ML20198G350

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Notifies of Util Request for Exemption Under 10CFR50.12, to Permit Certain Activities Prior to Decision by ASLB on Application for LWA Views Requested by 770318
ML20198G350
Person / Time
Site: Satsop
Issue date: 03/08/1977
From: Chilk S
NRC OFFICE OF THE SECRETARY (SECY)
To: Gossick L
NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO)
References
CON-WNP-1302 NUDOCS 8605290501
Download: ML20198G350 (1)
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'g NUCLEAR REGULATORY COMMISSION ~ 5Y 'r p(jeRecg, g ,,, wassincrou. o. c. 2csss g pol , p3 i March 8, 1977 5 $h p *, d ih[% . . . . *[,.e) s op4  !!,

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$ECHETARY MEMORAflDU:1 FOR: Lee V. Gossick, Executive -ector for Operations

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FROM: Samuel J. Chilk, Secreta b

SUBJECT:

REQUESTFOREXEllPTI0li0F1 The Commission has received a request for an exemption under 10 CFR E 50.12 from the applicant, Washington Public Power Supply System, ,

i in the pending proceeding for a power reactor facility license, Docket flos. STil 50-503 and STil 50-509 (WPPSS fluclear Project flos. 3 and 5), to permit certain activities prior'to a decision by the Licensing Board on an application for a Limited Work Authorization.

We note that the applicant has concurrentiy filed a motion for de-

! claratory relief before the Licensing Board with respect to some of the activities for which an exemption from the Conriission is sought, and the staff has supported that action with suggested conditions.

In the flatter of Kansas Gas and Electric Co._ (Wolf Creek fluclear Generating Station), Memorandun and Order (January 13,1977), sum-marizes three methods by which permission to proceed in advance of the issuance of an LWA might be obtained. In providing its views on the instant request for an exemption, the staff should address the relationship between the two methods for permission chosen by the applicant here, and the relationship of the instant request to the method not chosen, that is, proceeding in accordance with 10 CFR

i 2.758. Docs the staff believe that proceeding under 10 CFR 2.758 would be preferable in the circumstances of this case?

Views of the staff on this matter should be roccived no later than ihrch la,1977.

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e- WPSS EBCLEAR FB0 JECT NO. 3 (WFSS UNEES 3 4 5) Ny SAFEff svaxmArtoN REFont Plant unmes WPPSS Muelaar Proj4st No. 3 i Lisemaing StaSe: PS&R-SEE Sepplement Deshet Mos.: STN 56-508 & 509 n p===4ble Branch and Project Maasser LUE 1-3,'A. Bournia l

naquested Completian ants: May 7. 1976 .

Applimame's Easponse Date Necessary for Complettaa of East Asties i

Flanned on Projest: As Scheduled Description of Raspemees N/A

,' Emview Status: Complete ,

I In response to the concerns azpressed by ladividual ACRB members in the i

l April 16, 1976 ACRS report to Chairman Bouden en WFSS Projests No. 3 j and 5 the Meehamiaal Engineering Braneh has reviewed and evalented the . ,

concerns, our section of the supplement to the E E es esver these

' conearns are enclosed. This impet espp1 ===*s IES:imput tramonitted l with our letter of 5/7/76. This information uns infocueily transmitted to the LPM on 5/12/76. ,

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k s I WNP-3 and WNP-5 MEB Response to Additional Comments by ACRS Members David Okrent and Milton S. Plesset With regard to seismic capability, all essential mechanical and electrical equipment including' supports will be seismically qualified by experimental confirmation and/or analysis in accordance with the criteria in Appendix C of the WNP-3 and WNP-5 SER. This criteria is consistent with the criteria of NRC Standard Review Plan Sections 3.9.2, 3.9.3, 3.10 and IEEE Standard-344, 1975. In addition, the NRC staff is conducting a seismic audit program to assess the implementation of approved qualification methods

. and procedures for all essential mechanical and electrical equipment. This audit is being accomplished through visits to the architect engineering companies, reactor vendors, and to typical plant sites to evaluate the test or analytical method employed for each item of equipment taking into account the actual coniiguration and mounting location of the item.

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Subject File IUSkovholt, B!:ADQA0 NNeltz, B!:QAO: FIN JCPetersen, B1:QAO: FIN Docket .';os. S'n; 50-508 and ST.*l 50-5 h Richard C.11eYoung, Assistant Director for Lit At 1!ater reactors, P:t ll/ Sill;Girf; PGLIC IG.In SLPTLY SYST1, ET AL: ' T'PSS .'.L'CLTAR T71UECT L::IT h05. 3 Q 5 raclosed is an analysis prepared by Jin C. Pcterren, of :.y staff, re,ardiny. the financial qualificctions of 1.ashinson Public rover Supply Systen and its associated participants to design ::nd construct t'.c su'> ject facility. Tr.c analysis is intended for inclusion in a Supplccent to the Staff's Safety Evaluation leport.

