ML20198H994

SE Supporting Approval of Application Re Long Island Power Authority Aquisition of Long Island Lighting Co,Subject to Discussed Condition

ML20198H994
Person / Time
Site:	Nine Mile Point
Issue date:	12/29/1997
From:	NRC (Affiliation Not Assigned)
To:
Shared Package
ML20198H980	List: ML20198H975 ML20198H989 ML20198H994
References
NUDOCS 9801140017
Download: ML20198H994 (4)

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SAFETY EVALL'ATION BY THE OFFICE OF NUOLEAR REACTOR REGULATION RELATED TO PROPOSED AC W ISITION AND RESTRUCTURING LONG ISLAND LIGHTING COMPANY NINE MILE POINT NUCLEAR STATION. UNIT 2 DOCKET NO. 50-410

1.0 INTRODUCTION

Under cover of a letter dated September 8,1997, from its counsel, the Long Island Lighting Company (LILCO) submitted an application for consent by the U.S. Nuclear Regulatory Comission (NRC or Commission), pursuant to 10 CFR 50.80, regarding 3roposed alternative restructuring actions, each of which would result in tie indirect transfer of the operating license for Nins Mile Point Nuclear Station, Unit 2 (NMP2), to the ev ent held by LILCO. LILCO is licensed by the NRC to own and possess an 13-per ce,c interest in NMP2. LILCO revised its application on October 8,1997, such L at the pending request for consent now involves only a proposed acquisition o. LILCO by Long Island Power Authority (LIPA). LILCO supplemented the application on November 7,1997, to '

l indicate that subsequent to the proposed acquisition by LIPA, LILCO would provide notification to the NRC regarding any future transfer of significant LILCO assets.

According to the apalication, LIPA proposes to acquire LILCO by purchasing its stock through a casi merger, at a time when LILC0 consists of its electric transmission and distribution system, its retail electric business, substantially all of its current electric regulatory assets, and its 18-percent share of NMP2. LILCO thereby would become a subsidiary of LIPA.

After this restructuring, LILCO would continue to exist as an " electric utility" as defined in 10 CFR 50.2, providing the same electric utility services it did immediately preceding the restructuring. LILCO would continue to be a licensee of NMP2, and no direct transfer of tne operating license or interests in the station would result from the proposed restructuring. The transaction would not involve any change to either the management organization or technical personnel of Niagara Mohawk Power Corporation, which has exclusive responsibility under the operating license for operating and maintaining NMP2, and which is not involved in the proposed restructuring.

Pursuant to 10 CFR 50.80, the Commission may approve the transfer of control of a license after notice to interested persons. Such action is contingent upon the Commission's determination that the holder of the license following the transfer is qualified to hold the license, and that the transfer is otherwise consistent with applicable provisions of law, regulations, and orders of the Commission.

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2.0 FINANCIAL QUALIFICATIONS ANALYSIS

. The New York State legislature established LIPA in 1986, authorizing it to acquire some or all of. LILCO's securities and assets in order.to achieve, among other. things, the provision of electric servica to long Island customers at reduced rates. Through LIPA's acquisition of LILCO, LIPA will be able to '

provide rate reductions from LIPA's issuance of tax-exempt bonds to finance the acquisition and from the fact that LIPA will be exempt from paying Federal income taxes.

Under this transaction, LILCO will remain financially qualified to hold an 18-percent interest in NMP2. LILCO is and will continue to be an " electric utility" as defined by NRC regulations, 10 CFR 50.2, + hat "generetes (and) distributes electricity and... recovers the cost of t'ais electricity...through rates established by...itself or by a separate regstatory authority." LIPA

. will have the authority under New York State law '.o set the rates at which LILCO, its wholly owned subsidiary, sells power 'sith one limitation: When approving the LIPA transaction of July 16, 1997, the New York State Public Authorities Control Board imposed a condition on LIPA that it "not implement an increase in average customer rates exceeding two and one half percent over a twelve month period, nor extend or reestablish ar, portion of a temporary rate increase over two and one half percent without approval of the (New York

• State Public Service Commission) following a full evidentiary hearing."

LILCO's application to the NRC states that LIPA will ensure that LILCO can meet its obligations as an 18-percent owner of NMP2, including LILCO's arovision of decommissioning funds. The existing decommissioning fund for

.ILCO's 18-percent interest in NNP2 will continue to be held by LILCO, and LILCO will continue to make annual deposits to the fund. Pursuant to 10 CFR 50.33(f), LILCO, as an electric utility, is exempt from further financial 4 qualifications review.

