ML20209H910

Motion of Connecticut Light & Power Co & North Atlantic Energy Corp for Leave to Intervene & Petition for Hearing.* with Certificate of Svc & Notice of Appearance

ML20209H910
Person / Time
Site:	Seabrook
Issue date:	07/20/1999
From:	Gutierrez J CONNECTICUT LIGHT & POWER CO. (SUBS. OF NORTHEAST, MORGAN, LEWIS & BOCKIUS, NORTH ATLANTIC ENERGY SERVICE CORP. (NAESCO)
To:	NRC COMMISSION (OCM)
References
CON-#399-20662 LT, NUDOCS 9907210091
Download: ML20209H910 (16)

Text

e zou z-UNITED STATES OF AMERICA b:

NUCLEAR REGULATORY COMMISSION

'99 JUL 20 P4 :36

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OF in the Matter of

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North Atlantic Energy Service Corporation, Ital)

Docket No. 50-44dE Seabrook Station, Unit 1

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License No. NPF-86

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MOTION OF TIIE CONNECTICUT LIGHT AND POWER COMPANY AND NORTH ATLANTIC ENERGY CORPORATION FOR LEAVE TO INTERVENE AND PETITION FOR A HEARING L

INTRODUCTION i

Pursuant to 10 CFR { 2.1306 of the Nuclear Regulatory Commission's ("NRC" or "Com-mission") Rules of Prade and Procedure, and in response to the NRC's June 30,1999 Federal 1

1 Register Notice of Consideration of Approval of Application Regarding Proposed Corporate l

Merger and Opportunity for Hearing, see 64 Fed. Reg. 35190, The Connecticut Light and Power l

Company ("CL&P") and North Atlantic Energy Corporation ("NAEC") move to intervene in the above-captioned proceeding and petition for an oral hearing. CL&P and NAEC are co-owners and licensees of the Seabrool Station ("Seabrook").

On March 15,1999, New England Power Company ("NEP"), a co-owner and licensee of Seabrook, filed an application ("NEP Application") seeking authorization for an indirect transfer of control of NEP's ownership interest to The National Grid Group plc (" National Grid"), a 4

holding company incorporated in England and Wales. NEP currently owns a 9.9% interest in Seabrook.

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NEP is a whojly-owned subsidiary of New England Electric System ("NEES"), which entered into a merger agreement with National Grid on Decernber 11,1998. Pursuant to the proposed merger, NEES will become a wholly-owned subsidiary of National Grid, and NEP will remain a subsidiary of NEES# The effect will be an indirect transfer of the NEP interest to National Grid, an entity that is not an electric utility and that is a foreign entity. As described below, this license transfer, if approved, could affect the financial, property, and other interests of CL&P and NAEC as co-owners and licensees of Seabrook. Accordingly, CL&P and NAEC seek to intervene and request a hearing to ensure that these interests are protected.

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PETITIONERS MEET THE STANDARDS FOR INTERVENTION SET FORTH IN 10 CFR { 2.1306 AND 10 CFR 2.1308 The Commission's s+andards for granting intervention in nuclear power plant license transfer proceedings are set forth in 10 CFR { 2.1306 and 10 CFR { 2.1308.

A.

Identification of Petitioners Pursuant to 10 CFR Q 2.1306(b)(1), the names, addresses, and telephone numbers of peti-tioners are:

The Connecticut Light and Power Company North Atlantic Energy Corporation 107 Selden Street Berlin, Connecticut 06037-1616 (860) 665-5000 1/

NEES is currently in th:: process of merging with Eastem Utilities Associates, which own-Montaup Electric Company, an approximate 3% owner of Seabrook. In connection with this merger, NEP will acquire Montaup Electric Company's interest in Seabrook and as a result will own approximately 13% of Seabrook.

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' Service of documentyin this proceeding is to be made on:

Jay M. Gutierrez Esq.

William E. Baer, Jr., Esq.

Goran P. Stojkovich, Esq.

Morgan, Lewis & Bockius LLP 1800 M Street, N.W.

