ML20151N610
| ML20151N610 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 08/02/1988 |
| From: | Brock M, Mceachern P HAMPTON, NH, SHAINES & MCEACHERN |
| To: | NRC COMMISSION (OCM) |
| References | |
| CON-#388-6849 OL-1, NUDOCS 8808090048 | |
| Download: ML20151N610 (15) | |
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00CXETED USNP,C UNITED STATES OF AMERICA UNITED STATES NUCLEAR REGULATORY COMMISSION BEFORE THE .g g .3 p3 33 NUCLEAR REGULATORY COMMISSION pe r. - - . - ,
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In the Matter of )
) Docket Nos. 50-443-OL-1 PUBLIC SERVICE COMPANY ) 50-444-OL-1 OF NEW HAMPSHIRE, et al. )
) (On-Site Emergency (Saabrook Station, ) Planning and Safety Issues)
-Units 1 and 2) )
)
INTERVENORS' REPLY TO THE RESPONSES OF THE NRC STAFF AN D_ AP PLI C ANTS _TO_CO MM I S S I ON_OR DE R_OF_JU LY_14 , _1988 NOW COME the Town of Hampton, Seacoast Anti-Pollution League and New England Coalition on Nuc.*. ear Pollution (hereinafter t
"Intervenors") and reply to the responses of the NRC Staff and Applicants to the Commission's Order dated July 14, 1988.1 By this reply, and contrary to the responses proffered by the Staff 3
and Applicants, Intervenors urge the Commission to waive its regulations that exempt Applicants from financial qualification 1See NRC STAFF RESPONSE TO COMMISSION ORDER OF JULY 14, 1988 dated July 22, 1988 and APPLICANTS' RESPONSE TO THE COMMISSION'S ORDER OF JULY 14, 1988 dated July 22, 1988.
8808090048 800802 PDR ADOCK 05000443 0 PDR n
review,2 and to compel Applicants to demonstrate, prior to low power operation, that they possess or have reasonable assurance of obtaining the funds.necessary to safely operate and to decommission Seabrook Station. 10 C.F.R. S SO.33 (f) (2) .
HISTORY _OF_ PROCEEDINGS Under date of July 31, 1987, Intervenors filed a petition, pursuant to 10 C.F.R. 52.758, for waiver of Commission regulations that exempt Applicants from financial qualification review.3 As grounds for waiver, Intervenors cited:
- 1) The Commission's purpose in generically exempting publicly regulated utilities from demonstrating financial qualification rested upon the Commission's belief that the rata makinc crocess would assure adequate funds for safe operation.
2See 10 C.F.R. 5950.2, 50.33 (f) , 50.40(b) , and 50.57 (a) (4) .
310 C.F.R. 52.758(b) states as follows:
A part/ to an adjudicatory proceeding involving initial licensing subject to this subpart may petition that the application of a specified Commission rule or regulation or any provision thereof of the type described in Paragraph (a) of this section, be waived or an exception made for the particular proceeding.
The sole ground for petition for waiver or exception shall be that special circumstances with respect to the subject matter of the particular proceeding are such that application of the rule or regulation (or provision thereof) would not serve the purposes for which the rule or regulation was adopted.
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The Commission believes that the record of this rule making demonstrates generica'.ly.that the rate process assures that funds nee led for safe operation will be made available to regulated electric utilities. Since obtaining such assurance was the sole objective of the financial qualification rule, the Commission co;d udes that, other than in exceptional cases, no case by case litigation of the financial qualification of such applicants is warranted. 49 Fed. Reg. 35,750 (9/12/84).
- 2) As a matter of state law, however, the New Hampshire Public Utilities Commission is barred from allowing Applicants to recover, through the rate making process, any monies to operate Seabrook Station at low power, or to decommission that facility if it never commences full power operation.4 The Commission's purpose in generically exempting Applicants fron financial qualification review is thereby frustrated since the rate making process does not assure the "total revenues" to operate Seabrook safely. See 49 Fed. Reg. 35,750 (9/12/84).
4NHRSA 378:30-A states in relevant part:
All costs of construction work in progress, including, but not limited to, any costs associated with constructing, owning, maintaining or financing construction work in progress shall not be included in a utility's rate base nor be allowed as an expense for rate making purposes until, and not before, said construction project is actually providing service to consumers.
See also, NHRSA 162-F:19 (decommissioning costs are only recoverable through charges against customers, but those charges may only be assessed, and payments to the funds shall commence, "in the billing month which reflects the first full month of service from the facility". Under New Hampshire law, therefore, n2 revenues through the rate making process are available to pay clean up and decommicsicning costs of low power operation, if the facility never receives a full power license.
