ML20199E455
| ML20199E455 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 06/18/1986 |
| From: | Ellis J, Roisman A Citizens Association for Sound Energy, TRIAL LAWYERS FOR PUBLIC JUSTICE, P.C. |
| To: | TEXAS UTILITIES ELECTRIC CO. (TU ELECTRIC) |
| References | |
| CON-#286-666 CPA, NUDOCS 8606230307 | |
| Download: ML20199E455 (17) | |
Text
- - - _ _ _ _ _ _ _ _ _ _ -
L o? \
\ [ '/ g/
f MTED CORRESPONDENC4 .
- C 9
BEFORE THE ~
JUNg0 mQ $98$r &
UNITED STATES g NUCLEAR REGULATORY COMMISSION y tz,f'Q f Before the atomic Safety and Licensing Boa $ 4 g \6 In the Matter of )
)
TEXAS UTILITIES GENERATING COMPANY, ) Dkt. Nos. 50-445-CPA et al.- )
)
(Comanche Peak Steam Electric )
Station, Unit 1) )
PHASE I DISCOVERY:
CASE AND MEDDIE GREGORY'S THIRD REQUEST FOR PRODUCTION OF DOCUMENTS Pursuant to the regulations of the Commission and the Order of June 6, 1986, CASE and Meddie Gregory hereby request that Applicants Texas Utilities slectric Company, et al. , provide the following documents. " Documents" means any written, printed, recorded, typed, or other graphic or photographic matter of any kind or nature, and all mechanical or electrical sound recordings or a transcript thereof, any other sound reproductions, however produced or reproduced, and all copies of documents, by whatever means made, now or formerly in the possession, custody, or control of any of the Applicants, their agents or employees, or known by any of them to exist, including but not limited to s
studies, reports, minutes of meetings, memoranda (including but not limited to memoranda of meetings and phone conversations),
letters, rules, pamphlets, calendars, flyers, books, book lets ,
cards, and brochures.
8606230307 860618 DR ADOCK05000gg5 D5b3
. . . . . . . J
- 1. All documents in the possession of any of the owners of Comanche Peak Steam Electric Station that were generated in the course of the " monitoring program . . . . undertaken by Tex-La in connection with Comanche Peak," including but not limited to all assessments, independent assessments, eva luations , interim reports, notes of meetings, and raw data generated. See
" Permits / Licenses: The Minority Owners' Responsibilities - The Function of Legal Counsel," presented by William H. Burchette, General Counsel, Tex-La Electric Cooperative of Texas, Inc.,
before the NRECA Committee on Joint Ownership Meeting, May 20-21, 1986, p. 5, hereafter "Burchette Speech" (copy attached).
Please include all documents (1) between the persons conducting the assesments, monitoring, and evaluation and the persons requesting such assessment, monitoring, and evaluation; (2) between the persons requesting such assessment, monitoring, and evaluation and other persons within Tex-Lar and (3) between any person employed by, representing, or providing contracting or consulting services to Texas Utilities Electric Company or any of its parents, subsidiaries, or predecessors in interest and any person at Tex-La with respect to such assessment, monitoring, or eva luation.
- 2. To the extent any monitoring, independent assessment, or evaluations were conducted by other minority owners of Comanche Peak at any time, all the documents as identified in Request #1, above, generated of these independent assessments, monitoring, or eva luations .
- 3. all documents and all other information which provided the basis for the statement by Applicants in their Current
S Management Views and Case Management Plan (o/28/85), at 7, that TUGCO management is not satisfied with the status of the plant and would not proceed to operate it, even if authority were to be
, granted, until all of the outstanding
! concerns have been addressed, their safety l significance determined, generic implications and collective significance considered, and ,
necessary corrective actions have been completed.
- 4. With respect to each document identified on Attachment 1 to Texas Utilities Electric Company, et al., Response to Interrogatories and Requests for Documents dated June 16, 1986, a copy of all documents that (1) evaluate the findings and/or recommendatins in those documents, (2) propose actions to be taken in response to the findings and/or recommendation, and (3) direct implementation of any actions in response to the findings and/or recommendations.
S. All documents upon which TUEC relied to support the following statements contained in its January 29, 1986, letter l
r and request for extension of construction permit:
- Applicants submit that good cause exists for l the construction permit extension [.] [p. 1]
Applicants submit that the delay which necessitates the construction permit extension was not the result of dilatory action by Applicants [.] [p. 2]
LTJhere was no intentional delay of construction without a valid purpose. [p. 2]
- 6. All documents that assess the status of the plant and
! that were presented at all of the periodic meetings of the Owners Committee and all minutes or other notes recording what i transpired at those meetings where assessments were presented.
