ML20205C898

Forwards State of PA House of Representatives Select Committee Rept Re Cancellation of CP

ML20205C898
Person / Time
Site:	Limerick
Issue date:	09/17/1985
From:	Greenwood J PENNSYLVANIA, COMMONWEALTH OF
To:	Harold Denton Office of Nuclear Reactor Regulation
References
2.206, NUDOCS 8509230342
Download: ML20205C898 (146)

Text

{{#Wiki_filter:F JAMES C. GREENWOOD MEMBER COMM1TTEES C35TRCCT OF7tCE: 40 EAST COURT STREET D3YLE5 TOWN. PENNSYLV ANIA 18901 CONSERVATION PHONE. (215) 34& 7511 FEDERAL-STATE RELATIONS HAkRISBURG OFFICE-ROOM 2SA. CAPITOL ANNEX PHONE (717) 787 3845 HOUSE OF REPRESENTATIVES COMMONWE.ALTH OF PENNSYLVANIA HARRISBURG September 17, 1985 Harold R. Denton, Director Of fice of Nuclear Reactor Regulation United States Nuclear Regulatciry Commission Washington D.C. 20555

Dear Mr. Denton:

I have received notice that a petition has been filed pursuant to 10 CFR 2.206 dated July 28, 1985. This petition requests the NRC to initiate hearings to determine whether to life or retract the construction permit for the Limerick Generating Station Unit 2. It is my understanding that your staff is reviewing this petition and will issue a for :al deci-sion. Last year the Pennsylvania House of Representatives unanimously adopted House Resolution 257 which established a Select Committee to investigate Limerick Unit 2. Following extensive public hearings and collection of data the Select Committee concluded that the plant should be cancelled. I am enclosing a copy of the Committee's report for your information. Sincere y, -m W - Jane C. Greenwood Representative 143rd Legislative District JCG/ pad cc: Robert Sugarman, Esquire ENCLOSURE h B509230342 850917 OI PDR ADOCK 05000353 A PM ) w

HIC A02 t' 4 HOUSE OF REPRESENTATIVES COMMONWEALTH OF PENNSYLVANIA W (- 1 / November 28, 1984 MEMO

SUBJECT:

Select Committee Report TO: Honorable K. Leroy Irvis Speaker FROM: James J. /., Chairman Select C.nm 'th e onj imerick II Attached is the report of the Select Committee established under House Resolution 257 to investigate the need f.or the Limerick II nuclear generating station of the Philadelphia Electric Company (PECO). Also enclosed is a copy of H.R. 257. ( This report received the concurrence of six of the eight members of the Select Committee. Their signatures appear below. Representatives Saurman and Salvatore filed minority reports which are inserted at the end of the main body of the majad ty report. l c-

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. A. illagherj Rep. James C. Greenwood i Rep. Samuel W.' Morris ~ Rep. Robert D. Reber, Jr. [ p,5, \\ { l ",, ' f* N..d L ~ Rep. William R. Lloyd,.IY. Rep. Chaka Fattah .e c t L .s

Printor's No. 3386 THE GENERAL ASSEMBLY OF PENNSYLVANIA (. ~ HOUSE RESOLUTION Session of NO. 257 1984 INTRODUCED BY GREENWOOD, REBER, GALLAGHER, MORRIS, O'DONNELL, REINARD, RICHARDSON, FATTAH, B. SMITH, LASHINGER, HOEFFEL, CORDISCO, SERAFINI, EURNS, FLICK AND WILSON, JUNE 28, 1984 ADOPTED IN HOUSE, JUNE 28, 1984 A EESOLUTION 1 Appointing a select committee to investigate the circumstances 2 surrounding the need for Limerick Unit II Huclear Generating 3 Station proposed by the Philadelphia Electric Co pany and the 4 potential impact on residential and industrial ratepayers if 5 it is completed. 6 WHEREAS, There is continuing public concern and controversy 7 over the proposed building of the nuclear generating station ( 8 called Limerick Unit II; and 9 WHEREAS, There appears to be a question concerning the need 10 for the additional capacity given the availability of power 11 available from other sources; and 12 WHEREAS, There is concern about the projected project costs 13 and the necessity for additional investment in the Limerick Unit i 14 II project; and 15 .WHEREAS, The potential impact on af fected ratepayers - l 16 residentLal and industrial - could be deleterious in light of l 17 aircady projected rate increases to the. population; and l 18 Fil EEZ AS, There is the possibility that unemployment may 19 result from small and l'arge businesses who can ao longer afford -r

( REPORT I OF HOUSE SELECT COMMITTEE TO II:7ESTIGATE LIMERICK II ~ PURSUANT TO HOUSE RESOLUTION NO. 257 .s Hon. ' James J. A. Gallagher, Chairman Hon. Chaka Fattah-Hon. James C. Greenwood Hon. William R. Lloyd, Jr. Hon. Samuel W. Morris-Hon. Robert-D. Reber, Jr. Hon. Frank A. Salvatore Hon. George E. Saurman Special Counsel' to the Committee Mark ~P. Widoff, Escuire Larry B. Selkowitz, Escuire Widof f, Reauer, Selkowitz _g Adler, P.C. 129 State Str'eet-Harrisburg, PA 17101 y -r ~ (

l TABLE OF CONTENTS PAGE .s INTRODUCTION 1

SUMMARY

OF FINDINGS AND RECOMMENDATIONS FOR LEGISLATION 2 COMMITTEE PROCEEDINGS 4 FINDINGS AND RECOMMENDATIONS 6 BACKGROUND TO AND DISCUSSION OF FINDINGS 6 ANALYSIS OF FINDINGS 10 A. LARGE SCALE CANCELLATIONS { ,AROUND THE COUNTRY 10 B. FORECASTS OF GROWTH IN DEMAND FOR ELECTRICITY AND THE PROJECTED CAPACITY TO MEET ' THAT GROWTH 12 1. Retirement of Generating Units 13 2. PJM Load and Capacity 15 3. Conservation and Alternative Sources of Electric Power 16 C. CONSTRUCTION COST ESTIMATES, DELAYS AND CAPACITY FACTOR: PROJECTIONS 21 1. Cost Ectimates 23 2. Construction Delays 24 3. Capacity Facto,r 26 k. e i

r. (I PAGE D. CAPITAL ADDITIONS AND OPERATING AND MAINTENANCE COSTS 28 E. RELIABLE WATER SUPPLY FOR COOLING 30 F. IMPACT ON CUSTOMER RATES AND EMPLOYMENT s 31 RECOMMENDATION FOR LEGISLATION 36 -DISCUSSION OF RECOMMENDATION 36 PROPOSED LEGISLATION 41 CONCLUSION 43 k e 9 T

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INTRODUCTION Pursuant to House Resolution 257, this Committee has been appointed by the Speaker to conduct an investigation of the circumstances surrounding the need for Limerick Unit II, a nuclear power generating station under construct' ion by the Philadephia Electric Company ("PECO"). In consecuence of an order of the Pennsylvania Public Utility Commission ("PUC"), work on this project has been suspended.- House Resolution 257 directs the Committee to consider the concerns that have been expressed regarding the need for Limerick II and whether lesu costly alternatives are available which would make cancellation of the project desirable. The Committee is recuired to report R on its findings and recommendations for legislation. The Select Committee recognizes that the issue we have addressed is extremely complex and that-within the time period available to us we could not explore this issue in the detail we would have liked. Given the magnitude of the decision whether or not to complete construction of Limerick II, we believe it is important that the PUC be advised of this Committee's conclusions as it undertakes its more detailed investigation. of w _

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SUMMARY

OF FINDINGS AND RECOMMENDATIONS FOR LEGISLATION The Committee finds that strono evidence exists indicatino that the construction of Limerick II should not be completed. In fact, the Committee finds that circumstances are very dif ferent in many important respects from 1982 when an Administrative Law Judge of the PUC recommended completion of Limerick I and II and the PUC Commissioners recommended suspen-sion or cancellation of Limerick _I. PECO's case for completion, in our judoment, is weaker now than it was then. While this Committee cannot lawfully make a final determination of the matter, we urce the PUC, under its procedures established by ( law, to make a final resolution of the issue. The Select Committee recoa,nizes that the issue we l have addressed is extremely complex and that within the time period available to us we could not explore this issue in the detail we would have liked. Given the maanitude of the decision whether or not to complete construction of Limerick II, we believe it is important that the PUC be advised of this Committee 's conclusions as it undertakes its more detailed investigation. In particular, the Committee finds that the public interest would be served by a speedy conclusion of the present

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1 l PUC investigation into whether completion of Limerick Unit 11 is in the public interest. Further, this Committee believes i that the the legislature should provide the PUC with a clear i legislative mandate and the proper legal tools so that it can resolve the issue finally and clearly. Since cancellation by the PUC of a plant raises certain legal and constitutional issues, it is also necessary for the legislature to define the parameters of the PUC's authority with respect to the regulatory treatment of costs incurred in a cancelled plant so that all .I legitimate interests will be properly protected. The Committee further urges that all the responsible parties cooperate with one another so as to avoic further delay in ( resolving the issues finally and completely. Such delay is costly and undermines public confidence in public utilities and their regulators. T of j 9 w-ir-c- w =v g-w yw e e =

2 . ( ? . COMMITTEE PROCEEDINGS The Committee held public hearings in Harrisburg on September 14, 1984 at which time it heard testimony from PECO officials supporting completion of the Limerick,II project. On October 23, 1984 several members of the Committee and staff toured the Limerick I and II plants and heard testimony in the evening in Pottstown, Pennsylvania from numerous individuals and groups speaking on both sides of the issue. On November 2, 1984 at City Hall, Philadelphia, the Committee heard day long testimony from proponents and opponents of cancellation and also heard testimony from PUC Commissioners Bill Shane and Michael Johnson as well as Consumer Advocate David M. Barasch. On November 13, ( 1984 further testimony was heard in Doylestown, Pennsylvania. The testimony heard by the Committee was generally well informed and factual and addressed itself to the issues identified below in this Report. Opponents of cancellation of Limerick generally stressed the impact of cancellation on jobs at the plant, the need for increased energy to meet the demands of the area and to attract new industry, PECO's record of reliable service at reasonable cost and the advantages of nuclear power over other alternatives - particularly foreign oil. Proponents of cancellation expressed concern over the rapidly increasing costs of Limerick, emphasized statistics showing reliability 3 and cost problems with nu'elear power plants, pointed to the

? reduction in demand for electricity since 1973, and expressed concern over a reliable water supply and the impact of large rate increases on jobs and the economy of the area. In 4 addition, numerous witnesses expressed concern o'ver safety and over the evacuation plans for the area. Transcripts and summaries of the testimony are on file and available for l I inspection. A list of witnesses is attached to this report as Appendix 10. Where appropriate, references will be made i below to particularly relevant testimony that provided needed . information to the Committee. After making its presentation, PECO was asked to respond to questions presented by members l of the Committee and Special Counsel. PECO's responses are on file with the Committee. As discussed below, some of these responses bear on the Committee's conclusions.* The Committee wishes to express its thanks to the many witnesses who gave up their time so as to share their views on this important subject. Since the economic well-being of southeastern Pennsylvania may be at stake, they have performed an important and valuable public service.

• PECO. declined an invitation to appear at our Philadelphia hearing at which clarification on these answers might have been obtained.

We also note that the Governor's Energy Council is participatingrin the PUC investigation and has also expressed concerns about the economic impact and feasibility of Limerick II. k. i i. r-, ~. -,w.-.-. .n, ,n., a.- .,,-c n

i FINDINGS AND RECOMMENDATIONS FINDING #1 THERE IS STRONG EVIDENCE, WHICH THE PUC SHOULD CONSIDER, INDICATING THAT THE CONSTRUCTION OF LIMERICK UNIT II SHOULD NOT BE COMPLETED. FINDING #2 BECAUSE OF LEGAL, TIME AND RESOURCE CONSTRAINTS ON THIS COMMITTEE, WE URGE THE PUC TO MAKE A FINAL RESOLU-TION OF THIS MATTER. FINDING #3 THE PUC SHOULD MAKE A SPEEDY AND DEFINITIVE DECISION ON THE MATTER AND THE LEGISLATURE SHOULD EXPEDITE THAT DECISION BY i ([ PROVIDING ANY LEGISLATION NECESSARY TO CARRY OUT ITS FINDINGS. BACKGROUND TO AND DISCUSSION OF FINDINGS j The utility company constructing Limerick has maintained before this Committee, as it has before the PUC and the public-at-large, that the completion of Limerick II i is both desirable and necessary: Desirable in order to take advantaae of the substantial fuel savinas of uranium - produced electric power compared with electricity produced from coal and oil; Necessary because of PECO's projections of electricity demand and its inability to produce sufficient ~ electricity with its present power facilities. PECO has . presented this Committee Yith the full record of the proceedings before PUC Administrative Judge Joseph Klovekorn i (, r J

{ in 1981-1982 which considered the costs and benefits of the Limerick project. Since Judge Klovekorn concluded that Limerick I and II should be completed as quickly as possible and presented an exhaustive analysis of the questions and issues relating to completion of Limerick, PECO argues that there is no need to rehash the matter further. The problem, of course, is that the PUC did not fully accept Klovekorn's recommendation. The Commission, in effect, ordered the utility company to choose between cancellation or suspension of the construction of Limerick II, primarily because 1 the PUC believed that the utility simply could not finance the tremendous cost of construction of both Limerick I and Limerick II. In addition, the PUC was concerned that the impact on future electric rates of completion of Limerick II would be so severe that the PUC could not approve the rates. The PUC was further concerned that the utility company's financial position would deteriorate so severely if Limerick II financing were to continue that adequate service to the public would be threatened. The utility company', after exhausting and losing its legal appeals, chose to suspend, rather than cancel, construction of Limerick II. This decision means that the PUC will be forced to take another. look at the issue when construction at of Limerick I is completed and the utility company can argue that it will then be in a financial position to resume construction. In fact, the PUC has just begun a second investigation of the pros and cons related to completion of Limerick"II. In the meantime, as explained further below, interest costs on Limerick II continue to accumulate. The basic analysis necessary to a decision of whether Limerick II should be completed requires a judgment of whether the projected benefits of the plant outweigh its costs. The difficulty in weighing these costs and benefits arises because the benefits depend to a great extent on projections made by the utility company on future operation of the Limerick plant which may be viewed as "very optimistic" or " unrealistic". If one believes the utility's optimistic projections, benefits might outweigh costs. If one does not believe them, costs may outweiari benefits. Further, as discussed below, the weighing process is made more dif ficult by the f act that ratepayers will have to part with large amounts of money beginning right af ter construction in return for benefits that may be far distant. For many, this loss of the present use of their money may outweigh benefits many years into the future. Further, as discussed below, large rate increases will have a negative impact on jobs and the econoby. km,

1 f The Committee believes that an objective review of the issues that follow leads to the conclusion that PECO is assuming 4 an enormous financial burden in completing Limerick II and that the consequences of a wrong decision could be disastrous to itselfandtotheeconomyofsoutheasternPennshlvania. We emphasize, in particular, that there are a number of developments since 1982 which should give both PECO and the PUC serious . grounds for pause and concerns about the wisdom of carrying out this project.* We further emphasize here,_as we will later, that a decision by the PUC to approve further financina, at the very least, implies a determination on the part of the PUC to approve the necessary rate increases that will make attraction { of large amounts of future capital possible. Since the PUC in 1982 expressed its own doubts about the feasibility of such increases, both the PUC and PECO have additional grounds for Concern. 4

• Frequent references are made in the rest of this report

-l to_these developments which do create' doubt as to the continued viability of th'e Klovekorn Opinion. i e ANALYSIS OF' FINDINGS A. Larce Scale Cancellations Around the Country The concerns about completion of Limerick II are not unioue. There are certain realities.regarding nuclear power plant construction that have caused utility companies to cancel numerous projects, some much further along than Limerick II. As the financial health of utility companies has eroded, caused in.large part by the need to raise unexpectedly large-amounts of capital to finance projects many times more expensive than projected, some have simply found it impossible to continue financing the projects. Other utilities have determined that future needs for electric power, balanced against the ever increasing capital costs and' financial risks of nuclear plants, do not justify the planned outlay of funds. We attach to this report as Apppendix 1 a table prepared by Special Counsel which lists major cancellations-of nuclear power plants (defining major cancellations as those in which $50'million or more had been invested prior to cancellation). The Committee has on file a more detailed ~ list of cancellations which document the following main reasons for cancellation: Lower Forecasted Load Growth, ~ Financial Constraints, Regulatory Changes and Uncertainty, Reversal of Economic Advantage, Denia'l of Certification by State. With-rhe exception of the last issue (Pennsylvania - (_ e.,-- -.g g,,,,

has no certification of need procedure for power plants), all of the other factors seem present here as the continuina analysis below discusses. While PECO is understandably concerned about the investment already made and the physical facilities and eauipment already on site, it mudt be understood that many of the major projects cancelled had substantially more " sunk costs" (defined as costs invested in a plant and lost in the event of cancellation) than Limerick II. Indeed, the decision regarding cancellation must be based on an objective analysis of whether the costs of completion are greater or less than the alternatives. Since it appears that such determinations.have been made elsewhere, with a conclusion to cancel, it is imperative that both PECO and the PUC carefully analyze the choices to see if the same ..b circumstances apply to Limerick II. t .f n l (

B. Forecasts of Growth in Demand for Electricity and the Projected Capacity to Meet that Growth One of the key elements in plannina the construction + 1 of new electric generating equipment, especially, high cost nuclear facilities, is the Company's ability to make reasonable forecasts of the expected demand for electricity both in terms of total kilowatt hours to be used and also the peak demands for electricity that will be experienced. It is this combined demand which drives the need for generating capacity. PECO, in the early years of planning for Limerick, ~ projected growth in peak demand which, if realized, would have recuired Limerick to be on line in the mid to late ( seventies. However, the Arab' oil embargo in 1973 and the resultant chances in our economy drastically altered the experience and the projections. PECO, in recent years, has experienced' almost no growth in peak demand. The Consumer Advocate has consistently contended (since 1977) that PECO's peak load projections were too high and that Limerick 4 represented unneeded excess capacity. OCA's projections also included greater reductions in peak-forecasts due to more vigorous conservation efforts than those forecasts u;;dertaken by PECO. 9 -f L , 5b

( As the Consumer Advocate testified before this Committee: In the (1982) Limerick investigation, PECO estimated that its peak load would-grow at a rate of 1.6% per year and its energy sales would increase by 2.2% per year. In its most recent load forecast of May 1984, the Company was projecting growth in both peak load aid energy sales of less than one percer.c per year,. These current PECO forecasts are even lower :han those used by the OCA during i the original Limerick investigation, and thus further call into question the need for Limerick II in 1990 and beyond. As Appendix 2 to this Report, we attach PECO projections in 1982 (pp. 1& 2) and PECO projections just provided to this Committee (pp. 3 & 4). We note that ( peak load projections have been scaled back. In addition, there are three other concerns that are highlighted by these projections: (1) Retirement of Generating Units. A vital component in assessing peak needs in produc-tion plannina is the scheduling of retirement of existina units. PECO bases its "need" for Limerick on a schedule of retirements of certain existing plants, based on those' plants' age, fuel source and reliability. PECO argues that it should retire old plants rather than renovate them and that others are too 4 ~ expensive because of fuel costs (oil and gas) to economically operate. . ( e,

F + The Consumer Advocate and others argue that many retirements are premature. This includes 458 MW of leased capacity to be retired next year at the Richmond and Plymouth - stations, 10 years before the leases on the uni"ts expire and long before their useful lives have ended. It is argued by OCA that cancellina these retirements and extendina the lives of other plants, even with expensive fuel costs, may - still be cost-effective when compared to completina and operating ~ L ime rick. As'the Consumer Advocate testified: Furthermore, it should be noted in this regard that while other utilities have begun to explore the extension of operating lives of old fossil i fuel plants,. PECO has advanced the retirement of a number of oil and gas fired plants, which might ( still.tua used for meeting peak loads at least into the 1990's. A review of pages 2 and 3 of Appendix 2 shows: A.. Southwark 1 and 2 and Richmond 9, totalling 504 . MWs originally scheduled for retirement in 1988, now to be retired in 1985. B. Delaware 7 and 8, totalling 258 MW, oricinally not scheduled, now to be retired in 1988. In the opinion of this Committee, these accelerations of retirements, combined with lower demand projections, raise serious questions as to whether an objective viewpoint is being i used by PECO in determining the need for Limerick II. 4

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The PUC must carefully review these dramatic changes in PECO's projections over such a short time to determine whether they truly represent considered judgment or whether they represent an attempt by PECO to come out with the "right"wanswer no matter what. If additional generating capacity is not needed, it makes no sense to burden shareholders and ratepayers with the enormous risk and cost of Limerick II. (2) PJM Load and Capacity. If Limerick II is not constructed, PECO will arguably be more dependent on purchased power from the PJM Power Pool (Pennsylvania, New Jersey, Delaware and Maryland). The cost of power f rom the pool will, in turn, depend on how electric, demand increases in the entire area and what other construction projects are completed or cancelled. Complicating this issue is the fact that other companies in the pool (e.g., PP&L) are aggressively trying to sell off excess capacity. Thus, one question needing careful exploration is whether PECO can arrange for cheaper power purchases. We attach a two page document as Appendix 3 relating to a recent rate case indicating that PECO has tried to sell capacity itself. When this information is considered together with,,a careful lo' k at Appendix 2 o -(showing a PJM reserve capacity projection done for

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1 submission to this Committee which is higher than that submitted in the 1982 Limerick investigation), another 1 serious issue is clearly presented as to the wisdom of adding Limerick II to the PJM capacity. It is our understanding that the Governor's Energy Council is particula ly interested in this issue and we urge that careful consideration be given to it by the PUC. If the PUC does not fulfill its role of coordinating the individual projections of each Pennsylvania utility company, it will not be performing one of its most essential purposes. This is because it may be too much to expect an individual utility company to take the " larger view" of regional resources and needs.* (3) Conservation and Alternative C Sources of Electric Power PECO's record on investing in energy conservation (as a supplement to or substitute for constructing new capacity) and on cooperating in the production of alternative electric energy sources - such as cogeneration, which involve's the use of excess industrial heat to generate

• There is substantial sentiment on this committee that service territory boundaries should be re-examined, if a better job is not done of matching construction programs to total regional needs.

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electricity - was criticized by many witnesses.* As noted-elsewhere in this report, a rate increaselof 20-25% for each of the two Limerick Units is a conservative estimate of the impact on rates if both units are completed. Anticipating such-increases, there is already increasing interest by industry in looking at coceneration and other alternatives. Both PECO and the PUC must carefully consider both aspects of this situation:

• For example, Pennsylvania Energy Ratepayers Coalition testified:

Conservation opportunities have not been taken seriously by PECO. Althouch they've initiated in C the past month a procram to weatherize the homes of its electrical-heat customers, a significant public service, the procram will not lower demand in the summer-time when air-conditioners are running. Utilities must, of course, plan to meet the hichest level of demand and unless a conservation procram can affect this peak demand, it is i..consecuential as an alternative to plant construction. Serious conservation studies show that a gift of a new energy-efficient refrigerator to every household would affect PECO's peak load, lessen the need for new capacity, and cost only 2 cents per kwh of lowered demand. PECO has not considered serious conservation programs because it still wants to build Limerick. PECO has stated, correctly, that with the completion of Units I and II, it will have plenty of generation capacity into the 21st century. In this. case, any measures to conserve energy or to generate power from alternative sources would only increase PECO's excess capacity -- presently 23% -- raising rates to all customers. The Committee notes testimony that Pacific Power & Licht is doing precisely what the coalition suggests - i.e., givino away energy-efficient refrigerators. km l i

i (a) Would an investment in other energy sources'and energy conservation be a= cheaper alternative than an investment in Limerick II? (b) Will the rate impact of Limerick I and II, together with other projected rate increases, result in further excess capacity caused by depression in demand?* j

• An analysis in the November 1984 issue of-Philadelphia Macazine put it this way:

...It all comes back to Limerick. The unfortunate fact is that while much of the country is exploring the dramatic potential of conservation and cogeneration, ( the Philadelphia area may not fully enjoy their benefits because PE is committed to Limerick. And the risks of following this course could be greater than'many realize. Lu-i, kens Steel and Scott Paper might not have been bluffing. It is conceivable that elec-tricity rates could get so high that Phila-delphia companies will proceed with cogeneration. and conservation measures even without aggresive encouragement'from PE. One way or another, many of the electric company's biggest customers might find a way to reduce greatly their dependence on electricity. In effect, Limerick could accomplish what was once1 thought impossible: it could price' electricity out of the market. The result would be disastrous. "You raise. rates to pay for the new plants," says "one analyst, "but you sell less electricity, and you wind up making less money than you did before you ralsed the rates. That's a great i way to go broke." The same article notes that PECO is spending $9 million per year on conservation.and $5 million per week on interest for Limerick. o L

We note, in this regard, the comments of Scott Paper Co. presented to this Committee, appended to this Report as Exhibit 3A. After noting the likelihood of rate increases of 35-45% just within the next 12-18, months (mostly related to Salem II and Limerick I), Scott went on: 4 The likely effect of such rate increases seems obvious. Any private business which uses a significant amount of electricity will be forced, as a minimum, to employ much more effective conservation measures. And each such business will also have to reevaluate its options very carefully as to the most cost-ef fective locations to which to steer its future operations. The importance of energy costs to economic development is reflected in "The Fif th Study of General Manuf acturing Business Climates" prepared by Alexander Grant & Comp any, the purpose of which was to evaluate each 4 state's " manufacturing business climate" on the basis of those 22 factors viewed by manufacturers .f( as important to their business success. Of all 22 factors, the factor designated " Energy Costs" (fuel and electric energy costs, was " determined by participatino state manufacturers' associations to be the most important determinant of a manufacturing business climate in the 1983 study". A copy of the Executive Summary of this study is enclosed. Clearly, PECO's load forecasts in the past have failed to recognize the extent to which higher electric prices have forced conservation and other l measures to reduce electric usage. One of those "other measures" that such high electric prices are forcing (and will continue to force) is the development of alternative sources of power. It is understandable why the shareholders of a utility would prefer to have all-generating plant assets in its " rate base" (so that they can~ earn a " rate of return" -- the primary source of stock dividends -- on such assets). Obviously, the holders of stock options (i.e., the officers) have a similar interest in the constantly growing construction program to maintain growth of the rate base (even though another plant may not be needed). If a utility purchases power b.

