ML20151N614
| ML20151N614 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 08/02/1988 |
| From: | Jonas S MASSACHUSETTS, COMMONWEALTH OF |
| To: | NRC COMMISSION (OCM) |
| References | |
| CON-#388-6852 OL-1, NUDOCS 8808090049 | |
| Download: ML20151N614 (16) | |
Text
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Ijh J es.1 00CKETED UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION TO AW -3 P1 :15 BEFORE THE COMMISSION OFO:
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In the Matter of
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Docket Nos,
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50-443-444-OL -f PUBLIC SERVICE COMPANY OF NEW
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(On-site EP)
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(Seabrook Station, Units 1 and 2),
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August 2, 1988
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RESPONSE OF MASSACHUSETTS ATTORNEY GENERAL JAMES M.
SHANNON TO COMMISSION ORDER OF JULY 14, 1988 INTRODUCTION On July 14, 1988, the Commission issued its order authorizing the Applicants, the Staff, the Mass AG and other Intervenors to file responses addressing the Mass AG's financial qualifications petition.
On July 22, 1988, the Applicants filed their response accompanied by the Affidavi.t of John F.
G.
- Eichorn, Jr.,
the Chairman and CEO of Eastern Utilities Associates.1 On the l
same day, the Staff filed its response, accompanied by a July 13, 1988 press release concerning the decision of Northeast Utilities to advance the Massachusetts Municipal
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Eastern Utilities Associates is the parent company of Montaup Electric Corporation, a 2.9% owner of Seabrook, and EUA Power Corporation, a 12*5 owner of Seabrook.
Eichorn Affidavit T 1.
8808090049 880802 5 PDR ADOCK 05000443 G
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.6-Wholesale Electric Company ("MMWEC") its Seabrook payments through the end of this month.
The Applicants and the Staff, as well as the Appeal Board in its July 5, 1988 decision on the financial qualifications petitions (ALAB-895), fundamentally misapprehend the purpose of the NRC's financial qualifications rule and the showing required to obtain a waiver from it.
The rule allows the i
Commission to conduct its financit.1 qualifications inquiry, required by the Atomic Energy Act, on a generic rather than individualized basis for regulated utilities.
The rule proceeds from the assumptions that those utilities are under the jurisdiction of public utility commissions and would likely recover sufficient costs of safe operation in ratemaking proceedings.
Those assumptions do not apply here because Seabrook's lead owner is subject to New Hampshire's anti-CWIP law and is within the jurisdiction of the federal bankruptcy court.
Rather than address these central issues, the Applicants, the Staff and the Appeal Board conclude that the Mass AG and Intervenors must demonstrate that a shortage of funds exists or is certain to exist before a waiver can be given, effectively claiming that a financial qualifications inquiry cannot be opened until the subject of the inquiry is decided.
The Commission should reject that position and order that the record in the on-site proceedings be reopened for a full financial qualifications proceeding. -. _ _ - _ -
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ARGUMENT A.
THE COMMISSION'S FINANCIAL QUALIFICATIONS RULE IS BASED ON THE BELIEF THAT PUBLIC UTILITY COMMISSIONS WILL CONTROL AND AUTHORIZE FUNDING THRQ. UGH RATEMAKING, Under the Atomic Energy Act of 1954, 42 U.S.C. SS 2011 et seq., each app 1'ication for a construction permit or operating license "shall specifically state such information as the Commission, by rule or regulation, may determine to be necessary to decide such of the technical and financial qualifications of the Applicant as the Commission may deem appropriate for the license."
42 U.S.C. S 2232(a).
In 1956, the Atomic Energy Commission adopted a rule that applicants must be "technically and financially qualified to engage in the proposed activities."
10 CFR S 50.40(b)(1956).
In 1968, the Commission amended the regulation by requiring each applicant to submit information "sufficient to demonstrate to the Commission" that it either possesses funds necessary to cover the estimated costs of operation, shut down and maintenance or "has reasonable assurance of obtaining the necessary funds."