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Dcn.J.i J. " c init Donald J. 9.ovholt Assistant Director for Ouality Assurance and Operations Division of Project :.:anare ent inclosure:

As stated cc: w/cnclosure

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FINANCIAL QUALIFICATI m S I. INTRODUCTION Sectim 50.33(f) and Appendix C'of 10 CFR Part 50 are the Comission's regulations which relate to financial data and information required to establish financial qualifications for applicants for facility con-struction pemits. In accordance with these regulations, the applicants, Washingtcn Public Power Supply System (WPPSS), Pacific Power 6 Light Company, Portland General Electric Company, Puget Sound Power 6 Light Campany and he Washington Water Power Company, submitted financial infomation with their application, as well as providing additional financial infonnation in response to a request by the Staff. hPPSS and the four investor-owned utilities are the applicants for hPPSS Nuclear Project No. 3 (hW-3). hPPSS and Pacific Power 6 Light Company are the applicants for hPPSS Nuclear Project No. 5 (WNP-5). Their respective percentages of undivided ownership interest in each unit are listed below.

Ownership Interests lhit 3 Unit 5

! WPPSS -

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Pacific Power 6 Light Company lot 10%

Portland General Electric Conpany 10% --

Puget Sound Power 6 Light Company 5t --

De Washington Water Power Capany 5% _

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t 2-he following analysis stenarizes our review of the application and the additional information and addresses the cualifications of each applicant to finance its tmdivided interest in the costs of designing and constmeting the mit(s) in which it is a participant.

II. CDNSTRUCTICN QST ESTIMATES he applicants have submitted construction cost estimates for the facility as follows:

WNP-3 and 5 (dollars in millions)

Nuclear Production plant costs. . . . . . . . $2,380.1 Transmission, distribution and general plant costs . . . . . 35.7 Nuclear fuel inventory cost for first Core. . . . . . . . . . . . . . . . . 134.8 Total $2.550.6 he applicants' estinnted cost for the nuclear production plant has been conpared with costs estimated by the CONCEPT computer costing

', model. He Oak Ridge National Laboratory, which does the CONCEPT i

i computer work for the Staff states that " estimates pmdtced by the i

00NCEPT code are not intended as substitutes for detailed engineering cost estimates, but were prepared as a rough check on the applicants' estimate." he 00NCEPT costing model projected the cost of the nuclear production plant to be $1,942.0 million. Discussions with ORNL and WPPSS indicate that extraordinary stmetural requirements for the

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mits (which are not asstmed by the CONCEPT model) accotat for a significant portion of the difference between the two estimates. In additiar., the tmits will have a smaller proportion of common use facilities the is assumed by the 00NGPT model. 'Ihe Staff has em-cluded that it is reascmable to use the applicants' estimate for purposes of this analysis because it represents the more detailed

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engineering cost study for this specific project.

III. PARTICIPAVI5 AND FINANCING PIANS A. Washington Public Power Supply System (WPPSS)

WPPSS is a municipal corporation and a joint operating agency of the State of Washington. It is composed of 18 operating public utility districts of the State of Washington and the cities of Richland, Seattle and Tacoma, Washington. WPPSS has statutory authority to acquire, constmet and operate plants and facilities for the genera- .

tion and transmission of electric power. It has conpleted two electric generating projects: the 27.5 megawatt Packwood ifydroelectric Pmject and the 860 megawatt flanford Steam Electric Pxoject. In addition to WNP-3 and 5. WPPSS has under construction or in advance planning, three e

additional nuclear units, namely NNP-1, 2, and 4. WPPSS does not i

, engage in the distributiort of power to retail customers, but is reimbursed for the cost of each project, including debt service, by t the participants therein. Also, it is not under the jurisdiction of I of any regulatory agency having control over its rates and services of'the existing and proposed projects.

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4 The respective financial obligations between WPPSS and the above-named investor-owned ccmipanies are covered in the Ownership Agreement. Such agreement provides that each party shall be asponsible for providing its omership share of the costs of constmction and operation, and will be entitled to its ownership share of the taits' electrical capability, thder t.he Ownership Agreenset, the inverter-owned utilities have designated hPPSG to act as their agent to c,mstmct, cperate and maintain the project.