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- 3) Finally, as grounds for waiver, Intervenors pointed to the likely (and now accomplished) bankruptcy of Applicants' lead owner, Public Service Company of New Hampshire. PSNH's perilous financial condition therefore casts further doubt on the ability of Applicants' lead owner, now subject to direction by the Bankruptcy Court, to meet its ongoing financial obligations or to reasonably assure the safe operation of Seabrook Station.
Under date of August 20, 1987, the Licensing Board denied Intervenors' petition, principally upon grounds that the concerns raised in Intervenors' petition were "speculative". Similarly, the Appeal Board concluded that Intervenors had failed to establish a crima facie case for waiver, and affirmed the Licensing Board's decision. ALAB 895. That denial is presently on appeal to the Commission.5 By ALAB 895, however, the Appeal Board additionally concluded that the Massachusetts Attorney General (MASS AG), by a parallel petition for waiver of the financial qualification regulations, had stated a prima facie case for waiver a"d certified the MASS AG pe?.ition for decision to the Commission.
In certifying the MASS AG petition, however, the Appeal Board narrowly, and improperly, circumscribed the grounds justifying S S.gg SAPL, TOWN OF HT'? ION AND NECNP APPEAL OF PARTIAL DENIAL OF WAIVER REQUEST (ALAB 895) TO REVIEW FINANCIAL QUALIFICATIONS OF PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE dated July 12, 1988. In this reply, Intervenors will not revisit the arguments made in their appeal brief, although those arguments are hereby adopted and incorporated by reference in this reply. For ease of reference, Intervenors have attached an additional copy of the appeal brief to this memorandum.
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certification and waiver. The Appeal Board ruled that the only circumstances establishing a Erima facie case for waiver arose out of the decision by the Massachusetts Municipal Cooperative Electric Company (MMWEC), Applicants' fourth largest owner, to cease its monthly payments-for Seabrook and to get out of the project.. ALAB 895 at p. 34. Certain additional grounds proffered by MASS AG, including those previously articulated by Intervenors, were rejected by the Appeal Board as speculative or otherwise not adequate to support the waiver of Applicants' exemption from the financial qualification regulations.
Intervenors concur that the decision by MMWEC independently justifies financial qualification review. The unduly narrow scope of the Appeal Board's Order, however, and the Staff's response that subsequent events have mooted MMWEC's decision to cease payments, warrant two comments.
First, in rejecting Intervenors' petition, the Appeal Board placed an undue, and improper, burden of proof upon Intervenors to obtain a waiver of the regulations exempting Applicants from financial l
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4 qualification review.6 By regulation, however, the Commission has concluded that the purpose of demonstrating financial qualification is to assure:
The applicant possesses or has reasonable assurance of obtaining the funds necessary to cover estimated operating costs for the period of the license, plus the estimated costs of shutting t!:e facility down and maintaining it in a safe condition. 10 C.F.R. $50.33(f)(2).
Whether a particular Applicant has "reasonable assurance of obtaining the funds necessary to cover estimated operating costs",
6 Applicants have acknowledged that, ia their view, the burden of proof upon Intervenort; is so extreme as to effectually preclude Intervenors from avgr obtaining a waiver of the financial qualification regulations.
The sine cua non of a petition under 10 C.F.R. 52.758 is a crima faqig showing that the rule being challenged will r.ot serve the purpose intended. To_becin_with, _it_is_ doubtful whether under that standard, there ever can-be_a_orima_faEie_showina_that_the_finan ial cualification_ rules _for_ utilities _will_not serve the nurpose intended. The avowed purpose of the rule is to eliminate case by case adjudication of financial qualifications of public utility applicants for operating licenses. Clearly the rule is serving that literal purpose here. APPLICANTS' ANSWER TO SAPL, TOWN OF HAMPTON AND NECNP APPEAL OF PARTIAL DENIAL OF WAIVER REQUEST ( ALAB 895) TO REVIEW FINANCIAL QUALIFICATIONS OF PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE, dated July 26, 1983, p. 3. (Emphasis Supp.ied)
Applicants' position is inconsistent with, and should be rejected, as contrary to the Commission's own statement of purpose at the time it promulcated the financial qualification regulations. 49 Fed.
Reg. 35,751 (9/12/84). There the Commission expressly recognized that, in "special circumstances", it may be appropriate, through a petition under 2.758, to conduct financial qualification review of a nublicly regulated utility. Id. I i
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- 50. 33 (f) (2) , necessarily requires a predictive finding of whether future revenues will be adequate to assure safe operation. This predictive finding is not, as asserted by the Appeal Board and Applicantu, "speculative", but is rather compelled by the Commission's regulations to assure sufficient financial resources throughout the period of operation.7 In addition, certainty of the rate making process represented the sole justification, in the Commission's opinion, for generically exempting Applicants from financial qualification review.