See uurchette 6peech, supra, p. 5.
I
-3 l
- .~,
~
n-_ --
ANTaf0NY Z Q
Trial Lawyers for Public Justice 2000 P Street, NW, #611 Washington, D.C. 20036 (202) 463-8600 Counsel for Meddie Gregory s
WITA ELLIS 26 S. Polk Dallas, TX 75224 (214) 946-9446 Representative for CASE i
, ' Dated: June 18, 1986 4
1 I
I
!g / '
PERMITS / LICENSES: THE MINORITY OWNERS' RESPONSIBILITIES - THE FUNCTION OF LEGAL COUNSEL Presented by:
William H. Burchette, Partner Heron, Burchette, Ruckert & Rothwell i Washington, D.C. I i
i Committee on Joint Ownership Meeting Ramada Renaissance Hotel 1
I Washington, D.C.
May 20 - 21, 1986 !
NRECA 1800 Massachusetts avenue, N.W.
Washington, D.C. 20036 I
-~
i
My purpose here today is to diccuss chs, legal responsibilities of a minority owner participant in a power project, and particularly the role to be played by tne minority owner's ledal counsel in ensuring that these responsibilities are properly fulfilled.
While in past years I nave dealt with various minortcy owners involved in power projects jointly witn other utilities, my most recent experience in this area has been as general counsel of Tex-La Electric Cooperative of Texas, Inc. As nas already been explained, in the early 1980's Tex-La became a minority owner of the Comanche Peak Nuclear Pro]ect, in Texas.
Since then, the project has experienced extensive oeAays, price escalations, and significant difficulties in ootatning an operating license f rom the Nuclear Regulatory Commission. The l majority owner and manager of the project is Texas Utilities, an investor-owned utility.
In assessing the minority owner's responsleilities, one is well advised first to focus on the legal stanaard wnicn will govern the ninority owner's conduct. As is true or essentially all utility management actions, the minority participant's conduct will be judged by tne standard of prudence: whether the action it took can de viewea as reasonable, given the circumstances and facts known to it at
- g.
the t'ime. An important consideration in assessing pruoence is to determine how the actions compare with those of oener companies ih the industry facing similar circumstances.
The prudency standara mignt be appitea to a minority ow'ner in a variety of circumst'ances. Most 11xely, however, it will be applied when the minority owner seeks to recover trom its ~ rate payers the full cost of its minority participation.
Particularly where the pro]ect involved is plagueo oy proolems and is far over b'udget, the state utility commission will want to determine whether,.the minority owner's expenottures were incurred prudently.
/ /
It is Worth noting "tha t the. minority owner 's .
responsibilities, and how its prudency will be Juagea, are not necessarily identical to the standards governing the ma3ority owner and manager of the project. This alfference was oealt with recently by the Federal Encegy Regulatory Commission, in a proceeding involving New England Power Company, which was a minority owner in the Pilgrim'II nuclear project. Tnat pro]ect ultimately was cancelled by tne majorihy owner. At the time the issue of the minority owner's prudence arose before PERC, i the Massachusetts Public utilities Department alreaay'had determined, based on the prucency s'ancard, t chat ~the majority owner should have cancelled the project approximately one year e
sooner than it did, and that any expenses it incurred in that intervening year were imprudent. The question oefore FERC concerned the minority owner's share of those same expenditures. What FERC concluded was that tne imprudence ot !
the majority owner could not automatically be imputea to tne a
minority owner. Rather, the minority owner's actions in continuing to make contributions in the year prior to cancellation had to be assessed independently, casea on wnat the minority owner knew at the time, what it shoula nave known, whether it had reason to believe that the project's problems could be overcome, and other such consicerations. In the eno, FERC concluded that the minority owner, given ene circumstances and facts known to it at the time, haa been reasonable in continuing to pay for the project even after the pro 3ect naa encountered difficulties.
l I now will review some of the actions a pruoent minority owner might take to ensure that it properly rulf1Als its legal responsibilities. Many of these steps were taken oy Tex-La in connection witn Comanche Peak. The role or the minority owner's legal counsel is to help make the minority
! owner fully aware of its duties, and, at every step along the way, to advise the minority owner regarding the prudent course of conduct.
l l
1
-4 .