WPPSS will finance its 70 percent ownership in hNP-3 and its 90 percent ownership in hKP-3 througtt the J.ssuance of its revente. notes and its long-term revenue bonds. 'these securities am issted from time to time as construction ftads are required. NPPSS engages in " project financing" and thtis each of its security issues is related to a specific ,

constmetion' pmject. Its recent revenun bond offerings have been rated Ana, the highest rating, by R ody's aid by Standard and Poor's.

WFPSS issted $150 million of reventat bonds in Deceatber 1975 to finance f constmetien of hSP-3 and an additional $100 million in April 1976.

It issued $100 million of rever.ue bonds in July 1975 in partial support of prelisdnary work on ET-5. An additional revenue band issuance is <

planned during 1976 in sipport of SP-5.

As noted asbove, WPPSS is not a retail distributor of electric power.

Its 70 percent share in the capacity of %?-3 and its 90 percent share in the capacity of B7-5 will be sold to approxinately 100 ccusu:ner-ownel

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o 5-utilities in the Pacific Northwest. The Net Billing Asats provide the contractual arrangements whemby the participants are obligated to rake payments to WPPSS for their pro-rata shares of project costs whether or not the project is completed, orierable or operating, and notwithstanding interrtption or curtailment of output. Thus, the satisfaction of project costs is not solely depen-dent on actual project revenues, but is insured on a broad base through other revenue-producing assets of the participants. Each participant has covenanted that it will establish, maintain'and collect rates or charges for power, energy and other services furnished through its electric utility properties which shall be adequate to provide mvenues sufficient to make the required payments to WPPSS. The afore-mentioned contractual arrangements and the underlying revenue-producing capability provide the security for the servicing of hPPSS revenue bonds and notes.

B. Pacific Power 6 Light Company (PP6L)

PPf.L is an investor owned electric utility operating in six states in the West and the Pacific Northwest. It serves appruximately 540,000 nsidential, comercial, and industrial customers as well as selling power at wholesale to consumer-owned utilities. PPf.L's operating r revenues increased fra $254.2 million for the 12 months ended February 28,1975, to $309.4 million for the 12 months ended February 29, 1976, and net income increased from $56.1 million to

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$72.7 million over the same period. . Invested capital at Ihcember 31, 1975 amounted to $1,542.6 million and consisted of 53.5% long-term debt,10.2% preferred stock and 36.3% cxxmon equity. The company's first mortgage bonds are rated "Baa" by Hoody's and "A " by Standard and Poor's.

PP4L plans to finance its ten percent portion of the WhT-3 and WP-5 design and construction costs as part of its overall constmetim program. The funds will be provided from a combination of internally-generated sources (including retained earnings, depreciation and deferred taxes) and from the issuance of securities including long-tena debt, preferred stock and comon stock. Interim funding requirements will be met with short-term borrowing. In response to a staff request, the company has submitted a sources of funds statement (or financing plan) with underlying assumptions for its system-wide construction expenditures for the period 1976 through 1982, the estimated earliest year for completion of kNP-5. 1he financing plan and assumptions are attached as Exhibits A-1 and A-2, respectively.

PP4L is subject to regulatory jurisdiction by state comissions in Oregon, Idaho, Washington, California, Montana and Wyoming. Since December 31,1974, PP4L has. been granted seven rate increases in five of the jurisdictions totalling $55.9 million on an annualized basis.

The allowed rates of return on comon equity ranged from 11.25 percent l

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to 13.5 percent. De company has four rate increases pending which request an average 15.0 reicent retum on en====t equity ad a total annual revenue increase of $35.0 million.

C. Portland General Electric Company (PGE)

PGE is an investor-owned electric utility operating in northwest Oregon. It serves approxinately 390,000 residential and industrial customers as well as selling powcr at wholesale to other utilities.

PGE's operating revenues increased from $146.8 million for the 12 months ended January 31, 1975, to $184.8 million for the 12 months ended January 31, 1976, and net income increased from $30.3 million to $51,2 million over the same period. Invested capital at December 31, 1975 amounted to $837.4 nillion and consisted of 53.1 percent long-tem debt,13.0 percent preferred stock and 33.9 percent comon equity. The company's first mortgage bonds are rated "Baa" by Wody's and "BBB" by Standard and Poor's.

PGE plans to finance its ten pettent portion of the hh?-3 design and i construction costs as part of its overall construction program. He i funds will be provided from a combination of intemally-generated a

sources (including retained eamings, depreciation and deferred taxes) and from the issuance of securities including long-tem debt, preferred stock and couvron stock. Interim funding requirements will be met with short-term borrowing. In response to a staff request, the company has subnitted a sources of funds statement (or financing plan) with

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mderlying assunptions for its system-wide construction expenditures for the period 1976 thmugh 1981, the estimated earliest year for completion of WP-3. h financing plan and assunptions are attached as Exhibits B-1 and B-2, nspectively.