Washington, D.C. 20036.

(202) 467-7000 (202) 467-7176 (facsimile) guti7466@mlb.com (e-mail) baer7454@mlb.com (e-mail)-

stoj7684@mlb.com (e-mail)

B.

Petitioners Have Standing and a Strong and Clear Interest That Will be Affected by the Proposed Indirect Transfer Entities that "own (or co-own) an NRC-licensed facility plainly have an AEA-protected interest in license proceedings involving their facility." North Atlantic Energy Service Corp.

(Seabrook Station, Unit 1), CLI-99-6,49 NRC 201,216 (1999). As the Commission recently noted, "it is hard to conceive of an entity inore entitled to claim standing in a license transfer case

.than a co-licensee whose costs may rise, and whose property may be put at radiological risk, as a result of an ill-funded license ransfer. This kind of situationjustifies standing based on 'real

'vorld consequences that conceivably could harm Petitioners ed entitle them to a hearing."' hl.

at 215, quoting Yankee Atomic Electric Co. (Yankee Nuclear Power Station), CLI-98-21,48 NRC 185,205 (1998). For CL&P and NAEC, these real-world consequences would include

having to provide additional funding to make up for failures of a co-owner who is unable or i

unwilling to meet its financial obligations to Seabrook.

In this case, the NRC is asked to approve an indirect transfer of NEP's license to National Grid, a foreign entity that is not an electric utility. As co-owners and licensees of Seabrook, o

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1 CL&P and NAEC havedirect and vital interests in the following areas implicated in the proposed transfer:

the continued firvehl qualifications of NEP; and assuring appropriate mechanisms to prevent foreign control of NEP's license.

These issues are directly relevant to judgments that the Conunission must make in response to the proposed indirect transfer. As co-owners, CL&P's and NAEC's property interests in Seabrook will be affected if there is not a continued assurance of NEP's financial qualifications or if the extent of foreign control remains unclear. Specifically, CL&P and NAEC will be injured if the Commission grants the indirect transfer because the information in the NEP application does not provide sufficient assurance that NEP will remain financially qualified or that NEP's proposed " negation action plan" places appropaate limits on foreign domination or control. Accordingly, CL&P and NAEC may suffer financial harm and harm to their property if NEP no longer provides sufficient financial resources to support safe and efficient operation of Seabrook, or if NEP's foreign owner takes action not in the interest of this U.S. nuclear plant.

These injuries can be prevented or redressed by the Commission by denial of the proposed license transfer or by conditioning of the transfer on a showing of adequate financial assurances and appropriate mechanisms to prevent foreign control of the license. These interests are clearly within the " zone ofinterest" protected by the Atomic Energy Act of 1954, as amended,42 U.S.C. Q 2011, et. seg. (the "Act").

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C, Statement of Admissible Issues Petitioners seek to intervene and request a hearing on the following issues:

1.

NEP has not provided sufficient assurance ofits continued financial qualifications to support Seabrook as required by the Act and its implementing regulations; and 2.

NEP's " negation action plan"is not sufficient to prevent foreign domination or control as required by the Act and its implementing regulations.

Both of these issues fall squarely within the scope of this proceeding and are relevant and material to the findings NRC must make before granting an indirect transfer of NEP's license.

- With respect to each issue, there is a genuine and rnaterial dispute based upon the information provi6d in the Application, and Petitioners have provided facts and references supporting each issue.

1.

NEP has not provided sufficient assurance ofits continued financial qualifications to support Seabrook as required by the Act and its implementing regulations.

The issue of NEP's continued financiz : qualifications is both within the scope of this proceeding and relevant to the findings the NRC naust make to grant the application for license transfer. See 10 CFR Q 2.1306(b)(2)(i) & (ii). Section 182a of the Act authorizes the Cornmission to estabiish financial qualification requirements, and the Commission's regulations define the information that must be included in license applications. Specifically,10 CFR Q 50.80(b) requires that an application for transfer of control of a license must include tae information necessary to establish such financial qualification as provided in 10 CFR Q 50.33.