10 CFR S 50.33(f)(1982).
The rule requires such information as estimates of costs, identification of sources of funds and financial statements.
10 CFR part 50, App. C (1982).
On January 6, 1978, the Commission issued an order resolving, inter alia, the financial qualifications issue for the Seabrook construction permit.
Eublic Service Co2 of NeM Hampshire (Seabrook Station, Units 1 and 2), CLI-78-1, 7 NRC 1 (1978).
The Commission affirmed the findings of the Licensing I
1 0
Board and Appeal Board and concluded that there was "reasonable assurance" that the Applicants were financially qualified.
The case raised concerns for the Commission about the "seemingly tenuous link between safety and financial' qualification, particularly for a large regulated utility."
Id. at 19.
Therefore, the Commission directed the staff to initiate a rulemaking proceeding "in which the factual, legal and policy aspects of the financial qualifications issue may be reexamined."
J4. at 20.
On March 31, 1982, the Commission adopted a new rule, eliminating case-by-case financial qualifications determinations for electric utilities applying for either construction permits or operating licenses.
47 Fed. Reg. 13751 (1982).
In doing so, the Commission abandoned one of the premises of the rule in its proposed version -- that regulated utilities generally recover the costs of construction and operation through the ratemal:ing process.
Compare 46 Fed. Reg. 41786, 41788 (1981) with 47 Fed. Reg. 13751.
The rule was defended principally with the claim that there was no "demonstrated link between public health and safety concerns and a utility's ability to make the requisite financial showing."
Id.
The rule was then challenged in court, and remanded by the DC Circuit to the Commission because the remaining justifications for the rule did not support the rule's singling out of public utilities.
New England Coalition on_ Nuclear Pollution v.
NRC, 727 F.2d 1127, 1130-1131 (DC Cir.
1984).
-O On September 12, 1984, after another round of rulemaking designed to cure this defect, the Commission again promulgated a rule excepting public utilities from case-by-case financial qualifications determinations.A#
49 Fed. Reg. 35747 (1984).
This time the rule was firmly grounded in the assertion that the ratemaking process "assures for regulated electric utilities the ability to meet the costs of safe operation of a nuclear power facility."
49 Fed. Reg. at 13045 (rationale in proposed rule explicitly relied upon in final rule, 49 Fed.
Reg. at 35748).
The Commission believes that case-by-case review of financial qualifications for all electric utilities at the operating license stage is unnecessary for the following reason.
Utilities are usually regulated through state and/or federal economic agencies, and generally are allowed to recover all or a portion of the costs of constructing generating facilities and all of the costs of operation, subject to the oversight of such state and/or federal agencies.
49 Fed. Reg. at 13045.
The Commission placed great emphasis on a national survey conducted by the National Association of Regulatory Utility Commissioners ("NARAUC").
The survey indicated that ratemaking authorities always considered safety-related operating costs as reasonable expenses recoverable through rates.
49 Fed. Reg. at 35749.
The survey results were bolstered by NRC Staff visits to several public utility commissions.
Id. at 35750.
2/
Because of the financial difficulties experienced by some plant owners at the construction stage and because no construction permit proceedings were then pending, the Commission elected to "focus" on the operating license stage rather than the construction stage.
49 Fed. Reg. 13044, 13045 (April 2,
1984)( proposed rulemaking). t
t The Commission _ concluded that the necessary predictive finding on the financial integrity of regulated utilities could be made on'a generic rather than a case-by-case basis:
The Commission believes that the record of this rulemaking. demonstrates generically that the rate process assures that funds needed 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 concludes that, other than in exceptional caseb, no case-by-case litigation of the financial qualification of such applicants is warranted.
Id.
B.
THE BASIS FOR THE FINANCIAL QUALIFICATIONS RULE HAS NO APPLICATION IN THIS CASE.