[ from a cogenerator, it only recovers the cost of such purchases on a dollar-for-dollar basis, i without any " return" or " profit". PECO has not gone out of its way to encourage alternative sources of generation and it is difficult to say with any precision how much cogeneration and small power production could be developed in PECO's territory. We note that ouestions directed to PECO by this Committee involving these issues were not able to be answered because data was still being prepared by PECO for the PUC and would not be completed until December 1984. However, we note ~ that PECO estimated in May 1984 that over 700 megawatts of cogeneration and small power production could be reasonably a expected to be developed in its territory if such alternative sources were paid 2 cents per Kilowatt hour more than the PJM ( pool rate. We urge that a careful review of these questions be i considered in the upcoming PUC investigation. .(See Appendix 3A). This Committee wishes to go on record as supporting efforts at increasing cogeneration as a source of electric power, because it is such an efficient use of our energy resources and because its' cost is so much below the cost of new electric plant construction. j .e

C. Construction Cost Estimates, Delavs and Capacity Factor Projections. In its testimony before this Committee PECO 1 has maintained that, regardless of how the cost of Limerick has escalated over the years (and, of course, PECO maintains that additional cenerating capacity is necessary), the cost advantaces of nuclear fuel, compared to the alternatives, make Limerick II more attractive than any other alternative. It is incontestable that there are substantial fuel savings i in generatina electricity with nuclear fuel as compared to q oil, gas or coal. (The amount of these savings obviously depends on future prices of uranium, oil, gas and coal.)* The complexity of projecting future costs, however, involves I estimating whether the larger construction costs, capital w addition costs, operating and maintenance costs and other related costs (e.g., decommissionino costs, regulatory costs, etc. ) of operating Limerick as compared to conventional plants will be greater or less than the fuel savings. What complicates i this projection even more is that PECO is estimating that Limerick will have a lifet'ime capacity factor (percentage of actual electricity production over theoretical capacity l l

• Several witnesses have noted that fbssil fuel prices have not been rising nearly ai rapidly as expected in 1982.

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~ N k of the plant if operating 100% of the time) s ignif icantly areater than experience would suggest. Obviously, if Limerick capacity f actors run at a lower percentage than projected, the result will be less fuel savings. This Committee recognizes that it cannot make a final determination of these factors. But in analyzing these issues, the Committee is again concerned that PECO and the PUC take a realistic and objective look at the evidence. To put it in a nutshell, if one assumes net savings of S3 billion over the life of Limerick (not an unreasonable assumption even based on PECO's capacity factor projection; see, e.g., Klovekorn Opinion of March 26, 1982, p. 115 and 116), most of { those savings may have already been eaten up by the S2 billion increase in construction costs since 1982.* This is before one even considers other cost escalation factors and the fact that the project has years to go before completion. In the final analysis, both shareholder's and ratepayer's money is being put at great risk, based on PECO's projection that fuel savings

• See also Appendix 3A and 'the Data Resources, Inc. study attached which stated: "the fixed cos'ts overwhelm the variable cost savings and total r~dvenue requirements increase close to 20%."

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will ultimately be greater than the additional investment and operating costs of Limerick II. There is substantial evidence to suggest that a careful further look is necessary before a final decision is made to proceed: s (1) Cost Estimates The cost of Limerick has er eeded all estimates including those rejected by th P"' .iy two years ago as i too hich. -Appendix 4 shows the estimates rising from S326 million to $6.6 billion since the initial decision to construct. Based on the latest data provided to this Committee, PECO now projects construction costs in excess of S6.65 billion. This figure does not include the cost of a recently ( announced dele.y in commercial operation of Limerick I l-that will add significant further costs. It is obvious that at some point the price tag for 3 Limerick II becomes too high to make economic sense. This j Committee, as already stated, is troubled that the costs of l Limerick may be reaching that point. Of the S6.65 billion last projected by PECO, S2.95 billion plus S.9 billion for common costs is projected for Limerick II. In addition, PECO has now indicated it is " reevaluating" the cost of j Limerick II. At what point do these numbers become economically unfeasible - both from the point of v,iew of raising the capital at a reasonable " cost and from the point of view of (. - _

" rate shock" to the ratepayers when these costs become part of PECO's rate base?* (2) Construction Delays. In 1976 and 1978** PECO unilaterally decided to delay construction of the Limerick units. The first delay, of two years, was undertaken because PECO felt it would have difficulty financing the project with its then financial problems and the general condition of the economy. The second delay, also of two years, was the result of markedly lower demand for electricity and a concern that an on-time completion would cause the PUC to exclude much of Limerick from rates as representina excess capacity. ( In the 1982 investigation, the PUC staff araued that the 1976 delay was unwarranted and demonstrated how the financing could have been accomplished. Judge Klovekorn i concurred and further held that the 1978 delay was unreasonable

• It is interesting to note that various numbers of $8.5

.illion, $6.97 billion and $6.6 billion were used by PECO in the last investigation as the " flash" point where Limerick is not economic, i.e., fuel savings no longer outweigh capital costs. At the time, these numbers were determined by Judge Klovekorn as unrealistic. As we now see, these numbers are now very realistic, perhaps even low. See Klovekorn Opinion of March 26, 1982, p. 119.

• • There was also a voluntary 2 year delay in 1974 resulting from the oil embargo and ensujna economic crisis, which the ALJ suggested

{ was warranted. 1 because the company had failed to fully analyze the probable effect of the delay on the costs to ratepayers. The issue of how much, if any, offset to rates for these unreasonable delays should be ordered by the Commission was'left for the future rate cases which would consider including the Limerick units in rate base.* As stated earlier in this report, the PUC in 1982 effectively ordered PECO either to suspend or cancel Limerick II. PECO chose to suspend. Because of the accumulation of interest and permissable direct expenditures during the sus-pension period, approximately $700 million has now been invested in Limerick II (as compared to $400 million in 1982).

Further, additional delays in operation of Limerick I may occur, in part, because of cooling water availability problems.

The i Committee also notes PECO testimony and other evidence that escalation of costs and delays have been caused by modifications and retrofitting problems reauired since the accident at ) Three Mile Island. There is no reasonable basis, in the 4 r i i i .r

• We include as Appendix 5 a recent Philadelphia Inquirer article that suggests other reasons for construction delays.

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(. Committee's opinion, to believe that these modification reauirements are fully behind us. All of this succests to this Committee that further escalation of capital costs is likely, due to delays in completion of the project. For this reason the Committee uroes all parties involved to cooperate in expediting final determination of the PUC investigation. We emphasize again the public responsibility of PECO and the PUC not to allow resumption of construction if further problems in financing the project - and thereby delaying it - are likely. Based on the history of several delays related directly to PECO's inability to finance at ( reasonable rates and the PUC's justifiable reluctance to grant even larger rate' increases, we must ask what is the basis for PECO's confidence in a reasonably delay-free future between now and 1990 (the estimated completion date for Limerick II). (3) Capacity Factor As explained above, the projected capacity factor for Limerick is crucial in estimatino whether projected fuel savings will be as great as theoretically possible. In the 1982 investigation, PECO projected a 70% capacity factor for Limerick which the PUC considered-unduly optimistic. .r. PECO has now informed this Committee that it is now projecting a 65% lifetime capacity factor for Limerick I and II. This . 4

k compares to a realized capacity factor of only 62% for ' PECO 's Peach Bottom Units (up to the end of 1983) 48.7% for Salem 1, 48.0% for Salem 2 and a national average of 54.8% v for 1983 (See Appendix : 6 (3 paces)). PECO's projections for 1984 are as follows: Peach Bottom 2: 26%; Peach Bottom 3: 85%; Salem 1: 31%; Salem 2: 54%; This averages to 49% for i PECO's nuclear system in 1984. These floures demonstrate the nature of this Committee's concern. If present capacity factor trends continue, how much more must be dedLcted from PECO's estimate of l fuel savings over Limerick's lifetime? When this Committee { asked PECO: "At what capacity factor does Limerick become ) economically unfeasible to run?", PECO answered: "The Company has not performed an analysis that shows at what capacity factor Limerick becomes economically-unfeasible to operate." There is clearly a point at which Limerick II is not cost effective. Again, we urge PECO and the PUC to make a realistic determination of what can reasonably be expected over the life of Limerick II. The Consumer Advocate, in his testimony before this Committee, has challenged PECO to quarantee the projected fuel savings to customers. While PECO may be understandably ~ unwillino to make such a guarantee, it is necessary for PECO to project fuel savinas as'ff it were guaranteelna the results. The economic health of PECO's service area may depend upon it. km - -

D. Capital Additions and Operatina and Maintenance-Costs. One of the assumptions upon which PECO and other utility companies have based their projections.sof long term savinos from nuclear power generation has been that nuclear plants--once constructed--are cheaper to operate than coal or oil fired. plants.- As we have discussed, this saving is assumed to come mostly in the form of cheaper fuel costs. As the years of operation of a nuclear plant continue, these operating savings eventually make up for and surpass the higher up-f ront construction and capital costs of nuclear plants. The Consumer Advocate Of fice, however, reports a dramatic rate of growth of both capital additions and operating and maintenance costs for nuclear plants. (See Appendix 7 (3 pages) provided by OCA). The capital addition costs for Peach Bottom, for example, are so large that --according to OCA--they have actually surpassed accrued depreciation. The result is that the ratapayer has greater capital costs to pay over the remainina life of Peach Bottom than when Peach Bottom was completed. To the extent that PECO is not projecting these costs, and to the extent it is reasonable to expect a' continued growth of them, PECO has overestimated the savings from, and -underestimated the construction costs of completion of Limerick II.

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As the Consumer Advocate testified: The utilities typically show the costs and benefits of a nuclear power plant by depicting two intersecting lines on a page: the top line showing nuclear 4 capital and operating costs declining over time, and the second line showing rapidly rising energy cost savings which soon exceed the annual cost of the plant and thus produce substantial net benefits to ratepayers. What we may actually see, how eve r, are two parallel lines (or, in some cases diverging lines) where the ever increasing cost of building, operating and retrofitting a plant vastly exceeds the energy savings produced by the plant. For example, our analysis of PECO data in the Company's most recent rate case indicated that the net investment cost of Peach Bottom Units 2 and 3 reflected in rates j is actually hiaher today than it was in 1974 when the l plants came on line. This is despite the fact that ratepayers have paid for ten years of depreciation on the plant. A similar pattern has occurred with respect to the Company's Salem plant. Thus, the capital costs of the plants have gone up over time ( rather than down. Also, PECO's nuclear operating and maintenance 4 expenses have risen at a very high rate over and j above general inflation. PECO's share of O&M expense for its 42.5% share of Salem 1, for example, rose J from S11.7 million in 1978 to S48.1 million in 1982 and S38.2 million in 1983. At Peach Bottom these expenses rose nearly ten-fold, from S4.7 million in e j 1975 to over S40 million in 1983.* In view of this history of rising capital and O&M costs, it is not clear that even the relatively less expensive Salem plants will be economical to PECO ratepayers, let alone the Limerick units which will cost more than three times as much to build. This Committee urges a full and careful examination of this issue by PECO and by the PUC. e " PECO has informed this' Committee that it projects O & M costs of $86 million for Limerick I's first full year of operation (1986). L :

. = I i E. Reliable Water Supply for Cooling. PECO has had considerable difficulty in completing ^ its water diversion project f rom the Delaware to the Schuylkill ,i River. Because of restrictions on the use of Schuylkill water i during the warmer months of the year, PECO must f nd other 1 ' sources of water if Limerick is to operate year round. Since PECO'is a summer peaking company, Limerick has to i be available during summer months. As the Consumer Advocate i l testified: ] Perhaps the most controversial issue regarding = Limerick is whether the Company will'have an assured i i supply of cooling water to run the plant in the summer months. Obviously, if there is anything worse l from the ratepayers ' viewpoint than paying for one multi-billion dollar baseload plant which cannot { operate when energy costs. are at their highest, it is 4 paying for two such plants. This Committee believes that this water issue clearly throws more doubt on the economic viability of Limerick II. Obviously a determination has to be made as to what is the j { likely resolution of this problem and how much it will add to i ] the costs and risks of the Limerick,II project. At public j hearina, when specifically cuestioned on this issue, PECO l declined to provide specific information on how back up cooling . water will be obtained. i l of l i t . 4 .. ~ ,n_- .._,,..y_%,_ _ _, _._f .y._ .,....,,,y,..,..w_,

F. Impact on Customer Rates and Employment. As discussed earlier, it is estimated that if Limerick II is completed, a rate increase of 20-25% is likely. This will be added to a 20-25% likely rate increase upon completion of .L'ime rick I. Given the high PECO rates now in effect compared to the other Pennsylvania utilities, (and other neighboring utilities) the result on business and employment could be very severe. The Committee heard the testimony of many residential customers who testified to the severe impact of i present high rates and the very severe impact of further large rate increases. Several small commercial users ( testified that further larce rate increases would lead tQ them going out of business. The Committee also heard testimony from SEPTA as to the dramatic impact of higher i rates on its f ares and what steps SEPTA is considering to reduce its dependence on PECO. As noted earlier, there is clearly a relationship between large rate increases l

• The Committee notes that a PECO rate increase request is i

now being considered by the PUC. of L . 1 i ~. - _ _ -. - _ _ _. .___.-__--___.,m_

( (hicher than the rate of inflation), customer conservation and search for alternatives and resultino depression of demand for electricity. The Committee attaches as Appendix 8.9 summary of a report done by Arthur D. Little, Inc. for Lukens Steel Co. and presented by Lukens Steel in its litigation before the PUC requesting the PUC to permit it to purchase its electricity from PP & L instead of PECO. The study shows very clearly the negative relationship of higher electric rates and employment. Indeed, in a submission to this Committee relating to the issue of changes in service territory and increasing competition between electric companies, PECO noted that it had correlated ( a 0.376% increase in electric rates for industrial customers with the loss of 1,127 jobs. The impact on the economy of the PECO service territory of 20-25% rate increases is, therefore, incontestably negative.* This Committee recognizes, of course, that there are potential rate consecuences to cancellation of Limerick II. Assuming Limerick is cancelled, however, and assuming all of the sunk costs were apportioned to ratepayers,

• We note that 1,600 jobs at Scott Paper Co. alone are at stake and that Scott Paper has declared these jobs in jeapordy because of high electric rates.

N-f

PECO customers would still face a significantly lower base rate increase than if Limerick II is completed. Althouch the cost of amortizing S700 million over 10 years, for example, is not insignificant, (and paying for additional common costs to Limerick I) the immediate impact on rates is much less than the cost of depreciation and paying a return on S3 or S4 billion over 30 years. As presented to this Committee by Scott Paper Co. : PECO emphasizes that S800,000,000 has already been " spent" on Limerick II and claims that it is over 20% completed. A substantial portion (perhaps half) of the amount spent represents AFUDC (Allowance for Funds Used During Construction), and approximately one-third of that represents return on equity. More importantly, however, is the fact that the cost to ratepayers of amortizing most of the sunk costs (over a ten-year period, for example) is virtually nothino compared to what Limerick II ( micht cost. Costs of completion are very difficult to estimate accurately for projects that large; regulatory and construction delays can result in finished costs that are up to 10 times the original estimate. PECO might well claim that Limerick II could be completed for less than $3 billion, but it could just as easily cost $6 billion or more. Because of such risks no one is completing nuclear plants that have such large portion yet to complete. Several nuclear plants have been cancelled that were over 90% complete. One cannot allow the mistakes of the past to force him into compounding the problem for the future. The risk of the costs becoming far worse than PECO estimates is simply too great. We believe that there are better alternatives than taking such a multi-billion dollar gamble. Experience strongly succests that such a camble would involve far greater "downsids" risk than " upside" potential. PECO's high electric rates 'already have contributed to significant" job losses in southeastern Pennsylvania L i There can be little doubt that if Limerick II is completed and its costs brought into the rate base, the ensuina escalation in electric rates will result in even more job losses as eneroy-intensive Additional job losses would have a disastrous ~3/ business are forced to shut down -- or relocate. i impact on the local economy, which st'ill is recovering from the last recession, while still hicher electric rates would severly hamper efforts to attract'new business and industry to this part 3 of the state. i 3/ in the statement referred to in footnote 1 above, PECO stated that an increase in its revenue requirements of only j $100,000,000 (i.e., approximately 5%) ...would surely erode Pennsylvania's ability to retain and attract industry and jobs". (F.ephasis in original). As discussed above, the crucial question is: Is the electricity to be produced by Limerick II reauired by the ( service area and, if so, what alternatives to Limerick II-3 exist and at what cost? A responsible resolution of the issue of either completing or cancelling Limerick II reauires a i i concerned and conscientious review of the economic impact of completion on the PECO service territory. Commissioner Michael Johnson testified before this Committee that, in his opinion, no weicht is civen by the PUC to the negative I impact of rate incteases on the economy of the service territory. If this is true, it is time for a change. PECO t cannot be permitted to proceed with its plans for Limerick II if, to do so, it will seriously endanger the economic health of the region. The PUC'has a responsibility to the public i ' 1

d interest which transcends the wishes of any single utility company or the company's short-run standing in the financial community. This Committee, for all the reasons stated above, has serious concerns about the economic feasibilitysand desirability of the completion of Limerick II.* It urges that PECO and the PUC examine all the facts carefully and fully. We have noted above that questions directed to PECO by this Committee involv-ing these issues were not able to be answered because data was still being prepared by PECO for the PUC and would not be ) completed until December 1984. Because the Committee considers l the potential consecuences of a wrona-headed completion of a j project of this magnitude to be very serious, it makes the ( 1 followina recommendations for legislation: i a i i ) i 5 i

• The committee is, of course, very concerned about jobs related to Limerick II, if the project is cancelled..However, an. objective evaluation must be made as to whether these jobs (many of which are temporary) can be relocated with less negative impact than if large rate increases from completion affect many other permanent jobs.

In' addition, jobs will be created by alternative en6rgy and conservation projects. k',

r. i RECOMMENDATION FOR LEGISLATION SINCE THERE IS DOUBT ABOUT THE PUC'S AUTHORITY TO ORDER CANCELLATION OF A UTILITY PLANT, THE COMPLETION OF WHICH IS NOT IN THE PUBLIC INTEREST, LEGISLATION SHOULD"BE ENACTED TO CLEARLY PROVIDE SUCH AUTHORIZATION. l DISCUSSION OF RECOMMENDATION For the reasons discussed above, this Committee urges the PUC, as the appropriate agency to render a final determination regarding cancellation or completion of Limerick II, to do so without undue delay. The duty to regulate public utilities is a legislative one which has, been'delecated to the PUC as an arm of the legislature. ( l Because this Committee, as stated above, is deeply concerned about the consecuences of completion of Limerick II, or any construction project that may not be in the public interest to complete, the Committee believes that the authority of d the PUC to order cancellation of a construction project not in the public interest should be made clear and uneauivocal. The consecuences of' delay of a cancellation order that might be challenged by lengthy litigation over the PUC's present authority to make such an order should be avoided, if 1 possible. This Committecchas received the opinion of PUC Commissioners Bill Shane and Michael Johnson that some doubt ) ( r m

does exist as to the PUC's authority to order a halt to a construction program not in the public interest. As Commissioner Shane testified: The Supreme Court of Pennsylvania's decision in PA. Public Utility Commission v. Philadefphia Electric Company, 501 Pa. 153, 460 A.2d 734 (1983) neld that the Commission could refuse to award a securities certificate where the proceeds from the sale of the securities were to be used to finance a construction project. It is not entirely clear, however, whether the Court would permit the Commission to exercise this authority only when the financial viability of the utility was threatened, or whether the Commission could act whenever the construction project was found to be unnecessary and-posed a threat of large rate increases. While I note that PECO itself has, in a Memorandum of Law submitted to this Committee, taken an expansive view of the Commission's authority under the Supreme Court's decision,* I still believe

• Committee Note:

PECO provided this Committee with the following view: While the Pennsylvania Supreme Court in PECO did note that the public utility code does not expressly grant the PUC ceneral administrative authority over the siting and construction of all utility plants nor over the proposed expansion of any facility on the basis of those facts alone, the court did apparently endorse the proposition that authority to act over public utilitysmanagement decisions will be found impliedly from the above express provision of the code if those public utility management decision portend ultmate danger of burdening the public with large rate increases or of impeding the utilities ability to raise capital. PECO, supra, at 737. Accord, Bell Telephone Company v. Uni-Licht, Inc., 294 Pa. Super. 89, 439 A.2d 763, 765 [1982] which construed 5501 (of the PUC Code) as conferring to the PUC exclusive jurisdiction gr authority over matters relatino.to the, reasonableness, adeauacy, and sufficiency of public, utility services as well as over matters relating to tariffs, the necesity of eauipment, deposits, and.the use of various types of service.

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( that legislation is required to remove any doubt that the Commission can use its authority over securities certificates to block unnecessay construction projects. Second, leoislation is necessary to clarify the Commission's power in the unlikely event that a utility seeks to continue a construction project solely with internally generated capi-tal. Since tne Commission is not specifically authorized to determine the need for generating plants or to step in and order a halt in their construction, the argument would be raised that the Commission lacks jurisdiction in this area. See generally Swarthmore Borough v Public Service Commission, 277 Pa. 472, 121 A.488 (1923). While it could be argued that the power to order halts in the construction of generating plants arises by necessary implication from the Commission's general supervisory powers (See 66 Pa. C.S. S501) and its duty to guarantee reasonable rates (See 66 Pa. C.S. S1301), the resolution of this issue is subject to considerable doubt. Therefore, legislation is necessary to give the Commission authority to order, in appropriate ( cases, a cessation of construction when a utility attempts to complete a plant with internally generated capital. Consumer Advocate David M. Barasch testified as follows: In its Order to Show Cause of August 7, 1984, the Commission called for the examination of a number of vital issues relating to Limerick II. Perhaps the most important of these issues, from this Committee's perspective, was the following: Should the Commission reject any securities filings, or impose any other appropriate remedy, ,to guarantee the cancellation of Unit 27 I emphasize the clause "or impose any other appropriate remedy" because it is not clear under the Public Utility Code what. remedies are available to the Commission if it does, in fact, find that cancellation of-Limerick II is in the public interest. =f 4 b 1 ' l

( In upholding the Commission's order in the first Limerick investication, the Pennsylvania Supreme Court adopted the positions of the PUC and the OCA that the Commission could reject the issuance of securities for construction of Limerick II, where it found that such issuance was not necessary or proper at that time. However, th4 Court went on to state in dictum that: Even the PUC concedes that it is without power to order that construction of Limerick II be ceased, an order which the PUC did not is6ue here. While the OCA does not believe that the PUC is powerless to prevent construction when and if it finds such an action is necessary to protect the ratepaying public, we are concerned that the Commission and/or the Courts may not share that view. This Committee, however, is in a unique position to propose legislation which would resolve this key issue which was lef t open by the Supreme Court's f Opinion. While it is clear that the Commission can 4 ( refuse to approve securities for construction of Limerick-II (or any other plant), it is not totally clear what power the Commission has to prevent a 4 utility f rom completino an unneeded plant by other means, such as the use of internally generated funds. I would respectfully urce this Committee to consider leaislation which would address this issue clearly and directly, so that the power of the PUC to protect the public interest in this respect will be indisputable and complete. Other witnesses have also recommended that this Committee recommend legislation that will clarify this issue.

See, e.g.,

the statement of. Scott Paper Co. (Appendix 3A). The -PUC Chairman, however, has declined to provide us _with her view on this subject. This Committee's Special Counsel also believes there is room for doubt as to the extent of the j PUC's authority to order. cancellation of a construction (' l 1 .m

( I project not in the public interest where a specific relationship to the financial viability of the utility cannot be demonstrated. PECO has submitted a legal brief to this Committee that sugaeats the possibility of constitutional claims in the { event of cancellation of Limerick II by a governmental i. acency. See Loretto v. Teleprompter, 458 U.S. 419 (1982); Kirby Forest Industries v. U.S., 52 U.S.L.W 4607 (May 21, j 1984) (No., 82-1994); Pruneyard Shoppino Center v. Robins, I-447 U.S. 74 (1980). This Committee is concerned that the PUC be guided by clearly defined parameters in providing regulatory treatment to the costs incurred in any cancelled plant. (See Appendix 9 which is a summary of the regulatory treatment ( of major nuclear power plant cancellations around the co'ntry.). (See also 132 U.Pa. L. Rev.-497: (March 1984), u "The Regulatory Treatment of Mistakes in Retrospect: Cancelled Plants and Excess Capacity.") I i i 1 of I i i ..,_.m

-( PROPOSED LEGISLATION Therefore, this Committee includes the following specific recommendation for leaislation as part of this report: i AN ACT Amending Title 66 (Public Utilities) $f the Pennsylvania Consolidated Statutes, providing the Public Utility Commission authority to order electric utilities to halt construction on ceneratino plants. The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows: Section 1. Title 66 of the Pennsylvania Consolidated Statutes Annotated is amended by adding a section to read: 5514 Power of Commission to order halts in construction ( of electric generating plants. (a) General Rule -- The Commission shall order any public utility engaged in producing, generating, transmitting, distributing, or furnishing electricity to modify or halt construction of any generating plant where the Commission, after notice and an opportunity to be heard, determines that such construction is not in the public interest. In addition to any other relevant matters, the Commission shall consider in its determination whether: (i) The ceneratrha plant is necessary for. the utility to provide adeouate and reliable service to the public, or

( (ii) There are less costly alternatives by which the utility could maintain its ability to provide adeouate and reliable service. (b) Investigations and Hearings -- For the purpose of enabling the Commission to make such s determination, it may hold such hearings, make such inquiries, and require the submission of such information as it may deem necessary or proper in enabling it to reach a determination. The burden of proof at such hearings shall be on.the public utility to show that construction of the generating plant is in the public interest. (c) Regulatory Treatment of Costs -- Notwithstanding ( any other provision of this Code,.and for any generating plant cancelled after the effective date of this section, an electric utility may recover a return of, but not a return on, prudently incurred costs on any partially completed facility whose cancellation is found by the Public Utility Commission to be in the public interest. The burden of proof shall be on the public utility to'show that any costs claimed were prudently incurred. W .g-r i ( 4.

CONCLUSION As stated elsewhere, the Select Committee recognizes that the issue we have addressed is extremely complex and that within the time period available to us we could not explore .s. this issue in the detail we would have liked. Given the magnitude of the decision whether or not to complete construc-tion of Limerick II, we believe it is important that the PUC be advised of this Committee's conclusions as it undertakes its more detailed investigation. Nevertheless, this Committee's recommendations, if adopted, would provide a clear path for final determination of whether completion of Ljmerick II makes economic sense for the people of Southeastern Pennsyvlania. Failure to make this determination carefully, but also expedi- { tiously and decisively, will be a default of our state's responsibility to its citizens. Public utilities are monopolies created by the state for the public good. When we fail to properly control and regulate these monopolies, there is a -failure of our democratic system. The confidence of the people will be severly shaken if responsible and prudent action is not taken to assure the people that all that can be done is being done to further the public good. of b..