Pursuant to these regulations, an applicant may either: (1) establish that it is an " electric utility" ex:mpt from financial qualifications review pursuant to 10 CFR Q 50.3.Nf); or (2) submit 1.WA/12.,1201.t 5

3 information which demonstrates that the licensee either possesses or has reasonable assurance of l

obtaining the funds necessary to cover the estimated operating costs for the period of the license?

In implementing these regulations, NRC's guidance regarding the review oflicense transfers in connection with mergers makes clear that the NRC must either determine that "the surviving licensed owner... will remain an ' electric utility' as defined in section 50.2," or must evaluate the financial qualifications of a non " electric utility" applicant. NUREG-1577, Rev.1,

" Standard Review Plan on Power Reactor Licensee Financial Qualifications and Decommissioning Funding Anurance,"Section III.1.e. at 6-7 (March 1999) ("SRP"). NEP's continued financial qualifications are therefore directly within the scope of this proceedirg and relevant to approval of the requested license transfer.

Notwithstanding these requirements, NEP has not provided sufficient information in its application for the NRC to find that it, as the surviving licensed owner, will remain an " electric utility" within the meaning of 10 CFR (( 50.2 and 50.33(f). NEP's application also does not include the information required for the NRC'to find, as a non " electric utility," that NEP either possesses or has reasonable assurance of obtaining the funds necessary to cover estimated operating costs ofits share in Seabrook. The specific facts which support Petitioners' position with respect to the inadequacy of Applicants' financial qualifications are set forth below. See 10 CFR { 2.1306(b)(2)(iii) and (iv).

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10 CFR Q 50.2 defines an electric utilhy as an entity that generates or distributes electricity and which recovers the cost of this electricity, either directly or indirectly, through

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i rates established by the entity itself or by a separate regulatory authority, 6

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a NEP's applic,ation is silent on whether it will continue to qualify as an " electric utility" under 10 CFR QQ 50.2 and 50.33(f). Rather, the Applicant asserts that in the context of providing adequate assurance for decommissioning funding "NEP provides assurances equivalent to those offered by an ' electric utility' pursuant to 10 CFR Q 50.75." NEP Application at 6 (emphasis added). However, this assertion relates to decommissioning funding and neither addresses nor meets the standards regarding financial qualifications to support ongoing operations and maintenance. The Commission, therefore, has been provided with no basis for concluding that NEP will continue to be an electric utility after the merger (i.e., that it will continue to recover its share of the costs of generating electricity through rates established by a separate regulatory authority. See 10 CFR 50.2)J Given that NEP has provided no information for determining whether or not it will l

continue to qualify as an electric utility, the only basis for reviewing and approving NEP's continued financial qualification is an evaluation of NEP as a non-electric utility. However, NEP has similarly failed to piovide the information required of non-electric utilLies under 10 CFR QQ 50.33 and 50.80. Under these regulations, NEP is required to submit what is often called a "five-yearproforma," i.e., estimates for the total operatmg costs for five years and an indication of"the source (s) of funds to cover these costs." 10 CFR Q 50.33(f)(2). In addition, NEP may be required to provide "information on cash or cash equivalents that would be sufficient to pay fixed

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In this regard, the only information provided is a passing reference that a contract termination charge (CTC) for certain of NEP's affiliates in one ofits jurisdictions in which it operates contains a variable component that will enable NEP to recover "80% of the operations and mnintenance expenses and property taxes for the t' nits." See NEP Application at 44-45.

However, NEP provides no discussion or context to dete.mine whether it will remain an " electric utility" as defined in 10 CFR QQ 50.2 and 50.33(f).

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operating costs during an outage of at least six months" as suggested by the NRC's SRP.

NUREG 1577, Rev. I at 5.F Absent such information, the NRC has no basis for a determination that following the transfer NEP will continue to be financially qualified to meet its obligations under its ficense, and that the transfer is otherwise consistent with applicable regulations. See 10 i

CFR 50.80(c)(1) and (2). Therefore, NEP's application is defective and must be either cured or denied.