PGE is s'aject to the regulatory jurisdiction of the Public Utility rama!ssion of Oregon. h company's most recent retail rate action, effective September 26, 1975, was a 24.7 percent increase amounting to

$39.6 million on an annual basis. A 13.3 percent rate of return on consnon equity was allowed in the case. PGE has requested a further 20 percent increase amounting to $42.2 million on an annual basis. A

, 13.3 percent ra:e of retum on comon equity has been requested.

D. Puget Sound Power 6 Light Cornpany (PSPSL)

PSP 6L is an . investor-owned electric utility operating in northern and central h'ashington State. It serves approximately 410,000 residential, comercial and industrial customers. PSP 6L's operating revenues j increased from $149.7 million for the 12 months ended March 31, 1975, j to $169.6 million for the 12 months ended March 31, 1976, and net t

l income increased from $19.6 million to $24.7 million over the same period. Invested capital at December 31, 1975 amounted to $622.9 f

I million and consisted of 57.8 percent long-tem debt,10.7 percent

preferred stock and 31.5 percent comon equity. The company's first
mortgage bonds are rated "Baa" by Wody's and "BBB" by Standard and Poor's.

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4 PSP 6L plans to finance its five percent portion of the WiP-3 design and construction costs as part of its overall construction prugram.

l Se funds will be provided from a combination of internally-generated sources (including retained earnings, d-preciation and deferred taxes) and from the issuance of securities including long-term debt, preferred stock and comon stock. Interim funding requirements will be met with short-term borrowing. In response to a staff request, the company has submitted a sources of funds statement (or financing plan) with under-lying assumptions for its system-wide construction expenditures for the period 1976 through 1981, the estimated earliest year for comple-tion of WNP-3. The financing plan and assumptions are attached as Exhibits C-1 and C-2, respectively.

PSP 6L is subject to regulatory jurisdiction by the Washington Utilities and Transportation Comission. Its most recent rate increase amounted to $22.9 million or 19.9 percent on an annual basis and was effective November 1,1974. The company has filed an additional $36.5 million rate j increase request which would allow a 13.0 percent rate of return on f comon equity.

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! E. %e Washington Water Power Comany~ OWP)

I WWP is an investor-owned electric and gas utility operating in the States of Washington and Idaho. It serves approximately 190,000 residential, comercial, and industrial custcmers as well as selling power at whole-sale to consumer-owned utilities. NWP's operating revenues increased

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from $117.4 million for the 12 months ended March 31, 1975 to $142.5 million for the 12 months ended March 31, 1976, and net income increased from $14.6 million to $19.1 million over the same period. Invested capital at December 31, 1975 amounted to $409.7 million and consisted of 63.2 percent long-tem debt and 36.8 percent coamon equity. The company's first mortgage bonds are rated "A" by Moody's and Standard and Poor's.

WWP plans to finance its five percent portion of the NNP-3 design and construction costs as part of its overall construction program. The funds will be provided from a combination of internally-generated sources (including retained earnings and depreciation) and from the i issuance of securities including long-tem debt, preferred stock and comon stock. Interim funding requirements will be met with short-tem borrowing. 'In response to a staff request, the company has submitted a sources of funds statement (or financing plan) with underlying assunptions for its system-wide construction expenditures for the period 1976 through 1981, the estimated earliest year for completion I

of NNP-3. The financing plan and assumptions are attached as Exhibits D-1 and D-2, respectively.

i WWP is subject to regulatoIy jurisdiction by the Washington Utilities

! and Transportation Comission and the Idaho Public Utilities Comission.

In August 1975, the Washington Comission authorized electric and gas

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increases totalling $3.6 million on an annual basis and allowed a 12.75 percent retum on conmon equity. Also in August 1975, the Idaho Cennission authorized electric and gas increases totalling $1.2 million on an annual basis and allowed a 12.75 percent retum on conmon equity.

'Ihe conpany had no rate requests pending as of January 31, 1976.

IV. CONCLUSION Based on the preceding analysis including our evaluation of the reasalableness of the financing plans and underlying assumptions, we have concluded that Washington Public Power Supply System, Pacific Power 4 Light Company, Portland General Electric Company, Puget Sound Power 4 Light Company, and The Washington Water Power Company are financially qualified to design and construct hPPSS Nuclear Project thit Nos. 3 and 5 in proportion to their respective undivided owner-ship interests as indicated in Section I, above. Our conclusion is based on the determination that the applicants have reasonable assurance of obtaining the funds necessary to complete the design and construction activities including related fuel cycle costs. It is I

also based on the basic assunptions of raticnal agulatory environment and viable capital markets due to the lengthy future period involved f

and the expected heavy dependence on external financing.