It is irrefutable, however, that the rate making process is unavailable to Applicants to finance low power operation, N. 4, supra, and, as recognized by the Appeal Board itself, "it is self evident that bankruptcy creates major uncertainties". ALAB 895, 7In Applicants' view, Intervenors may obtain a waiver of the financial qualification regulations only upon conclusive proof that Applicants presently lack adequate funds to conduct low power operation safely.
When, as, and if, the Seabrook project, in ,
fact runs short of funds and thereby is unable adequately to fund safety related matters, then the prima facie case is made and not before. To say otherwise is to speculate.
[S_eg e APPLICANTS' RESPONSE TO THE COMMISSION'S ORDER OF JULY 14, 1988 dated July 22, 1988 at pages 7-8.)
Applicants thereby urge the Commission to endorse the illogical view that Intervenors must first conclusively prove their case and than obtain subsequent and redundant financial qualification review by the Commission. Or, as in Alice _In_ Wonderland, first the case should be decided, then the trial conducted.
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- p. 23.8 Irrespective of MMWEC, therefore, these circumstances presently preclude a finding of reasonable assurance that Applicants will obtain the funds to operate Seabrook safely at low power, 10 C.F.R. 50.33(f)(2). The Commission should not wait until the facility is contaminated by low power operation, and high level nuclear waste generated, before determining whether Applicants' financial circumstances can assure safe operation and prompt decommissioning.
The subject regulations should be waived.
Second, on the basis of the vote by the MMWEC's Board of Directors to cease monthly payments for Seabrook, and to move to get out of the project, the Appeal Board concluded that the MASS AG had stated a Drima facie case for walver of the financial
- qualification regulations and certified the petition to the ,
Commission. Subsequent to MMWEC's decision to Withhold Seabrook payments, and certification of the MASS AG petition, Northeast Utilities entered into an .3J.2 ment with Applicants to pay 8 Applicants argue that a determination that bankruptcy per se should require financial qualification review may represent "a direct violation of Section 525 of the Bankruptcy Act". In substance, this section bars discrimination against a bankruptcy debtor "solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act." 11 U.S.C. 5525(a). That statute, however, was never 1 intended to preclude a determination that the debtor is l financially qualified to undertake new or expanded j responsibilities. "It (Section 525) does not prohibit
> consideration of other factors, such as future financial '
responsibility or ability, and does not prohibit imposition of requirements such as net capitol rules if applied nondiscriminatorily. Senate Report number 95-989. To adopt Applicants' construction of Section 525 would effectually grant PSNH greater rights to avoid financial qualification review than those enjoyed by nonbankruptcy applicants. This was never the intent of the law. Re: Professional Sales Core, 56 Br. 753 (N.D.
Ill. 1985).
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approximately,$2,000,000 to fund MMWEC's share of Seabrook cost; through August 31, 1988. Seizing upon these few additional weeks of funding, the NRC Staff argues that the MASS AG petition should now be denied since "the circumstances underlying the Appeal Board's decision to-certify the Attorney General's petitlen to the Commission do not currently obtain". NRC Staff Response, Page 10.
The Staf f further cites with approval that Applicants "are workir.g vigorously to structure an arrangement to provide funding for tne KMWEC share for a period of at least a year". NRC Staff Response, Pages 9-10.9 Even assuming the legality of the interim payment of MMWEC's share by Northeast Utilities,10 that payment by a single private utility to meet the shortfall occasioned by a defaulting co-owner in Seabrook, for a one month period, hardly constitutes equivalent 9It is ironic that the Staff faults Intervenors' petition as "speculative" and then argues that financial qualification review should be denied, in part, since Applicants presently are engaged in '
negotiations to plug a financial hole 1.ecessitated by MMWEC's refusal to make further Seabrook payments. Staff Response pp.
9-10. The Staff's argument on this issue, grounded upon the Affidavit of John F. G. Eichorn, Jr., proffered by Applicants, presents nothing more than an admission that Applicants financial circumstances presently do not provide reasonable assurance that Applicants have adequate financial. resources to conduct Jow power operations safely.
10 Based upon information provided by Northeast Utilities to Intervenors, it appears that payment by NU of approximately S2,000,000 was conditioned upon an agreemert by PSNH, among other Seabrook Applicants, to purchase power from Northeast Utilities over the next year. This transaction, which may extend beyond routine "shcrt term" power purchases in both duration and cost, as well as including as partial consideration for the agreement, the funding of Seabrook Station, may fall catside PSNH's ordinary course of business, thereby requiring prior Bankruptcy Court aprova7. 11 U.S.C. 5363(b). This PSNH failed to do.