The following r. embers of the Select Committee submitted minority { reports in lieu of signing the Pla.iority committee report: Hon. George E. Saurman Hon. Frank A. Salvatore These nincrity reports are attached, s T -f L

Prepared by: Representative George E. Saurman ( The Comonwealth of Pennsylvania is faced with a serious economic decision which will undouctedly have long lasting repercussions on the future. The dilemma causing the state such intensive financial unrest is the question of the final resolution of Limerick Nuclear Reactor Unit II. The designated regulatory body to make such a decision is the ~Public Utility Ccemission. In 1982, the PUC Administrative Law Judge, Joseph J'.' Klovekorn, entered an initial decision some seventeen months af ter the order to conduct an investigation was entered on October 10, 1980. His decision was that both Units I and II should be completed as quickly as possible. However, the PUC went the other way and gave the Philadelphia Electric Company the choice of suspending or cancelling construction of Limerick II; PECO chose to suspend. Two years later, with Unit I approved for low capacity testing, the spectre of Unit II has returned and the PUC has ordered PEC0 to "show cause" for its completion. Another extensive, exhaustive investigation a looms ahead. The Governor's Energy Council has entered into the picture, maintaining a neutral position, but seeking to assure that all aspects of the debate be thorougnly aired and considered in the interest of economic c development. 1 Into tnis arena of heavyweights steps the House Select Committee-to ( Investigate Limerick II created.by House Resolution No. 257, adopted on June 28, 1984. The resolution indicated public concern and controversy over the continued construction of Limerick Unit II. It raised the question concerning the need for additional capacity; expressed concern over projected costs and additional investment; and indicated that the potential impact could be deleterious in light of already projected rate increases. The Co=ittee was instructed to conduct a thorough investigation of the ~ circumstances surrounding the need for Limerick Unit II, paying particular attention to: (1) the potential impact on ratepayers and; (2) potential alternative sources of electrical energy. Finally, the Committee was instructed to report back _as soon as its study and investigation was completed. 'The Speaker, K. LeRoy Irvis, on July 20, 1984, appointed the following members to the Committee: James J. Gallagher, Chairman Chaka Fattah William Lloyd Samuel Morris James Greenwood Robert Reber;r Frank Salvatore George'Saurman f E -n-,+ -,,,,e ,g e

ame,

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Page 2 - Limerick Resolution The first meeting of the Committee was called for August 23, 1984. A discussion followed to attempt to set a course of action. Rep. Greenwood came prepared with a " ready to go to work" consulting firn, Union Associates, who had been involved in nuclear plant studies in Long Island, *:ew York, Ohio and tiew Hamoshire. In spite of the fact that, even at that merent, less than three months remained to complete a very lengthy and comolex investigation, the consultant, Gregory Palast, expressed" confidence that there was sufficient time. He indicated that his firm would consider the " ripple effects" of large rate hikes on businesses, jobs, pro;:erty values and taxes, as well as the most economical alternative to meet energy needs. However, there was objection expressed to hiring the "only" firm before us for consideration. That danger was overcome by the selection of Mark P. Widoff, former Consumer Advocate who indicated that his firm of Widoff, Reager, Selkowitz & Adler, Attorneys at Law, would be willing to serve as.special counsel to the Select Committee in accordance with a conversation held in Mr. Gallagher's presence and that of Charles Bacas of the House Majority Leader's Office. At a meeting in which this action was made known to the Committee, I questioned the need for legal counsel wnen we had previously been gearing up for financial matters and considering a consulting firm. ilo vote was taken to confirm the selection of this firm whose quotation indicated a ( maximum total fee of 515,000. However, the necessary votes were there. On Septercer 18th, the House passed H.R. 260 which appropriated a sum not to exceed 525,000. Let me hasten to add that Mr. Widoff funcationed in a very professional manner and while I do not believe, nor agree with, the reported findings of the Connittee, it was a worthwhile learning experience and I truly hope some positive results' will be forthcoming. Let me state that in my opinion, four meetings and.the testimony presented thereinare not sufficient for any reasonable person to conclude that Limerick Unit II should not be completed. flor _is there ample evidence - to show that i t should be. The simple truth is and was, that the task set.forth for the Select Committee was " Mission Impossible." The Committee held its first information gathering meeting on Friday, September 14, 1984, in Room 140 of the Main Capitol. The bulk of the time was spent taking testimony and _ questioning at length, Mr. Joseph F. Paquette, Jr., Vice President for Finance and Accounting for. PECO. The Committee also spoke of the inter-related nature of the construction of Units I and II, stating that it would be economically _, unfeasible to have the one without the other. Patrick Gillespie, Business Agent for the Council and a former House member, testified that cancelling Limerick _ II would mean the loss of 4,000 construction jobs representing 12 million man hours of labor. L A.+ e. w-w.

w. - -

9

Page 3 - Limerick Certain information requested of Mr. Paquette was not immediately available and fomarded in a written response subsequently. In response to a subsequent request to testify, the legal counsel for PECO stated that the Company had no further information to suggest but would respond to any requests for information from the Committee. The Committee report would lead one to believe they were unwilling to come bac,k, whicn was not the case. The Committee became aware that the PUC had held a pre-hearing conference on September 7, in an inquiry requiring PECO to show that construction of its Limerick II plant would be in the public interest. Administrative Law Judge Allison K. Turner held the session to define case issues. The Commission will look into possible alternatives to the plant and the effect of the project on PEC0's financial health. It will attempt to determine whether action should be taken to cancel the unit, and, if so, whether the company should be allowed to recover any of the " sunk" costs from ratepayers. Sunk costs are those monies already expended which would be completely lost if the project is cancelled. It should be noted there that there is a law suit presently being brought by bondholders of the utility in the state of Washington to recover ( losses due to the cancellation of a plant in construction. We should recognize that utilities are monopolies created by the state for the puolic good. For the right to function exclusively in a given delineated market area, the utility subjects itself to certain regulatory rules. The best known of these regulations is the need for approval of all rate increases. However, the courts have maintained that the utility is entitied to a reasonable return and in some~ cases have granted appeals to PUC rulings. After the " brown out" several years ago, the PVC instructed the utilities that such a situation must never again take place. This required that each utility was expected to be able to meet projected capacity limits recognizing-that plant construction time was set at about 15 years. During the hearing before the Administrative Law Judge, many alternatives to completion of Limerick were considered including conversion to coal and utilization of Delaware 7 and 8 converted to coal; purchase of capacity from Susquehanna and conservation PECO's studies included the consequences of replacing the Limerick operation with four smaller coal-burning units for service during 1989-1992, at a cost of 54.3 billion; cancellation of Limerick without replacement; completi.gn of Limerick I and replacement of Unit II with two small coal plants in 1990, at a cost of $2.2 billion; and cancellation of Limerick and its replacement by the purchase of 500 megawatts of cacacity from the Susquehanna Nuclear Generating Station and the construction of two {' smaller coal _ units at a cost of $2.2 billion for completion in 1990. ~ 1

Page 4 - Limerick Carroll H. Betting of Gilbert Associates addressed in his report the technical feasibility, capital costs and construction scnedule of conversion to coal. -He also spoke to the feasibility and cost of a limestone-based S02 removal system, sludge storage requirements and the stacks necessary to meet environmental regulations. He testified that one-half of the facilities already constructed at - Limerick would be unusable in a ' coal-fired plant. These" included the nuclear reactors, radioactive waste treatment equipment and reactor safety facilities. He then described the new equipment needed for the conversion such as the 1100 foot stack which is twice the height of the existing cooling owers. The converted plant would burn about 22,000 tons of coal daily when operating at full capacity and produce about 6,800 tons of S07 sludge per day. The operation would adversely impact clean air, solid and liquid waste, j transportation disposal and water quality. The Limerick site area meets the National Ambient Air Quality Standarcs for S02 and total suspended particulates, but Pottstown and Phoenixville are classiried as "non-attainment for total suspended particulates - secondary standards." Therefore, there would be a requirement for an extensive regulatory agency review of air quality regulations, subject to the New Source Performance Standards, the rules for Prevention of Significant Deterioration { and the requirements of EPA's Emission Offset Interpretative Ruling. The need for an adequate coal supply would mean about two ICO-car unit trains each day. The equivalent of one 21-car trains per day would be needed to transoort the limestone needed for the S02 removal system and a waste disposal site of 1.1 square miles within a 20 mile radius of the generating station to accommodate about 50 million cubic yards of solid waste. As a member of the house Mines and Energy Management Committee, I have visited coal-fired plants in other parts of the state and witnessed the manifold problems inherent with the management of these waste stcrage sites. Also to be considered is the effect on water quality. Waste steam from a coal-fired plant includes boiler cleaning wastes, run-off from the coal storage piles pose problems as does the ash handling water and the run-off and leachate from the solid waste disposal area. The total water consumption required to operate a coal-fired plant would not be materially different from that recuired for the nuclear operation. Hence, conversion.to coal would not resolve the Pt. Pleasant Pumping Station problem as many would be led to believe. A study was also made of' construction in' the city of Chester on the Delaware River. Both costs and environmental impacts were cMsidered. . -. a

Page 5 - Limerick ( The conclusion was that conversion of Limerick to a coal-fired generating station is impractical and that construction of alternative coal-fired generating stations anywhere in PEC0's service area is attandant with considerable environmental problems and extensive financial costs. Arguments for conservation as an alternative to Limerick fail to provide the certainty needed to assure necessary capacity. Details on how the program would work, when it would be implemented, its cost-effectiveness and other substantial factors are simply not available witn sufficient specificity to make it a reliable planning tool. My reason for this detailed description of the coal conversion suggestion is to indicate the extensive factual evidence provided to the PUC Administra-tive Law Judge. While each Committee member was supplied with a cocy, the contents were never discussed. As a matter of fact, after the organizational meeting, the proceedings were that of a public hearing during which testimony was received. At no time did the Committee discuss any of the findings with each other, unless it happened informally. Staff memoers were not querried for input although they were constantly present for individual consultation. How any concensus can therefore be attributed to "the Committee" is totally beyond my conprehension. Only af ter the lengthy report was prepared did we get togetner briefly to review it. ( Two PUC Commissioners appeared in the Philadelphia hearings to testify. They were Bill Shane and Michael Johnson. The Chairman, Linda Taliaferro, declined the offer to testify because of the proceedings already underway with the new hearing. One has to wonder if the Committee received a balanced perspective from the Commission. Commissioner Johnson, who is concluding ten' years on that board and will be retiring, inoicated that "the PUC never considers the impact of its major ^ rate decisions on the economy." He indicated that the PVC could and should have been more responsive but failed to perform the legislative intent. The philosophy relative to the PUC is extremely interesting and worthy of more extensive examination. How can the legislature make certain that the system works effectively for all concerned. If it is designed for punishment of the utilities by financial penalties,' then the final objective of adequate, dependable energy will be frustrated. More reasonably, the PUC should work cocoeratively with the utility and the Office of Consumer Affairs to achieve mutually beneficial results. It is quite apparent tnat the adversarial roles currently played are self destructive. Perhaps a parallel could be drawn to Health, Care Cost Containment whicn progressively pushed itself off the charts. Historically the method emoloyed ~ to reimburse hospitals for capital expenditures with no pre-establisned parameters has encouraged waste and inefficiency. L 1

Page 6 - Limerick ( So it will be with utility cost precedures., Perhaps we need to install an approval "up front" of planned construction to determine the need and economic feasibilty. This would then require a certainty of comoletion in the most expeditious fashion with an " escape clause" so that unforeseen, dramatic changes which might occur would be recognizeo and new directions taken. That clause must reasonable protect investors so that future projects are not jeopardized because of risks that are too great to permit the purcnase of stocks and bonds. Currently, in the name of pro'tecting the rate payers, we imcose financial road blocks which ultimately and forever force the rates uo. As a memoer of the Whissahickon School Authority I learned that a year's delay in construction will result in about a 12" increase in ecst. At no time have I heard any figures on what electric rates would be right this minute if the delays to Limerick had not occurred and the megawatts were pouring out over the delivery wires. But we stand, looking back, and criticize the mistakes so reacily available in retrospect but so difficult to pick out when looxing anead. We need to stand together, look ahead together, agree on a course of action and make certain that every effort is made to reach that objective in tne most cost-efficient manner. Then we'll all be serving tne public. fiuclear reactors have been operating and producing commercial electric power in the United States since about 19e0. During this time no memoer of ( the public or plant employee has ever been injured by an accident at a commercial nuclear power generating station. This safety record is largely due to the " defense in deptn" principles upon which the plants are designeo and constructed. This record certainly contrasts favoraoly to the recent. explosion of natural gas in Mexico which killed over two hundred people, and forced thousands of others from their homes. "fluclear power is the safest major technology ever introduced into this coun try. " This quote is from Philip Handler, President of the flational Academy of Science. Why then do we not have nuclear insurance for property owners ? Studies have indicated that nuclear property meets the criteria for protecting home owners and should be made available. What then can we conclude about Limerick with the very limited information we have? Until the matter of " sunk costs" has been resolved, nothing else can be settled. How can any comcarisons be made until we decide who will pay for the monies already expended? If they are to be borne by the rate payers, how much will that increase their rates? If now, who will pay?. That' question becomes vital even for PECO to consider its options. If the " sunk costs" are gone for ever that means about a 5700 million loss. In the fact of that kind of a financial bath, they really have no choice but to push ahead. Other alternatives don't really exist. It is certain that someone will have to pick up those costs, they will not go away on their own. L

Page 7 - Limerick ( The following table from the U. S. Department of Labor and Industry gives a comparison of rates Of increase from a base year of 1967 to the present. Where are tne cries to halt the construction of new homes, or new cars, or hospitals? Utility costs have risen, but so have otner costs. We have oeen victimized for several years by inflation that has taken away the savings of our senior citi: ens and placed those on fixed income in financial jeocardy. But why pick on the utilities? .s Consumer Priceinden. Al! Urean Consumers Public Inde r With All Medical Trans. Used New Addeo Safety Year items Housino Care portation Gasoline Cars Cars & Emissions 1970 116.3 118.2 120.6 128.5 105.6 104.3 107.6 112.0 1971 121 3 123.4 128.4 137.7 106.3 110.2 112.0 117.5 1972 125 3 128.1 132.5 143.4 108.8 110.5 111.0 117.7 1973 133.1 133.7 137.7 144 8 118.1 117.6 111.1 121.3 1974 147.7 148.8 150.9 1480 159.9 122.6 117.5 131.7 1975 161.2 164.5 168.6 158.6 170.8 146 4 127.6 145.6 1976 170.5 174.6 184.7 174.2 177.9 167.9 135.7 155.0 1977 181.5 186.5 202.4 182.4 188.2 182.8 142.9 163.9 1978 195.4 202.8 219.4 187.8 196.3 186.5 153.8 176.7 1979 217.4 227.6 239.7 200.3 265.6 201.0 166.0 191.5 1980 246.8 263.3 265.9 251.6 369.1 208.1 179.3 210.8 1981 272.4 293.5 294.9 312.0 410.9 256.9 190.2 236.7 1982 289.1 314.7 328.7 346.0 389.4 296.4 197.6 248.4 ( 1983 298.4 323.1 357.3 362.6 376.4 329.7 202.6 257.8 1931 1 262.9 280.9 282.3 289.5 405.6 234.6 184.3 229.0 11 269.0 288.5 289.2 299.6 416.7 245.7 189.7 235.6 111 276.7 300.1 298.9 326.6 411.9 263.7 191.9 238.3 IV 280.7 304.3 307.7 332.6 409.3 280.5 194.9 243.9 1982 1 283.0 306.7 316.1 336.1 396.5 280.4 195.8 245 8 11 287.3 313.6 324 0 342.1 376.6 291.6 197.2 247.6 Ill 292.8 319.7 333.1 349.5 397.6 303.8 198.3 249.0 IV 293.4 318.7 341.7 356.0 386.9 309.9 198.9 251.1 1983 1 293 2 318.3 350.5 355.8 360.2 309.8 201.2 254 6 11 296.9 321.7 354.8 360.5 276.5 317.5 201.4 256.4 til 300.5 324.2 360.2 364.9 383.3 336.7 202.1 257.2 IV 303.1 327.2 364.5 369.2 381.5 354.7 205.8 262.9 1984 1 306.4 330.6 371.2 377.7 373.5 358.9 207.2 255.2 Il 309.7 334.7 376.2 380.7 375.2 378.3 207.6 265.6 .e Residential Class of Service, August - Bill Residential Customers ( 1967 511.66 100", = 1970 12.83 110.05 = 1975 25.04 215.05 = 1980 37.45 321.0% = 1983 45.35 389.0% = 12 months end October, 1984 = 552.35 449.0%

Page 8 - Limerick ( What we need to do is rethink some of the traditional ways we have dealt with our utilities. The answer is not changing how the PUC is selected, certainly, but the relationship of that body to the utilities and how well they carry out the intention of the General Assemoly. 4 The folicwing specific legislative recommendations offer some new direction: (1) All future construction by a utility in the Cobsonwealth of Pennsylvania must be approved by the PUC before any detailed plans are drawn. There must be determined a need for additional 1 capacity, a proposed location, an environmental empact study, etc. (2) The construction of the facility, once approved, must be jointly i monitored by the PUC to assure efficient and expeditious progress. (3) A predetermined settlement be agreed upon to allocate sunk costs in the event of an unforeseen change that would dictate cancellation. (4) That legislation be adopted to create nuclear property insurance to i orotect home owners. (5) That PURTA taxes be kept in.the immediate area and credited against i property taxes to property owners within a thirty mile radius of the ( plant site. (6) That the PUC be given the power to terminate construction (with legislative oversight) but contingent upon adequate allocation of sunk costs for prudent expenditures. (7) That every municipality be notified of its responsibility to prepare, l maintain and keep current a disaster emergency management plan for the prevention and minimization of injuryand damage caused by disaster in consenence with the Pennsylvania Emergency Management Plan found t in Pennsylvania Act 323 of 1978 with special notice that this has nothing to do with wnether or not they are located near a nuclear i reactor generating plant. } ? sf ) i L 2.

C e APPENDIX 1 ? .g

HTC A%2 HOUSE OF REPRESENTATIVES [7 4g COMMONWEALTH OF PENNSYLVANIA ($ I November 27, 1984 hi E hi C)

SUBJECT:

Comment upon the recommended committee report 'hubmitted by Special Counsel to the Select Committee Membership on 16 November 1984 TO: The select Committee established by HR 257, PN 3386 FROM: Representative Frank A. Salvatore I have reviewed the report of the House Select Committee to Inve st igate Limerick Unit II pursuant to House Resolution 257. The report was prepared by special counsel to the Committee, Mark P. Widof f, Esquire, and distributed to the Committee on Monday, November 26, 1984. It is clear that a special committee such as this, equipped with minimal resources and limited time for adequate hearings, evaluation of testimony and information and full committee discussion prior to directing the consultant to l prepare a draf t report, could not make a definitive and comprehensive report to the House of Representatives. It should be noted that Committee members have been given only 24 hours to consider the contents of Mr. Widof f's work. The one specific recommendation of action to the House of Representatives in Mr. Widoff's Report to the Committee is the recommendation for new legislation which appears on pages 41 and 42 of the report. I make the following comment on the language of the recommended legislation. The language of the recommended legislation seems to be primarily addressed to the immediate circumstance of Philadelphia Electric Company and the decision on whether or not to complete Limerick Unit II. For example, it does grant specific authority for the Public Utility Commission to build into future rate structures the funding necessary to return to Philadelphia Electric the " prudently incurred costs" of Unit II construction to the time the unit was ordered cancelled by the Public Utilities Commission. However, in acting to resolve the Limerick Unit II problem through legislation, we would be erecting law and policy for future times and circumstances. -f w

Select Committee established by HR 257 November 27, 1984 Page Two While time has not permitted thorough consideration of the long-range impact of the suggested changes in law, several questions present themselves and deserve thorough study before the General Assembly considers the language for new law contained in this report. Examples are: 1. Leaving aside the question of Limerick Unit II, do we want to grant to the Public Utility Commission sweeping authority to order any utility to cancel construction of a generating plant already under construction? 2. If such legislation becomes law, would any utility begin construction of a generating plant unless the Commonwealth were faced with an immediate power shortage? 3. What would such a situation do for economic development in the Commonwealth, for jobs? 4. With such a law on the books, could any Pennsylvania electric utility attract the capital needed for construction? There is reason to believe that the Commonwealth should have some participation in electric utility decisions to build major generating s ta tions. It seems to me that the way to do that is to get the public-into the act before_ construction begins, not af ter millions of dollars have been invested. The way to do that is to require the Public Utility Commission to certify the need for additional capacity. The Public Utility Commis sion is in a position to look at projections of growth in demand for electricity, to weigh these projections in the light of existing capacity and all alternatives for meeting future demand. I see no reason why the utility industry would ~ object to proper certification legislation. It would protect them and protect the public, and it would be the proper way for the public to participate in such decisions. Y of a C

DATE OF PERCENTAGE MONEY SPEUT l'LAiiT N AHr OWNER C A!!Cl:LLAT100 COMPLETED (IN MILLIONS) durry 3&4 Virginia Electric Power 3/77 0 98 s. l ilouglaa Point'1&2 Potomic Flectric Power 7/77 0 65 t A tlan tic 1&2 Ptiblic Services Electric 1/78 0 328. and' Gas (80%) Jersey Central Power and L Ligh t. ( 10%) , Atlantic City Electric (10%) Jundesert San Diego Gas' and Electric 9/78 0 92-l Tyrone 1 ' Northern States Power (67.6%) 8/79 0 103 l Lake Superior Listrict Power (2%) Cooperative Power Ass'n.~.(17.4%) Daryland Power Cooperative (13%) Erde 1&2 Ohio Edison (39.3't.) 1/80 0 107 Cleveland Electric Illumin.ating l (29.6%) Toledo Edison.(17.3%) Duquesne Power and Light (8%) i Pennsylvania Power Co. (6.8%) ( Lavis-Besse 2&3 Ohio Edison (39.3%) 1/80 1 120 Cleveland Electric. Illuminating (29.6%) Toledo Edison (17.3%) - Duquesne Power and Light.(8%) Pennsylvania Power.Co. (6.8%) Sterli6g Orange and Rockl'and (33%) 2/80 0 129 Rochester Gas and Electric (28%) Central Hudson Gas and Electric (17%) Niagra Mohawk Power-(22%) ' i --1--

.... ~.. -... DATE OP PERCEtiTAGE . MONEY UPENT - . PLANT N AMB '0WNER C AllCELLATION - COMPLETED (Ili.tilLLIGH3) !!cw llaven'.1&2 Long Icland. Lighting. ( 50%) 3/80 0 '/9 New York State Electric and Gas- ( 50%) ,Greenwo'od 2&3 Detroit Edison -3/80 0 71 ~Jamesport 1&2 'New York State Electric 9/80 0 120 and Gas (50%) l- -Long Island Lighting (50%), 4 t f Forked Riverl1 Jersey Central' Power 11/80 5.6-414 'and Light North Anna. 4 Virginia Electric Power 11/80 4 155 i 'Bailly-Nuclear . Northern Indiana Fublic "8/81 0.5 191-Service '. Pilgrim 2 Boston ~ Edison (59%) 9/81 0-394 New Englan' Power (11%)- i Others (30%)' l -w l ballaway.2 Union Electric 10/81 0.7 70 Hope Creek 2 Public. Service Electric 12/81-19 419 and. Gas (95%) Atlantic City Electric (5%)- Harris 3&4 Carolina Power and Light-12/81 1 187 f-WPU 4&S - Wahington Public Power 1/82 Unit 4 24.9 2225 Supply (90%) Unit 5 17 Pacific Power and Light- (10%) l Black Fox 1&2 Public Services.of.Ok. (60.9%) 2/82 Unit 1 5 390 Ass'n Elec. Coop. of Unit 2 2 i l ' Springfield '( 21.7%) ' - Western Farmers Elec. Coop. (17.4%)- --2.- b ~ ,V d ,, _ _ _ - ~

= I DATE OF PEltCENTAGis - ,!OUEY SIZ:T j ' PLAMT ilAME O'..".! ER CAllCELLATIOil C0i4PLETEL-(I'*.C LlJ:.J) llartsville'B1&B2 Tennessee Valley Autiiority 8/02 Unit 1 17 718 Unit 2 7 l'hipps Bend 1&2 Tennesoce Valley ' Au thority 8/82 Unit 1 29 IP01 Unit 2 5 Allens Creek 11 llouston. Lighting and Power .8/82 0 362 l Pebble Springs 1&2 ~ Po5tland General (47.1%) 10/C2 0 -P'f. Morth Anna 4 Virginia Electric 1ower 11/82 -8 51? Cherokee 2&3 Duke' Power 11/82 0 68 1 e Clinch River Tennessee Valley Authority 10/83 0 1500 Sh' aron Harris 2 Carolina Power and Light 12/83 4 315 - Zimmer Cin'cinnati Gas and Electric 1/84 97 1700 Dayton Power and Light Columbus & Southern Ohio ^ Electric t Hartsville A1&A2 .Tennesee Valley Authority S/84 Unit 1 44 1500 Unit 2 34 Yellow Creek 1&2 Tennessee Valley Authority 8/84 Unit 1 35 1210 Unit 2 3 In addition, at least 3 plants have been cancelled pending a satisfactory plan to return invested money to their owners. 'They are: Marble !!1ll 1&2 Public' Services Co. (83%) 1/84 Unite 1 56 2500 . Wabash Valley Power. Ass'n (17%) Unit 2 33 Seabrook 2 Public Services Co. (35.6%) 1/84 23 811 15.others (64.4%) 111dland 1&2 Consumers Power Co. 7/84 85 3600 _3_

s (- APPENDIX 2 O T e -f a L 1 l

Historical Annus1 Peak Demands and Installed Gensetting Canacity Actual Installed Change ( Percent Annual Change ( ) Generating in Gen. Generation (- - Peak in Peak Capacity Capacity Re s e rve W W W W Caoacity 1966 3,67'i 3,572 (2.7) 1967 3,727 54 4,111 539 10.3 1968 4,375 648 4,800 689 9.7 1969 4,592 217 5,066 266 10.3 1970 4,712 120 5,357 291 13.7 1971 4,922 210 5,928 571 20.4 1972 5,31' 391 6,136 208 15.5 1973 447 6,377 241 10.7 ~ 1974 3,_ (329)(3) 6,968 591 28.3 1975 5,530 99 7,214 246 (3) 30.5 1976 5.346 (184)(3) 7.167 (47) 34.1 1977 5,888 542 8,202 1,035 (3) 39.3 1978 5,667 (221)(3) 7,727 (475) 36.4 1979 5,641 (26)(3) 7,727 0 37.0 1980 6,095 454 7,698 (29)g3) 26.3 NOTES: (1) Corrected to the most severe temperature conditions which have a 507. probability of occurrence. D (2) Change from previous year. ( (3) Decrease D D e T Table B L e O a e,- ,n-, , - -, ~ -