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Applicant PACIFIC POWER & UGHT COMPANr Nuclear Plant WNP No. 3 4 5 , -

Source of Funds for System-Wide Construction Expenditures During Period of Construction of Subject Nuclear Power Plant (miT1 ions of dollars)

Construction Years of Subject fluclear Power Plant Security issues and 19 76 1977 1978 1979 1930 19 81 19 82 other funds Common stock 5 -

5 120 5 140 3 80 5 70 5 300 5 140_

Preferred stock 40 -

50 40 20 30 40 S Long-term debt 95 140 200 180 1(o 155 207

flotes payable (17) 17 (7) -

(36) - - -

( Contributions from ~

parent-net - - -

Other funds 119 8 - - - - -

Total 237 285 '487 900 212 28s '4 R7_

i i Ir,ternal funds m

9 I Net income 82 97 123 1h5 162 174 188 G

! .Less: ,

y l Preferred dividends 19 16 19 23 26 29 32 :i.

. Common dividends s1 57 68 __

80 89 95 11 0 A l Retained earnings 18 24 36_ 42 47 50 52

Deferred taxes 3 2 2 2 3 _

3 3

' Invest. tax cred.

(deferred) 2 9 1 __ ___

3___ 10 12 15 Depreciation & amort. 40 46 48 52 62 70 _ 85 -

Less: AFDC 23 22 _ 43 5'i 53 65 80 Total 40 59 44 44 69 70 75 TOTAL FUNDS $_g $ alitt_ $_., It 27_ $_31tL! .. $_30L , $ 355__ $ 462 _

Construction Expenditures

  • Nuclear power plants- T 54 $ 166 $ 171 $ 178 $ 185 $ 175 $ 190 Other 223 156 265 Imi 126 303 293 Total Const. Exp's. $g.{ $_3P2,_ $d31 $_3M.._ $ ._311 $m__353 $ 403 -

Subject nuclear plant $ 11 $ 18 $ 31 $ 26

$_f8 $_ 12 $ 3

  • Exclusive of AFDC (allowance for funds used during construction)

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j EXHIBIT A-2 )

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PACIFIC POWER AND LIGHT COMPANY

! INPUT ASSUMPTIONS FOR SOURCES OF FUNDS STATEMENTS FOR WPPSS NUCLEAR PROJECT NO. 3 6 5

1. Capitalization goals of 52% Debt, 10% Preferred Stock and

. 38% Common Equity;

2. Rates of 95% on long-term debt and preferred stock;
3. Short-term interest rates at 8\%;
4. Over-all rate of return up to 9.83%;
5. Price / earnings ratio of 10;

. 6. Dividend payout ratio of approximately 65%, and

7. Coverages sufficient to maintain current bond ratings.
8. Preferred Stock Coverage requirement and its method of calculation as contained in the " Restated Articles of Incorporation," Article III (17) (c) (Attached).

For the period 1976-1983, the coverage of total interest and preferred dividends combined would be:

. 1976 1.85X 1980 1.90X 1977 .1.86X 1981 1.94X 1978 1.93X 1982 1.93X 1979 1.91X 1983 1.87X e

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Applicant Portland General Electric Co. Nuclear P,lant WFPSS 1Rtelear Plant No. 3 .

Source of Funds for System-Wide Construction Expenditures During Period of Construction of Subject Huclear Power Plant (millions of dollars) ,

Construction Years of Subject Nuclear Power Plant Sec iss s and 19 76 19 77 19 78 19 79 19,,_e_o 19 81 19 19 19 79 5 104 5 60 5 60 5 -

5 5 5 Connon stock 5 514 5 Preferred stock 25 38 38 (2 I (2) (2) 206 -

Long-term debt 106 c6 _ 124 167 1 << 6 Notes payable (40) (la ) _ 1 48 27 (38)

Contributions from -

parent-net - - -

Other f.unds 9 5 _ 114 16 (15) 25 Total 154 204 281 309 216 185 _

Internal funds flet income 53 514 89 101 115 127 m

Less:

Preferred dividends 11 13 17 20 20 20 - 4 41 47 52 57 m Conrnon dividends 27 33 0

Retained earnings 15. _ 8 31 34 43 50 Deferred taxes 6 9 13 38 19 17 Invest. tax cred.