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financial assurance, or. predictability over time, as provided by the rate making process. The certainty of onaoinc financing through rates, however, was the sole justification articulated by the Commission for exempting regulated utilities from financial qualification review.
The NRC's analysis of the NARUC survey, discussed infra, has shown that all State public utility commissions have sufficiunt rate making authority to ensure sufficient utility revenues to meet the cost of NRC safety requirements.
By contrast, the history of the Seabrook proceeding is one of financial utruggle and default by private utilities obligated by contract to continue funding the Seabrook project.11 The Staff, however, still requests this Commission to accept a stop gap approach to Applicants' extreme financial circumstances, regardless of the source, or limited duration, of the funding.
11 As previously noted by Intervenors to the Appeal Board:
- The Appeal Board should be aware that various f other ownership interests in the project are in dire financial straits. Vermont Electric l
Coop has been in default on its Seabrook obligations for mores than a year, and the Washington Electric Coop, of East Montpellier Vermont has just announced it will be defaulting on the next payment. In addition, the Eastern Maine Cooperative, which is a participant through its participation with one of MMWEC's power sale contracts, has filed for bankruptcy reorganization. Other owners, including some with much more substantial interests, have recently been placed on credit watch by Moody's Investor Services.
SAPL RESPONSE TO APPEAL BOARD MEMORANDUM AND ORDER OF JAaUARY 29, 1988 REGARDING FINANCIAL C0ALIFICATION RULE dated February 23, i 1988, pago 3, note 2.
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The commission should reject-this invitation to create a significant ,
safety hazard through low power operation without reasonable assurance of Applicants' financial qualification.
I Respectfully submitted, TOWN OF HAMPTON By Its Attorneys SHAINES & McEACHERN, Prof ssional Associatio
\ \ ','\
By \. '
Paul McEachern DATED: August 2, 1988 \,
By ! h. d Matthew T. Stock i
l 4-1 11 i
L 00LxtiE0 uwc
'E8 MD -3 P3 :33 CERTIFICATE QE SERVICE []' g~ ~
Bu m.4 I, Matthew T. Brock, one of the attorneys for the Town of Hampton herein, hereby certify that on August 2, 1988, I made service of the foregoing document, INTERVENORS REPLY TO THE RESPONSES OF THE NRC STAFF AND APPLICANTS TO COMMISSION ORDER OF JULY 14, 1988, by depositing copies thereof in the United States Mail, first class postage prepaid for delivery (or, where indicated, by Express Mail, prepaid) addressed to:
- 1 van Smith, Esq., Chairman *Dr. Jerry Harbour Atomic Safety & Licensing Board Atomic Safety & Licensing Board (Off-Site) (Off-site)
U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Comm.
East West Towers Building East West Towers Building 4350 East West Highway 4350 East West Highway Bethesda, MD 20814 Bethesda, MD 20814
- Judge Gustave A. Linenberger, Jr.
- Atomic Safety & Licensing Atomic Safety & Licensing Board Appeal Board Panel (Off-Site) U.S. Nuclear Regulatory Comm.
U.S. Nuclear Regulatory Commission Washington, DC 20555 East West Towers Building 4350 East West Highway
- Thomas Dignan, Esq.
Bethesda, MD 20814 George H. Lewald, Esq.
Kathryn A. Selleck, Esq.
- Adjudicatory File Ropes & Gray Atomic Safety & Licensing Board 225 Frankin Street Panel Docket (2 copies) Boston, MA 02110 U.S. Nuclear Regulatory Commission East West Towers Building
- Stephen A. Jonas, Esq.
4350 East West Highway Assistant Attorney General Bethesda, MD 20814 Department Chief Public Protection Bureau
- Stephen E. Merrill, Esq. One Ashburton Place George Dana Bisbee, Esq. Boston, MA 02108 Office of the Attorney General State House
- Diane Curran, Esq.
Concord, NH 03301 Andrea C. Perster, Esq.
Harmon & Weiss 2001 S Street, N.W., Suite 430
- Sherwin E. Turk, Esq. Washington, DC 20009-1125 Office of General Counsel U.S. Nuclear Regulatory Commission
- Edward A. Thomas 15th Floor - One White Flint North Federal Emergency Mgmt. Agency 11555 Rockville Pike 442 J.W. McCormack (POCH)
Rockville, MD 20852 Boston, MA 02109
P Philip Ahrens, Esquire Robert A. Backus, Esq.