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NEP's proposed " negation act on plan"is not sufficient to prevent 2.

i foreign domination or control as required by the Act and its implementing regulations.

Under the Applicant's proposed transaction, NEES will become a wholly-owned subsid-iary of the National Grid Group plc, a "public limited company" incorporated under the laws of England and Wales. NEP will remain a wholly-ewned subsidiary of NEES. Accordingly, NEP will indirectly become 100% owned by National Grid, a foreign endty.

NEP's application recognizes that conditions must be imposed through a " negation plan" to ensure that this transaction fu':y complies with Q 103d of the Act, prohibiting issuance of a license to any alien or any corporation that is " owned, controlled, or dominated" by a foreign entity. This restriction is reflected in the Commission's rules at 10 CFR {@ 50.38 and 50.40(c).

Furthermore, the NRC's SRP on Foreign Ownership, Control or Domination requires that applicants propose a " negation action plan" to provide positive measures ta assure that the l

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The quoted guidance falls under Section III.l.b of the SRP which applias to " Operating License Reviews." Notably, however, the guidance for reviews oflicense transfers in Section III.l.e. specifically acknowledges that "the reviewer will use the criteria described in other sections ofIII.1 of this SRP, as appropriate, to conduct his or her license transf r reviews."

NUREG-1577, Rev. I at 6.

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foreign ownership interest is denied control or domination over licensee decisions. 64 Fed. Reg. 10166,10169 (March 2,1999).

NEP's proposed negation action plan fails to provide sufficient assurance that the license will not be controlled or dominated by National Grid and, therefore, NRC does not have a sufficient basis to find that the proposed transaction complies with the Act's prohibition against

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toreign control. It is without question that the issue of foreign control of NEP's licenses is both within the scope of this proceeding and relevant to the findings the NRC must make to grant the.

application for license transfer. 42 U.S.C. { 2133(d); 10 CFR { 50.38 and 50.40 (c). More specific facts and references are provided below. See 10 CFR { 2.1306(b)(2)(iii) and -(iv).

' Following the proposed merger, NEP will be 100% owned (through NEES) by National Grid, a foreign entity. Directly or through NEES, the NEP Board of Directors will be answerable to, and subject to appointment or dismissal by, National Grid. In other words, NEP's Board will be subject to control by National Grid. Furthermore, there do not appear to be any restrictions on Board membership of NEP, so that a majority of NEP's Board may ultimately be comprised of j

foreign nationals - an even more direct form of foreign control?

In an effort to mitigate foreign domination and control, NEP has proposed a "r.egation action plan," NEP Application at 32, that consists essentially of three elements:

(i)

A Nuclear Committee of the NEP Board, comprised of U.S. citizens, has j

been created and has been given authority over a range of nuclear matters, with the exception of mrtain rights reserved to the full NEP Board, id.;

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Four of nina of the Directors of NEES, including its Chairman, will be foreign nationals following the merger with National Grid. As with NEP, there appear to be no limits precluding NEES, the direct owner of NEP, from being controlled by a foreign-majority Board.

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(ii) _ Only the Nuclear Committee will have access to certain sensitive nuclear-related information, id. at 35; and (iii)

The Nuclear Committee will be free from any foreign control or influence, because Nuclear Committee members will be shielded by "whistleblower protection." Id. at 36.

As demonstrated below, this negation plan does not provide sufficient protection against foreign domination or control.

With respect to establishment of a Nuclear Committee, NEP's negation action plan is insufficient because it reserves fundamental rights over nuclear matters to the full NEP Board of Directors such that the full Board (which has no prohibition against foreign control), and not the Nuclear Committee, retains substantial control of the license. Among the rights reserved to the full NEP Board of Directors are:

the right to decide whether or not to close the facility and begin decom-missioning and whether to seek license renewal, id. at 33; the right to decide whether to sell, lease, or otherwise dispose of NEP's interest in the facility; and the right to take action ordered by the Commission or any agency or court of competentjurisdiction. Id.F In its " Preliminary Critet. i for Non-owner Operating Service Companies," the Commission enumerated areas to be considered when determining whether certain decision-n.aking authority is sufficient to constitute a transfer of an NRC license. 63 Fed. Reg. 54,389.

