caterials (large pipe and electrical ecnnodities) installation duration. The civil /
structural nilestone and start of large pipe was delayed cne month frc= the August 28, 1972 schedule to reflect cask drop desi6n criteria changes and the bulk materials installation duration was extended four renths due to revised productivity (unit / rates) reflectinC Bechtel's experience from other jobs and :
changing QA requirerents of Arpendix B. The piperitter and electrician manpcVer peaking which resulted from the productivity changes was censidered in developing the extensicn of the bulk taterial installation duration. 8 I
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Question 3 Appendix E states that adverse financial conditions in 197h and 1975 made it impossible to obtain financial resources on reasonable terr.s, that this resulted in adjusting construction and engineering activities, and resulted in a delay of 24 months for teth units. Describe in greater detail how adverse financial conditions in 197h and 1975 contributed to the delays for the Midland units. Specify what financing alternatives were considered to avoid these delcys. Define the criteria which you used for judgini; the acceptability of these alternatives. 'Jhich specific areas of construction and enEi neering had the pacing influences and to what extent did each con-tribute to the total delay for the 24-month delay?
Respons3 The conditions prevailing in 19Th vere bleak for the entire electric utility industry. The Arab oil embargo beginning in late 1973 began a restructuring of prices for all fuels while the inflation of 197h and 1975 created cost pressures which electric utilities could not reflect, on a timely basis, in the prices thq charged for electricity. The decisien by Ccnsolidated Edison Company of New York, to forego its regular quarterly dividend in l'ay of 1974 chocked the investment community and vividly illustrated the impact these conditions were having upon the industry. Investors ' skepticism of the industry in 197h was reflected in the capital markets as securities undcrvriters vere unab:e to narket successfully the securities of some electric utilities and intelest rates for both long-tern and short-tern debt instruments were rapidly increasing.
National Economic Eesearch Associates, Inc, reported that as of October 15,197L, utility construction cutbacks for the period 1974-78 total $16.1 billion. Those cutbacks af fected some 132,h90 megavatts of planned generating capacity, of which 89,300 meccvatts were nuclear.
Consumers Power Company confronted these general conditions of 197h with continually declining earnine,s, such that it was legally precluded from issuing preferred stoch URAFI
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by August and first mortgage bonds by September because of coverage requirements.
Consumers Power Company cannot legally sell its common stock at less than par value ($10 per share) and the market by September of 197h closed as lov as I l
10 1/h. A new preference stock vas issued in July of 197h. Although no coverage I test is required on this stock the Company was advised by its investment bankers in October of 197h that it vould not be reasonably marketable in significant amounts. Further, the Company was advised that little investment interest existed I
for its unsecured indebtedness (downgraded earlier in 197h to BBB) and any offering would be of high costs and yield limited new capital. In October the Company 1 000 negotiated the sale and lease back of $32,500 4 of its nuclear fuel supplies.
In November of 1974, faced with the inability to raise significant additional capital, the uncertainty of when the Michigan Public Service Commission vould act on its pending applications to raise the prices chargad for electricity and natural gas as well as the uncertainty surrounding the operation of the Palisades nuclear facility and the substantial additional capital necessary to continue the construc-tion program as it then stood and refund over 86 million dollars of bonds coming due in mid 1975, the Company was forced to delay each of the Midland nuclear units.
This decision was made with full knowledge that the required pro forma coverage requirements (12 months ended) for the issuance of additional first mortgage bonds and preferred stock could not recover before mid 1975 because of the delay by the Michigan Public Service Commission in granting requested rate treatment and that additional sale and leaseback arrangements might provide 20-50 million of capital to fund the construction program. Although numerous financial projections were made with varied assumptions about operating conditions, regulatery treatment and the acceptance of Consumers Power Company securities to the capital markets, the Novec3her delay decision was made leaving the option for addition.t1 delay decisions if earninFs were not restored to the level necessary to attract capital f
DRA7 by mid 1975 In early 1975 the Company negotiated a coal inventory financing In June of 1975, and by June sold and leased back its general office buildings.
the Company sold 50 million of convertible preference stock and in July,150 million of first mortgage bonds marking its improved financial health and the acceptance of its securities by the capital markets for the first time in over ten months.
As a result of a questionnaire forwarded to Consumers Power Company on May 29.
197h by the Deputy Director for Reactor Projects of the Atomic Energy Commission regarding the Company's financial status , the period from April 197h through December of 1975 has been docunented in considerable detail. Attached is a copy of the responses Consumers Power Company provided at that time.