The Commission acknowledged in its 1984 rulemeking that the rule's rationale was of "limited applicabiliy."
1.
If the applicant is an electric utility which can Icok to ratemaking authorities to ensure the payment of costs of operation, the rule applies -- if not, the rule does not apply.
The Commission emphasized its reliance on the presence of ratemaking authority in its response to an assertion raised by the State of Texas during the 1984 rulemaking.
Texas, in its comments on the rule, indicated that because a state may be preempted by the NRC from judging the financial capabilities of I
its utilites, the states may not, in fact, have effective ratemaking authority.
Significantly, the Commission did not view the suggested lack of authority as irrelevant.
- Instead, it disagreed with the Texas claim, noting that either state i
public utility columissions have sufficient ratemaking authority or publicly-owned utilities have independent cate-setting authority.
Id. at 35749.
Either way, sufficient authority l
l
O existed to enable the Commicsion to make the generic finding that costs would be met.
The Seabrook case presents a situation neither contemplated by the Commission nor governed by the limited rationale expressed in its rulemaking.
New Hampshire law forbids recovery from ratepayers before commercial operation of any costs associated with the Seabrook plant.
NHRSA 378: 30-9.
Ee.e. In re Public Service Co. of New Hampshire, 130 N.H.
- 265, 539 A.2d 263 (1988).
Moreover, the availability of funds to PSNH for low-power operation and testing # is presently A
within the control of the federal bankruptcy court, not the New Hampshire Public Utilities Commission.
The interests at play in the bankruptcy, including those of vendors, stockholders, bondholders and other holders of security interests in Seabrook and other PSNH assets, are much broader and more complex than in a state or federal ratemaking proceeding.
The Atomic Energy Act requires a finding which predicts an applicant's financial ability to operate, shut.down and maintain a nuclear plant.
The Commission, in an exercise of J
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Once lcw-power testing occurs, the Applicants subject themselves to increased operating costs and, by the NRC's calculations, $54.6 million to $84.8 million in decommissioning costs.
San Mass AG Petition, Supplement to Mass AG Petition, a nd B rie f Anitus Cu ri ae o f U. S. Senator Gordon J.
- Humphrey, Att. 1 (July 29, 1988).
!/
See Massachusetts Attorney General James M.
Shannon's Fatition Under 10 CFR S 2.758 For A Waiver Of Or An Exception From The Public Utility Exemption From The Requirement Of A Demonstration Of Financial Qualifications."
(March 7, 1988).
its discretion, has elected to make that finding generically based on certain key assumptions.
Those assumptions do not apply in this case.
Therefore, there is no basis for such a finding.E#
As the DC Circuit stated when it' remanded the 1982 rule, the Commission has relied on "the peculiar characteristics of public utilities that assure solvency." Raw England Coalitian, Eugta 727 F.2d at 1129.
That reliance is obviously misplaced here for Seabrook's bankrupt lead owner.
The Commission can make the requisite financial qualifications finding only by waiving its rule, reopening the record of the on-site proceedings and addressing the exceptional circumstar.ces that have overtaken PSNH.
C.
THE APPLICANTS, STAFF AND APPEAL BOARD MISREAD THE PURPOSE QF THE RULE AND THE BURDEN TO OBTAIN A WAIVER FROM IT.
In ALAB-895, the Appeal Board interpreted the waiver provision in the context of the Mass AG and Intervenor petitions as requiring a showing that "the applicants have insufficient funds to cover the costs of low-power operation."
ALAB-895 at 20.
The Appeal Board granted the Mass AG petition based upon MMWEC's decision to cease monthly payments and attempt to sell its ownership share:
As matters now stand, the remaining joint owners and applicants will have a substantial 11.59340*5 deficiency in monthly operating expenses and the additional funds necessary to operate Seabrook safely at low power at the expiration of that period.
Id. at 37.
[/
The Act itself lists "the character of the applicant" as an appropriate consideration for the Commission.
42 U.S.C.
S 2232(a).