TAlli.E I I AHilUAI. PEAK 1.0All Allil INSTAI.I.ED GEllEllATING l'APACITY F0ltECAST PJtt Interconnectioni Philaitelphia Electric Company, _, Installed Estimated installeil Estimateil Cenerating Peak I.oail Reserves Gene ra t i ng Peak I.oad lleserves Year Capacity-ita liv 1 Ca pa c i t y-flu liv c 1980 7968 5800 33 44774 33180 34.9 88 mw: Retire Chester S&6 7566 5900 28 34090 34.0 1981 - 38 mw: Retire Barbados 6&7 6 inw: Retire Diesels (2) 30 mw: Retire Schuylkill 9 7521 6000 25 46876 35090 33.6 1982 i ~ - 15 mw: Derate Schuylkill 3 25 siw: 'Cromby 1 & Eddystone S02 7490 6100 23 47882 36070 32.7 l 1983 i 6 saw: Cromby Cooling Towers 1984 1985 +1055 mw: Limerick 1 (4/85) 8539 6300 36 50826 38030 33.6 o - 473 mw: Retire !!isc. CT's & Diesels o 7 mw: Cromby 2 S02 .g + 474 mv: Salen 2 c E* 1986 8539 6400 33 51024 '39000 30.8 1987 8539 6500 31 53271 39950 33.3 1988 +1055 mw: Limerick 2 (10/87) 9067 6600 37 54090 40810 32.5 - 356 mv: Retire Southwark 1&2 - 166 mw: Retire Richmond 9 5 siv: Retire Diesels (2) 1989 9067 6700 35 54020 . 41720 29.5 1990 9067 6800 33 55274 42650 29.6 1991 9067 6900 31 55891 43580 28.2 1992 9067 7000 30 55638 44510 25.0 1993 9067 7100 28 56785 45480 24.9 1994 + 800 mw: Unassigned 2 9136 7200 27 57790 46420 24.5 731 mw: lliscellaneous retirements 0 1

y,g_g e s-Page 1 of 2 1. / \\ 4 TABLE 2 . PECO L3AD & CAPACITY TEN TEAR HIS1CRICAL & PROJECTED VALUESIPR02ABLE & HIEH LOADSI 1980-89 PERCENT LCA05 RESERVES E HIGH PRCS HIEH PR0! .Y AR RW BATE CHANSES CAPACITY EST. EST.- LCAD LP" 1/80, '7691 li!0 7 2/30 Schuylkil! ? U; rate 7678 5310 (1) 12 -El 1/81 Retire Chester 5 & 6 -3 t/81 Retire Chester Diesel . -3 1/81 Retire larhad:es Clesel 1991' -30 2/B1 Retire Schuylkill ? 7574 5730 (!) 32 -38. 1/81 Retire Barbad:es 6' & 7 ' If82 12/81 Sales ! Reductica 7535 5610 !!! 34 4 1/82 Xeystone I & 2 Uprate, ' 32 6/83 ' Schuyltill 3 Derate 1133 -4 6/83 Crcshy I Errate 7503 .( 6030 11) 24 -12 1-84 Rerate Eddy. I,2 .-15 1-84 Retire larb 5 -102 6-84 Rerate Conceings- -67 6-84 Creydca CT -2 6-84 Crcsty1 -3 6-84 Schuylkill 3 198 0 -20 6-24 Southwark 1,2 7222 60(0 5700 21 23 '471 1-85' Sales 2 ,.-459 5-85 Retire Risc CI's -166 5-85 Retire Richscad 7 IfB5 1C55 4-85 Liserick1 8184 6150 5f:0 33 !!B6 -335.-12-25 Retire 5:1. 1,2tD 7816 6260 5960 25 32 -1987 - 7846, 6370 5190 23 31 Ifll 78{6 6(80 '4020 '21 30 -253. 12-88 Retirs Del. 7, eld !?lf -12 12-38 Artire Sch. 3 75B1 6510 6050 15 25 IllLeadscorrectedtostandard'veatherconditicas. Actual loads were: If80 - 6095es,1981 - 5731su, !?B2 - 5671sv,1983 - 5879ss.. !! arch 14,1994 D d l

MW-2 Page 2 of 2 1.{ PJM Load and Capacity Forecast (Megawatts) Year Capacity Load Reserve 1984 47,051 34,850 35.0: 1985 48,586 35,270 37.8% 1986. 48,398 35,730 35.5% .1987 ' 49,31'3 36,080- -36.7% 1988 49,313 36,540 35.0% 1989 49,694 36,920 34.6% 0 k 1 P T e 9 e D B 9 .c l L o

3 e APPENDIX 3 8 9 e 9 Y =f L

L., t '- T. ._ 'fs ( % &* i () J' C ;,~; l s l%%..+ ( IIMX'A-1-50 [X1.Q , ".f;ji,' t g >~. f k.v IRHXA-1-50. Has PICO attarpted to sellsom or all of its share at

h. JS i

Salen Unit #2 to any other utilities? If not, why not? { (ju Q.1 If yes, please provide copies of correspondence and documents soliciting such sales?' 3 Q#.' ly,9 -M9yl IPMEA-1-50. 'Ihe Crginy has investigated 'the possibility of celling f 4 its share of salen 2 to other uH1itics. 'Ihis investication !. i.ImPE revealed that there were no other prospective buyers wl. thin t.D[f I reasonable h=yission distance fran PECD. No formi

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t)f fs/Tl, ? M / nt-ccA-1-49 ( . O. IR-OCA-1-49. PleasIa c:: plain why PECO will no longer sell itn share of Salen Unit 92 output to Jersey Central Po.zer & )dght. A. Iit-CCA--l-49. 'Ihe FEEC Order issued June 17, 1981 cceepted thd. PNC Agreecnt for filing to centinue in effect through IMccnnnr 31, 1984. - PECO instituted negotiations with. GNI in the fall of 1982 for a long tern lease of ita sharc of Salem s 2. Negotiations continued unti.l. the spring of: 19tl4, but despite. diligent efforts the Car.pany was unable to reach a reasonsble agreement Tna agrue: rent tharefore ua:. not extended. m ef 6 O at e* j 2 3 9 D i 4D t .i ~ 9 -f 1 e O _ gp M 5 ,+,-r-- +w1, y ~ v,- ~~ -m -- ~ g 9

,A

's APPENDIX 3A e e T

• f L

~ ' ~ ~ v--,,-

JAMES A. CoRRoDI Depv*r General Counsel e $ts!I Vice Presleent November 15, 1984 Honorable James J. A. Gallagher The House Select Committee investigating Limerick 11 Room 637 Main Capitol Bulloing Harrisburg PA 17120 RE: _ HOUSE RESOLUTION NO. 257

Dear Representative Callagher:

This letter will set forth the comments of Scott Paper Company concerning the Limerick Unit 11 Nuclear Generating Station which is currently under investigation by your Select That Resolu-Committee pursuant to House Resolution No. 257. tion focuses on the two key issues -- (1) is Limerick ll needed? and (2) is it cost-justified (versus available alternatives)? Scott has given considerable attention to these issues in connection with our planning for the future of our Chester mill. We faced a serious dilemma because of the fact that we pay nearly C four times more for our electricity than our major competitor in the Northeast and because of our projections that the cost of electricity-in our area will continue to increase at a greater rate than that of our competitors. Scott had only two options -- either make a very substantial investment to fix the cost of energy at our Chester mill, or stop putting any more investments into the mill and let it wither on the vine, gradually shifting production to more cost-effective locations in other states. Fortunately, we have been able to justify making the investment of $115 million for a new cogeneration facility at Chester (which our Board of Directors approved last month). I. Is Limerick 11 Needed? The need for any new generating plant depends on a number of assumptions such as the projected rate of demand for elec-tricity (the so-called " load forecast"), the life expectancy of existing plants, the availability of alternative sources of power, and the desired level of " reserve" capacity (i.e., the amount of capacity in excess of peak load). PECO's assumptions regarding these factors shguld be evaluated by the PUC in the light of cross-examination by other interested parties. The load growth estimates at the time thbt Limerick was conceived have turned SCCTT PAPER CCMPANY. SCOTT PLAZA, PHI *MHI A, PA. 19113. (~15) 5 2 5131

Honorable James J. A. Gallagher November 15, 1984 ( out to be greatly excessive. It is difficult to determine what future load trends will be, but everyone seems to agree that the high cost of energy will keep demand relatively " flat" for the foreseeable future. The existing PECO rates are already high, and neither Salera' nuclear unit 11 nor Limerick unit I are in the rate base yet! PECO currently has pending requests for an increase of $250,000,000 in annual revenue (i.e.,11.8% rate increase) to include Salem !! in its rate base and $106,000,000 in Energy Cost Recovery (4.9% rate increase). Next year PECO will file a request to bring Limerick I into the rate base. That filing will involve a request for an increase in annual revenue of between $400,000,000 and $600,000,000 -- a rate increase of another 19%-28%! It is too late to do much about those rate increases. Therefore, regardless of whether con-struction of Limerick 11 is resumed, PECO's rates will be going up by 35%-45% within the next 12-18 months. The likely effect of such rate increases seems obvious. Any private business which uses a significant amount of elec-tricity will be forced, as a minimum, to employ much more ~ effective conservation measures. And each such business will also have to reevaluate its options very carefully as to the most cost-effective locations to which to steer its future operations. ( The importance of energy costs to economic development is reflected in "The Fifth Study of General Manufacturing Busim ss Climates" prepared by. Alexander Grant & Company, the purpose of which was to evaluate each state's " manufacturing business climate" on the basis of those 22 factors viewed by manufac-turers as important to their business success. Of all 22 factors, the factor designated " Energy Costs" (fuel and electric energy costs) was " determined by participating state manu-facturers' associations to be the most important determinant of ~ a manufacturing business climate in the 1983 study". A copy of the Executive Summary of this study is enclosed. Clearly, PECO's load forecasts in the past have failed to recognize the extent.to which higher electric prices have forced conservation and other measures to reduce electric usage. One of those "other measures" that such high electric prices are forcing (and will continue to force) is the develop-ment of alternative sources of power. It is understandable why the shareholders of.a utility would prefer to have all generating plant assets i7 its " rate base" (so that they can earn a " rate of return" -- the primary sourte of stock dividends -- on such assets). Obvio6 sly, the holders of stock options (i.e., the officers) have a similar interest in the constantly growing construction program to maintain growth of the rate base (even though another plant may not be needed). If a utility purchases L

Honorable James J. A. Gallagher November 15, 1984 power from a cogenerator, it only recovers the cost of such pur-chases on a dollar-for-dollar basis, without any " return" or " p ro fit". PECO has not gone out of its way to encourage alter-native sources of generation and it is difficult to say with any precision how much cogeneration and small power production could be developed in PECO's territory. In May of 1984 PECO estimated that over 700 megawatts of cogeneration and small power production tw!d be reasonably expected to be developed in its territory if such alternative sources were sfaid 2c per

• Kilowatt hour more than the PJM pool rate.1/ The important point here is

~ that alternative sources of power can be encouraged through incentives that cost no more than the most cost-efficient central generating stations and at the same time avoid the horrible risk of miscalculations, a risk that grows exponentially with the size of the plant. Schtt's new cogeneration facility will have a capacity of 55 megawatts, and there are undoubtedly other , companies in PECO's territory that would prefer to install cogeneration rather than shifting production to other areas. The bottom line seems clear that Limerick 11 is not 'needed. Even if future load growth increases more than expected, PECO's reserves will be more than adequate for quite some time. If the trends over the next five years suggest that PECO might need more capacity in the early 1990's, there will be ample time for PECO to build a modern new coal plant at that C time (perhaps utilizing the fluidized bed technology that Scott will be demonstrating with its new facility at Chester). If PECO needs any capacity on a short-term basis pending completion of its next plant, it can certainly purchase from the PJM pool (which also has excess capacity). 11. Is Limerick 11 Cost-Justified? Since the case for Limerick 11 cannot be made on the basis ^ of need, PECO has tried to justify it on the grounds that the fuel savings will more than offset the enormous, fixed costs. Scott has had studies made in this area by two independent consultants, each of whom concluded that PECO's electric rates will increase more if Limerick ll is completed than if it is not completed, even assuming that the PUC would allow PECO to recover the sunk costs of the cancelled plant through retail rates. Data Resources, Inc. of Lexington, Massachusetts com-1/ See the Statement on Behalf of the Philadelphia Electric Company Sponsore_d by William 'B. Morlok, Vice President of Commercial Operations, James R. Rodisch, Supervisor, Alterna-tive Energy Section: William F. Sundermeir, Supervisor, Cost and Load Analysis Section presented to the. Committee on Mines .f and Energy Management of the Pennsylvania House of Representa-(. tives on May 3,1984, a copy of which is enclose,d.

Honorable James J. A. Gallagher November 15, 1984 ( pared PECO's rates through the year 2003 under a so-called " base case" set of assumptiors representing what it believed to be the "most probable" sc'enario (i.e., Limerick 11 being cancelled) and compared thost rates to an alternative case if Limerick 11 were to be complideo. Its conclusion was as follows: "Once Limerick 2 comes on line in 1990, the direct cost of power shows significant saving's but again, the fixed costs overwhelm the variable cost savings anc total revenue recuirements increase close to 20s. Appenaix A-40 shows this alterna-tive average electric energy price path and the base case price projection." l Emphasis added: Appendix A-40 is attached.] Such projections obviously depend upon nur..:!rous assumptions. Two of the most crucial assumptions are the total cost of con-struction and how well the. plant w!!! operate. Almost any proposed plant can be made to appear economically attractive by underestimating its construction costs anc. overestimating its capacity factor (i.e., its average operating rate as a percentage of its full capacity). For example, a 1000 MW plant costing $2 billion and operating at a 70% capacity factor would have a fixed cost of approximately 6.5c per ( kilowatt hour; the same plant costing $3 billion and operating A at a 50% capacity factor would have a fixed cost of approxi-mately 13.7C per kilowatt hour. This vast difference in cost per kilowatt hour may help explain why utilities through-out the country have consistently underestimated the construc-tion costs of nuclear plants and overestimated their operating rates. 2/ There are many additional assumptions, of course, that have an effect upon the projected economics of Limerick 11, including the cost of alternative fuel or the PJM grid price, whichever is assumed to be displaced by Limerick 11, and the cost of capital and the financial impact on PECO of a huge, costly project that could become delayed even further. As the financial burden becomes greater, of course, the uti.lity's credit rating is often lowe red, thus increasing its cost of capital (which increased cost is passed on to the ratepayers). PECO emphasizes that $800,000,000 has already been " spent" on Limerick 11 and claims that it is over 20% completed. A substantial portion (perhaps half) of the amount spent rep-resents AFUDC (Allowance for Funds Used During Construction), 2/ in the staterdent referred to in footnote 1 above, PECO estimated that 720 megawatts of cogeneration and small power production would cost $100,000,000 per year. That would be -( $138 per kilowatt, versus an annualized fixed cost per kilo ~ watt A. for Limerick ll of at least $570 (assuming a construction cost of only $3 billion).

Honorable James J. A. Callagher November 15, 1984 C and approximately one-third of that represents return on equity. More importantly, however, is the fact that the cost to ratepayers of amortizing most of the sunk costs (over a ten-year period, for example) is virtually nothing compared to what Limerick I" might cost. Costs of completion are very difficult to estimate accurately for projects that large; regulatory and construction delays can result in finished costs that are up to 10 times the original estimate. PECO might well claim that Limerick 11 could be completed for less than $3 bi" ion, but it could just as easily cost $6 billion or Because of such risks, no one is completing nuclear more. plants 'that have such a large portion yet to complete. Several nuclear plants have been cancelled that were over 90% complete. One cannot allow the mistakes of the past to force him into compounding the problem for the future.- The risk of the costs becoming far worse than PECO estimates is simply too great. We believe that there are better alternatives than taking such a multi-billion dollar gamble. Experience strongly suggests that such a gamble would involve far greater "downside" risk than " upside" potential. PECO's high electric rates already have contributed to significant job losses in southeastern Pennsylvania. There can (- be little doubt that if Limerick 11 is completed and its costs ( brought into the rate base, the ensuing escalation in electric rates will result in even more job losses as energy-intensive business are forced to shut down or relocate. 3/ Additional job losses would have a disastrous impact on the local economy, which still is recovering from the last recession, while still higher electric rates would severly hamper efforts to attract new business and industry to this part of the state. Ill. The Existing Legal Framework in Pennsylvania In' many states the need and economic justification for a new plant must be evaluated by the Public Utility Commission in that state, and the Commission must certify the need for such a plant, prior to commencement of construction.

However, Pennsylvania has no such law, and the FUC must rely upon its authority to approve or disapprove requests by the utility to issue securities to raise capital or to approve or disapprove the inclusion of a new plant in the utility's rate base after 9

3/ In the staternent referred to in footnote 1 above, PECO stated that an increase in its revenue requirements of only $100,000,000 (i.e., approximately 5%) "...would surely erode f Pennsylvania's ability to retain and attract industry and b jobs". (Emphasis in original). v i.-_ w y.

Honorabia James J. A. Gallagher November 15, 1984 the plant has been completed. Accordingly, when FECO requested approval of a $1.1 billion revolving-credit loan to help finance Limerick construction, the PUC required that none of the loan proceeds be used to finance Limerick 11 and that no further construction. on Limerick 11 proceed until Limerick I was completed. PECO appealed that ruling on the grounds that the PUC had exceeded its authority. The Supreme Court of Pennsylvania upheld the PUC action but made the following observations in its decision: "It is well established

that, absent express legislative authority, the PUC is powerless to interfere with the generat management decisions of public utility companies.

...T he Public Utility Coce does not expressly grant the PUC general authority over the siting and construction of all utility plants. Nor does it require PUC approval for expansion of all facilities, the discretion of the company's management over such matters being generally beyond the PUC's power to supersede. Even the PUC concedes that it is without power to order that construc-tion of Limerick 2 be ceaseo, an orcer wnich the FUC did not issue here " (Empnasis added) 4/ One problem with the Pennsylvania regulatory scheme is that the utility can undertake a huge capital commitment such as ( Limerick and have an enormous amount of capital " sunk" into the project before the PUC has ajn opportunity to review the need and economics of the plan. To make matters worse, however, even when it becomes apparent that the project is no longer prudent, the PUC cannot require construction to cease! Clearly, one key issue for ycur Committee to address is whether the FUC should be given such authority. After a plant is completed, it may be too late. At that point in time, the FUC is left with a very unhappy chcice between substantial economic waste (and the financial integrity of the utility) versus the adverse impact on ratep,ayers of allowing excessively costly and unneeded plant into the rate base. 5f 4/ Perinylvania FUC v. Enilacelonia Etectric Company, 400 A.2d 734 (Pa.1983), at 737. 5/ The PUC has disallowed a portion of a utility's existing capacity into the cate base in an effort -to find a way out of this dilemma. See PUC Docket'No R-822169, order adopted August 19, 1983 and en,tered August 22, 1983. Th::t remedy does not protect the ratepayers, however, when plants that are substan-tially denreciated are deleted from rate base to justify adding billions of dollars of new construction that was in fact unnecessary. { 1

r Honorable James J. A. Gallagher November 15, 1984 1 [ As you know, the PUC recently issued a Show Cause Order (a copy of which is enclosed) to require PECO to show that completion of Limerick 11 would be in the public interest. We firmly believe that the PUC uill find, after evaluating all of the relevant assumptions in the light of current facts, that completion of Limerick 11 would not be in the public interest. However, we are concerned that there be a reasonable resolution of this-issue. Even if PECO would agree to cancel Limerick !!, who should pay for the sunk costs? Although it may be clear today that completion of Limerick 11 would not be " prudent", it may not have been imprudent at the time that construction commenced. Even if the PUC should find that most of the costs expended thus far on Limerick 11 were prudent at the time that they were incurred, there seems to be substantial doubt under Pennsylvania law that the PUC is permitted to allow FECO any recovery of costs of a cancelled plant in view of $1315 of Title 66 of the Pennsylvania Consolidated Statutes, which includes the following: "...the ' cost of construction or expansion of a facility undertaken by a public utility...shall not be made a part of the rate base nor otherv.ise included in the rates charged by the electric utility until such time as the facility is usec and useful in service to the public." (Emphasis added) ( This section was added in 1982 (via 581366, Act 1982-335) and was designed to keep construction work in progress (CWIP) out of the. rate base. We are not urguing that costs of cancelled plants be added to the " rate base" and earn a return (or " profit") for the shareholders. However, to the extent that expenditures were prudent at the time they v.ere made, shou!d not the out-of-pocket pc rticn be receverable over a reasonable perioc of time? The underlined portion cf $1315 quoted above apparently prec!cdes any recovery of a cancelled plant, no matter how prudent the ex'penditures were at the time they were made. As such, 11315 gives the utility little choice but to " bull ahead" in an effort to complete construction so that the plant can be-put into service (even :.. the risk that the PUC may disallow some portion of the plant into rate base on the grounds that it is more than necessary to maintain a reasonable capacity reserve). We believe that your Committee ought to give serious consideration to legislation that would accomplish two purposes -- ( 1 ) give the -Pt)C authority to stop the construction of plants when completion appears imprudent, and (2) modify 51315 to clarify that although costs of construction cannot be allowed into rate base unless and until a facility is "used and useful," that portion of the out-of-pocket costs of a cancelled fac:lity that the FUC determines were prudent at the time that they were (

Honorable James J. - A. Callagher November 15, 1984 ~ incurred may be recovered in rates over a reasonable period of time. Such legislation would be a realistic resolution of a ~ serious problem that has no easy answer. Ratepayers would be protected by the " prude,ncy" standard and would not be saddled with excessive fixed costs in the rate base. Utilities would be willing to consider ' plant cancellation when it became apparent, through changes in circumstances beyond their control, j that completion of construction was no longer justified. We appreciate the opportunity to submit these comments and hope that they will be of some value to your Committee. Sinc rely, O ,] + n Ja 'es A. Corrodi \\ \\ 1 J AC/cmm 41 CC: Mark Widoff, Esq. Widoff, Reager, Selkowitz 6 Adler, P.C. 129 State Street l Harrisburg FA 17101 4 4 4 W 4 g. of [ / L 4_ .._..m.,m..-._.

as 1 Statement,on Behalf of the Philadelphia Electric Company Sponsored by William B. Morlok, Vice President of Commercial Operations, James R. Rodisch, Supervisor, C Alternative Energy Section: William F. Sundermeir, Supervisor, Cost and Load Analysis Section PECO wishes to thank the Mines and Energy Committee f or the opportunity to present its views on this very important legislation. I am William B. Morloh, Vice President of Commercial Operations. I have with me today Messrs. Rodiser. and Sundermeir who are co-sponsors of this statement as well as technical supp' ort persons who will be available to respond to your questions. At tne outset I should state that Philadelphia Electric Company shares the views expressed by Mr. Butler on behalf of the Pennsylvania Electric Association. In short, PECO recognizes tnat lower energy costs are in everyone's best interests and fully supports the o ]ectives reflected in PURPA, the Putlic Utility Regulatory Policies Act of 197E. Ec*ever, PECO also must recognize and protect the interests of all its customers and make every effort to insure that its customers are not required te pay excessive costs for electric energy produced by cogenerators, such as Scott Paper Company, which will happen if PECO is required to pay more than PECO's avoided costs - the costs for PECO to generate such electric energy or purchase it from another source. Since Mr. Butler has already outlined the legal ob]ections to the proposed legislation, the principal purpose of this statement is to quantify the significant economic impact on other PECO customers of House Bill 2095. The legislation as proposed will substantially increase the rates for e electricity paid by other electric customers including, I note for special emphasis / PECO's other incustrial customers. ( First, considering specifically the 55 MW cogeneration plant proposed by Scott Paper, other PECO customers will be forced to provice a minimum subsidy

. te Scott ot 57,700, DOL in the first year of the contract under the proposed legislation. This suusidy increases during the term of a contract with a 10-yea: life anc will total at least $108,000,000 for the ten years. Inis analysis is Lased on PECO's policy of paying cogenerators a rate for tneir energy which equals the rate PECO pays for purchases of energy from other utilities through the Pennsylvania-New Jersey-Maryland Interconnection (PJ.J.). Approximately one-third of PECO's energy is purchased from other ut:11 ties on the PJM because PECO can do so at a rate cheaper than it c a r. gens: ate itself. ceite sin. ply the pu: chases from the cogenerator and small power producer (cunulatively knowr,as qualifying facilities) oecome a substitute for parenases on the PJM. Therefore, the value of the qualifying facility power e to' PECO is no greate: than the price PECO would have psic to otner PJM utilities had tne qualifying facility power not been made available. One average cost of power purchased by PECO on the PJM (PJM cilling rate) i t. ;yE3 was 4.2c per kilowatt hour.

p contrast the average rate for

,/7f3 custorers on rate B'i (High Tension Po..:) under the PICC tariff currently op) file anc approved by the PUC is 6.94 per kilowatt hour. House Bill 2099 establishes a cinimum paycent the cogenerator may demand at 90% of the average sale p: ice per kWh at rate ET. Ninety percent of the average ET rate is 6.2c per kilowatt hour. Thus, if this legislation were adopted, PECO and ultimately its customers would be required to pay 2.04 per kilowatt hour more for the energy purchased f rom. Acott than for energy purchased f rom other PJM utilities. This is 46% higher than the cost of energy that could have been ~ . purchased througr, tne PJM Interconnection which in fact is PECO's avoided cost. Thus, this overpayment of 24 per kWh is nothing more than a direct subsidy to Scott.

r- . Che inequity of the proposeo legislation to other customers becomes even me:e apparent wher. one realices that Scott currently pays only 6t per kilowatt hour for its energy because of its high load facto:. House Bill 2099, nowevc:, would require PECO to purchase the same energy from Scott at 6.2d pe: ~ .' kilo.att hour. Under this scenario, Scott would sell all of its cogenerated energy to PECO for b.2d per kWn and purchase its requirements from PECO at 6.0c pe: kWn. Therefore, PECO would have to pay.2d per kilowatt hour more te L_. purchase ene:gy from Scott than PICO could sell such energy to Scott. In effect, PICO would be paying Scot .24 per kilowatt hou: to use PECO electricity anc Sectt wculd contricute nothing towa:d the fixed costs f or generation. transmission and distribution facilities even though they etvleusly make use of the equipment. 'ihus, the legislation provides Sect: a r.d o.her cogenerato:s with an opportunity to make an unearned and unwarranted profit at the expense of PECO's other custcmers. Ecwever, House Bill 2C99 dces nct apply 3 cst to Scott, cut to all et;eneraters anc srall pc.e: p:od ce:s. C:.e minimum eccnomic pctential for cogeneratten and small pc-e: p:cducticn in 't'he PECO service" area has been previously estimated to be 376 MW (1 MW is ' eq.a1 tc 2000 kW). "nis pctential is a censervative estir. ate based cn'a Gcvernor's Energy Council Forecast f or cogeneration and estimates cf small power production potential by the PA PUC, Army Corps of Enginee:s, developers, anc PECO experience. Under cu:rert rates, this would mean a $53,000,000 subsidy in the first year by P'ECO customers and a $937,000,000 subsidy over the life of a ten (10) year contract if the proposed legislation is enacted. k_ If ratepayers were forceo to subsidize'such facilities as Scott proposes, PECD couad reasonably. expect 720 MW of cogeneration and small power production (