8 19 3 21 6 (deferred) 3 Depreciation & amort. 26 37 40 __ 42 46 59 Less: AFDC (15) (22) (36) (57) (56) (51) -

Total 35 40 67 lo i 73 81 TOTAL FUNDS $ 169_ $_244_. $ _ L $_ 349 $_ 269__ $_ 266__ $ _ $ $_

Construction Expenditures

  • Nuclear power plants $ II4t $ 60 $ 112 $ 172 $ 155 $ 177 $ $ $

Other 145_ _ _ 164 236 177 134 69 Total Const. Exp's. phr, $ 266 $ $ $

$_3 89__ $ $ ar48 $__319_ $_ 269_

4 Subject nuclear plant $_ 10 $ 17 $ 28 $ 21 $ 12 $ g$ $ $

  • Exclusive of AFDC (allowance for funds used during construction)

EXHIBIT B-2 ORTLAND GENERAL ELECTRIC COMP /

INPUTASSUMPTIONSFORSOURCES0.j FUNDS STATEMENTS FOR WPPSS NUCLEAR PROJECT NO. 3

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Item Numerical Value _

13.5%

Rate of return on average common stock equity I*I 10.0%

Preferred stock dividend rate Crowth rates [b}

7.44%

a. kWh sales 16.48%I *l
b. revenues 13.03%
c. cxpenses 19.38% .
d. interest charges

. 14.54%

e. net income

"* Harket/ book ratio with respect to pro- 1.00/1.00 on 2/29/76[d]

1.21/1.00 on 12/31/85 jected common stock offerings Common stock dividend payout ratio 62.7% (1976) to 44.1% (1985)I I 55% debt Target capital structure 10% preferred stock 35% common stock .

1976 - 2.330 1981 - 2.352 Resultant SEC and indenture coverages 1977 - 2.250 1982 - 2.356

.over the period of constructionlfl 19C',- 2.247 1978 - 2.677 1979 - 2.467 1984 - 2.337 1980 - 2.399 1985 - 2.199 10%

Long-term debt interest rate 8% (general)

Short-term debt interest rate 8.5% (nuclear fuel)

[a] Applies to new issues.

l l [b] Each element of revenue and expense is individually analyzed and fore-casted so that no single growth ra'te is used in their development.

The values given summarize the results of all of the detajicd analy-ses for the period December 31, 1975 to December 31, 1985 ' cn an annually compounded rate of growth basis.

[c] Includes forecasted rate of increase in average sales price of 9.60%.

Remaining growth rate is caused by increased unit sales.

it is the product f [d] The market / book ratio is not an independent input; of other forecasts and therefore varies over the range shown.

Varies over the range shown due to assumed 6C/ycar annual dividend

-o [e]

increment.

December 31 covering earnings divided by December 31 annualized fixed

[f]

charges.

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L.

Applicant PUGET SOUND POWER & LIGHT COMPANY Nuclear Plant WPPSS #3 - SAT 50P ,

SOURCE OF FUNDS FOR SYSTEM-WIDE CONSTR CTION EXPENDITURES DURING PERIOD OF CONSTRUCTION OF SUBJECT NUCLEAR POWER PLANT

. (Millions of dollars) ,

Construction Years of Subject Nuclear Power Plant 1976 1977 1978 1979 1980 1931 Security issues and other funds Common stock $ 24.7 $ 28.7 $ 25.9 $ 47 9 $ 71.4 $ 87.2 Preferred stock 22.0 25.0 35 0 45.0 40.0 0.0 Long-term debt 40.0 40.0 105.0 155.0 115.0 140.0 Notes payable (short term) (10.9)~ 12.0 18.5 15.4 12 7 12.I Contributions from parent-net - - -

Other funds (pollution control) 2.3 - - - - -

Total 78.1 105.7 184.4 263.3 239.1 239.3 Internal funds .

g Net income (adjusted) 30.0 46.8 52.4 76.2 99.1 112.2 Less: ~ E Preferred dividends (6.8) (8.8) (10.6) (13 9) (17.8) (19.3) 23 Common dividends (15.3) (18.0) (23.6) (29.8) (37.7) (44.6) ~4 Retained earnings 7.9 20.0 18.2 32.5 43.6 48.3 q)

Deferred taxes 1.7' l.8 1.4 1.0 2.0 3.8 ""

investment tax credit (deferred) 73 6.0 6.4 10 3 8.5 8.3 Depreciation and amortization 19.0 21.1 22.6 24.6 28.7 . 35.2 Less: AFDC (6.5) (12.3) (24.5) (44.4) (59.0) -(68.6)