Where, as here, that character departs significantly from the character which forms the basis for the generic rule, an individual determination should be made. _ -,.
In their responses to the Commission's Order of July 14, 1988, the Applicants and th2 Staff advocate the same general approach and argue similar points on why the Appeal Board should be overturned.
The Applicants criticize the Appeal Board for its "exercise in speculation" on the funding shortfall caused by MMEWEC's actions.
Applicants' Response at u.
The Staff claims that the agreement by Northeast Utilities.
to advance MMWEC's share through August 31, 1988 renders the waiver petition without a "present basis."
NRC Staff Response at 10.
The most concise formulation of the position of both the Applicants and the Staff atoears at pages 6-7 of the Applicants' Response:
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.E/
This approach ignores the most critical issue for any waiver petition -- the purpose of the underlying rule.
Egg 10 CFR S 2.758(b)("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.").
The purpose of the rule has no application and cannot be furthered here because the ratemaking mechanism 6/
The approach of the Appeal Board is somewhat different.
The Appeal Board would not require a present shortage of funds.
Instead, the Board concludes that the petitioners must show that a shortage will occur at some defined point in the future.
San ALAB-895 at 37.
e e
supposedly available to. provide reasonable assurance of funding is not available to PSNH.2/
Moreover, the Applicants and the Staff are in effect making the extraordinary claim that a petition' seeking only a case-by-case inquiry (and thus an exception to the present rule) must meet a areater burden than exists for the petitioners in the inquiry itself.
The Commission has created a process for reaching a predictive finding about the financial integrity of operating license applicants.
That process does i
not require a showing that all of the necessary funds are presently available but rather only that the applicant "has reasonable assurance of obtaining the funds."
10 CFR S 50.33(f)(2).
Conversely, a party challenging an applicant's financial qualifications need not establish a present shortfall in funds if he can show that the requisite "reasonable assurance" does not exist.
The Applicants and the Staff argue that in order to force an individualized inquiry the petitioners must show a present shortage in funds.
In other 2/
The position of the Apneal Board and the Applicants here is not completely consistent with their positions in the Seabrook construction permit case.
The Appeal Board, in finding the Applicants financially qualified to construct the plant, placed great weight on the prospect of future rate increases by the New Hampshire PUC.
Eulllic Service _CL _of New Hampshire (Seabrook Station, Units 1 and 2), ALAB-422, 6 NRC 33, 77 ("it is scarcely likely that the PUC would stand in the way of tl.e establishment of those rates necessary to enable Public Service to fulfill the obligation imposed upon it by its nuclear facility licenses.").
The Applicants urged the Commission to affirm the Appeal Board "on the theory that public utility commissions must be presumed to discharge their duties responsibly."
ESHH, sup.ta, 7 NRC at 17.
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f words, 'the petitioners bear a greater burden on their waiver petition than they do on the merits.E' The argument is C
unreasonable,and should be rejected.E#
Finally, the claim that the sho*.tfall left by MMWEC's actions no longer exists is, for the reasons set forth above, irrelevant.
Nevertheless, even if the Commission reaches the claim, it should reject it.
MMWEC's actions stand and the Applicants and Staff have done nothing more than show that the effect of the actions will be mitigated for one month.
After August 31, 1988, the shortage will exist again.
The "opinion" of John F.G.
Eichorn, Jr. that an "arrangement will be concluded" to cover MMWEC's share until August 31, 1989 is entitled to no weight in this context.
While Mr. Eichorn's hopefulness i3 understandable, the fact remains that no agreement has been reached.
To suggest otherwise is to engage in "an exercise in speculation," to quote the Applicants.
H/
The Appeal Board would place on the petitioners a burden equal to tnat they bear on the merits.
Although not as extreme as the position of the Applicants and the Staff, it is still inconsistent with 10 CFR S 2.758.
1/
Under Commission case law, there is strong support for a finding on the merits that the Applicants are not financially
' qualified.