The very first question the minority owner faces, of course, is the decision of whether to participate in tne power project in question.
The prudence or that decision necessarily must reflect what is known about the project at the time ene decision is made. Invariably, any time a minority owner elects to become a minority owner, it will do so because the project looks promising at the time, and appears to fulfill tne minority owner's needs.
Unfortunately, those assessments,
- however pcudwnt when they are made, snmarimes prove wrong.
Attempting to negotiate the best possible terms in a joint ownership agreement is of course essential. In most casas, the majority owner will retain to itself the tuli management discretion and authority regarding tne construction and licensing of the project. Most majority owners will not readily agree to share control witn the minority owner.
Nevertheless, the minority owner should make certain enac ene l
agreement gives it the right to receive all information ana l
progtces reports it needs to properly monitor tne status of ene l project as it is being built and licensed. Other key terms or the joint ownership agreement include those involving the potential default of the minority owner, and the majortcy owner's responsibilities in the event that the project is delayed, costs too much more, or encounters other difficulties. The exact standard governing the majority
owner's construction and'11 censing effort is par ticularly crucial. Quite commonly the majority owner will expressly commit to constructing the project in accoccance with so-callea
" prudent utility practice." This requires it to manage the project's construction and licensing in a competent manner, based on the prevailing industry standard of performance.
Assuming, as is likely, that the minority owner nas no direct say in how project construction and licensing are being handled, it should make certain that it knows at all times how those tasks are progressing. It must be sure to obtain from the majority owner all essential information regaroing the project's status. As soon as the minority owner _begins participation in a project, it is imperative that it initiate a monitoring program comparable to that undertaken by Tex-La in connection with Comanche Peak. This program nas enabled Tex-ua
. to make its own independent assessment of the status of the project. Often this assessment has been consioerably more pessimis~ tic than the assessment the majority owner announcea publicly or conveyed to tne minority owners at the perioaic meetings of the Owners Committee. Unfortunately, the pessimistic assessments from the monitoring program in the long run have proven to be accurate. In this regard, it is particularly important not simply to rely on information tea to you by the majority owner. They necessarily will oc reluctant >
6 -
to admit that problems exist. Thus, any information they provide should be carefully scrutinized ana questionea by experts retained by the minority owner ana having the appropriate type of expertise, depending on tne kina of pro]ect involved. It is important that these ce outside exper ts, not on the minority owner's regular staff, so that they can evaluate the data with an appropriate degree of indepenaence and objectivity. If at all possible, the monitoring program also should include, on a regular basis, airect interviews witn key management people from the majority owner.
l Whenever the minority disagrees witn how tne project is being managed, it should raise questions witn the ma]ority owner, and alert the majority owner to its concerns. It is important, however, if under the joint ownersnip agreement the majority owner has retained sole management responsibility, that the minority owner not actually seen to participate in ene majority owner's management decisions. It it does so, it runs the risk that it ultimately will share tne responsibility ror any management imprudence whien occurred. This coula severely undercut the minority owner's ability to recover its share of the project costs in its rates, or to ootain a recovery in a l
l i
l
-1 ~
possible lawsuit against the majority owner based on mismanagement. Therefore, the minority owner shoula monitor, raise questions, and express its concerns, but it snoula not tell-the minority owner what to do.
The minority owner's legal counsel necessarily wt11'oe involved also in interpreting the joint ownership agreement for the minority owner and advising the minority owner of its 4
rights. One question which almost inevitably will arise if a project is in trouble, and which arose in the case of Comanche Peak, is the question of whether the minority owner should .
continue to make payments to the majority owner for its snare of the project. comanche Peak now is years oenind schedule, and the majority owner appears unable to date to satisty tne Nuclear Regulatory Commission that an operating license shoula be issued.
It is uncertain whether a license ever w111 ne issued. Tex-La believes that the majority owner has acteo imprudently in its management of const,uction and licensing, and, no doubt, the majority owner will be unable to recover all its project costs in its rate base. Nevertheless, tne question of whether the minority owr.ar shoulo continue paying the majority owner is quite complex, and involves numerous factors. Although the majority owner may have been imprudent, the minority owne'r might reasonably expect the pro 3ect ultimately to be completed and licensea, ano therefore may want l
l t
l
a
-8~ .
to avoid the risks inherent in stopping its payments. in particular, the Comanche Peak Joint Ownership Agreement imposes severe penalties on any minority owner who aefaults, and, until i either a court or a commission has held the majority owner imprudent, the minority owner is proceeding at some risk in taking action based only on its own opinion that impruaance has occurred. The minority owner's ability to continue funding the ever increasing costs of the project also will affect the decision. All these considerations must be balancea in determining whether to continue to pay for a troubled pro 3ect, and in deciding precisely when to discontinue payments.