Total 29.4 36.6 24.1 __24.0 23.8 . 27.0 TOTAL FUNDS })l,0M 0 n2;.1 j]g83 ,g8213, 12f6L9. '12_662 _

Construction Expenditures

  • Nuclear power plants $ 34 3 $ 67 5 $ 87.6 $156.2 $150.5 $170.0 Other 73.2 74.8 120 9 131.1 112.4 93.3 Total Const. Expenditures $ 10725. $1424 im 12.83,_,3. 1262_ 3. $266.3 Subject nuclear plant $ 5.8 $ 8 .], S 13.7 }_I_0,. 4,,

j__J,d $ 3.1

  • Exclusive of AFCC (allowance for funds used during construction)

This source of funds statement is based upon and qualified by the assumptions described on the attached pages and has been prepared and furnished at the request of the Nuclear Regulatory Commission, it is not to be used in connection with the sale or purchase of the Company's securities.

,. EXHIBIT C-2 (paga 1) ,

, )

PUGET SOUND POWER & LIGHT CCMPANY ASSUMPTIONS FOR SOURCE OF FUNDS FOR SYSTEM VIDE CONSTRUCTION 1976-1982 WPPSS #3 - SATSOP 4

1) Generally maintain a minimum of either a 13% return on average common equity or first mortgage bond indenture co.verage of 2.2 times interest.
2) Preferred dividend rate on new issue of 10%.
3) Growth rate in KWH sales to consumers 6%.
4) Inflation factor of 7% compounded each year through 1982 for construction

, expenditures and certain operating and maintenance expenses, 5% inflation factor compounded each year used to forecast. operation and maintenance of major generation plant.

~~

5) Interest rates used in forecast:

Notes payable (short term):

Bank loans 10%

Comme.cial paper 6%

Long term debt 10.25%

6) Target capital structure: 1976-1980 1981-1982 Notes payable (short term) 5% 5% '

Long term debt 50% 50%

Preferred stock 13% - 10%

Common stock 32% 35%

- 7) Canmon stock price / earnings ratio of 7 times earnings.

8) Common dividend payout ratio averages 52%.
9) Maximum dilution of common stock does not exceed 15% in any 9.Iven year.

10), in line with the 1975 Tax Reduction Act (Sec. 402 of P.L. 94-12) the follow-Ing investment tax credit assumptions are incorporated in the projections.

a. investment tax credit rate - 1976 at 10%; 1977 to 1982 at 4%.
b. Investment tax credit taken on progress payments on Colstrip 3 and 4, Skagit Units I and 2, and Pebble Springs Units 1 and 2. Applicable transition percentages for phasing in qualified progress payment are 1976, 40%; 1977, 60%; 1978, 80%; and 100% af ter 1978.
c. Limitation on use of investment tax credit as a percent of tax liability Is 100% for 1976 and is scaled down 10% each year until it reaches the 50% level in 1981.
11) AFDC rate adjusted periodically to reflect composite cost of capital. AFDC accruing f rom construction of major production plant is normalized in 1977 and subsequent years.

-.g  ; u pys q -

v- - a g gy.

  • j EXHIBIT C-2 (page 2) )

. .. PUGET S0JND POWER 4 LIGH CIMPANY

12) Schedule of Major Plant Construction ,

Puget Power Projected ...

Plant Ownership Share Completion Date Colstrip #2 - coal 50% August 1976 Colstrip #3 - coal 25% . July 1980 Colstrip #4 - coal 25% July 1981

. WPPSS #3 - nuclear 5% March 1982 Skagit #1 - nuclear 40% July 1983 Pebble Springs #1 - nuclear 20% July 1985 Skagit #2 - nuclear 40% July 1986 Pebble Springs #2 - nuclear 20% July 1988

13) Power Supply: ,
a. System resources are based on an average of the 30 water years . included in the 1975 west group forecast.
b. Purchased hydro power costs debt service requirements are as prescribed in the project owners official statement.
c. Secondary (non-firm) sales are made either within or outside the North-west Power Pool, and are based on relative levels of surplus. Revenues derived from sales are primarily based on established BPA rates or other agreements as applicable.
d. Wheeling charges are based on:

I) Required capacity to move purchased power to Puget's system,

11) BPA established rates Other Information
1) S.E.C. Fixed charge coverage:

. 1976 - 1.95, 1977 - 2.68, 1978 - 2 30, 1979 - 2.39. 1980 - 2' 36, 1981 - 2.37, 1982 2 39

2) Growth rate of revenue from sales of electricity 17%, expenses 15%, Interest cost 21%, and net income 26%.