In Northeast Nuclear Eneroy Co. (Millstone Nuclear Power Station, Unit 3), LBP-74-58, 8 AEC 187 (1974), the Licensing Board found that a 3.694% joint owner possessed only "marginal" financial qualifications because its earnings hed dropped and Moody's had withrawn its rating of the utility's first mortgage bonds.
Id. at 194-196.
The Appeal Boari endorsed the Licensing Board's findings and observed that if the participant owned a larger share of the f acility (st ch as the 39.75% interest of the Millstone lead owner) "it would have been doubtful whether the applicant would have had the requisite financial qualifications."
ALAB-234, 8 AEC 643 (1974).
Egg PSNH Eupla, 7 NRC at 8 n.
10.
Unknowingly, the Appeal Board described the later financial circumstance!. of the Seabrook joint owners with remarkable accuracy.
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4 CQHCLUSION For all the foregoing reasons, the Mass AG petition should be granted.
Resptectfully Submitted, JAMES M. SHANNON ATTORNEY GENERAL COMMONWEALTH OF MASSACHUSETTS j
By*
StepTien A.Sonas Deputy Chief Public Protection Bureau Department of the Attorney General One Ashburton Place, 19th Floor Boston, Massachusetts 02108 (617) 727-2200 DATED:
August 2, 1988
f 4
UNITED STATES OF AMERICA DOCMETED thMRC NUCLEAR REGULATORY COMMISSION
'88 NE ~3 p ; ;g NMbhd$#f'
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In the Matter of
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PUBLIC SERVICE' COMPANY OF
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Docket No.(s)
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50-443/444-OL-1 (Seabrook Station, Units 1 and 2)
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CERTIFICATE OF SERVICE I,
Stephen A.
Jonas, hereby certify that on August 2, 1988, I made service of the within RESPONSE OF MASSACHUSETTS ATTORNEY GENERAL JAMES M.
SHANNON TO COMMISSI'., vRDER OF JULY 14, 1988, by first class mail, or by Federal Express as indicated by [*] to:
Alan S, Rosenthal, Chairman Howard A. Wilter Atomic Safety and Licensing Atomic Safety and Licensing Appeal Panel Appeal Panel U.S.
Nuclear Regulatory U.S.
Nuclear Regulatory Commission Commission East West Towers Building East West Towers Building 4350 East West Highway 4350 East West Highway Bethesda, MD 20814 Bethesda, MD 20014 Thomas S. Moore Mr. Ed Thomas Atomic Safety and Licensing FEMA, Region I Appeal Panel 442 John W.
McCormack Post U.S.
Nuclear Regulatory Office and Court House Commission Post Office Square East West Towers Building Boston, MA 02109 4350 East West Highway Bethesda, MD 20814 Administrative Judge Sheldon J.
Robert Caraigg, Chairman Wolfe, Esquire, Chairman Board of Selectmen Atomic Safety and Licensing Town Office Board Panel Atlantic Avenue U.S.
Nuclear Regulatory North Hampton, NH 03862 Commission East West Towers Building 4350 East West Wighway Bethesda, MD 20814
Administrative Judge, Diane Curran, Esquire Emmeth A.
Luebke Andrea C.
Ferster, Esquire 4515 Willard Avenue Harmon & Weiss Chevy Chase, MD 20815 2001 S Street, NW / Suite 430 Washington, DC 20009 Dr. Jerry Harbour Stephen E.
Merril, Esquire Atomic Safety and Licensing Attorney General Board Panel George Dana Bisbee, Esquire U.S.
Nuclear Regulatory Assistant Attorney General Commission Office of the Attorney General East West Towers Building 25 Capitol Street 4350 East West Highway Concord, NH 03301-6397 Bethesda, MD 20814 Adjudicatory File Atomic Safety and Licensing Sherwin E.
Turk, Esquire Board Panel Docket Office of General Counsel U.S.