Assistant Attorney General Backus, Meyer & Solomon Ctffice of the Attorney General 111 Lowell Street State House, Station 6 Manchester, NH 03105 Augusta,-MB- 04333 Mrs. Anne E. Goodman Jane Doughty Board of Selectmen Seacoast Anti-Pollution League 13-15 Newmarket Road 5 Market Street Durham, NH 03824 Portsmouth, NH 03801 William S. Lord, Chairman Rep. Roberta C. Pevear Board of Selectmen Drinkwater Road Town of Amesbury Hampton Falls, NH 03844 Town Hall, Friend Street Amesbury, KA 01913 R. Scott Hill-Whilton, Esquire H. Joseph Flynn, Esq.
Lagoulis, Clerk, Hill-Whilton Office of General Counsel
& McGuire Federal Emergency Mgmt. Agency 79 State Street 500 C Street, S.W.
Newburyport, MA 01950 Washington, DC 20472 Stanley W. Knowles Ashod N. Amirian, Esquire
! Poard of Selectmen 376 Main Street P.O. Box 710 Haverhill, MA 01830 ,
North Hampton, NH 03862 J.P. Nadeau, Selectman Alfred V. Sargent, Chairman Selectmen's Office Board of Selectmen 10 Central Road Town of Salisbury Rye, NH 03870 Salisbury, MA 01950 Senator Gordon J. Humphrey Senator Gordon J. Humphrey U.S. Senate One Eagle Square, Suite 507 Washington, DC 20510 Concord, NH 03301 (Attn Tom Burack) (Attn: Herb Boynton)
William Armstrong Allen Lampert Civil Defense Director Civil Defense Director 10 Front Street Town of Brentwood Exeter, NH 03833 Exeter, NH 03833 Richard A. Hampe, Esq. Gary W. Holmes, Esq.
l Hampe and McNicholas Holmes and E13s '
35 Pleasant Street 47 Winnacunnet Road Concord, NH 03301 Hampton, NH 03842 i 2
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Charles P. Graham, Esq. Calvin A. Canney, City Manager Murphy & Graham City Hall 33 Low Street 126 Daniel Street Newburyport, MA 01950 Portsmouth, NH 03801 Sandra Gavutis Brentwood Board of Selectmen Town of Kensington RFD Dalton Road RFD 1, Box 1154 Brentwood, NH 03833 East Kensington, NH 03827 Robert Carrigg, Chairman Mr. Thomas H. Powers, I2I Board of Selectmen Town Manager Town Office Town of Exeter .
Atlantic Avenue 10 Front Street No. Hampton, NH 03862 Exeter, NH 03833
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Judith H. Mizner, Esq. Beverly Hollingworth 79 State Street 209 Winnacunnet Road 2nd Floor Hampton, NH 03842 Newburyport, MA 01950 Leonard Kopelman, Esquire Barbara J. Saint Andre, Esquire Michael Santosuosso, Chairman Kopelman & Paige, P.C.
Board of Selectmen 77 Franklin Street Jewell Street, RFD 2 Boston, MA 02110 So. Hampton, NH 03827
- Alan S. Rosenthal, Chairman Atomic Safety & Licensing '
Appeal Board U.S. Nuclear Regulatory Comm.
East West Towers Building
- Thomas Moore .
Third Floor Mailroom Atomic Safety & Licensing 4350 East West Highway Appeal Board Bethesda, MD 20814 U.S. Nuclear Regulatory Comm.
East West Towers Building Third Floor Mailroom
- Howard A. Wilber 4350 East West Highway Atomic Safety & Licensing Bethesda, MD 20814 Appeal Board U.S. Nuclear Regulatory Comm. ;
East West Towers Building Third Floor Mailroom 4350 East West Highway Bethesda, MD 20814 t
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- Sheldon J. Wolts, Chairman
- Administrative-Judge Atomic Safety & Licensing Emmeth A. Luebke Board (On-Site) 4515 Willard Avenue U.S. Nuclear Regulatory Comm. Chevy Chase, MD 20815 East West Towers Building 4350 East West Highway Bethesda, MD 20814 j
- Lando W. Zech, Jr., Chairman *Thomes M. Roberts
' U.S. Nuclear Regulatory Comm. U.S. Nuclear Regulatory Comm.
Washington, DC 20555 Washington, DC 20555 t
- Frederick M. Bernthal *Kenneth M. Carr U.S. Nuclear Regulatory Comm. U.S. Nuclear Rcgulatory Comm.
Washington, DC 20555 Washington, DC 20555
- Ker.neth C. Rogers
- U.S. Nuclear Regulatory Comm.
Washington, DC 20555 Y
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Matthew T. Brock ,
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- Purolator/ Courier i
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UNITED STATES OF AMERICA I UNITED STATES NUCLEAR REGULATORY COMMISSION BEFORE THE ;.