e

  • d e

+

~

THIS INFORMATION IS NOT TO BE CONSIDERED A FORECAST - ,

Applicant Washirigton Public Power Suppix.ggear P,lant WNP No. 3 ,

Participant The Washington Water Power Company (5%) -

Source of Funds for System-Wide Construction Expenditures During Period of Construction of Subject Nuclear Power Plant (millions of dollars)

Construction Years of Subject Nuclear Power Plant (1)

'Sec iss s and 19 76 19 77_ 19 78 19 79 19 80 1981 Common stock 5 12.0 5 5 23.0 5 24.0 5 15.0 5 15.0 15.0 15.0 20.0 Preferred stock 30.0 Long-term debt 30.0 30.0 62.1 40.0 60.0 Notes payable ,

(7.0) 9.0 (9.0) 29.0 _ (29.0) Contributions from -0 .

parent-net Other funds (4.4) 4.6 (4.8) 2.5 .$ . 9 (.5)

Total 30.6 58.6_ 86.3 _ 95.8 69.9 44.2 Internal funds ,

Net income 18.0 20.4 24.0 26.7 34.0 ~38.1 Less:

Preferred dividends 1.4 2.7 2.7 4.5  %

Common dividends 11.4 13.2 15.6 17.6 22.3 24.7 Retained earnings 6.6- 7.2 7.0 6.4 9.0 8.9 f Deferred taxes Invest. tax cred. 1.6 (deferred) 1.9 -

1.4 2.4 _. 3.4 1.9 Depreciation & amort. 9.6 10.5 11.3 12.2 14.3 17.2 Less: AFOC ~ 1.8 .6 .3 .4 __

.4 .5 Total 16.3 19.7 20.4 __ 21.6 24.8 27.2 ,

' TOTAL FUNDS $ 46.9 $ 78.3 $J_06L $ 117.4 ___ $17_ $ 71.4_

Construction Expenditures (2) .

Nuclear power plants $ 9. 8' $ 20.5 $ 34.1 $ 37.2 $ 35.7 '$ 31.6 Other 37.1 57.8 72.6 80.2 59.0 39.8 Total Const. Exp's. . $ 46.9 $ 78.3 $ 106.7_ $ 117.4 $ 94.7 _

$ 71.4 Subject nuclear plant $ 5.7 $ 8.2 $ 13.6 $ 1093 $ 7.2 $ 1.8

. Interest Coverage 2.1 272 2Tf 27 2 . 4 2.4 0ExclusiveofAFOC(allowanceforfundsusedduringconstruction) .

L)First five years (1976-1980) based on five year. financial model data. Last two years projected manually on a consistent basia

  • unT' Tn oc nern ni enMNrrTinu 1, lith ANY Rai r np pilprHEF 0F THF COMPAllY'S SECURITIES
  • EXHIBIT D-2 }

. THE WASHINGTON WATER POWER COMPANY Assumptions for Source of Funds Statement (a) . Rate of Return on Average Common Equity - 14.5-15.0%

(b) Preferred Stock Dividend Rate - 9%

(c) Growth Rates: Sales of general business kwhr are estimated to increase about 5% per year during the forecast period. As you know, kwhr sales to other utilities are subject to resource availability and market conditions and therefore are not trendable.

Electric and gas revenues included within the , forecast'are a result of the general business kwhr / therm sale trends and

  • include elements of rate relief which were programmed through-out the forecast as needed. The basis of rate relief was the debt / equity ratios and composite debt cost prevailing at that point in time and the return on common equity as previously mentioned.

Operating expenses subject to inflation were escalated at 10%

in 1976, decreasing to 7% in 1977 and finally to 6% for the balance of the forecast. Items such as power and gas purchased are generally regulated by contract and are not subject to escalation.

(d) Common stock price / earnings ratio or market / book ratio with respect to the projected comon stock offerings: This forecast assumes that market and book values of comon stock are approximately equal, but on an increasing annual rate of about

- 5%. No price / earnings ratio was used for projected common offerings.

(e) Common stock dividend payout ratio: a target of 65% was assumed. .

(f) Target capital structure: a target goal of 60% debt, 30%

common equity and 10% preferred has been assumed.

(g) Interest coverage requirements: Our most restrictive indenture

' requirement states that annual interest requirements must be at least twice any 12 consecutive months pre-tax gross earnings.

Considering the rate relief programed in the forecast, our results have allowed us to exceed the two times interest coverage test under the indenture. We have not made an SEC coverage test.

(h) An interest rate of 9% was assumed on all projected mortgage bond issues. For short term bank loans, a rate of 73%5 was

. utilized.

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