Included in these enumerated areas is the decision to permanently cease operations. Id. at CL&P and NAEC recognize that by reason of the Agreement for Joint Ownership NEP has limited authority to unilaterally implement any of these actions; nonetheless, the Petitioners remain concerned that decisions on whether or not to support ind, in turn, fund these actions remain in control of a foreign entity.

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w 54,390. As a p4actical matter, retention of this right (as well as the right to dispose of NEP's interest in Seabrook) by the full NEP Board provides it with tremendous leverage to influence the actions of Nuclear Committee members, as well as to directly impact operaticns and Petitioner's interests ai Seabrook by exercising the authority to withhold funds. Expressly reserving to the tull NEP Board final decisionmaking authority with respect to continuing or

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permanently ceasing operations is tantamount to a transfer of control of the license to National Grid. Thus, the negation plan is insufficient to provide assurance NEP's license will not be controlled or dominated by a foreign interest.

Another of the powers reserved to the full NEP Board of Directors is the right to "take action" ordered by this Commission or any v.her agency or court of competentjurisdiction. NEP Application at 33-34. This exception is overly broad and provides the opportunity for a poten-tially foreign-controlled NEP Board to bypass the Nuclear Committee's authority to act on nuclear matters that are addressed by an agency or court order. The authority to "take action" in response to an order would logically encompass the right to decide whether to comply, challenge, or how to interpret such an order. All of these determinations go to the essence of the respon-sibility of being an NRC licensee. In these instances, a foreign-controlled NEP Board would be able to bypass the Nuclear Committee and exert the very control prohibited by the Act. Thus, the proposed negation action plan does not provide adequate assurance that NEP's license will not be cot kolled or dominated by any foreign interest?

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NEP's purported extension of"whistleblower protection" to Nuclear Committee mem-bers similarly adds no greater assurance that the Nuclear Committee and NEP's license will not be dominated or controlled by a foreign interest. The Commission's "whistleblower" regulations (continued...)

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i, III.

CONCLUSIOiy For the foregoing reasons, CL&P and NAEC respectfully request that they be permitted to intervene in this proceeding and that a baring be granted on the issues presented. If NEP is given the opportunity to cure the defects in its application, the Petitioners respectfuliy request that (1) they be provided thirty days to review and assess the new information provided by NEP, and (2) they be provided with an opportunity to amend, supplement, or withdraw this Petition based upon their assessment of any such new information.

Respectfully submitted, d4yW1. Gutiegz, Esq. /

William E. Baer, Jr. Esq.

Goran P. Stojkovich, Esq.

Counsel for CL&P and NAEC Morgan, Lewis & Bockius LLP 1800 M Street, N.W.

Washington, D.C. 20036 (202) 467-7466 (202) 467-7176 (facsimile) guti7466@mlb.com (e-mail)

July 20,1999 2/(... continued) contained in 10 CFR Q 50.7 prevent any licensee - foreign dominated or otherwise - from dis-criminating against any employee for engaging in " protected activity." Id. at 37. The existence of this regulation does not vitiate or supplant the Act's separate prohibition on foreign domination or control. In short, the purported endorsement of 10 CFR Q 50.7 (which would apply in any event) in NEP's negation action plan provides nc additional assurance that the licensee will not be controlled or dominated by any foreign interest and would not prevent harm as a result of that domination.

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DOCKETED UNITED STATES OF AMERICA ggupp NUCLEAR REGULATORY COMMISSION

'99 JUL 20 P4 :36

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NORTH ATLANTIC ENERGY SERVICE )

Docket No. 50-443 CORPORATION, claL

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Seabrook Station, Unit 1

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NOTiC OEAPPEARANCE The undersigned, being an attorney at law in good standing adndtted to practice before the courts of the District of Columbia, hereby enters his appearance as counsel on behalf of petitioners The Connecticut Light and Power Company and North Atlantic Energy Corporation, in any proceeding related to the above-captioned matter.