.to develop. The potential impact, again, assuming current PECO rates, would be $100,000,000 in t'ne first year and $1,414,000,000 over the life of a 10-year contract. The impact of the sucsidy on the electric rates of PECO's other industrial .g-eustomers would be espeelally adverse and must not be ignored. For example, the potential impact of the proposed Act on a large industrial customer using 500l000,000 kilowatt hours per year would be 51,690,000 in the first yea: anc $26,724,000 over the life of a ten-year contract. This is detailed in case 3 cf the PECO tack-up matetials. Subsidies such as tnis vocid sureli erode Pennsylvania's acility to retain and attract industry and Jets. Further, they woule negate efforts race by utilities and the PUC te design rates that foster the industrial development of Pennsylvania. For instance, PECO has recently { proposed and tne PUC nas approved a :evision to the Night Service Rider and a special Employcent and Economic Recovery Rider to lower the electric rates paid by energy intensive industry and to attract new industry to the PICO service' area. :ne su:sidy p:cp: sed by tnis leg; slat;cn would nullify Lenef: s vestc+'ed Ly tnese :ste ct.anges. Nor would the legislation proposed cy Scott, produce new gobs in the coal industry. Only a s.all portion cf the total potential cogenerators and small pcwe: produce:s would use coal as a fuel source. Yet the power supplied el Scott and others would replace coal fired generation purchased f rom other PJM ccepanies. Consequently, there epuld be a decrease in the total amount of coalpitchasedby'utilitieswhjchcouldforeseeablyresult ~ in a decrease in the total nucoer of 3ots in the coal industry. .Sicilarly, the Scott legislation provides for the sale of back-up, ~ caintenance and supplementary power to the cogenerator at a kilowatt hour rate s

f 5_ f wnich ignores minimum charges ces:gnec to recover fixed costs. Se: tion 210 PURPA requires that utilities provide such service to qualifying facilities at a rate which does not discriminate against the qualifying facility.in comparison to rates to other custcmers served by the utility. In compliance with federal and state regulations, PECO nas flied its Auxiliary Service Rider. The Auxiliary Service Rider, as most recently amended and approved by the PUC, specifically requires PECO to supply qualifying facilities with tack-up, maintenance or supplerentary power at the same rate as any other custome: with similar load characteristics. Therefore, Scott is treated the same as any cine: ET custome when it tgspower. Tne PUC as recently as July 19E1 examined PECO's Auxiliary Service Rider and found the rate estat,lisned for back-up, maintenance and supplementary power te be just and reasonaole. Scott did not challenge that Rider either oefcre the PUL or in the ccurts. In fact, there was no ot3ect:en by anyone to the a;;;;va; cf tre rev: sed Aux:1:a:3 se:vi:e.n der, se:tt ts n:. re:e.y attempting tc c:rcumvent the appellate process. If the provisions of the Auxiliary Service Rider are changed to conform witn the p:cvis:cns of the p:cp sed Act, there could te an an.ual revenue loss, cased on PECO's present rates, of $14,b00,000. Tnts revenue shortfall would also have to be borne by otter industrial and residential ratepaye:s. Eatemaking has traditionally been-delegated to the PUC and it should remain there where the true impact ofra rate change can be ascertained. / In summary, the policy of Philadelphia Electric Company is to pay all { , qualifying f acilities a rate for each kilowatt hour generated that is equivalent to what is paid to our utility suppliers through the PJM O

. 7 Interconnection for purchase power. Tnis is PECO's true avoided cost, and any amount pazd ove: this is a subsidy which must be contributed by all non-generating customers, including other industrials. In order to acnieve a bail-out, Scott proposes that PECO, along with all n other utilities in the state, be asked to make a payment equal to at least 90% cf the utility's retail rate to high voltage customers for each unit of elec'tricity purchased from a qualifying facility. In the case of PECO, this requires a 4Et ove: payment for purchase power which, pursuant to the p:cposed Act, will.be passed on to FECO's other non-generating electric custcmers. Surely all PECO ratepayers wou;d like a similar subsidy. State-wide, Sect; would encou: age the legislature to pass on callions cf dellars to ratepayers in the ecming years. These increaseo utility costs for the benefit of a select group of customers could have a disastrous effect on economic development plans in the Commonwealth. I want to emphasize that PECO has always been willir.g, and stands ready tciay, t; ne;;tiate :n 9t:: fa::: w:tr 5:::: and an3 ct.e: c:;ene:at:: f:: :ne Fr..F A. :: purchase cf e;ect::c ene:gy w: thin :ne parameters mandated c) cannot, however, agree to require its ratepayers to pay more for such energy than it would cett PELO to acquire such energy f c.- othe: sources. 7nat is why FICO cast cpp:se tr.is leg:slation ar.d u:ge that it net te enacted. Lastly, PECO would bring to your attention the Alabama experience. In y.ay, 1963, Scott Paper arranged for a similar legislative proposal in Alabama.* We have discussed this experience with our counterparts at Alabama ey.nown as hB so7) and titled ' Alabama Energy and Joo Developments Act of 1963". )

W 7-1 f:. Powe: Company. The samt rush to a vote was organized. Eet legislators there l realized there.were pitfalls to avoid, slowed do n the process,' carefully ~ i reviewec the consequences, and rejected the proposed legislatien. Substitate j legislation with which all parties could live and~which did not unfa:rly j . impact c,:ner customers was enacted. ( 1 l' i 1 f ( t 1 A i J l l 1 a 1 i l 1 ? e b g o .9* 1 j e !L .I e 4 i 4 e .... -..- --, -.,,-.-,-.-,.,,,,-... - -.~., -,, - -.--,

r-PENNSYLVANIA PUBLIC UTILITY COMMISSION + Harrisburg, PA 17120 Public Meeting held July 6, 1984 Cc=missioners Present: . Linda C. Taliaferro, Chairman,' dissenting Michael Johnson James H.'Cawley, dissenting-Frank Fischl ' Bill Shane Limerick Unit No. 2 Nuclear Generating Docket No. Station Investigation I-840381 ORDER TO SHOW CAUSE BY THE COMMISSION: By order entered October 10, 1980 this~Co==1ssion instituted an investigation at Docket No. I-80100341 into certain issues concerning Philadelphia Electric Company's (PECO) construction of the Limerick Nuclear Generating Units 1 and 2 in order to gather infor=ation in an orderly and expeditious manner prior to PECO seeking to include Limerick in its rate base as used and useful property. At the conclusion of said investigation we found that the simultaneous construction of Units 1 (( and 2 was not financially feasible.if PECO was to insure the continued maintenance of safe and reliable service to the public.- PECO was then given-the option of either suspending or cancelling the construction of Unit 2. In the event PECO refused to suspend or cancel the construction of Unit'2, we declared that we would not approve any new securities issuances, in whole or in part, for the construction of. Unit 2. The Cc==ission's decision was upheld by the Pennsylvania Supre=e Court. Pennsv1vania Public Utility Com=ission v. Philadelphia Electric Cc=cany, 501 Pa. 153, 460 A.2d 734 (1983). Subsequent to the Court's decision, PECO elected to suspend construction ~at Unit 2 in accordance with the Co==1ssion's orders. On February 22, 1984 we accepted PECO's response to our order requiring l ~ suspension or cancellation as being in compliance with. the Cc==1ssicn's -Orders of August 27, 1982, June 10, 1983 and December 23, 1983. 'In the Order entered February' 22, 1984 we also. recognized that PECO's decision to suspend construction meant that the co=pany intended to resu=e construction of Unit 2 upun. completion of Unit 1. We also I recognized that PECO, at some future.date, might seek Commission approval I of securities financing for construction of Unit 2. Pursuant to I Section 1903(a),-we would then~have to consider whether the proposed financing,is "necessary or, proper for the present and-probable future capital needs" of'the company. We therefore directed PECO to fila certain information concerning Unit 2 no less than 120 days prior to the ~ (,., filing of any securities certificate for the financing of Unit 2. e 9 (

Since the cc pany's anticipated in' service date for Li=erick Uni: 1 is April, 1985, it is reasonable to assu e that PECO will resume construc:icn of Unit 2 upon ccepletion of Uni: 1. However, we believe C that seriaus questions exist regarding the need for the addi:ional generating capaci:y represented by Unit 2 the cos: effectiveness of Unit 2 as cc pared to other alternatives, anc the effect upon PICO's financial health and its abill:y to provide safe and adecuate service at reascnable rates. In additica, we are concerned about the potential effec: of the cos burden of Uni: 2 upon PECO's existing cus:ccer base. Recen: actions by sc=e of PECO's industrial cus:ccers to generate their own pcuer or to swi:ch to alternate suppliers may ce=e to typify these classes cf cus:ccers. The loss of revenues frc: such cus:ccers could, of ccurse, exacerbate PECO's financial situa:ica and i= pact its ability to serve other ?ECO cus:ccers. Por the afore=entioned reasons and :o enable us to exercise inforced judgmen; when' security certificates :o finance Uni: 2 are presented to us for registration, we believe : hat certain issues mus: he exa:ined prior :o any cc==itten by PECO to :he resu=ptien cf ccnstrue:icn on Unit 2. In crder to gather infer =a:1on in an crderly and expedi:icus nanner prior to having to render any decision en the resurp:icn cf c nstrue:ica of Unit 2, it is necessary to institute an inves: iga:icr in:o such =atters and to order PICO :o shew cause why the cc ple:icn of Li=erick "uclear Generating Sta: ion, Uni: 2, vculd be in :ne public interest. The following issues should be exasined in this preceecing: 1. Is construe:1cn cf Uni: 2 necessary for PECO {

o maintain adequate reserve =argins?

2. Are there less costly alternatives - such as cogeneration, additional censervation =easures, or purchasing power frc= neigh-bcring utili:1es er the ?...M. in:tr:hange - f:: SE:: :: :b:r'- ::.-r :: :::: _. :

nsu=p:1:-:

3. E:V will the : api:al rec,uire =n:4.ccessary

c.cc ple:e Uni: 2 affec: PECC's financial health and its ability to provide adequate s ervice?

Shculd :he Oct:issi:r rejec:

n-se:uri:ias filings, or impese anr c:her a;pr:pr a:e re:edy, to guaran:ee :he cancel *a:ict of "b,...

5. If Uni: 2 is cancelled, what, if any, percen: age of the sunk ces:s sh: tid PECO be per=itted to re' cover frc= its ra:epayers? O.

e 6. If construction of Unit 2 is found to be in the public interest, should the Ccenission adopt an " Incentive / Penal:y Plan" as an C inducement to cost efficient and timely cons:ruction? In recognitica of the cc plexity of these issues and the need

o proccud with such an exa=ination prior to the cc=ple: ion of Uni: 1 and the resu=p; ion of construction of Uni: 2, we cannot delay insti:uting this investiga: ion until the time frame established in our February 22, 1984 order at Docket No. I-80100341. An ex2=ination of the issues listed herein cust be cc==enced at this time. THEREFORE,,

IT IS ORDERED: 1. That the Philadelphia Electric Co=pany is directed to show cause why the completion of Li=erick Nuclear Generating Statien, Unit 2, is in the public interest. 2. That pursuan: to the Order to Show Cause a formal inves:1-gation is hereby insti:uted and tha: :his investigatica shall include, bu: necessarily be lici:ed to, an exa=ina:icn of :he fellcwing issues: not - Is construction of Uni: 2 necessary f er PECO to maintain adequate reserve margins? - Are there less costly alterna:1ves - such as cogeneration, additional conserva: ion { neasures, or purchasing power frca neigh-boring utilities or the P.J.M. interchange - for PECO to obtain power or decrease censump: ion? - Ecw will the ::pi:al requireren:s ne:essary

c:::le:e Uni:

ffe:: 'I.:*s finin::a. heal:h and 1:s a: 2.:y

:::cife 2:=:. :e service?

- Should the Cc==ission rej ect any securi:ies filings, or i= pose any other appropriate remedy, to guarantee the cancella:i: of ..a. .e e If Uni: : is cancelled, wha:, if anv, percentage of the sunk costs should PECO be per:i:ted :c recever frc: ::s ratepayers?

f construction of Cnit : is found to be in the public in:erest, should the Cen=issien adopt an "Incent'fve/ Penalty Plan" as an inducement to cost efficien: and timely construction?

(_ 3- ~

F i l 3. Tha: :his inves:1gation be referred to the Office of {" Ad=inis::a:1ve Law Judges for hearing and Initial Decision. 4 That a copy of this Order be served upen all par:ies :o the Cc =ission's Inves:igation at Docket No. I-80100341. 3Y TdI C0hN..ISSION, .s Jerry Rich Secretary (SEAL) CRLER ADO?!ED: July 6, 198; ORDER ENTEi.ED: Aucust 7, 1.034 ( e of e (_,

1 f _-s : - n -== w1w ~e :. . =.. c.a - - - .1 case, the direct cost of power again changes about 2: -4 but fixed costs must now N spread across fewer KW. The result is a more dramatic change in ( average electricity price: 7 - 10%. One implication is clear, price will be more sensitive to decreases in demand than increases in demand. Cocpletion of Limerick 2 provides an interesting alternative case. The base case assumes Limerick 2 will be canceled in 1985 and the investeent recovered through depreciation charges. PECO is assu=ed not to earn any return on the t investnent. In this alternative case, construction is resumed on Limerick 2 and the plant is completed in 1990. Appendix A-39 displays a set of income statements which are the ratio of the alternative case to the base case. In the 1984 - 1989 in:erval deprecia: ion charges are lower. Increased interes: costs, preferred dividends and shor term borrowing due to construe: ion need are o4s et by the allevn ee for funds used durine cope **ucion incoce accountine.fonce Limerick 2 cones on line 1svo, tne direct cost of power shows significant savings but again, the fixed } cr>s :s overwhelm the variable cost savings and total revenue reouirements FJ increase close to 20%. Appendix A-40 shows this alterna:ive average elec:ric I-energy price path and the base case price projection. V Fi L: ?s I( m F. ' 0: { f v Ir. y

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The Fifth Study of C 1983 GENERAL MANUFACTURING BUSINESS CLIMATES of the Forty Eight Contiguous States of America Prepared by Alexander Ctant & Cornpany i l ~ Copies of the Fifth General Manufacturing Busipess Climates Study 'are asaitable for 520. To order, write: 1983 Manufseturing Business Climates Study, Alesander Grant & Company,1700 Prudential Plaza, Chicago, Illinois 60601, 312/856-0001 i ( C 1984 Alexander G_ rant; GrantThornton% e ~ CERiffit0 PUBLIC ACCOUNTANTS

Alnander Brant n...., ~,,.:.:::=; Table of Contents Page { Executise Summary 1 Introduction and Summary 1 Table 1: Summary of National Results 2 Map of State Ranks and Regional Averages 3 Table 2: State Ranking and Scores by Region 4 Table 3: Comparison of Government and Non-Government-Controlled Ranks 6 Background and Methodology 7 7 Purpose of Study How to Use the Study 7 7 Scope of the Study Factors 8 Methodology iI Regional Analyses IS Factor Tables 19 State Analyses 64 t e 9 of a L

ALuander tirant em an w eacco.,u..n Executise Summary C Introduction and Summary This is the fifth annual study of general manu'facturing business climates prepared by Alexander Grant & Company. The purpose of the study is to evaluate a state's " manufacturing business climate" and rate it relative to the 48 contiguous states. The term " business climates." as used in this study. refers to a collection of 22 measurement factors viewed by manufacturers as important to 4 their business success. The factors are oriented toward the cost of doing business and the j availability of resources. The study ranks the 38 contiguous states on each'of 22 measurement factors and on the j' composite total of all factors. Each state is nationally ranked to indicate its attractneness among all states, and regionally ranked to reflect attractiveness compared with neighboring states. Addition-t ally, separate rankings for government controlled and non government controlled factors are provided to present another perspective of results. The methodology of the 1983 study is identical to that used in the 1981 and 1982 studies. Factor weightings have been re evaluated by state manufacturing associations and individual factor values updated. In certain instances, adjustments were made to specific factor data in order to improve the factor. These adjustments are discussed in the Methodology section of the report and i noted on the individual factor tables. Beesuse the methodology is censistent. changes in state rankings are the result of different factor weightings more recent data,improsed data. or a i combination of the three. l In using the study, the reader should consider not only the overall national rankings out also j the scores associated with those rankings. In addition. rankings within regions and results for each measurement factor should be evaluated. A detailed review of factors will reveal each state's strengths and weaknesses. A regional review will indicate how states compare with neighbors, and where the strongest competition usually exists for new business locations. ( The 1983 General Manufacturing Business Climates Study national results are summarized in j Table I on page 2. State ranks and regional averages are illustrated on a map following Table 1. South Eastern and North Central states were most heavily represented in the top ten rankings. The lower national rankings were dominated by Great Lakes and Mid Eastern states. Among the top ten states are three that ranked lower last year. S:ut'. Dake:a improsed i:s rank frem la te 2. Utah rac ed frem a ranking cf 20 :o L and ALnm p med irr 1 :: ' Th: ~- ee m:e; :h t were displaced in the top ten in:!:.ded Sad. Caronna. w v. crc; ped Nm ! w :5. Gr ;ia 5::ch fell from 6 to 13. and Kansa;. which slipped from 10 w :' Further reg:cr and ca:e ara!ysis ;s l provided in the Regional Analyses and State Analyses sections of the report. The reader should note the close grouping of 1983 scores, especially in the 65 68 range and the 1 55 59 range. With such close results. ranking states from I to 48 may give an impression of greater differences between states than actua!!> exist. Also. te:me 105: sccres w ere simiarb c:nder. sed. j rank changes occurred as a result of relatise!> smai: $;cre chances. Che a:: ender e3u:c be pid i to scores that may be more revealing than national rankings. ? Regional groupings of the states are shown in Table 2 on pages 4 and 5. The South East 1 maintained its number I ranking: however, the difference in average regional score between the South East and the runner up South Central r.egion was less than one point. The Nor:h Central [ region. containir's the 2nd 3rd and 4th nationally ranked states. followed in the third pesition. f Table 3 on page 6 lists rankings for states on two groupings of measurements: gesernment-controlled and non government controlled factors. Government controlled factors relate to a state's fiscal policies and regulated employment costs. Non government controlled factors relate to labor i costs. labor productivity and availability, energy costs and other manufacturing issues. A major, difference between the rankings can be an indication of a need for government action. For example. ( if a' state ranks well in non government controlled factors and lower in gesernment controlled factors, a review of those factors may reveal an area (e.g. taxes) where legislative action would lead to a substantialimprovement in composite rank. Alternatively, good ranks in government controlled j factors could form the foundation for an industry attraction program. 1

1 :............ -. = . t.. MrdF S.IT$. u

e....... ~.s.c.e m.., s General. tanufacturing Business Climates State Ranking and Scores i

Table 1: Prepared by Alesander Grant & Company ( National Rank National Score

• 1983 1982 1983 1982 State 1

1 79.4 S4.6 Florida 2 14 76.5 62.2 South Dakota 3 4 74.0 65.3 North Dakota 4 5 71.1 64.8 Nebraska '0.8 65.7 5 i Arizona 6 2 6S.8 7 5.- Texas 7 9 66.8 64 0 Mississippi S 20 66.3 59.2 Utah 9 IS 65.9 60 0 Arkansas North Carolina 10 3 65.9 71.5 11 10 65.6 63.6 Kansas 12 17 65.1 61.6 Virginia 13 o 65 0 667 Georgia. la !3 60.6 62.9 Tennessee South Carolina 15 5 60.5 67.4 Louisiana 16 12 50 0 62.9 Idaho 17 55.- 63 6 Colorado 18 15 55.2 62.2 Alabama 19 23 57.4 $6.7 Montana 20 25 57.0 $2.8 Oklahoma 21 24 56.9 55.6 Missouri 22 14 56.6 59.3 '( Nevada 23 16 55.0 61.7 24 30 50.1 41.3 Kentucky Indiana 25 49.8 44.6 New Hampshire 26 21 45.7 57.3 Maryland ? JF.6 !!.I NewMeQ: I' ~ 4: : New Jeney 22 42 Cali.'ctnia V 4: 4 5' 5 lona 4 l' 3 e 3 4 Wyoming 32 41.S 57.0 Massachusetts 33 33 40.7 3S.8 34 3S 3S.6 33 8 Connecticut 35 25 O 4t0 Vermo..t 12 ' Delaware 36 4 j Maine 3' 40 Ilt 323 Washingten 36 3' 34.5 35 4 New York 39 45 33.7 2.9 West Vircinia 40 39 32.S 33.3 Pennsyldnia 41 46 32.2 25.7 Wisconsin 4: 36 3:.1 35.7 Minnesota e 43 32 29.4 39.7 44 42 29.3 31.' filinois Rhode Island 45 47 26.3 20.9 J Ohio 46 44 23.3 28.7 ~ ( Oregon .47 43 21.3 30.6 1 !.S 16.2 L Michigan 48 JS

• Scores based on 22 measurement factors tie =ed b3 manufacturers as important to business success. Factors are oriented toward cost of doing business and similability of resources.

n n f* Alexander Gr...t & Company 1983 MANUFACTURING BUSINESS CLIMATES STUDY L State Ranks and Regional Averages l ' * ^ ' GREAT LAKES NORTH CENTRAL

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( 1 M M 'a 2 29 33 ,,,,o ,,,,,,,.s,. . (j a n. o,s o ,,,..) 46 ,f0 k[ost. 36 4 44 ~ 27 j g yp [ ='550u"' 25 u MID EASTERN } 22 l 23 u r... cos o.. =aasas 11 35 8 18 12 i 30 24 ,,, < + ~ 5 catero.. ,,,,,,,c.. f'""" 14 10 WESTERN 38 ....as s s c.... ,,..s 0 15 I 28 21 9 13 i-7 ,,,s.,. s,,!, 19 ' c' oa'"' SOUTH EASTERN --SI i 16 { 13 'g, 6 l %'- + i SOUTH WESTERN g (,1,,s3.N. 1 1G i SOUTil CEill'RAL 3 13 + 0 i ,- a C2. '= S .ii c J 'k2 Kev: Number williin In. tale is its overall rank li.ncil on 22 lactors affecting in.innt.icturing Inninew i ., :a /0 (litsi.ites. Ninnlici liclow slic segional si:isite is alic aves,tre Iank of states within I!ic scrinn.

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AisiasdarG_ ras. a r.. ~.6,c.u a...,. Table 2: General Manufacturing Business Climates State Ranking and Scores by Region { Prepared by Alexander Grant & Company National Rank National Score

• 1983 1982 1983 1982 Regions and States South Eastern l

1 79.4 S46 Florida 7 9 66.8 64 0 Mississippi 10 3 65.9 71.5 North Carolina 12 17 65.1 61.6 Virginia 13 6 65.0 66.7 Georgia 14 13 60.6 62.9 Tennessee 15 5 60.5 67.4 South Carolina 19 23 57.4 56.7 Alabama 24 30 50.1 41.3 Kentucky 13 12 63.4 64.1 Regional Average South Central' 6 2 65.5 7 5.- Texas 9 IS 65.9 60.0 Arkansas 16 12 59.0 62.9 Louisiana Oklahoma 21 24 56.9 55.6 13 14 62.7 63.6 Regional Average North Central 2 14 76.5 62.2 South Dakota 3 4 74.0 68.3 ( North Dakota 4 8 71.1 64.8 Nebraska 11 10 65.6 63.6 Kansas 17 11 58.7 63.6 Idaho 20 25 57.0 52.5 Montana 2 !9 56 6 59 3 M:ssouri 3f : 3' low a 22 22 4: i 5-~ Wyerning

^ ;

fi - Regicna! Ase ace South Hestern 5 7 70.8 65.7 Arizona 8 20 66.3 59.2 Utah !S SS.2 62.2 Colorado 23 I t-55 0 61 - Nesada 25 3' 4 i.1 20 2 New Mexico 16 15 59.7 5*3 Regional Aserage l ef 4 ) O .I ) E ,t

A!F.xa d r B.i _irt cc.,,,, o ~.<,e acem.m Table 2: General Manufacturing Business Climates State Ranking and Scores by Region { . Prepared by Alesander Grant & Company National Rank National Score

• Regions and States 1983 1982 1983 1982 Mid Eastern Maryland 27 27 48.6 51.1 New Jersey 29 34 47.2 3.0 Delaware 36 41 37.7 32.9

~ New York 39 45 33.7 2 ~.9 . West Virginia 40 39 32.S 33.3 Pennsylvania 41 46 32.2 25.7 Regional Average 35 39 35.7 34.7 New England New Hampshire 26 21 48.7 5.3 Massachusetts 33 33 40.7 35 8 Connecticut 34 38 3 S.6 33 S Vermont 35 2S 37.S de 0 Maine 37 40 37.6 32 9 Rhode Island 45 47 26.3 X9 Regional Ascrage 35 35 38.3 3i.3 HEstern California 30 26 42.9 51.5 Washington 38 37 34.5 35.4 Oregon 47 43 21.3 30.6 ( Regional Average 38 35 32.9 39.2 Great Lakes Indiana 25 29 49.8 44.6 Wisconsin 42 36 32.1 35.7 Minnesota 43 32 29.4 3c - !!!!nois 4: 42 2c.3 3.- Ohio

(

24 23.3 Michigan 45 25 .5 '2 Regional Aserage al 39 2c.3 3: i National Average 50.0 50.0 High 9.4 84 6 Low . :.5 h2

• Scores based on 22 measurement factors *ie-ed b.* mar.ufacturers ss ir pcatant te business $wccess. Faete s are critr d to-ard cost of doing business and similabilit.s of resources.

W Wf L 5-

r 6.- - - a c:ma===- tietiett; eus it a;;;w=ta=*5 Table 3i General Manufacturing Business Climates Comparison of Gosernment and Non-Gosernment Controlled Ranks { Prepared by Alexander Grant & Company Gosernment-Non Gosernment-National Rank Controlled Rank Controlled Rank State 1983 1982 1983 1982 1983 1982 Alabama 19 23 13 11 29 30 Arizona 5 7 1 2 16 25 Arkansas 9 IS IR '6 % 7 8 Califernia 30

d 24 1-39 35 Colorado 15 15 14 26 Connecticut 34 35 33 al 35 36 Delaware 36 J1 46 46 18 29 Florida 1

1 2 1 4 Georgia 13 6 15 13 12 4 Idaho 17 11 19 4 20 20 44 4 39 3: 44 42 lilinois indiana 25 29 4 3 45 in Iow a 31 35 3: 29 31 40 Kansas 11 10 11 5 13 Kentuck) 24 30 23 3-30 3' Louisiana 16 12 36 2-2 i Maine 37 40 43 43 24 33 L Maryland 27' 27 29 25 21 28 t

• y Massachusetts 33 33 34 32 h.