Counsel for the minority owner will have to aavise nts client also on what legal rights it may have to oe maae wnole by the majority owner for any imprudent management by the majority owner. This necessarily will involve an assessment ot all of the complex factors and considerations that normally affect a decision on whether or not to initiate litigation.
I will close by describing one particular incident of l cather obvious imprudence by the majority owner of Comanene Peak, and some of the consequences that Texas Utilities now faces as a result. In late January, 1986, the NRC ciscovereo that Texas Utilities' construction permit for Unit 1 of Comanche Peak had expired in early August, 1985 --
almost six
9_
months earlier. Neve. sefore had an applicant for a nuclear project license allowed its cons :ruction permit to lapse. Tne NRC advised the Company of the expiration, ano the Company immediately ceased all construction activities on tne project.
The Company then promptly filed in application for an extension of the expired permit, and, within two weeks, the NRC staff reinstated the license and construction was resumed. However, the consequences of the Company's oversight in failing to renew its permit in a timely fashion are still continuing. Had it sought the extension before the permit expired in August, 1985, a grant of the extension by the NRC would have been almost routine. The NRC's extension of the permit some sax montns after expirat' ion, however, now is open to legal challenge oy an intervenor in the NRC proceeding, which has appealeo tne decision to the United states Court of Appeals for the District of Columbia Circuit. In addition, the question of whether
" good cause" exists for granting the extension, as requireo by law, still is to be the subject of a hearing before tne Atomic Safety and Licensing Board established by the NRC to hear this case. Either of these proceedings could oring aoout tne cancellation of the construction permit, which inevitably woula spell the ena of the project.
l l
1
- LO -
As to Tex-La's actions, over a year ago, through its monitoring program, it raised a question with the majority owner as to whether the system it was using for keeping track of its licenses and permits was adequate. Ooviously, te was not. Since the license has expired, Tex-La has furtne-inquired of the Company regarding the proceoures it intenos to institute to ensure that no other licenses or permits will expire.
At this stage, it is unclear when Comanche Peak will be licensed, and, indeed, wheWec it ever will be licenseo.
Tex-La continues to closely monitor the proceedings at the NRC,
! and is doing everything it can to make sure that its minortcy ownership interest is being managed in a prudent manner.
l j~
l i
i ,
i i
p tovm m ..
UNITED STATES NUCLEAR REGULATORY COMMISSION Before the Atomic Safety and Licensing Board In the Matter of )
)
TEXAS UTILITIES GENERATING COMPANY, ) Dkt. Nos. 50-445-CPA et al. )
)
(Comanche Peak Steam Electric )
Station, Units 1 and 2 )
CERTIFICATE OF SERVICE I hereby certify that copies of PHASE I DISCOVERY: CASE AND MEDDIE GREGORY'S THIRD REQUEST FOR PRODUCTION OF DOCUMENTS were served today, June lu, 1986, by first class mail, or by hand where indicated by an asterisk, upon the following:
Administrative Judge Peter Bloch*
U.S. Nuclear Regulatory Commission Washington, D.C. 205SS ,
Dr. Walter H. Jordan 881 West Outer Drive Oak Ridge, TN 37830 Dr. Kenneth A. McCollom 1107 West Knapp Stillwater, OK 74075 Elizabeth B. Johnson Oak Ridge National Laboratory P.O. Box X, Building 3500 l Oak Ridge, TN 37830 l
l Nicholas Reynolds, Esq.*
Hishop, Liberman, Cook, Purcell & Reynolds 1200 17th Street, NW Washington, D.C. 20046 Docketing & Service Section office of the Secretary U.S. Nuclear Regulatory Commission Washington, D.C. 20bSS 4
e Geary S. Mizuno, Esq.*
Office of Executive Legal Director U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Thomas G. Dignan, Jr.*
c/o Ropes & Gray 1001 22nd St., NW, #700 Washington, D.C. 20037 Thomas G. Dignan, Jr.
Ropes & Gray 225 Franklin Street Boston, MA 02110 ersoie z.fe -[%
1 l
l l
, _ - . . . _ _ - _ - _ _ - .