NUCLEAR REGULATORY COMMISSION ,
)
In the Matter of ) ,
)
PUBLIC SERVICE COMPANY ) Docket Nos. 50-443-OL-1 OF NEW HAMPSHIRE, et al. ) 50-444-OL-1 ,
)
(Seabrook Station, ) (On-Site Emergency Units 1 and 2) ) Planning and Safety Issues)
)
SAPL, TOWN OF HAMPTON AND NECNP APPEAL OF PARTIAL DENIAL OF WAIVER REQUEST (ALAB 895) TO REVIEW FINANCIAL QUALIFICATIONS OF PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOW COME the Seacoast Anti-Pollution League, the Town of '
Hampton, the New England Coalition on Nuclear Pollution, as joint '
intervenors, and hereby appeal to the Commission pursuant to 10 CFR S2.786(b), the July 5, 1988 Decision of the Atomic Safety and f:
Licensing Appeal Board, ALAB 895, insofar as the Appeal Board t
denied the joint intervenors' waiver request which if granted .
would permit consideration of the issue of the financial qualifications of Public Service Company of New Hampshire (PSNH).
- 1. BACKGROOND AND INTRODUCTION :
The joint intervenors by a pleading dated July 31, 1987, had [f sought a waiver of the Commission's rules pertaining to the j-[
determination of financial capability of applicants for nuclear I' '
i operating licenses. The intervenors based their petition for a waiver on a July 1987 form 8K filed with the Securities and t
.. o.
O Exchange Commission by PSNH which disclosed that the avoidance of bankruptcy for PSNH was going to be "extremely difficult."
4 Accordingly, the joint intervenors sought a determination that a prima facie showing had been made, pursuant to 10 CFR S2.758, that the Commission's rules which ordinarily foreclose a financial qualification inquiry for regulated electric utilities should not be applied. The rules in question are found at 10 CFR SS50.33(f) and 50.57 (a) (4) . The intervenors thus sought a s
determination that, given the parlous financial condition of PSNH, and the fact that the Commissinn still held that there was a safety need to have financially qualified applicants, that the issue of PSNH's financial capabilities should be made available for litigation in th: licensing hearings.
On August 20, the Licensing Board rejected the intervenors' waiver petition, and a timely appeal to the Appeal Board followed. .
Oral argument was held on December 8, and the issue was awaiting P
decision when two important events occurred.
First, on January 26, the New Hampshire Supreme Court unanimously upheld the New Hampshire Anti-CWIP statute, RSA 378:30-a. This statute flatly prohibits any ratepayer recovery for any generating plant "until and not before" the plant "is v
actually providing service to customers." ,
Second, on January 28, two days later, PSNH filed for bankruptcy protection, the first utility in modern history to do
so, and the first ever to do so while seeking a nuclear operating license from this Commission.
On January 29, the Appeal Board, noting these events, invited :'
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the joint intervenors to file new or amended peticions for waiver, and invited other parties to file petitions. In response, intervenors filed a supplemental brief and another party, the Massachusetts Attorney General (Mass AG), on March 7 filed a new petition for waiver. -
In addition, Mass AG filed two supplements to its petition.
The first, on May 13, disclosed the attempt by PSNH's third ,
mortgage bond holders to obtain timely payment of the interest on their securities, which PSNH had conceded would likely prohibit it from meeting other obligations, including its more than 5 million I dollar a month obligation to the Seabrook project, absent rate relief.
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The second Mass AG supplement disclosed the decision of the fourth largest Seabrook owner, the Massachusetts Wholesale .
Municipal Electric Corporation (EMWEC) to cease making project payments as of June 2, 1988. ;
Seabrook project costs, allocated among the joint owners, t-apparently vary between 10 and 15 million dollars a month. PSNU's .l c.
share, at its 35.56952% ownership level, has been averaging ,f a
approximately 5.5 million dollars a month. It is conceded that 5 low power operation will cause these costs to increase.
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se ,
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- 2.
SUMMARY
OF DECISION BELOW r On July 5, the Appeal Board ruled that a prima facie case for a waiver was met by the se7ond Mass AG supplement: that is, due i to the decision of HMWEC to cease funding the project as of June 2, 1988, the project would soon have a 11.5934% funding deficiency. This deficiency, the Appeal Board noted, might be overcome, but it was sufficient to present a "prima facie case that the applicants lack sufficient funds to operate Seabrook safely at low power" and therefore, we must "certify the petition to the Commission." (Slip Opinion at page 38) ;
However, the Appeal Board affirmed the denial of the ,3 intervenors' petition, which relied fundamentally on the f bankruptcy of the largest Seabrook owner as, on its face, if 1 establishing a prima IAcig case for a financial qualification ,
review of the project. The Appeal Board acknowledged: [
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Because PSNH's bankruptcy filing is unprecedented, h the appellants' arguments have a certain visceral f attraction. t However, the Board added:
such a reaction, however, can never be a proper [
substitute for the showing required under 10 CFR 2.758--the only basis on which we are authorized to act. (Slip Opinion page 16) ?