Michigan 48 4S 47 40 48 S 1 Minnesota 43 32 40 3 41 34 Mississippi 7 9 12 15 10 11 M-Missouri 22 19 10 1: 33 27 P' Montana 20 25 27 25 8 1: o 13 5 3 Nebska

5 Ne da 23 New Hamph -e

e N

New Jersey 29 3

~

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3

e New Mexico 25 31 26 3-3 3:

1 New York 39 45 41 25 34 37 ] North Carolina 10 3 9 5 15 7 Ner:h D2ko:a 3 J 16 1 3 Ohio 16 4: 35 43 45 Oklahoma 21 25

3 1:

9 27 43 42 39 46 34 i { Oregon ,1 Pennsylvania 41 46 38 42 38 23 j Rhode Island 45 47 45 48 37 3S Souh Carolir.. 15 5 20 19 la 6 j South Dakota 2 11 5

0 5

10 6 27 21 4 Tennessee 14 13 Texas 6 2 17 15 6 i 5 lj Utah .8 20 6 14 1-23 r 35 28 31 32 36 26 i Vermont 8 Virginia 12 17 8 16 19 14 \\ Washington 38 37 22 22 47 47 7-i ;I West Virginia 40 39 35 33 42 41 I.1 } Wisconsin 42 36 37 30 40 4: j. Wyocning 32 22 as 38 3 5 0 ( - - -- '

M3XB3dF M. >-.- u.uc %<.awm Background and Methodology [ Purpose of the Study The primary objective of this study is to assist manufacturers to evaluate the 45 conticuous states in terms of important factors that affect business success. The measurement factors originally chosen by manufacturing associations are import: tnt to the broad range of business firms in the manufacturing sector of the economy. The study also serves as a general information source of comparatise business data. It adds important findincs to the collection of information on business development. location analysis. and area differences. How to Use the Study The 22 measurement factors and their weightings represent manufacturing associations' combined judgment of the important issues relating to a manufacturer's location and business success. This knowledge can help a reader evaluate the potential innuence of current events on a state's business climate including proposed legislation. demographic trends, worker attitudes, and business costs. Additionally. the study can be used to anai>ze trends of a particular state or region. From a state perspectise readers can use the study to resiew the general attractiveness of states to manufacturing firms. Gosernmental agencies responsibie for bus: ness deselopment can use the study to evaluate their state and how they may capitalize on strenc business factors and improve those that may be viewed as disincentives by manufacturers. The study is also helpful in comparing business climates of different states. To facilitate comparisons, we have used data sources that are standardized and comparable. Companies are often interested in comparing business climates to assess the opportunities and disadvantages of { operating a plant or business in a particular area. Comparing states' business climates can also be useful for evaluating marketing opportunities. Scope of the Study This study is not meant to present an al!. encompassing definition of business c!! mates; rather, the study examines factors that impact the business success cf manufacturing firms. Specifica!!y: T'. e ethedcorgy c: centrated :; iss;cs x :pe;: ' c r :er . m r.r.r 4 en.ie< Thus. only factor ceta relesant ta the rnanuncturmg secter m ca.iectec ar.d ana.yzee. "ManufacturingJ cs referred to h this sit.dy. ;s cef ned.a he.echanic:.! or chemica. transformation of materials or substances into new products. the 25>emb'y cf manufactured products. or th'e blending of materials. Measurement factors were chosen thatt are quantifiable do not require subjective interpretation are obtainable from credible sources are available or can be derived from available data for all aS contiguous states. This is not to say other factors are not important in assessing the desirability of a state for a particular manufacturer. However, many of these factors are nen.quantifiable. Such factors include attitude of government officials and,the community. quality of transportation. and quality of theavailable infrastructure. A frequent request by users of the study is for the inclusion of a quality of life factor. However. no single, quantitative composite factor is available. as the definition of quality of life is distinctly subjective. While the years of the data used for the factors vary. they are the latest available in eyery (- 1 case. The study is limited to the 48 contiguous states. as the geographic locations and economic situations in Hawaii.and Alaska are sufficiently different to make comparisons . inappropriate. i 7

N T O.I _T 8 ~ come we.cew-s F.F. acto. r. r y { Twenty two meas'urement factors representing five general categories were selected for this study. An explanation of each factor's significance to business climates and highlights of 1953 factor salue results are presented below. The following key is used in describing each factor Short title Definition

y. A brief explanation of the factor's significance to the business climate Highlighting of unusual variations in factor values and./or ranks The factor values are

- shown in parentheses when a state is named. Negatise factor values are denoted by a (-) sign. (*) Denotes that the factor is judged to be controllable or strongly innuenced by state or local governments. State and Local Government Fiscal Policies Al'. Taxes. State and Local Taxes per 51.000 of Personal Income. ... Indicates the lesci of taxation in the state and the capacity to support such a level. .... Niissouri (SS7) and Florida (559) were the oni) states with state and local taxes per 51.000 personal income below 590. The forty-eight state aserage for this factor was 5110. Wyoming (5209) had the highest state and local taxes. This reflects a one-time acceleration in tax collections based upon Wyoming's change from an annual to a quarterly tax collection cycle during 1982. Other states exceeding 5130 per 51,000 of personal income were New York (5156) and New hiexico (5131). i( A2*. Change in Taxes. Percentage Change over Three Years in State and Local Taxes per 51,000 of Personal Income. ... Indicates the trend in the level of taxation. .... Arizona had the largest decrease in taxes (-25.439) for the three ye:.rs ending in 1982. Only four states showed increases in tax le.e!s. The forty eight state average was -S 10c. c Womhc s :: r:e :f 3! 3c-rene::: a ; - u a:: era :: tv er"e:t rs Mc..m the swe's ::- h-ir:m an an.ua; t:. :. :::..v. ::.?c:t : :? u durmg ;9C. A3*. Expend:ture Gr: st' ts. Reunue G cwt'- State and Local Gesernment General Expe.fiture Grewth cser Three Years Versus S:ste and Local Government General Revenue Growth over Three Years. ... Indicates the ability of the state and local authorities to match expenditures with revenues. .... Over half (25) of the states increased their expenditures at a greater rate than their resenues. The five states with expenditure increases oser resent.es in ncess of 25~c (1.25) were Delaware (1.51). Arizona (1.39). Niinnesota (1.38). Washington 0.30), and Wisconsin (1.26). The four states with expenditures increasing at a rate less than 75cc (.75) of their 4 resentes included hiontana (.63), Kentucky (.70), Utah (.71). and South Dakota (.74). p Nationwide, the average increase in expenditures over revenues was 3c. c A4*. Debt. If State and Local Gosernment Debr Per Capita. i ... Indicates the potential for future increases in order to service past debt and the ability of a i state to raise future debt. This factor was adjusted in this year's study to exclude non. I guaranteed debt. As a state is not required to service non. guaranteed debt through Ir taxation, the debt does not indicate the possibility of future taxation. The factor did not 5 take into account any unfunded pension liabilities of state and local governments as.the (, data was not available. .... Oregon (52.719) had the highest debt per capita. 51aryland's debt was 51.424. and ,( Delaware 51.380. South Dakota's debt (5147) was the only debt per capita level below 5200. Tac average debt per capita for the 48 states was 5721....,, i}., .AS*. Welfars Expenditure. r 3,7., .., ( g,., c-

r. _.,.~.

M 3rB _ rat C(8hh(0 NO.*C &*COVm4=fl State and Local Government Public Welfare Expenditure Per Capita. ~ Indicates a ma.ior expenditure category by state and local authorities-an expenditure which ( is often viewed by businesses as not directly beneficial to their performance. .- New York (5450). California (5379). Rhode Island (5371). Massachusetts (5362). and Minnesota (5351) were the on!> states with per capita welfare expenditures in excess of 5350. Arizona (559) was the only state below 5100. The aserage per capita welfare expenditure was 5209. State-Regulated Employment Costs Bl*. UC Benefits. Average Unernployment Compensation Benefits Paid per Covered @orker per Year. ... Indicates the current level of withdrawals from the unemployment compensation trust fund and the potential for increased or decreased unemployment insurance taxes for the employer. .... Niichigan's unusually high average payment (5637) reflects the recession's impact on heavy industry. Other states with average benefits paid above 5500 are Pennsylvania (5523) and West Virginia (5518). Florida (5109) had the lowest lesel of benefits paid. On aserage. the states spent 5254 of benefits per worker per year. B2*. UC Net Worth. Net Worth of State Unemployment Comp:nsation Trust Fund per Cosered Worker. ... Indicates the strength of the state unemployment ccmpensat:on trust fund and the potential for increased cr decreased unempicyment insurance ines for the employer. .... Twenty states had a negatise balance in their Unempicyment Compensation Trust Fund in 1982. Michigan (-5913 per worier) had the largest deficit. Mississippi (5431) was the only state with a positive balance in excess of 5400 per worker. The average trust fund balance was slightly negative (-54) for the 48 states. B3*. Maximum WCl Payment. ( Maximum Weekly Payment for Temporary Total Disability under Workers' Compensation insurance. ... Indicates the maximum weekly claim that has to be paid by the employer for tempcrary total disability. In states where the a.crage payment is less than the maximum, the maximum indicates the potential level of future payments. .. Two states had.aximu:- disab". benefits 253: 5'01 Thee were low 2 85f 2D and 1:linois t52;6 T:ve mtes bel:w 5:50 ere 'E.- r 5 :.2 s Ge.r;;_ ;5 : 35 '. Tennessee 3 5:36e. and Indiana iS;a0i The r.e ; .n:n_ weei_) p.3.ent rec,uired was 5256. B4 *. WCl Lesels. Weighted Average Workers' Compensation insurance Levels for Manufacturing Occupations. Indicates the cost of workers' corrensation inst.rance for the employer. This f.:ctor presents the ratio of a state's weighted r.erage workers' compensation rate. per 5100 of payroll. to the national average rate. Factor data for 22 of the 25 states was co!!ected in a special study conducted by the Inst.rance Technical & Actuarial Consultants Corporation (ITAC). Additional state information was compi!cd by Alexander Grant & Company. Reference should be made to the B4 factor table for further details on the derivation of this factor: .... Ratios in excess of 1.5 were found in Rhode Island (1.545). California (1.827). Montana ) (1.523) and Maryland (1.502). reflecting high leve!s'of workers' compensatien insurance rates. North Dakota (.224) and Indiana (.282) had the only weighted average workers' compensation ratios below.4.50. Labor Costs k Cl Wages. Annual Average Hourly Manufacturing Wage. ... Indicates the level of wages and therefore the relatise cost of the general labor resource in a state. I n

ggetia'(D PutuC ACC0vntants .... Only four states had' average wages in excess of $10.00 per hour. These were Washington (511.23). Niichigan (511.18). Ohio (510.07), and Oregon (510.02). On the other hand. [ only North Carolina (56.35) and Niississippi (56.41) had wages below 56.50 per hour. The forty-eight state average wage was 58.37. C2 Change in Wages. Percentage Change over Three Years in Annual Average Hourly Nianufacturing Wage. ... Indicates the trend in wage rates and therefore the trend in the cost of labor. .... A comparatisely large differenc:: esisted between the state with the highest increase. Louisiana (359) and the one with the lowest increase. Niontana (179). The total average increase for all states was 257 over the three-year period. C3 - Unionization. Total Private Se: tor. Non-Agricultural Union Niembership, per 100 Non. Agricultural Workers. Indicates the degree of unionization in the workforce and therefore the impact of the unions on labor costs. labor relations. and state political activity. Source data for this factor was not available through federal sources. Alexander Grant & Company therefore engaged the services of Leo Troy. Ph.D.. cf Rutgers University, to compile the necessary data. Dr. Troy is a recognized authority in the field of industrial relations. The union membership data presented represents the most current information available. This year. the factor includes only private sector union:zation. thus giving a better indication of the unionization levels affecting manufacturers. .... Only two states had less than 59 ef their total workforce in private sector labor unions. These were the two Care!inas (South 3.89 a9d North 4.7Q). Only Washington (32.37) and New York (31Fe) had.cre than 30rc of their total workforce in private sector unions. Of the right to work states. Nevada (19.8Fc) had the highest percentage. Of the non.right to work states. Vermont (6.89) had the lowest union membership percentage. C4 Change in Unionization. ( Percentage Change over Two Years in Private Sector. Non-Agricultural Labor Union Membership per 100 Non-Agricultural Workers. ... Indicates the trend in unionization in the workforce and its resulting impact. As with factor C3. the data for this factor was prepared for Alexander Grant & Company by Leo Troy. Ph.D.. of Rutgers University. By including only prnate sector changes in unionization. manufacturers ~.2y nore c! ear!) examine the implication of unionization trends for 'he.t cperai:rs ... Louisi.na (-22. t". h.d the g utest red.ct :- '-.ni:n.:=:n Tc.eSe de states e\\perienceC red ctie.s greater than :c9 Availability and Productivity of Labor Force Dl*. Voc.Ed Enro!! ment. Vocational Educationa! Enre:: ment as a Percertage of Population Indicates the future ability of a state to provide ski!!ed workers. .... Calif'ornia (3.77?c). Arizona (3.549), and Illinois (3.22%) were the only states with more than 3% of the population enrolled in vocational education institutions. Wyoming (.42rc) had the lowest percentage enro!! ment. The average for all states was 1.54c. D2*. High School Educated Adults. ~ Percentage of Population 25 Years Old and Over Who Have Completed Four Years of High School. -r ... Indicates the level of a trainable workforce available in a state. .... There was a relatively even distribution of percentages between the highest state. Utah .? (80.3%), and the lowest. Kentucky (51.9%). D3 Manhours Lost. Average Percent of Estimated Non. Agricultural Working Time Lost Due to Work t .! j Stoppages over Two Years. X.i. r . Indicates the stability of the labor force and the effect of work stoppages on productivity M, b. which results in higher manufacturing costs. This year, the data obtained fron(thd Bureau

. c.

[!$0.n,p.[,M'

L Alaxander G_ rant u.m o..s. 4.c::w., of 1. abor Statistics was adjusted by Alexander Grant & Company to exclude time lost due to work stoppages in mining and other extractive industries. The data, as adjusted. provides C improsed comparative information regarding work stoppages. .... South Dakota had the lowest number of manhours lost due to work stoppages (less than five thousandths of one percent). Indiana (.2559). consersely. was the only state experiencing a work stoppage percentage in excess of.20. D4. Value Added. Value Added by.\\fanufacturing Employees per Dol!ar of Production Payroll. ... Indicates the productivity / cost relationship of manufacturing employees. i ... Wyoming (55.S4) and Louisiana (55.39) were the only states with value added in escess of 'i 55.00 per dollar of production payroll. All other states. escept.\\fichigan iS:.S4). had alue added between three and five dollars. D5 Hours Worked. Annual Average Hours Worked per Week. ... Indicates the state's economic ability to utilize its human resources. .... Only South Dakota (41.1 hours) exceeds a 41 hour week. Idaho (36.7 hours) was the only state below a 37 hour average work week. Niost states fell between 35 and 20 hour weeks. Other Manufacturing Related issues El Energy Costs. Fuel and Electric Energy Ces:s per.\\lillion BTUs fer N!anufac:crets. Indicates the costs of energy for manufacturers in a state. .... Energy costs in Connecticut (56.6

• per million BTUsi were over : 1/2 times that of the lowest cost state. North Dakota (52.47). Regionally, the South Central (53.02) was the r

i least expensive. and New Encland (56.03) the most. This factor was determined by participating state manufacttirers' associations to be the most important determina'nt of a / ( manufacturing business climate in the 1983 study. A E2". Environmental Control. State Expenditure on Environmental Control as a Percentage of Total State Expenditures. ... Indicates the importance placed on environmental control by 4 tate and !ocal government and the potential emphasis placed on private sector complianee. .... The four states that had expenditure levels of.i!G or belcw inc!uded Krnsas ( 13s. \\1 Mis s:p:i I.131 A2 t2 ~a. 3 : : F"ia '. H:;r.:.ue- - O-

2-~

Dem are,2.' :7-.nd No F_-

e

..... :e ne ::..- n;; r..- : :e reper:ing pr..eede:i ar npen; ;ur:< e e. ;- e :_. c.- --

aege

e ca _... ; ;

he found to allow ecu; tat:e rei:atemen; of :he.uice3. E3 Population Density. Population Density per Square N!ile. Indicates the density of general markets. ... New Jersey H96 0). Rhede !cand 405.'. \\fa43cch.ae:u i 3 5 A. and Connee:.e.: # li were the anly <tates haeg a densay grea:er then 500 persens per <q. se -::e. T e :ow e : state was Wyoming with a denmy of 5.2. E Population Change. Absolute Change in Popu:2t.on oser Three Years.10003) Indicates the growth or decline in size cf general markets. .... Only Niichigan (-98.000i had a perub: ion loss. w hile California (2.030.000). Texas -(1.900.000) and Florida i t.55e.000) had gains in excess of 1.000.000. The states gained an average of 236.000 people oser thr;e years. .\\lethodology ( The methodology and measurement factors used for the 1983 General N!anufacturing Business Climates Study are identical to those used in the 1951 and !982 studies Data adjustments were made for certain factors in order to improve the factor or because updated information was not available. Specifically: 11-

... -... ~ M3% BIN M_ ca.n.co ~ w e.ccou m is Non guaranteed debt was removed from Debt per Capita (A4) figures. A state is not ( required to service non. guaranteed debt through taxation. Therefore, the debt does not indicate the potential for future taxation. This adjustment will provide a better indication of those states with a higher potential for tax increases. Workers' Cornpensation Insurance (WCl) levels (B4) for 42 of the 48 states were computed in a special study conducted by the Insurance Technical & Actuarial Consultants Corporation (ITAC). The study presents a comprehensive evaluation of WCl lesels. Over 60 manufacturing labor classifications were sampled in each of the 42 states in order to calculate an average manual rate by state. These rates were then conserted to national average indices. Additional state information was compiled b Alexander Grant & h Company and based on samples of selected manufacturing occupations in the states not included in the ITAC study. Union membership data (C3. C4) was collected in a special study conducted by Leo Troy, Ph.D., a recognized industrial relations expert from Rutgers University. The data reflects d private sector union membership only and represents the most current information available ,Jtij @j Extractive industry work stoppages were removed from total work stoppage data. The data. {g-y as adjusted, provides improved comparative information regarding work stoppages. Although these adjustments prevent direct data comparisons between the 1983 study and @d 7 previous studies at the individual factor level. they provide improved criteria for evaluating overall manufacturing business conditions. Factor Weighting Thirty-two state manufacturers' associations participated in assessing the importance of the factors. The associations represented a majority of the states in each region. The associations were first ( asked to assign a percentage >cighting (totaling 1007c) to each of five general criegories, based on their assessment of the relative importance of each category to the general manufacturing business climate of their state. The results of this step are summarized in the following table. Summary of Category Weightings 1983 1982 Factors in d erage Asera;e Each Category Category Category Catecory %eichting Weighting (l e A. State and Local Government Fiscal Policies 5 23.307c 17.86'c 4 18.30 21.05 B. State-Regulated Employment Costs 4 21.25 22.75 C. Labor Costs D. Availability and Productivity of Labor Force 5 19.55 20.0S E. Other Manufacturing Related Issues (Energy 4 17.30 18.26 Costs,. Environmental Control and Markets) -E 100.007c 100.007c (1) Thirty-nine state snanufacturing associations. participated in the 1982 factor =eighting process. Category wei~ghtings changed significantly between 1982 and 1983. Participating state manufacturing associations judged <the State and Local Government Fiscal Policies category as being the most important to a state's manufacturing business climate. This represents a reverse from its low weighting in 19E2. Labor Costs and Productivity of the Labor Force remained I important categories: however, both were weighted less heavily than in the 1982 study. State (. Regulated Employment Costs and Other Manufacturing Issues were weighted as least iinportant in f determining the manufacturing climate. The general trend in the weigh.ings seems to indicate increased concerns among manufacturers regarding the ability of states to mxt their fiscal responsibilities in light of less federal govemment involvement.

h d ar h. _ 4 cge%gg stoot accopaa s in the second step of the voting process the associations were asked to weigh the relative importance cf each factor within the rise categories. An overall weight for each factor was then -{ computed by multiplying the percentage assigned to each factor by the percentage assigned to its relative category, adding the results for each factor and dividing by the niimber of state associations voting. The rounded factor weights in descending order of importance are shown below. Summary of Rounded Factor Weightings 1983 1982 Factor Weight Weicht EI: Energy Costs "8.127 8.767 C3: Unionization 6.69 6.40 Al: Taxes

• 6.66 4.96 CI: Wages 6.61 8.0S B4: WCl Rates
• 5.41 6.23 D3; Manhours Lost 5.01 4.83 A3: Expenditure Growth vs. Revenue Growth
• 4.75

4. ! 0 A2: Change in Ta.ses*

4.67 3.37 D4: Value Added 4.59 4 99 Bl: UC Benefits

• 4.53 5 62 B3: Maximum WCl Payment
• 4.26 4.25 C2: Change in Wages 4.21 4u A4: Debt
• 4.15 3.19 B:: UC Net Worth
• 4.09 2 95 Dl: Voc-Ed Enrollment
• 3.91 3 95 D2: High School Educated Adults
• 3.89 3.55 E2: Environmental Control' 3.89 3.84

( C4: Change in Unionization 3.74 3.29 E4: Population Change 3.13

.75

. elfare Expenditure

• 3.01 2.24 W

A5: D5: Hours Worked 2.45 146 E3: Population Density

.17 2,9 i

w. er --

m v. ,= .,__.n

• Indicate factor is control:ed or stroet!y ir.fksnced oy taa or 19:21 cr.sen ntnte Once again in 19S3. Energy Cests were cuidered the mest imperunt acter A:theugh t'.: 3 result was consistent with last year. other individual factor weightings changed substantially. Among the top five factor weightings is one that ranked lower last year. Taxes per 51.000 of Personal income (Al) moved from the eighth most important factor in 1082 to the t'ird most important in 1953.

Other changes occurred within the tep fiie spots. Unicnization (C3) mosed from the third to the second most heavily weighted factor. Wages (Cl) dropped to the fourth position. Average -Workers 1 Compensation levels (Ba) slipped from fourth to fifth position. Unemployment Compensation Benefits (BI) dropped from position five to the number ten spot. Oserall. the changes reflect the increased emphasis on government-influenced factors. specifically those that relate to fiscal policies. ~ Generating the Score The states were' ranked for each factdr based on their factor values. The level of precision used to determine ranks was five decimal places. When ties did occur on this basis. states were all given ( the same (higher) rank. The next state in sequence was given its normal rank. Ties are denoted by an equal sign (e.g.18=). Since raw factor data is not directly comparable, a means of " normalizing" the values was = developed. The standard deviation of a state's factor value was computed for each state in each ( .n.

~. WWW 6 CON cc..... : w.ccou i.. factor. For example. in 1983'for factor A1. Taxes. Alabama's factor value was 592.34 while t 4 The standard deviatior. for factor Al for Alabama was computed at { mean factor value was 5109.51. i .8767 standard deviations. To calculate the business climate score. the standard desiation was multiplied by the we the factor. If a low factor value was faserable (e g. Ai. Taxes), the standard deviation was multiplied by the weight and then by -1. For factor A:. the weighting is.066626. giving Alabama a weighted standard deviation of.055 ! for factor C Muttiplying the weighted standard The 22 fmal factor scores were then added deviation by -l results in a final factor score of.0554: For Alabama this was +.1456. To to generate the unscaled business climate score for each state. adapt the unscaled business climate score to the more genera!!) accepted 0 to 100 sca being the highest possible score, the fellowing basis was used. An unsealed business clin. ate score of +i.00 w25 considered the optimum. If a state had achieved this it would have scorec 100 An unscaled business climate score of -1.00 was considered the worst pessible. If a state had achieved this,it would hase scored O. 4; 9 The formula used to artise at the state's business climate score was: (Unscaled business climate i: ore + 1.0) x 50. } Therefore. Alabama's unsealed busir.ess climate s::re cf.laS6 translated to 5 0-100 scale. To make the scores. in addition to the ra-bngs comparable in future years. this procedure and the formula will not change unless there are major increases in the top s decreases in the bottom state's. unscaled business cliT.lte >c.re. To compute the partial business climate score. based or. the factors controllable and net controllable by state and local governments, a similar procedure to that outlined above was fo As the government controllable factors had a combined u eighting of approximately 53?c. 53 w considered the optimum score after scaling. The fo'.lewing scaling formula was used: 4 j (Unscaled government-controlled business climate score +.53) x 50. biipilarly, factors not controllable by goverment had a combined weighting of 47?r and 47 was considered the optimum score after scaling. The scaimg formula used was: 4.Crs:2:ed ncr-gever.rer -:cntroPet hp es c!ir. ate score +.47) X 50. 1 9 i o Y -f O tla i - - - ~ -,-n

9 APPENDIX 4 ap 9 =f e L i

g,a:gr. r

,u 2W .G 5.,- Provide all of the cost estimates cade by PECO and/or the s C,* "~ ~w. architect / engineer of. the total cost Q.1-3 The 'information requested 13, providEd'IT'TWet'1'de--belon --....,u ~' A.1-3 ' Limcrick Cost Estimates (Costs are in Millions of Dollars) .g. Li:::erick ' Service Total Literick Cost Dates _ Direct Cost AFDC Date of Estimate. .1975-77 $289 $37 $326 1825 60 485 5/63 1975-77 2no 620 96 715 1975-77 1978-80* 923 206 1209 In1 83 :1 3' 17 3v 7/72 1981-82 1295 2002 1697 505 10n!1 1 '1981-83 2578 ~ 1983-85 1857 721 1045 1985-87 2007 1175 318 a. 647 1985 87 2113 1245

335, 8/78 1985-87 2317 18357 a<83 2/80 4120 9/80 1985-87 2559 1561 10/30 S2 5S00 (1985-1988)

( '8 4 - 6600 (1985-1990) p Overhead and' Taxes are included 16 Direct Cost. Note: .. a.a r.. n .....n...

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4 4 .g APPEtIDIX 5 O T ef e L (

> 'b, > N h,MN S O * ".IMi yri;M, *it ' g g_ N (Y ,lq ' N.;s - A," ,,%s,. k ,}, p. j ' M.4 < N L, 'i i l' b . lhr is T' y S F a 0 v 1 M}a n,", I h h pH1. .% e 3 7 .g ba . d.I. ;,,thOsc of three osher plants with con 1 l aae unp. -(1.*%m wni..I+2' "

• of.

,,are availante - the cosis of correct. ;' 0 *,'L.a" ep. g l's42 is 3 3 S [L.

• ' $.. 4 *.lainment probicms for which Ilgures '. -

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===f = =d - y ad m m. a w n :,::: =. ~ .s. u say they k nemicalthanthe pressortred destgs#; cords and. interviews with present a 4,.g.Otor,eover rr erricials.iJie utility ich Neidera

It didarturn.ont inat way. [44 wand former federst off!clatt py;. g.. pian o.