The pacing influence contributing to the total delay of 24 months was the reduction in manuel labor from approximately 1,000 people in August 197h to an approximate average of 200 people in 1975 This reduction plus the 1976 time duration to restaf f (approximately 6 months) to the same manual labor level of Au6ust 1974 was the pacing or principal factor contributing to the delay of 2k months. Also, engineering 9.nd procurement activities were reduced in 1975 from 300 people to a lov of approximately 100 people. This reduction when reviewed today with the benefit of hindsight had a construction delay impact by reducing the lead time from approved desi 6 n to start of construction plus impacting the placin6 of purchase orders and causing delays in the delivery of materials and components.
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- h. Describe the special Quality Assurance provisions which were and are bcing l implemented for materials and components as a result of the extended con- l struction period. l l
Response
In order to protect existing materials and components on site, and to prevent unacceptable deterioration during the extended construction period, a joint plan i was developed by Eechtel and Consumers Power Company commencing in November 197h i to address the problem. The key elements of this plan were as follows:
- Determine delivery dates for equipment and material, and arrange for storage at the vendor facility whenever possible.
- Contact vendors to determine special requirements for long-term storage.
Special procedures and requirements were to be approved by Bechtel Engi-neering.
- For materials and components stored at the site:
- 1. Modify existing Bechtel Construction storage procedures to cover the extended period.
- 2. Incorporate new vendor requirements for extended storage into existing field procedur'es.
- Contact the Babcock and Wilcox Ccmpany (B&W) for any special requirements for USSS related materials and components.
- Contact the General Electric Company (GE) to arrange storage and dis-position of turbine / generator components.
While the initial steps of the above-described plan were being implemented, a detailed estimate of physical requirements for site storage af materials and components was made. This included a review of all purchase orders to determine sizes and quantities, followed by a categorization into the four levels of storage specified by ANSI Mb5 2.2. Following an economic analysis of alternatives j i
to provide satisfactory site storage I pfollowing actions were taken: l nsMr !
- A new 10,000 cubic foot Class A varehouse was constructed.
- An additional 60,000 cubic foot Class B and C varehouse vas constructed.
- A 60 acre plus addition to the Class D outside laydown area was scheduled, )
l with completion specified in 1976.
Meetings were held with representatives of B&W and GE to determine requirements for the USSS and turbine / generator equipment, respectively. B&W provided special long-term rtorage inctructions for components within their scope of supply. An interior inspection of major NSSS vessels stored on site was recommended to deter-mine the "as received" condition prior to extended storage. This inspection was accomplished over the summer of 1975 Special site storage facilities were de-signed for the reactor coolant pump motors and the reactor pressure vessel internals.
Off-site storage of the turbine / generator components was arranged with commercial warehouses and GE.
By the summer of 1975, site storage procedures were modified by Bechtel Construc-tion to reflect additional requirements for long-term storage. All long-term related storage activitiec u:idertaken vere performed by Bechtel Construction Field Engineers and monitored by Quality Control Engineers (Q-listed items), as an ex-panded part of their normal activities. These storage related duties were des-cribed in site storage procedures. Implementation of long-term storage require-ments, where applicable, has continued to date.
Evaluations of Bechtel activities in the area of long-term storage vere conducted by Consumers Power Company throughout the extended period, and have continued to date where applicable. These included a formal audit program for Q-listed items conducted by Quality Assurance Engineers, and a monitoring program for Non-Q listed items conducted by Construction Field Engineers. In addition, inspections D;t4FT
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by NRC Re6 1 on III Inspection and Enforcement have reviewed Consumers Power Company's activities in the area of long-term storage on a routine basis.
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DPdT Question 5 Appendix E accounts for 33 months of delay due to changing project scope (9 months) and financial conditions (2h months). However, the delay as-sociated with operation of the first operating unit is 3h months (ie, the difference between December 1, 1977 and October 1, 1980. What is the reason for this one additional month of delay?
Response
The additional month delay to the 9-month and 2h-month delays previously dis-cussed was added to the Project schedule in February 1973. This schedule is summarized as the Revision 5, March 29, 1973 schedule in Exhibit 1 and is due to the actual remobilization of Bechtel in February 1973 instead of the January 1973 planned remobilization contained in the September 1b,1972 schedule basis.
Also a decision to construct Unit 2 first was made at this time and the status of design, procurement and construction of this unit was behind Unit 1, necessitating more work to do or catch up and this impacted the end date.
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