Nuclear Regulatory U.S.
Nuclear Regulatory Commission Commission East West Towers Building One White Flint North, 15th F1.
4350 East West Highway 11555 Rockville Pike Bethesda, MD 20814 Rockville, MD 20852 Atomic Safety and Licensing Robert A.
Backus, Esquire Appeal Board Panel Backus, Meyer & Solomon U.S.
Nuclear Regulatory 116 Lowell Street Commission P.O.
Box 516 Washington, DC 20555 Manchester, NH 03105 Philip Ahrens, Esquire Mr.
J.
P.
Nadeau Assistant Attorney General Selectmen's Office Department of the Attorney 10 Central Road General Rye, NH 03870 Augusta, ME 04333 Paul McEachern, Esquire Thomas G. Dignan Matthew T, Brock, Esquire Ropes & Gray Shaines & McEachern 225 Franklin Street 25 Waplewood Avmnue Boston, MA P.O.
Box 360 Portsmouth, NH 03801 Mrs. Sandra Gavutis Mr. Calvin A.
Canney Chairman, Board of Selectmen City Manager RFD 1 - Box 1154 City Hall Route 107 126 Daniel Street Kensington, NH 03827 Portsmouth, NH 03801 Senator Gordon J.
Humphrey R.
Scott Hill-Whilton, Esquire U.S.
Senate Lagoulis, Clark, Hill-Washington, DC 20510 Whilton & McGuire (Attn:
Tom Burack) 79 State Street Newburyport, MA 01950 c
Senator Gordon J. Humphrey Mr. Peter S.
Matthews One Eagle Square, Suite 507 Mayor Concord, NH 03301 City Hall (Attn:
Herb Boynton)
Newburyport, MA 01950 Mr. Thomas F.
Powers, III Mr. Willimm S.
Lord Town Manager Board of Selectmen Town of Exeter Town Hall - Friend Street 10 Front Street.
Amesbury, MA 01913 Exeter, NH 03833 H.
Joseph Flynn, Esquire Brentwood Board of Selectmen Office of General Counsel RFD Dalton Road Federal Emargency Management brentwood, NH 03833 Agency 500 C Street, S.W.
Washington, DC 20472 Gary W.
Holmes, Esquire Richard A.
Hampe, Esquire Holmes & Ells Hampe and McNicholas 47 Winnacunnet Road 35 Pleasant Street Hampton, NH 03841 Concord, NH 03301 Judith H. Mizner, Esquire Charles P.
Graham, Esquire 79 State Street, 2nd Floor Murphy and Graham Newburyport, MA 01950 33 Low Street Newburyport, MA 01950 Lando W.
- Zech, Jr., Chairman Thomas M.
Roberts, Commissioner U.S.
Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission One White Flint North One White Flint North 11555 Rockville Pike 11555 Rockville Pike Rockville, MD 20852 Rockville, MD 20852 Kenneth M.
- Carr, Frederick M.
- Bernthal, Commissioner Commissioner U.S.
Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission One White Flint North One White Flint North 11555 Rockville Pike 11555 Rockville Pike Rockville, MD 20852 Rockville, MD 20852 Kenneth C.
- Rogers, William C.
Parler, Esquire Commissioner General Counsel U.S.
Nuclear Regulatory Office of the General Counsel Commission One White Flint North One White Flint North 11555 Rockville Pike 11555 Rockville Pike Rockville, MD 20852 Rockville, MD 20852
c-
't Marjorie Nordlinger, Esquire-
- Docketing'and Service Deputy General Counsel U.S.-Nuclear Regulatory Office of the General Counsel Commission One White Flint North 1717 H Street 11555 Rockville-Pike
'da s h ing t on, DC 20555 Rockville, MD 20852
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Ste$ hen /f. Jonas Deputy Chief Public Protection Bureau Office of the Attorney General One Ashburton Place Boston, MA 02108 (617) 727-2200 DATED:
August 2, 1988