. '.. YIN ~ -tu 4 hortly f er onstf9C*, ft took nearly s nhars for PC ] t Co m 'n us.c - .J rdan the utall. !!1 hte -.m. m AlleetM peerggyhegt offletali gtlen begas at Limerick. FElearned og and owncrs of to other plants wtitt .cr tr : es temers pay for ine multi. similar containment sessets to car.- 3 million<sollar desita error. t,t. Panadelphia Electric cowere;; rious selety prontem tn a ter part the anclearpower project:8 he CE,bolitag water system..th . rect the' problem'At'!Jmerick;ac. ;.. r..:.<.PE says it wtit seen to recover the t wee 10hstojbe4 nown asl**7,f' ctor Cording to PF..'the additional engl.). let* cost of the contalement repairs as IRetteWltp4hadtanelsportant* Which (%tContainmeStiltritettre-a s.desighed to prevent r8dl fieertrlg and Cof!strtelloQ work Cost.6. icy part of a 20 pertent to 23 percent h*c8 S =*** Whether to cacone a tion front teaung into the.anviro 1N. 5 H3'" lin'8,- I'- 3-M 8It" d"# "" @"* ' 'N e ic newstecreactorsor tne mar

• ment.: As.thisysten.was originally FE says it has not calculated how I t

h WmoW "b

• • 'EMIEN gdestgued54verLnormalsperation of,much it has paid.ta, interest to (11,,.

eteestives epted for a,ceneral,,the plasteould trigger powerful.vq. mance the modificationi HowcTer.lf t,- n rc o ration ment prtt. If g gg I *? ctCebotstas. water reactor, aretions Fsimilar to those of a ma financtng charges,for'the contato i. m allar to one they had alreadr.se por.eartaquate-that conid damese jment prestem are typicalof those forl'yfjgq anreisied increases alr,eady itted-g3g_ eg, ed for:PC'r-Peach sottoin plant, reactor safety < systems and cause an gle overallIJmerick project-andt;, ad be more ecog accident.! accords.g,6gt,edersgrg'g (See IgigCKjafBQ.. j _g, .s customer to l, as W1 .WT.ft. 4 V.MAi.hfD.W.; W....wn,..., q., e.eet:A h.s U'..~..dh_ r....... . 3 cent over current levels, e a" y

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~ ~.e s.. .s at ~ to: Iw c in interviews lut monthlPE offs. - - - -meri -e8Ctcr. de......

• M.T.p*"' 8'tW"N mtam-

~.cials md the atuar would not sur -*r Sig . to recover the repair costs from CE SC U . PR,.O.NEM.uM-fre THE SOL.U,T.10N.S D.r QMF. b .si ecause it did not hold the company .+~.~e ..responsieta. for..the c containment n t.7tchlemLt P. Mr.cmyr*tt -s l Newed seareanne end ertan "Ikk U E rgnews. _ ^ _- -- A w,,,,,T, j " l .l l g3 h

• k7'".'.Yf*""#

'*1 don 1 thirtt ! can affit blE on 4 ,k u . ' tT U Simt*8e sirWI. anybody? said Bill Voltmer. chief or l )

• ~

dem.qped es _z_ i, D Wten teamaw areaucma eumse @!i .., e.gseer.*s .I 6,Jo ea mouse.evee sisusaas*

• structural engineering at PE *This

,4. Adeterias coot for redewyt*! is a cost of building the plant" 4 N. roast h{ -. I Q. *[. $ d Ni clear. experts'and off!ctats of b a[ I f } . s.-~.wty wds attemott. '..other utstitles witti GE containment t iw weser e J b ,.?d v'. 'to pass en to ns. ,3 proelems have been less reticer t. l [' L. y* 3, y w .M m Wassen - 1 f.4 i h 1 7' d.. Q. mh,atsoeyws ( -j{ "about asstgning blame. howevet fas te ennes eme t .b - d , l

H ]q i Last month. for example. the own.i.

ft - l 7 q HErGHTl W1

• • • ers of the recently scrarped William 4 l

U[ebtifb M / j i I h M'M8#

• M I

. #c n a e i led a 4[o g of eman sow'd welb4 p.' p k., t 1 I on law t y , M '.p.

h.. <.gi

.. r - overthe pret4em. Named as defend.' 1

• L a

f: wesieges 4, p j I U I e h k,a,mer,cQWsurssieureMN 4G -. o anta were GE. which deveieped the. j Ih' ' l' U ] l L'~ t CWCfitTT *- W,kconcept and specifications for the -'4 .s 9 M N ! p oeewo mer emshmeg b I. [. WALL W ,; j l a containment structure, and

• the.

i h Six FT.44h,5

11. de plant s engineering firm. which t -

g y j' :anisas._ Q_ " lh ! I l %. ;THIC g leveewung .P t l l l: (~ n drew vp plans for the co.ntainment :. s ) i f

• WI WI

'," based on that concept.) - ' -' p des W ,. fl l ; , gg',p,.. i , <{li. mated the stresses the containmen {t I I,Q $trong !f..*. vessel would have to withstand on.. r-1

i )

(L.INER. 'sL i h '.ll-o a csises ll d I s %hesig m 'F'- 4.*,,.tfig plant eperation affd that t'* i Uttsidou. - lh ,j ,!. j 1 {*$... p ? gmeering firm fatted to catch %. g i ,.* %,,gy;. .t *., alleged mistates. The suit said the, ] !l lj eessmed 1I i, l .j, tyeese s ,i , Y.... , CE reactor s) Tem ?was inadequately *, l q s i j l d, g i 4 ,l . W fi. k.M l ! dF %dles 848 ( .g be".* testet technicatty unsound. unreia. ; . y n .d .M ' OI [$LMl d 188Me '; j able. and incapable of meet. O ' w ll ( h ' pl v 1 71~M7 l"8. gu.aiory rettutrements.".j, +. ijpau.uiaiklh,.. % f., % Nr . n. former U1 Nuclear Regulatory Com- .u. *! dont know about legal respons1 't n "- -FA 2, r.n g }.- c, ,jg Wi F g M"j blitty." added Stephen Itanswer. a t a j /., 9n 4 Th 7. mission (NRC) official who worked, ju,,b*g- ,g; l p f l l -{"I.%, g9 .y for nearir live years on the cor.tain. ] l l l v.. f i.

9.. ment problem for the agency. *But

? i 1 J iblhl l l, / C. the techngst error was made by GE. .P l'" '. '"d 'h"' ' ' " sit q *i= csu bt it. l - w h!!Q Nlb")IfMegf,;,' s ~ ' " * ' M} .. d k4M si? M".$N 6 W i ~ l mi g i fi,- * [,3 Calif. dented that the company was .yw W;dI e l e .3 - etf/ responsible for the ' containment b-i 4 ) @ 1 3 W i *; e -*i r 1 !.n

• 9 8 ' I ',
• h,

' ( l Si., problems at Zimmer and ciner .Y. 6ymom _. _, j C. re i M ";,p. " plants. Although GE provided tech. y[f*i 7, J # - f h l O ;eY ,r i b i a N - W "*8b *"M3q M nical data for the structures, it was. t. *. 3 5 %a., i i

,~

a- .3,E ' the responsibility of the utilities to ' ' * - m e f i i I .9 y ,a q ((Q q r t 9 f '89 - { \\ ,f,i 3,* " ' We're confident that we have M W conn them. he said. q l 4 a '. e .s 4 g e I. ]h,,f.Q... l 9 M, d!' d k v{. { ] j D!!cd all of the contractual obhca. I g. 6 g I J 's p tions that were related to Ithe Tim.. ' -

f.., g a

h..

J. - p, i h.,.4, 4 .? lL f 7 l I 7.* ~, . mer plantL and that therew no sound a kT ;f h '[ f **e~ m s.e r i-5 d' 's h

• I The containment problem is only

.9)L.* , d d f M 9 i ) ,.lo Cott 3's times what PK oricinally 6 eE l k .ap th /- r L. rs i W I one reason =hy t americk is es pected 9' ^ a W \\ ) w y . p g 4 g k. h:4 M 4 "U; **- ] y'

• ^

) 3-

;, protected when construction started 1/

T..', ~ ) "8 4 M g. J 6 E 7 -L.[./ ] a decade ago. inflanon. higher toter. k. / 4p 9.,j 't, r c E c i 'i pd hq hf ' @$.kR... e. +

• S

'l 1 .....,. h ( V.:'O..v...c..I.... .a) l i J U,(4 3a..,.,..g".,,. h...,, ).Tt P s ii. W T_ @ M L] 4 9,' Q@V y @ s. v 'RN t ,s dm@gj m.r. ac. MM-q?-. '7.0 V

r 4 MV QO L t *Ncwq i: f.. $fy. h S ftN - + y .I p 4 S d . i. - (j ' ' ' *. d r j f ~. g)%Rb .h 5 O -

• Q.h ** * %j f Get% f n'r*7rwwwtwe

i.

'4 n

• w f' ').',f'.'

{s ^ a** 1 s Mert. 'w'ist rithuf tr."W!n T P.,h 's.E 1e M amar.st b M2n dte=.4f be bt- .g Qd (., kh t b j .9 d' f t' g 8 7 Q,j4 M.. I j *< .( Sq s tw em 'ait)pt94i*Ne vii L-i

C.

l k:/ y y e Mt@,. f.W.t = "" ele.t a..e @%thuy t"s m fif enced'durtng test!nc at plants in

• " {; ' *
• t

..; j. g). gD e ++- w. {- 6 est rates and sah erstations add

• fy Switzerland and.a:Waad Cities in j

g.-' ggied 3M2 the'Is? ctdent at Three I. Illinoit W hen-technicians'dettber. i* j g;(..[!#' At., Mlle tstand also t..,e contnbuted to istely tr ed to simulate the problem ,m,,". !g , Wthe tacreases. PE sayse '. F. dunes tests at the Drowns retty .4 ,g'tser tut resolving 'the f contatnment 1 plant in Alabama in'1973. the pres. I sure pulses became so great that ' y tt{.2*nh,P,q s.probles was the greatest singte chat-e ind { tenge raced by entineers tnvolved tn technicians stopped the tests.out of , l(.,, *. i ,g betiding Umertch and other simitar atfear they would seriously damage 1 Ji plants. Iederat officiais and nuclear v the reactor. e experts sartrace-m. "The forces were so large. they asse"o.wny the utilities paid CE. l L; iPennsylvanta Power.& Ught Co. itdidla t dare flatsk.* paid llanauer. .which some now hold responsible [ =. . owner of6the'Susquehanna nuclear .rp 4 - y-a.". At the sa'ne time. CE had discov* for tu proMcu PE's %'Mw m I plant near Serwick. which is simitar

• I ;thered even more serious problems plied. *GE was the knowled(cabre k

during. source. And they were itghtjearg in destan te umerick.has called the - ficult techatcal issue in B,WR lboit t ty* with is Ce lainMnl design 's ahead of anybodyitse in the technol. ntalemene problem "the most dif. f. } more,ad anccd at s go g gg y gy,, ed t )! '87-ng. water reactori history. *

. ~ earlier containmnt vmts.CE.s en.

The Mark !! owners also worked s 6-e g 4 Modifications lo the Zimmer plant .f* gtnects had underestitanted the pres-with NRC and universtly esperts, as [ n 5 qcost $Ja0 attiton inc!ading taterest. 8' d bund up in the well as ectineers at nuclear plants 3 costof theccatalamentisccordingto l'3,e sure that woul 44]ttmes.sbe ortstnal.133 frillion i l . wetwell when tadioactive steam was ande research facilities in Swedea, j

• }

4 preleased into the water during cer. . West Germany. Italy and Japan. g D flgarer trouLthe plant owtiers con f gf. tain tosseWant. accidents, the It was not until ts82 that the NRC E ?' f for 45ef folkiCounty/ New York. .f.f most senous type of accidents at nu* lssued its final guidelines for rede-anned in their lawsuit.'A study done - I 4 showed modifications to lang Island 'rt clear facilities, siguicg the Mark ti contatetwats to' Ughung. Cats.Shoraham.piant to='. o.: ; *!t's clear that Ceneral Electrte climinate the safear hazards.. s$ P simply did not allow for the fact that To solve the safety relief. valve 4. k] .taled $22(million Jwith. toterest. i .i nearly five times the. containment's ! the forces they bitilt that thing for, problect esperienced' at the West

• original $451,mtttton cost.

namely the quenching of the steam German plant. the ' engineers rede-PE spokesman Ron liar'rer said that j( D

• y{$'

Feoff!ctals saie they had no figure l ' ... provided forces that they dido t 'M ~ signed the quenching devices to re-at the time of the interview he and

.,

' ton the ortstaal cost of Umerick's i

,l' destga the structure to withstand." duce the pressure pulset - other cificials, including Voltmer - U-' More substantist hardware a top eng:neer, who worked on the 4.{ *Ilecontainment vessel because it was d ; said if anauer.These new problems posed's sitatf. changes were required for the pulses - problem - were unaeare that (3e I' 5 41 part of a larger contract for the over= l

• N"*dg (* 4, M all planL M 7h

g

leant safety coocern for Mark 11 1 that might occur during a lossef-statistic had been compiled.

4 ,,.y. Like all American nuclear power -,. plants.tecluding 1.tmerick.in which I coolant accident. In essence the es. Financial studies at raree osher

8 gineers were forced to redestra the Mark,11 riants - Susquehantia. Ls-4

,,4. plants the Umerick< reactor is en-J ' the wetweit essentially serves as the I ci ly]igf;.h.8.*h; pgelesed within a leak-tight contun-m W ne conmeniens. sup- { containment vessels as thougn the mer and 5horeham -that were done .,9 ment system designed to prevent ra-k,fporting the reactor. vessel and its t plants were butit on an eartnquase as part of challenges to rate requests highly radioactive fuel The CE engt. ! f ault 11ne, according to Farouk contended tSat she contasament @ idtoactive. fluids or. steam frota o " py .QC h,, jg escaping into the environment. Litn-I, ' neers had found that during a lossef ' Eliawita, an NRC cagineer who spent. problems forced delays ranging tres = accident. the water poet four years on the prablem. ", six months to two yeart ,g rick'a containrent. engineered and

. goolant would rise and stam against the Dot.

The debate over who must pay for Dut PE cfftetals say construction of e ,c p./ (-- j,, constructed by Dechtel Corp. is a 1 gmassive structure, made of steet 1 ( g tom ot the drywell.shaatng the reac. the containtment repatts es only be, Limerick was nor held up by the {" .m-f ii ter ve* set and piping connectcd to it,

r. tuning to be heard now as the Mark containe ent problem.

n . i. Itned concrete. 4 feet thtch and more f.'t. e than 170 feet high. 4 ii and threatenicg Bey safety systems.

• !! plants start to come on.line.

3 Limerick's revtsed completion date s ( 1.ast year. Pennsylvania Power 8r - Unit 1 originally was supposed to in GE s Mark II design, which FE f.; d."; selected',for Limerick. the reactor j f last year. Robert C Traytor, an em-Light Co. received permisston from - go on-Itne in 1979-has been a result . In testimony prevented to the PUC C ine PUC to charge its customers for of chanong electricaldemand fore-51.. _? f5 vesset is surrounded by a large.emp-ployee of Manseement Analysis all the containment-repair costs at its casts and the uttitty s finacces, ac. 'I"]+M

h. '; !. " ty chamber known as a drywell. A

, g San Diego. described the risks of the Susquehanna plant. despite stiff op ' ccrdtog to the officialt .[

i Corp. a nuclear consulting firm in M second chstaber.part!s ty 'llied with position from the state consumer ad-

- FE also says that because Limerick ' 'N.. -w N S water - the wetwell - La located ' '. vibrations this way:

• vocate's office. The consumer adve-.was tiot very far along in construc-f:{E'@ u,nderneath the reartor.'.

I , $y

4. }at The Mark fl uses a concept known *

• "The systems which provide for cate maintained that the tion when the containment defects

... y Q;as

• pressure siippression." in which I nt i safe shutdown of the reactor must be containment modifications had cost ~ were first disclosed. it was not forced t

the water,la the wetwellis used to t * - j protected from datnage. If not, the St4JJ7 million at Susquehanna.' to tear out substant:st amounts of },(.f;1. yb**,Q1 eased when pressure butids up in-M pes absotD any escess best or steam r* ' h,. accident could continuc. ultimately whose first unit went on-line last, eqmpment, as was necessary at some. year. other plants. - ,,,y.j:, 4sp - f 4 s yi, side t'te r*eeter a process known as.. p.resulting in'possible ruptu're of the Norman Kurtis. PP&L*s vice prest-Nonetheless Limerick's enodifica-. t*e ec. c" 'ely nuclear reactors. ,1 reactor vessel and containn:ent. dent for nuclear operations. said in. tions included hundreds of ad"ttton. )t s.i ! e itsred water reactors. ')f. The dlscovery of the ContalDment an interview that the company had. al pipe supports and elaborate brac+- ' * }...#7,h .M.*, a g and r w $* M pa are housed La completely dry con- ' ,,7 problems dealt a sertous blow to the not decided yet on possible lecat ac-itg systems to make the reactor-(9 w r nuclear industry. Att 11 plants with . tion to recover the costs from GE.' safety systems rnore r: tid. ' to N6 -e t,,,qr. y.C y} tatementt.se ) % ** . 1; .what GE engineers did not know, . Mark !! containments, including sev- ,,g t , crat uptts that.were far along in . contiecival dispute you'have with

• were similar to the ones made at-e i b.+.

-w.- = Pen the prenue*surt= cat ton con-construction.' required sabstantial ~~ O Y k"*'

• a-{c 19 sos and early 1960s was that the g cept was first developed in the late suppliers and contracters entt ca n PP&tla 3asquenanns plant. whica lL

1. i destga teenalysts and changet e can t'e very damsent in terms of underwent extensive modifications.

4 *In addition.GE had found that the ' E 'ah. I a quenching process could crectc pow l - ~ i getting the job done. Kurtis said. At Susquehanna, accordies.o Han- 'J 8 ' W'" '4 erfst tremors in the containment t problems also affected an earticr "So our strategy has been to get the aver. 7oin see pipe supports three containment design.known as Afark

plant lintshed get it online, and times as Dtg as the pipes themselves

' r$g,1 4' system.~ according to NRC records ! which had been used at 25 U1 ie4.+- U. 9 andintervtews with present and for- '[ . nuclear plants, many of which al. 1,,1 sort out the contractual because of the CDacget* (.~ ^ '.s.h,'U' mer NRC officials. e. then . PC spokesman llarper said that ready were on hne mac!vding PE's K" [% i -The first indication of these trem- . wf iders emerged durtag as accident in. .tw&untt reach Bottom factitty ccar OnJuly13.three PEoffletats stead.. problems such as the ene that oc. ,t 'p' fastly maintained in an laterview curred with the Mark It containment f,' f f April ly72 at a West German nuclear 1 - tancaster. w' i .'I" N {py'* y;, at to'GE1. NRC records and other .b* last that traed 8 confalni!"ent stf21' !! wasS'l ttntil late 1974 = ltlort that they could not come up with any routinCly crop up at r.tarty all con-9 .than two years after the West Ger. cost ftture for correcting the con-struction sitet The containment re- )Q .pp studics show. " * ' man plant accident - that GE for-tainment problems at IJmerick. fairs. despite their high cost. are -mally notified its U1 clicats of the . Thelnquirerlaterleartied that the simply "part of the cost of building g I *jg - go,,. 3The west German reactor bad be t. '. containment prootems. I e utility had produced a figure of the plant." Harper said. + .. -q.come loverpressurisedr and steam In their lawsuit. Zimmer's c*riers i $164 2' million, several days beforo. summed up rE s voiimer.-we had p..%,q*3 ad been etschargecthrough a set of l accused GE of *t.n.tenitonal miscon* the interview. for the consumer ad* a technical probicm and we solved it. h t 'N safety relief valves into the wetwell., 7e .f +7 ',y 7 ',; quenched rbst the valves f ailed to } duct" for not notifytog them of the vocate s office. which had requested We were able to solve it in a pretty t The steam

• was successfully tt in preparatton for the Limerick ' ef: cient way. It cost a lot of money l = problems sooncr. Prodded by the NRC to derron-rate case.

".'t.L ] but it rifcetitely didn't impact coni .e ,,- v,ctose andastcas continued to be - iW;* ?i. /*p* - ejected into the water poet, lacreas - ' strate the adequacy of their contain* Question d about the discrepancy. ; struction."

trig the water temperature./

} ments.the Mark 11 owners.tncluding $P - [ 4 '.). b h. As the water got hoiter, powerful I . I'E. began working together in carIV jets of steam called pressure putses i + 1975 on research to solve the proO-qw . Q.,/ r %~ begart poundirg.the wetwell.tkfort 6 - I tems. the reactor was shut dowti. 3 part of .The group titred GE to serve as its d.

• %',tf. h.:

the =ctwell wall had ruptured. [ technical consultant, at a cost that }

• d *g.
• og 4 During the nest two years. similar i

. eventually totated $23 mittion. ac-M ':. 9 48 r I * -(y safety relief-valve problems, al. {, cording to l'E cfficials. PE's share to

d. t '

4 W ' though not as serious. were cmpert. GE for the twi> unit Limerict plant 3

• ?,Y
• 7.  ;*.

. came to more than 5 cnitison, the f y,j officials said. j

4. s

e.

t L

C ( APPEND 1X 6 O e Y -f ~ L

p~ 2*%_

• ~

~ CA?AC[.. TALTCPS Oi FA !"JCLIAR r* AMT5 AS DEP'RTCD IN NUREC 0020 i l I i 1980 1961 1982 1983 1984 Throu7h 3/31 e Year L1fetime Year Lifetime Year Lifetime Year Llfetime Year Lifetime 8 Date Cap. Cap. Cap. Cap. Csp. Cap. Cap. Cap. Cap. Cap. of factor Factor ractor Factor rector rector ractor Factor ractor factor [ l Pa. Commercial (MDC)' (MDC)* (MDC)* (MDC)* (MDC)' (HDC)* (MDC)* (MDC)' (MDC)* (MDC)* Plant-Company Operation (NCT)** (NET) ( NET ) " (NET)** (NCT)** (NET) (HET)** ( H ET ) " (HET)** (NET)" 8 1 d i I y meaver Duque sne/ 10/01/76 4.2% 26.4% 65.7% 34.8% 37.9% 37.74 65.9% 39.9) 80.3% 41.48

• [

/ alley 1 Penn Pwr. 4:- b ~J Peach PECO 07/05/74 47.1% 63.4% 72.01 64.6% 52.1% 63.1% 48.3% 61.6% 81.6% 62.1% L. 3ottos 2 y s \\ ) ~, A reach PICO 12/23/74 79.6% 65.9% 34.5% 62.3% 94.11 66.3% 25.7% 61.9) 83.31 62.5% i ,'//] 30ttom 3 ? '. *C,A. .y ,;alem 1 PEco 06/30/77 60.0% 43.1% 65.5% 45.1% 43.3% 47.2% 56.9% 48.7% 51.7% 48.8% g I .) r.. c., .[, CT salem 2 PEC31 10/13/81 NR 76.8% 76.St 82.0% 81.0% 7.7% 48.0% 25.7% 45.7% H . '*.f ;...o ,O g .,7. ' M susquehanna PP&L 06/05/83 Na NR NR 68.8% 69.01 10.7% 51.2% .,"y! t-Ih \\ '. l85 f M.I.1 Met Ed/ 09/02/74 .01 54.G) 0.1 47.:) .0) 41.5% .01 37.2) .01 35.3 ( {C Penelec ..9

1. ?f

• • i

?.M.I.2 Met Ed/ tiot t:o t Not Not Not i,gg { .g, { Penele: Reported eted Peported Reported Repc ted Reported .:,.y, - '.h. D ~~ w t 'f .=3ximum Dependable Capacity 3.',

• • ?:e t Energy Generated for Use r

I, 1 All salen 2 tatut being soM to Jersey c:ntal, tMough 12/;;/24 { I-Y.

• , i.

f;U-Z..I';i.,' .. C,, s. yhj.,:% t','g***.==5, s o <.29 9 .s _. 9.;.*. 5v .* '; L-W . - ----- a e r a e . N Jed.E.F%Am7 q> '^ "^ "

Nuclear Nuclear Powerplant Operations Nuclear Maximum Portion of Dependable C Nuclear.Dased Domestic Capacity Operable Efectricity Electricity

• of Operable Capacity Reactors's Generation

' Generation Reactors'

• Factor
• Million not Million net ki'owatt hours Percent kilowatts Percent 1973 39 83,473 4.5 22.000 52.9 1974 48 113,976 6.1 31.710 48.3 1975 54 172,505 0.0 33.312 53.7 1976 60 191,104 9.4
• 43.277 57.8 64.1 19 77 65 250,803 11.8 46.046

.s 12.5 49.623 65.7 - 1978 70 276,403 G8 255,155 11,4 49.326 59.7 1979 - ~70 251,116 11.0 51.053 ~57.5 1980 1981 74 272,674 11.9 55.534 58.4 1982 January 74 25,070 12.2 55.481 62.2 February . 74 20.108 11.2 55.476 54 2 March 74 22,755 12.1 55.421 55 2 April 74 21,785 12.6 55.230 54.0 May 74 21,633 12.2 55.230 52.7 June 74 24.026 12.0 55.320 60.3 Juy. 74 25,467 12.1 55.105 62.0 August 75 24.986 12.1 SG.203 59.7 September 76 ' 25.331 14.1 57.600 61.2 October 75 23,248 13.4 57.345 54.4 November 77 23.235 13.4 53.531 54 2 December 77 24,376 13.2 59.552 55 0 YEAR 77 282,773 12.6 53.552 57.2 1983 January ~ 77 25,073 12.0 S3.S32 SG G February '77 22.108 12.9 59.G32 55 4 March 77 23,800 13.1 50.632 53 0 Apr3 - 77 22,335 13.1 53.655 52.1 May 78 22.051 12.7 53.803 49 5 June 79 24,152 12.6 61.606 54.4 July 79 25,602 11.6 61.230 - 56 2 August 79 26,201-11.1 61.440 57.3 September 80 25.007 12.7 62.227 55 8 October 80 25,797 13.8 62.876 55.1 November 80 25.010 13.6 62.809 55.3 December 80 ' J,361 12.4 62.003 55.5 YEAR 80 233,677 12.6 62.809 54.8 .'r 29,135 W. 13.5 62.772 62.4 ...,q 80 - January- ~, .; 1984 Februar/ '80. 28,340 15.0 62.942 64 7 March 81 26,613 13.3 RS4.03 S 55.9 Apri 82 24,103 13.3 165.031 151.6 Table F 'MonthPy data are the status as of thelast day of the' month. Yearly data are the status as of Occember 31 of each year,

• See Note 1 on the last page of this section for the definen.
• When posssbie, tiet mammurn dependable capacity WDC) is used. When a reactor has not operated long enough to permit determination of a nel MOC, the nel design electrical rating (DER) is used. The capacities for some un:ts have been reduced to reffect the jmposition of a power limit'* by the Nuclear fleQutatory Commission or by the operating utdity. For the definitions of net f. TOC and DER, see Note 3 on the last page of this section.

[ 'For an empfanation of the method of catCu!ating the capacity factor, see Note 4 on the fast page of this section. (Preliminary data. R = Revised data. L Note:

• Geographic coverage is the 50 States and the District of Cotumbia.

Sources:

• See the last page of this section.