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JpfAi, Guti ez MORGAN, EWIS & BOCKIUS LLP 1800 M Street, N.W.

Washington, D.C. 20036 Telephone: (202) 467-7466 Facsimile: (202) 467-7176 E-Mail: guti7466@mlb.com Dated: July 20,1999 I WA:126095.1

s DOCXETED

,7 UNITED STATES OF AMERICA USlp7c NUCLEAR REGULATORY COMMISSION

'99 JUL 20 P4 :36 0,

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In the Matter of

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NOR'1H ATLANTIC ENERGY SERVICE )

Docket No. 50-443 CORPORATION, et.aL

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Seabrook Station, Unit 1

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NOTICE OF APPEARANCE The undersigned, being an attorney at law in good standing admitted to practice before the courts of the District of Cohunbia, hereby enters his appearance as counsel on behalf of petitioners The Connecticut Light and Power Company and North Atlantic Energy Corporation, in any proceeding related to the above-captioned matter.

/ b William E. Baer, fr.

MORGAN, LEWIS & BOCKRJS LLP 1800 M Street, N.W.

Washington, D.C. 20036 Telephone: (202) 467-7454 Facsimile: (202) 467-7176 E-Mail: baer7454@mlb.com Dated: July 20,1999 1.WA:1261395.1

UNITED STATES OF AMERICA b

~ ' ' i NUCLEAR REGULATORY COMMISSION

'99 JA 20 P 4 :36

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os In the Matter of

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NORTH ATLANTIC ENERGY SERVICE )

Docket No. 50-443 CORPORATION, et.aL

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Seabrook Station, Unit 1

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NOTICE OF APPEARANCE The undersigned, being an attorney at law in good standing admitted to practice before the courts of the District of Columbia, hereby enters his appearance as counsel on behalf of petitioners The Connecticut Light and Power Company and North Atlantic Energy Corporation, in any proceeding related to the above-cc oned matter, f

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7 Goran P. Stojkovich U MORGAN, LEWIS & BOCKIUS LLP 1800 M Street, N.W.

Washington, D.C. 20036 Telephone: (202) 467-7684 Facsimile: (202) 467-7176 E-Mail: stoj7684@ndb.com Dated: July 20,1999 l-WA:1261395.1

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CERTIFICATE OF SERVICE l

I hereby certify that copies of the foregoing Motion and Notices ofgpearance have been served upon the following by courier this 20th day of July,1999.

JUL 20 P4 :36

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Office of the Secretary OF U.S. Nuclear Regulatory Commission Rt, ADJL Attn: Rulemakings and Adjudications Staff Washington, D.C. 20555-0001 I hereby certify'that copies of the foregoing Motion and Notices of Appearance have been served upon the following by facsimile, with a conforming copy deposited in the U.S. mail, first class, postage prepaid, this 20th day of July,1999.

Office of the General Counsel Samuel Behrends IV, Esq.

U.S. Nuclear Regulatory Commission Mary A. Murphy, Esq.

Washington, D.C. 20555-0001 Yvonne M. Coviello, Esq.

LeBoeuf, Lamb, Greene & MacRae, L.L.P.

Lillian M. Cuoco, Esq.

1875 Connecticut Avenue, N.W., Suite 1200 Senior Nuclear Counsel Washington, D.C. 20009 Northeast Utilities Service Company 107 Selden Street Paul K. Connolly, Jr., Esq.

Berlin,CT 06037 LeBoeuf, Lamb, Greene & MacRae, L.L.P.

260 Franklin Street i

Edward Berlin, Esq.

Boston,MA 02110 Scott P. Klurfeld, Esq.

Swidler Berlin Shereff Friedman, LLP 3000 K Street, N.W., Suite 300 Washington, D.C. 20007-5116 Thomas G. Robinson, Esq.

New England Power Company Ap. Gutij( ez i

25 Research Drive Westborough,MA 01582 i

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