However, in view of the NRC's concern that a merger or restructuring could lead to a diminution of assets necessary for the safe operation and eventual decommissioning of a licensee's nuclear power plant, it is NRC practice to condition approvals of transfers of control of licenses involving mergers and restructuring actions upon a requirement that the subject licensee not transfer significant assets to an affiliate without notifying the NRC. LILCO addressed this NRC concern by letter dated November 7, 1997, which provided the following:

... The Long Island-Lighting Company (LILCO) agrees that, subsaquent to the Long Island Power Authority's (LIPA's) acquisition of LILCO's stock, LILC0 will provide the Office of the Director of Nuclear Reactor Regulation a ecpy of any application, at the time it is filed to transfer (excluding grants of security interests or liens) from LILCO to LIPA, or to any other affiliated company, facilities for the production, trcnsmission, or distribution of electric energy having a depreciated h

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book utility value plant,exceeding tenon as recorded percent LILC (O's book of accounts.-10%) of LILC0's consolida The foregoing,'as a condition.to the NRC's approval of the indirect license  ;

transfer app ication, will. assist the NRC in assuring that LILC0 will contir.ue

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to maintain adequate resources to contribute to the saft operation and

• decommissiening of-the facility. .

Based on tho' above information, the NRC staff finds that LILC0 will remain- [

4 financially qualified to hold the license for NMP2 following the proposed '

4 acquisition of LILC0 by LIPA. ,

3.0-' IECHNICAL QUALIFICATIONS As stated earlier, Niagara Mohawk Power Corporation,.the licensed operator of'  :

Lthe facility, is.not involved in the LIPA/LILC0 transaction and thus will undergo no changes regarding-its technical qualifications, as a result of the proposed transaction.  !

E LILCO stated in its application that the proposed merger will have no effect

• upon the management of LILC0's utility operations. LILCO will remain a discrete.and wholly separate entity that will function just as it did prior to restructuring. LILCO's management will continue to make its own decisions with regard to utility planning, w rations, financial requirements, purchasing, and sales. No LILCO nuclear management positions will be changed ,

as a prerequisite or direct result of the merger.

4.0 ANTITRUST l Section 105c of the. Atomic Energy Act of 1954, as amended (the Act), which provides-for antitrust reviews to be conducted by the NRC, applies to an

, application for a license to construct or operate a facility licensed under Section 103 of the Act. Although LIPA may become the holding company of an NMP2 licensee, i.e., may indirectly acquire control of the-license, it will

, not be performing activities for which a license is needed.

Since approval of the application would not involve the issuance of a license, the procedures under Section 105c do not apply, including the making.of any "significant changes" determination. Accordingly, no antitrust review is e necessary in connection with this application.

5.0 FOREIGN OWNERSHIP. CONTROL OR DOMINATION LILCO indicated in'its submittal that after the acquisition is completed, LIPA will become the sole holder of LILCO's outstanding common stock.L LIPA is'a statutory creation-of New York State and is wholly controlled by_ trustees appointed by State officials.= According-to the application, there is no ,

foreign hold on these trustees. LILCO represents-that-LIPA's acquisition of LILCO will entail no control or domination by foreign entities of LILCO's- *

} interest in NMP2.-

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O-The NRC staff does not know or have any reason to believe that the proposed acquisition will result in LILCO being owned, controlled, or dominated by foreign interests.

6.0 ENVIR0t#1 ENTAL CONSIDERATION Pursuant to 10 CFR 51.21 and 51.35, an environmental assessment and finding of no significant impact was published in the Federal Reaf ster on December 18, 1997 (62 FR 66400).

7.0 CONCLUSION

S In view of the foregoing, the staff concludes that the proposed action will not dversely affect the financial qualifications of LILCO with respect to the operation and decommissioning of NNP2. Also, there do not appear to be any problematic antitrust or foreign ownership considerations related to the NMP2 license that would result from the acquisition and restructuring. Thus, the proposed transaction will not affect the qualifications of LILC0 as a holder of the license of HMP2, and the transfer of control of the license, to the extent effected by the proposed acouisition and restructuring, is otherwise consistent with applicable provisions of law, regulations, and orders issued by the Commission. Accordingly, with the condition discussed above relating to significant asset transfers, the proposed action should be approved.

Principal Contributors: M. Dusaniwskyj D. Hood Date: December 29, 1997 I

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