83 Monthly Energy Review April 1984 EnerDY nformation Administration I 9

u:1 cJ siugwpy uol:ewerju[46sau3 i = pggt ipdy CIAsu A6cu3 A 41u;W 1 } 69 vocess sigilo eSed Iset ey ses. :tesJnog 'e!qwnlog jo 33u S'O Oyl pue soie:s 09 syi s! s5eJoaos osydea6oes. 'uo.noas sN 30 eLed ase)AuguJ esnesaq pasa s! (U30) Su!:es groupa ays uo C aloN 88S t)On) Moedes eigepuedap wnuepeu. lau e ep!wanop c: papasu apuagadas scuo!:eJado aya pey nou aney s !un ey: Jo uoq!u!jop ay: Joj uo! pas s!y lo sted seg sy uo Z elon sage co! !uijap ey: Jo; uogoas sty: so eSed 3s:1 aus uo 1 eson eas. 'Jeal yara Jo LC saqwa300 jo se snie:s aq a;r eiep tenvuy yluow ey: 30 Aep tseg eyt jo se snie:s syn eJe eiep A ivon. N b= D D1921 r 521 tCL 0 3 0 Lt C 29 pdf 521 tCL 0 2 0 9t C LS 433en ' SZL PCL 0 Z 0 67 C Og Lega3 SZL tCt 0 2 0 67 C 03 henuer 9B65 CZL SCL 0 2 0 CS C 09 Jaqwasa0 ICL CCI O Z 0 SS 1 09 J84W8^oN CCI !?! 0 2 Z 99 1 09 >*40PO SCL Ctt O Z C LS I 09. Jaqwa;das PCL Ct1 O i C LS 2 64 Itn50Y tCL Cri 0 3 C LS Z 64 har FCt Ctt 0 Z C LS Z 64 aunc PCI Ctt 0 Z C 49 C BL Arn SCL CFL 0 Z C LS P 24 Ludy SCt th! 0 E C .CS C 24 43.eW SCL tti 0 2 C 09 - Z 21 Asewa3 SC1 ttL 0 Z-C 03 g L henwer. ggst SCL til 0 2 C 09 Z LL Jeqwassa SCL tt! O Z C 09 Z' 24 Ja4W*^0N CCL lt! O Z C t9 C SL

• • 40330 SCL Gil 0

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• '9

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henuer 'Ze6L

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C W. APPENDIX 7 t 9 O of 1

TABLE 6.1. 1 NET CAPITAL ADDITIONS FOR NUCLEAR STATIONS IN T11E U.S. Average Industry Average Industry 1983 Year Dollars Per Kilowatt Dollars Per Kilowatt 1970 1.5 3.4 1971 1.8 4.1 1972 4.0 8.6 1973 5.3 10?8 1974 4.7 8.9 1975 4.7 8.1 1 1976 6.5 10.6 1977 10.6 16.4 1978 9.2 13.3 - 1979 8.6 11.4 1980 20.1 24.3 1981 24.0 26.6 1982 21.8 22.7 1983 22.9 22.9 t Table I =f e (. 9

TABLE 2 GROWTH IN NET CAPITAL ADDITIONS FOR U.S. NUCLEAR STATIONS Average Annual Growth Average Annual Growth in Current Dollar per in 1983 Dollar per Years KW Costs KW Costs 1970-1978 25.3% 17.5% 1970-1983 23.0% 14.7% .e b h e 9 4 g e Y

• T*

i Table J i --,4. .m r,---

TABLE 5.2 OPERATIONS'AND MAINTENANCE COSTS FOR NUCLEAR STATIONS IN THE U.S. Average Industry Average Industry 1983 Dollars Year Dollars per Kilowatt Per Kilowatt 1970 5.7 13.5 1971 5.0 11.3 1972 6.4 13.8 1973 6.4 ,13.0 1974 9.6 17.9 1975 10.2 17.5 1976 12.1 19.7 1977 13.6 21.0 1978 16.8 24.1 1979 20.9 27.6 1980 29.2 35.3 1981 34.2 37.8 1982 40.5 42.2 1983 46.1 46.1 TABLE 5.3 GROWTH IN O&M COSTS FOR U.S. NUCLEAR STATIONS C Average Annual Growth Average Annual Growth in Current Dollar per in 1983 Dollar per Years KW Costs KW Costs '1970 1978 16.3% 9.0% 1970-1982 19.6% 11.6% 9 .e b Table K

( O e a APPENDIX 8 ef O +

m n-w-

ANALYSIS OF ARTHUR D. LITTLE, INC. REPORT: ECONONIC A!:D ENVIRONMENTAL IMPACTS OF THE ELECTRIC POWER SUPPLY OPTIONS OF THE LUKENS STEEL'CO. This rsc'rt was prepareu in connection with Lukens Steel company's re_ quest to alter its, electric service from PECO to PP&L. I. Employment ++ Lukens Steel presently averages 4,000 employees. 'Of enese, 16.6% reside in Coatesville; 69% in the rest of Chester County; 12.1% in the rest of Pen,nsyivania; and 2.3% in other states. Lukens accounts for 90% of manufacturing-employment in Coatesv111e and -50% of total empicyment. II. Purchases Lukens'(in 1980), had total purchases of gpods and serviced. million, 54.4% of which was made in Pennsylvania. III. _ Electricity Purchases and Costs In 1979, total. electric demand was 852 KWH/ ton of steci produced or, approximately 577 million KWH with a demand of 95,000 KW (on peak). In 1981, .Lukens was paying 5.68, cents per KWH. Total cost for electricity at 1981 rates would be $32.77 million. IV. Increased Cost of Electricity From 1974-1981 From 1974,-1978, electricity costs paralleled sales. After that da t e,, - huge increases in electricity costs occurred. In 1974, cost was 2.08 cents /KRH. This' increased to 3.3 cents /KWH in 1979. From 1979 to 1981 the cost went from 3.3 cents /F.WH to 5.68 cents /KWH.'. Using 1975 as a base year (100), electric costs were 186 in 1980, while Lukens revenue's were 122.2. slectric costs for Lukens have risen f' aster than all other oper'ating costs, which were 125.9, using the 1975 ' base year. Again using 1975,:it is useful to note th,t electric costs to Lukens l were: (_ N e

1975 - 100 1978"= 108 [" 1980 = 186 Similarly, Lukens profits in 1980 were 43.1% of-its 1975 level, while electric costs were 186% of the 1975 level. V. Comparative Costs of Electricity for Lukens Compared With Other Steel Manufacturers follows: Using PECO rates at a base of 100, comparative rates are as PECO = 100

• Los Angeles = 108 Delmarva. (Phoenix Steel) = 86

~ Houston P & L (U.S. Sinc * ' Armco) = 72 ' Baltimore G & E (Bethlehem Steel) = 70 Duquesne'(U.S. Steel) = 69

• Los Angeles' higher rate reflects a high dependence on oil and gas'to generate electricity.

VI. Impact on Lukens Even~though Lukens has reduced the KWH/ ton used in its arc furnacc from 530 KWH/ ton (1976) to 490 KWH/ ton (1981), its costs have still skyrocketed. Because of this it is cheaper to import raw steel from Canada and other off-shore countries than to melt and produce it. Consequently, Lukens is at a competitive disadvantage. khehighcostofele.ctricityreducesits' carn 1ngsanditsability ~ to generate capital.' Because Lukens is. in competition with other steel companies .that,have lower costs, it can't' raise its prices; nor can it compete with imports. ~ The only way it can; reduce its costs,is to cut its electricity costs. This is so because: -r (a) it has no control over the price of steel. (does not / I control the market). \\ 9

O (b) it has.no control over imports: (c) wages are difficult to cut, since its employees are members of USW, which seeks parity throughout the industry. Because of its inability to generate capital, Lukens will'not, at present, consider modernizing its plants. Unless el'ectricity. costs come down, as much.as 50% of Lukens'. raw .c steel may have to be purchased. This would reduce electric use 30%. Employment would be reduced by 300, and material purchases in the United States would drop $59 million/ annually. In addition', Lukens could redu'ce the production of marginallyprofitableproducts,resultingin26blost. jobs,andreduced purchases of $6 million. VII. Forecast of Usage of Electricity It is expected that Lukens will reduce its usage.o.f electricity from a rate of 852 KWH/ ton (1979) to 727 KWH/ ton (1985-86), because of efficiency. ( In 1986, average annual power purchased should be 582 millio,n KWH compared to 690 million.KWH in 1978. Peak load demand would range from 87,000 to 95,000 KW, ~ depending on efficiency'. VIII. Forecast of Rates and Impact on Lukens, If Remains With PECO PECO rate per KWH will' jump f rom 5.68 cents (1981) to 7.69 (1992). PP&L will rise from 3.20' (1981) to 5.36 (1992). From 1985 to 1990, if a switch occurred, cost savings would be in excess of.3 cents /KWH, while after 1990, savings would drop to 2.33 cents /KWH..Today, PP&L's fixed costs are 3/4 of PECO ~ and its energy costs are 1/2. By 1986, PP&L demand charges will double and its energy charges will drop 33%. PECO's demand charges will ' triple by 1986, and its energy charges will rise 50%. This means.that PP&L's rates will increase 25% above its present level, while PECO's will rise '30%. / I 8 e s v

If Lukens remains a PECO customer. it will have to reduce its usage (' by 188 million KWH. This will be done by reducing steel productien, and cut sales of. low margin items..The imp'act of these cutbacks will be a loss of Retail sales 560 jobs directly, and an indirect. loss of 840 jobs statewide. of SS.8 million (Coatesville) and $25.9 million (statewide) will be lost annually. Taxes tost will be S.3'million (Coatesville), and $2.7 million Covernment costs in the nature of benefits will rise $3 million/ (Pennsylvania). year. If Lukens does not remain.a PECO customer, it will reduce its elec-i .tricity costs $17.5 million/ year. 'The impact on PECO would be to reduce its i revenues 1%; its interest coverage would rise 1.6%; and there would be no 4 t i change in its' return on equity. As to PP&L, revenue would increase 1.7%; return on common equity would decline by slightly more than 1%; and interest coverage would fall 4.5%. Residential rates for PECO vould increase 50 cents i for 100'KWH and increase 26 cents'for PP&L. Industrial rates for PECO would increase 3/4% and.15% for PP&L. S 9 9 9 0 t 9 O d Y g -f T / .(, b 4-

C APPENDIX 9 O e Of C

HISTORY AND DISPOSITION L ~OF CANCELLED NUCLEAR POWER PLANTS Allens Creek 1 4 Houston Lighting and Power ordered this 12,00 MWe boiling water reactor in March 1973. Prior to const ruction, the unit was cancelled in' August 1982 af ter costing S362 million. The . Texas PUC allowed the utility to recover a portion of its costs over ten years with no return allowed on any unamortized balance. Atlantic 1 & 2 These of fshore 1150 MWe units were ordered by Public Services Electric and Gas Co., Jersey Central Power and Light and Atlantic City Electric in September of 1972 and cancelled in ( January of 1978 after costs of $328 million. Both units were proposed as. pressurized water reactors to be designed by Westinghouse. The New Jersey.BPU allowed partial recovery to the three utilities over a twenty year period. Baily Nuclear Northern Indiana Public Service Co. ordered this plant in January 1977 but cancelled the project in August 1981 after completing less than 1% of the project and spending S191 million. Baily was, designed as a boiling water reactor capable of producing 644 MWe. The Indiana PSC allowed Northern Indiana to recover a portion of - its cost over a fif teen ye.ar term. -e +

(: Black Fox 1& 2 These twin 1150 MWe boiling water reactors were owned primarily by the Public Service Co. of Oklahoma and ordered in December 1973. After constructing 5% of unit 1 and 2%~of unit 2, the project was cancelled in February 1982 at a cost of $390 million. The Oklahoma Corp. Commission allowed the utility to recover part of its costs over ten years and to earn a return on money _that was borrowed or came from preferred equity. Callaway 2 Union Electric.Co. of Missouri ordered this 1150 MWe pressurized water reactor in.Tuly 1973 but cancelled in October 1981 after completing less than 1% of the project and ( spending S70 million. No plan for recovery has yet been I developed because a second unit at the site, Callaway 1, is still under construction. Cherokee 1, 2& 3 Duke Power Co. ordered this project in April 1973. All three units were designed as pressurized water reactors capable of producing 1280 MWe each. Units 2 & 3 were cancelled in November 1982 prior to construction after costing Sf8 million. Cherokee 1 was cancelled in May 1983 after 17% of the work had 4 .been completed and S199 million.had been expended. No plan for cost recovery has yet been decided. .c ~ (-

J 1

,.w., y ,,m, .r,

I ( Clinch River The United States Department of Energy ordered this unique licuid metal fast breeder reactor capable of producing 375 MWe in November 1972. Af ter spending $1.5 billion on development costs, the Department of Energy was denied further funding for the project in October 1983. Costs will likely be absorbed by the Federal Government. Douglas Point 1& 2 The twin 1178 MWe units were ordered by the Potomic Electic Power Co. of Maryland in September of 1972 and cancelled in July of 1977. These boiling water reactors were designed by_ General Electric, but construction never got underway. The utility incurred costs of $65 million before cancellation. The costs were allocated to rate payers by three commissions. The District of Columbia PSC allowed Potomic Electric to recover _all of its costs over a ten year period. The Maryland PSC and Virginia SCC, however, allowed only partial recovery over a ten year period. The Virginia SCC, in addition disallowed recovery of land costs. Erie 1 & 2 and Davis-Besse 2 & 3 These seperate projects were owned by a coalition of utility companies composed primarily of Ohio Edison, Cleveland Electric Illuminating and T'oledo Edison. Erie 1 & 2 were ordered in July of 1976 dnd designed as pressurized water-reactors' capable of producing 1260 MWe each. Davis-Besse 2 & 3 j j (..

i l k were planned also as pr asurized water reactors but capable of only 906 MWe each. .oth projects were cancelled in July 1980 after little or no work having been completed. Erie cost $107 million and Davis-Besse $120 million. All three utilities were allowed partial recovery over ten years by the commissions involved, Federal Energy Regulatory Commossion and Ohio PUC. Forked River 1 Designed as a 1168 MWe pressurized water reactor, Jersey Central Power and Light ordered this unit' in December 1969. -After completina 5% of the project, the unit was scrapped in November 1980 at a cost of S414 million. The New Jersey BPU allowed Jersey Central to recover a portion of l( ~ ' ts costs-in decreasing amounts over fifteen years. i Greenwood 2 & 3 Detroit Edison ordered these units in April 1972 but cancelled in March 1980 prior to construction. The units were desianed as pressurized watei; reactors capable of pro-ducing 1264 MWe each and cost the utility S71 million. The Michigan PSC allowed Detroit Edison to recover a portion of its costs over a ten year period. Hartsville Al, A2, B1 & B2 The Tennessee Valley Authority ordered these four 1233 MWe boiling water reactors'in Decembe,r 1972. TVA cancelled ~ Bl'and B2 in ~ August 1982, af er completing 17% of the work on ~ (. B1 and 7% on B2 and spending a total of S718 million. Al & A2 were cancelled in August 1984 after 44% of the con-struction was completed on A1, 34% on A2 and $1.5 billion having been spent. TVA has not yet been authorized a recovery plan. Hooe Creek 2 Ordered in Auaust 1969 by Public Service Electric and Gas and Atlantic City Electric and designed as a 1067 MWe boiling water reactor, the unit was cancelled in December 1981 after 19% of the construction had been completed and S419 million had been spent on the project. The New Jersey BPU allowed both utilities to recover a portion of its costs in decreasing amounts over fifteen years. ( Jamesport 1& 2 Long Island Lighting and New York State Electric ordered these twin 1150 MWe pressurized water reactors in June 1973. The project was cancelled, prior to construction, in September 1980 after costing S120 million. Once again, the New York PSC allowed full recovery of all costs. New Haven 1& 2 Owned by Long Island Lighting and New York State Electric and Gas, these pressurized water reactors were designed to produce 1250 MWe each. They were ordered in July 1977 but cancelled in March 1980 after costing,$79 million. The New York PSC allowed full recovery to both utilities. ~ (. North Anna 3& 4 Virginia Electric Power Co. ordered this proposed 907 MWe pressurized water reactor in April 1971. Construction was halted on Unit 4 in November 1980 after 4% of the project had been completed and had cost $155 million. 'Af ter complet ing 8% of Unit 3 and spendina $512 million, the utility cancelled it in November 1982. The Virginia SCC and the West Virginia PSC allowed Vircinia Electric to recover a portion of its costs over ten and twenty years, respectfully. The North Carolina US allowed full recovery to the utility. Pebble Sprinas 1& 2 Three utilities, Portland General Electric Co., Pacific Power and Light and Puget Sound Power and Light ordered these C twin 1260 MWe pressurized water reactors. Unit 1 was ordered in February 1973 and unit 2 was ordered in May 1974. After spending $293 million prior to construction, the utilities can-celled the project in October 1982. The Oregon Commissioner and the Wyoming PSC denied recovery of all costs. Phicos Bend 1& 2 These twin 1233 MWe boiling water reactors were ordered by the Tennessee Valley Authority in August 1974. After completing 29% of Unit 1 and 5% of Unit 2, TVA cancelled the project in August 1982. TVA spent over $1.2 billion on the abandoned units. No recovery plan ha's yet been authorized. ..( Pilgram 2 This 1150 MWe pressurized water reactor was ordered by a group of New England utilities in March 1972. The unit was cancelled in September 1981 af ter costing S394 million but no construction having been completed.. A complex recovery plan followed. Massachusetts DPU allowed one utility, Boston Edison, to recover a portion of its costs over thirteen years but allowed only those funds used or construction to be amortized that came from loans and preferred equity. A second utility, Common-wealth Electric received similar treatment from the Massachu-setts DPU but was allowed to recover in only two years. The Vermont PBU~ allow':d a third utility, Central Vermont Public ( Service, to amortize its cost over a ten year period. Shearon Harris 3& 4 . Carolina Power and Light Co. ordered these twin 900 MWe pressurized water reactors in April 1971. After completing 1% of the work and spendina $187 million, the utility cancelled the unit in December 1981. Carolina P & L allowed the utility to amortize its costs over ten years but. allowed a return to be earned on money borrowed to finance the project. Shearon Harris 2 Carolina Power and Light ordered this 900 MWe pressurized water reactor as part of a four unit, project in April 1971. 1 Unit 2 was cancelled in December 1983 after completing 4% of W i -

the work and costing S315 million. No plan has yet been estab-lished to recover costs of unit 2. Carolina P & L was, however, allowed to recover a portion of its costs on Units 3 & 4 over ten years as outlined above. n Sterlina 1 Designed as a 1150 MWe pressurized water reactor, this unit was ordered by a consortium of four utility companies - ~ Orange and Rockland, Rochester Gas and Electric, Central Hudson Gas and Electric and.Niagra Mohawk Power - in July 1973. The project was cancelled in February 1980 after costing $129 million but prior to construction. The New York PSC allowed full recovery of all costs to all four utilities. S'undesert 1& 2 Designed as pressurized water reactors with a capacity of 950 MWe each, the San Dieco Gas and Electric Co. ordered these units in July of 1975 but cancelled plans in May of 1978 ~ l prior to construction. Expenses amounted to S92 million. The 4 California PUC allowed partial recovery over a five year period, but disallowed any AFUDC. Surry 3& 4 Both units were of the pressurized water reactor type designed by Westinghouse and each had a capacity of 859 megawatts (MWe). They were ordered ~by the Virginia Electric L. O

and Power Co. in September.of 1972 but were cancelled in March of 1977 before construction had begun but after the utility had expended $98 million. Four regulatory commissions were involved in the decision as to recovery of, costs by the utility - Federal Energy Regulatory Commission, Virginia SCC, West Virginia SCC and North Carolina UC. All four allowed the utility to recover only partial costs over a ten year period with no return allowed on any unamortized balance. The Virginia SCC, however, disallowed any recovery of allowance for funds used during construction (AFUDC). Tvrone 1 Northern States Power and Light Co. was the primary ( cwner of this 1100 MWe unit. It was ordered in July of 1973 but cancelled in August of 1979 prior to construction after costing $103 million. The FERC allowed Northern States to partially recover its costs over a ten year period..The Wisconsin PSC also allowed partial recovery but over a five year term. The Minnesota PUC, North Dakota PSC and South Dakota PUC all denied recovery but these decisions were later ~ reversed by state courts. Northern is now recovering a portion of its. costs. A minority owner, Lake Superior District Power, was allowed to recover all of its costs over five years by the Wisconsin PSC. -r +L 9-

e (. WPN 4 & 5 Washington Public Power Supply and Pacific Power and Light ordered these units in' July 1972. The units were designed as pressurized water reactors capable of producing,1250 MWe each. Af ter completing 24.9& of the work on unit 4 and 17% on unit 5, the utilities cancelled the. project in January -1982 at a cost of S2.225 billion. The utility commissions ir.volved, Oregon 4 Commissioner and Wyoming PSC allowed no recovery. The matter is presently being litigated. Yellow Creek 1 & 2 The Tennessee Valley Authority ordered these pressurized water reactors capable of producing 1285 MWe each. After ( completing 35% of unit 1 and 3% of unit 2, TVA cancelled the project in August 1984. A total of S1.21 billion was spent on the reactors. No recovery plan announced. Zimmer 1 Three utilities, Cincinnatti Gas and Electric, Dayton Power and Light and Columbus & Southern Ohio Electric, ordered this 810 MWe boiling water reactor in September 1979. After completing 97% of the construction and spending $1.7 billion, the utilities cancelled the project in January 1984. No recovery plan has been finalized at this time. 9 9 OL.

(

• \\

APPEtiDIX 10 (

• f L

"EETING 0F THE SELECT COM'11TTEE OFI LIMERICK IT Doon 140 - Main Ceoitol Buildina, Hba., Pa. Friday, September 14, 1984 ( The following witnesses were heard during a meeting of the Select Comnittee, connencing at 10:00 a.m. 10seph F. Daquetto. Vice President for Finance and Accounting Philadelphia Electric Co. (PECO) ?!r. Paquette up.s acconoanied by counsel: Charles Bcuser and. lanes P. Cousounis Thomas H. ' tiller, President Pennsvivania 9uilding '. Construction Trades Council Patrick Gillespie, Business Acent for the Council ( e -f

r AGEflDA 1 PilBLIC HEARIrlG ' SELECT C0 tift!TTEE Otl LIftERICK IFIIT II { Pottstown Junior. High School - Pottstown, Pa. Tuesday, October 23, 1984 From 7:00 p.m. to 10:00 p.m. -- the followina uitnesses were heard at aporoxinately 10 minute intervals. 7:00 p.n. . Mr. C. G. Bacon, Retired fluclear Engineer Rich Rosenblun and other Central Bucks Clean Energy Collective Clifford Little, Chairman - Science Department The Hill School 1 Pennsylvania Voice of Energy -- Virginia Brunner, Donna Beichl and flary Jo flaak . Pat Gillespie ?filliam R. Farallv, Jr., Business Reoresentative Sheet Metal llorkers, local d19 Peter Tinsman, Citizen-at-large Bonnie McCornick, Resident of Valley Forge 4 .The following people were not scheduled, but sioned up the evening of the hearing: Ray Vees James Buckwalter Robert Curcio Vera Hoff fiarvin Lewis Bernaro tjolf Phyllis Zitzer Peter Sickman Jin Gaut Suzanne Ercole Ronald E. Monro Dennis P. Elko Mercy Van Vlack David Stone Richard flyers Maureen flulligan i Ellen Curcio John Kostige Ken Read, Sr. Ralph Collick L

i AGEr10A 1 i - PUBLIC HEARit!G [ SELECT C0lit1ITTE ON LIf1ERICK II - ( City Hall. Philadelphia, Pa. Friday, November 2,1984 9:00'a.m. Comissioner Bill Shane Conmissioner Tlichael Johnson j Public Utility Commission i' 10:00 p.n. David marasch r j Office of the Consumer Advocate Comonwealth of Pennsvlvania - f i 11:00 p.n. James Panyard, Group Vice President / Governmental Affairs Philadelphia Chanher of Commerce 11:15 p.m. Vincent J. Malsh, Counsel / SEPTA Fron 1:30 p.m. to 5:00 p.m. -- the following wintesses were heard ~ 4' at aporoximatelv 10 minute intervals. 1:30 p.n. Citizens Action in Northeast (CANE), presentation on behalf 4 of flarvin f.ewis C.G. Bacon, Retired Nuclear Enaineer i Chuck Beichl, PECO Consumer Donna Wargo, Field Director i Youth for Energy Independence j ^ Carol Barnshau Rev. Alvin Taine l Carol Derring ] Kristin Dawkins, Pa. Energv Ratspavers Coalition Laurie Cameron, Gernantown Resident's Acting to Conserve Energy Jane Shull, Americans for Democratic Action i Allen Hornblum, Philadelphia Unemployment Project Alan Nogee, Environmental ~ Action Foundation i The Honorable Edward Schwartz, Councilman City of Philadelphia flax Weiner, Consumers Education A Protective Association flargaret Dardis i June Douglas, Resident of Philadelphia g

S.qEynA PUBLIC HEARIt!G SELECT CO."f1ITTEE ON LIf1ERICK UflIT II ( Bucks County Court House Community Doon Tuesday, November 13. 1984 Fron 1.:30 0.n. to 10:00 n.n. -- the following witnesses were heard at approxinately 10 minute intervals. 1:30 p.n. John Ccyle, Resident of Bucks County Rud Farallv. 9usiness Represcntative Sheet '!etal Workers Local *19 '! alter flannel, Resident of Newtown Township Or and firs. E.loar L. Eckfeldt Joseph Kazan,iian, Owner Giusepoi's Ice Parlor Heidi Hoover, Resident of flontoomery County Paul Beiger, Resident of Carnersville, Pa. Willian Tinsnan, Resident and Ratepayer of Lumberville, Pa. Carl F. Fonash, Bucks County Connissioner k Grace l'uscarella, Air ?. '!ater Pollution Patrol flargaret Dardis Arthur Greisinger, Jr., Resident of Doylestown, Da. Nicholas DiMuro, Resident nf Pottstown, Pa. Maureen Hurley, Resident of Erwinna, Pa. D.ichard licNutt, Industrial Engineer Cara Simonetta Spencer Bloor, Electrical Engineer EVENIt'G SESSION 7:30 p.n. Ed fleedham, Resident-of Lanahorne, Pa. Richard Torkelson, Peter Tinsman, Resident of Bucks County Susan Tinsman, ~ L Oominic Bonititis, Resident of Chalfont

Ken Beyer, Resident of Holland, Pa. Allen Fox, Resident of Roversford, Pa. (~ Charles Yarmark, Resident of Bucks Countv t! alt McRee, Resident of Bucks County Willian Schloo, "lew Britain Townshin Marinne Sciole Richard M. vers,florthampton Townshio flark D. Pornstreich, Perkasie, Pa. Janet 'lalker, New Hope, Pa. Thomas T. Tracv, Govlestown, Pa. Marv Ellen f!oble, Resident of Dovlestcun, o.a . lanes Farally Karl lleber, Resident of Doviestown, Pa. Pete Stollery ( Y -f w s

In addition to the oral testimony presented to the Committee durina ({ four public sessions in Harrisburg, Pottstown, Philadelphia and Doylestown, written statements also were directed to the Committee. These statements are on file. They emanated from: Dr. James R. Soang, President American Society of Utility Investors Dr. Jonathan Berger, Exacutive Secretarv Three flile Island Public Hea,lth Fund !!r. & firs. Walter F. f!cCurdv,.1r. Christopher Wilson !!ary Jo flaak Patricia E. fladsen 9arbara Ingram Deborah 0. Gannotta J. T. Cristaudo James and Anne Sloan ( Harold R. Caswell, Sr. Harold U. Schafer, Jr. F. Lane ifassev Louise !!artin Jim Crater Laura Hickershan fiarie H. 9ade Y -f s. 6 .}}