4 Accordingly, the Appeal Board affirmed the denial of the
{..
- intervenors' waiver petition. The Appeal Board's ruling was thus, t
in effect, that although the decision of the fourth largevt owner, .
i MMWEC, to withhold payments was sufficient to establish a prima :,
facie case for a financial qualification review, the bankruptcy of I
.. a the largest owner was not sufficient.
- 3. THE DECISIO WAS ERRONEOUS The Appeal Board erred in ruling that the bankruptcy of the largest Seabrook owner was not a sufficient basis, in itself, to waive the rule which ordinarily forecloses a financial qualification hearing. ,
The Appeal Board clearly stated that the intervenors "if they are to rely on PSNH's filing of a Chapter 11 Reorganization ,
Petition . . ., must demonstrate that the bankruptcy proceeding deprives PSNH and the other applicants of the financial resources ',
n to operate the facility at that power level [ low power]. (Slip .:
Opinion at page 22)
In short, the Appeal Board would hold that the intervenors -
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had to establish, not merely that a utility applicant was in r
bankruptcy, but that the bankruptcy would then result in an actual :
i funding shortage. This, we submit, reversed the burden of proof i on an important safety issue from the applicants to the intervenors, contrary to the requirements of 10 CFR S2.732.
The Appeal Board's error stems from a mischaracterization of the purpose of the financial qualification rule. As previously noted, the financial qualification rule, as recast in 1984, was e 5
not premised on the conclusion that there was no relationship ,
between financial qualification and safety. Indeed, the 5 Commission, in adopting the current rule, specifically eschewed ;
n this rationale:
The Commiss' ion is not relying on this premise for its current rule. 49 Egg. Eng. 35751 (September 12, 1984) l Rather,.the rationale for the rule was that case by case adjudication of financial qualification is "unnecessary due to the ability of such utilities to recover, to a sufficient degree, all or a portion of the cost > canstruction and sufficient costs of
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safe operation throuch Alq rate makina process." (Emphasis added.) Id. at 3548.-
In short, the rule obviating the need for case by case o l adjudication of financial qualification was baton 1 the fact that .
.i electric utility applicants are rate regulated (or can themselves j set rates), and on the assumption that the Imig reculation process -)
itself reasonably assures the availability of necessary funds.
The bankruptcy of Public Service has eliminated the basis for . -
the assumption. Under bankruptcy, there is no assurance that the i rate setting process is available to provide reasonable assurance of funds.1 Whether or not the bankruptcy process itself can act i
j as a basis for'providing the necessary funds is another question, ,
1 and one not within the rationale underlying the Commission's '
l current rule.
'i 1 /The only reference in the Bankruptcy Code to a rate setting -
commission is at 11 USC 1129(a)(6) which provides that if a plan '
of reorganization requires a change in rates, the rate change must ,
be approved by the rate setting commission. PSNH is a long way .;
away from having a plan of reorganization and just sought an "
extension, for filing a plan, which was granted to December 27, -
1988. -
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i The intervenors, in short, have fully met their burden of proof by establishing that the rate setting process, which was to act as a surrogate for Commission case by case inquiry into financial qualifi' cation, is no longer available. That burden having been met, the Commission now should authorize a financial qualif.' ation inquiry, as to the bankrupt entity which is the lead owner, PSNH.
Thus, the PSNH bankruptcy, by itself, establishes the prima f_acie case necessary for a waiver pursuant tc 10 CFR S2.758. This is so because the purpose of the rule eliminating the inquiry was not that the intervenors should be given the burden of showing an actual unavailability of funds, but to avoid case by case adjudication of financial qualification where the rate settina !
process could act as a surroaate for the confidence the case bv case adiudication would otherwise provide in assuring that a ,
nuclear operating license applicant had or could obtain the necessary funds for safe ope:ation. That assurance does not exist for a bankrupt applicant, because the normal rate setting process does not exist for a bankrupt applicant, and the waiver should be granted.
- 4. PEASONS FOR THE COMyj SSION TO ACCEPT REVIEW The Commission should review ALAB 895 both because the Appeal i Board erred in denying the waiver by reversing the burden of proof on an important safety issue, financial qualification, and because this case presents a major policy question of first impression:
y w -n e v F
o Should the commission authorize a bankrupt utility applicant to initiate nuclear operation? Not only is PSNH the first utility seeking a nuclear license to-ever file for bankruptcy, not only is it the largest the Seabrook owner with more than double the ownership of the second larrast owner, it is also the lead owner, the holder of the fuel loading license issued in October, 1986, and the parent of an entity known as New Hampshire Yankee, which is purportedly the present operator of the facility, as a division of PSNH. The intervenors submit that the Appeal Board decision fails to deal with thic underlying reality, and the major policy issues it presents.
In addition, the intervenors suggest that the Appeal Board decision is fundamentally opposed to the Commission's policy as set forth in its recently adopted decommissioning regulation.
In its new decommissioning rule, at 53 Fed. Eeq. 24018, the [
Commission specifically rejected the request from many utilities that they be allowed to meet the financial requirements for decommissioning through use of an internal fund. 10 CFR 72.18(3)
In so doing, the Commission in its Statement of Considerations noted that:
Although the law in this area is not fully ,
developed, in the event of bankruptcy there I
is no reasonable assurance that either '
unsegregated or segregated internal reserves '
can be effectively protected from claims of creditor . . .
53 Fed. Rec. at 24033.
?
If the uncertainties of bankruptcy, including the specifically mentioned bankruptcy of PSNH, are so great that nuclear licensees cannot be permitted to use internal funds for -
meeting decommissioning requirements, even if those funds are ,
segregated, then it seems that the Commission must treat bankruptcy as an issue that can impact on the "reasonable '
assurance" that its licensees can obtain the funds necessary for other aspects of safe nuclear operation.
In aodition, the Appeal Board refused to deal with the possibility that Seabrook, even if authorized to initiate low (
power operation, might never obtain a full power license. ',
In this event, there is now evidence before the Bankruptcy ,
L E
Court that operational costs would increase, as found by the Appeal Board, a decommissioning liability would be incurred, and yet PSNH would be prohibited by the New Hampshire Anti-CWIP '
statute from obtaining ratepayer recovery of these costs. Thus, a g potential public hazard would exist for which no funding is reasonably assured.
4 Whether, in this event, there is assurance that the costs of .
nuclear operation.can be met, including the handling of decommissioning expenses, is a matter the App 2al Board declined to ,
address, because it felt that it ran afoul of the "Commission's ;
prohibition on speculation as to the outcome of ongoing proceedings in applying specific regulations . . . (S1fp opinion at page 35)
_g_
.o However, no such "speculation" is needed to realize that it is more than a bare possibility that Seabrook will not obtain a commercial license, even if low power is undertaken. The Commission cannot ignore this.possible outcome, and the likely financial risk it would present, any more than it can assume the outcome of issuance of a full power license.
For the' Commission to authorize these licensing proceedings to be concluded without consideration of the financial qualification of the Seabrook owners, including the lead owner's position as debtor in possession under the Bankruptcy Act, would be to fail to meet the Commission's duty to insure that its applicants have clearly established that all requirements for nuclear licensing have been met.
DATED: 4 M /iff Respectfully submitted, t y 1 i Seacoast Anti-Pollution League By its Attorneys, BACKUS, MEYER & SOLOMON By:.V Ro6ert A. Backus, Esquire 116 Lowell Street P.O. Box 516 Manchester, NH 03105 (603) 668-7272 I hereby certify that copies of the foregoing have been forwarded by first-class mail to all parties listed on the ^^
attached service list. ,-
'7/ f$
R6bert'A. Backus, Esquire
- ?,, ..
Nic21ygg JUL 13199g UNITED STATES OF AMERICA UNITED STATES NUCLEAR REGULATORY COMMISSION BEFORE THE NUCLEAR REGULATORY COMMISSION
)
In the Matter of )
)
PUBLIC SERVICE COMPANY ) Docket Nos. 50-443-OL-1 OF NEW HAMPSHIRE, et al. ) 50-444-OL-1
)
(Seabrook Station, ) (On-Site Emergency Units 1 and 2) ) Planning and Safety Issues)
)
SAPL, TOWN OF HAMPTON AND NECNP APPEAL OF PARTIAL DENIAL OF WAIVER REQUEST (ALAB 895) TO REVIEW FINANCIAL QUALIFICATIONS OF PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOW COME the Seacoast Anti-Pollution League, the Town of Hampton, the New England Coalition on Nuclear Pollution, as joint intervenors, and hereby appeal to the Commission pursuant to 10 CPR S2.786(b), the July 5, 1988 Decision of the Atomic Safety and Licensing Appeal Board, ALAB 895, insofar as the Appeal Board denied the joint intervenors' waiver request which if granted ,
would permit consideration of the issue of the financial qualifications of Public Service Company of New Hampshire (PSNH).
- 1. BACKGROUND AND INTRODUCTION The joint intervenors by a pleading dated July 31, 1987, had sought a waiver of the Commission's rules pertaining to the determination of financial capability of applicants for nuclear operating licenses. The intervenors based their petition for a waiver on a July 1987 form 8K filed with the Securities and
. J