ML20210T063

Safety Evaluation Approving Application Re Proposed Restructuring of Enova Corp,Parent Company of San Diego Gas & Electric Co by Establishment of Holding Company W/Pacific Enterprises

ML20210T063
Person / Time
Site:	San Onofre
Issue date:	08/29/1997
From:	NRC (Affiliation Not Assigned)
To:
Shared Package
ML20210T038	List: ML20210T030 ML20210T040 ML20210T063
References
NUDOCS 9709120271
Download: ML20210T063 (4)

Text

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SAFETY EVALUATION BY THE OFFICE OF NUCLEAR REACTOR REGULATION I PROPOSED RESTRUCTURING OF PARENT OF SAN DIEGO GAS AND ELECTRIC COMPANY SAN ONOFRE NUCLEAR GENERATING STATION. UNITS 1. 2. AND 3 DOCKET NOS. 50-206. 50-361. AND 50-362 1,0 BACKGROUND San Diego Gas and Electric Company (SDG&E) is a 20-percent possession only co-owner of San Onofre Generating Station (SONGS), Units 1, 2, and 3 (Possession Only License DPR-13, and Operating License Nos. NPF-10 and NPF-15.

respectively). The remainder of the ownership is held by Southern California Edison Company (the sole authorized operator), the City of Anaheim, California, and the City of Riverside, California. SDG&E is a wholly-owned subsidiary of Enova Cor3 oration (Enova), which is proposing to restructure itself by combining witi Pacific Enterprises (Pacific), a holding company i

engaged in supplying natural gas throughout most of southern and central California through its wholly-owned subsidiary, Southern California Gas.

Company.

Enova and Pacific propose to combine to form a new holding company, Mineral Energy Com]any which, after subsequent intervening transactions to effectuate the comaination, will become the parent company of both Enova and Pacific. As a result of the merger, SDG&E will become a second-tier subsidiaryofMineralEnergyCompanythroughitsaarentcompany,Enova,but will remain an " electric utility pursuant to 10 CFR 50.2, and will also continue to be a 20 percent owner of the SONGS units. No direct transfer of the operating licenses or ownership interests will result from the proposed restructuring.

According to SDG&E's application to the Nuclear Regulatory Commission (NRC) dated December 2, 1996:

Pacific and Enova view the combination of the two companies as a natural outgrowth of the utility deregulation and restructuring that is resha and throughout the nation. ping The energy markets combination joinsintwo California companies with highly complementary operations that are geographically contiguous. The combination is expected to 3rovide substantial strategic financial, and other aenefits. These benefits include a greater capacity to compete effectively in a changing regulatory environment.

... an ability to consolidate corporate and administrative functions, [and] the capacity to draw on a large and more diverse pool of management... (Application dated December 2, 1996, p. 3)

DR DOCK 0 206 P PDR

Under 10 CFR 50.80. "No license for a production or utilization facility, or any right thereunder, shall be transferred, assigned, or in any manner disposed of, either voluntarily or involuntarily, directl through transfer of control of the license to any person,yunless or indirectiv, the Comission shall give its consent in writing." (emphasis added). SDG&E requested NRC consent to the extent the restructuring of Enova will effect a transfer of control of the SONGS licenses within the scope of 10 CFR 50.80.

2.0 FINANCIAL 00ALIFICAT10NS Based on the information provided in SDG&E's December 2, 1996 application, the staff finds that there will be no near-term substantive change in SDG&E's financial ability to contribute appropriately to the operations and decommissioning of the SONGS units as a result of the proposed restructuring.

SDG&E also would remain an " electric utility" as defined in 10 CFR 50.2.

engaged in the generation, transmission, and distribution of electric energy for wholesale and retail sale, the cost of which is recovered through rates established by the California Public Utility Commission and the Federal Energy Regulatory Commission (FERC). Thus, pursuant to 10 CFR 50.33(f) SDG&E is exempt from further financial qualifications review as an electric utility.

However, in view of the NRC's concern that restructuring can lead to a diminution of assets necessary for the safe operation and decommissioning of a licensee's nuclear power plants, the NRC has sought to obtain commitments from its licensees that initiate restructuring actions not to transfer significant assets from the licensee without notifying the NRC. SDG&E has made such a comitment:

"SDG&E hereby agrees to provide the Director of Nuclear Reactor Regulation with 60-day prior notice of a transfer (excluding grants of security interests or liens) from SDG&E to its proposed parent or to any other affiliated company of facilities for the production, transmission or distribution of electric energy having a depreciated book value exceeding one percent (1%) of SDG&E's consolidated net utility plant, as recorded on SDG&E's books of account." (SDG&E letter of March 24, 1995)

Notwithstanding SDG&E's comitment regarding the transfer of 1% of SDG&E's consolidated net utility plant. the staff believes such a comitment at a 10%

threshold as a condition to the NRC's consent to the proposed restructuring, will enable the NRC to ensure that SDG&E will continue to maintain adequate resources to contribute to the safe operation and decomissioning of the SONGS units.

3.0 MANAGEMENT AND TECHNICAL OUALIFICATIONS SDG&E is a co-owner only licensee for the SONGS units and thus is not involved in the actual operation of the facility, which is exclusively the responsibility of Southern California Edison Com)any. To the extent relevant to SDG&E's stctus as a co-owner only licensee. SE&E's application states that there will be no change in the management and technical qualifications of SDG&E's nuclear organization as a result of the restructuring. The proposed

I ,

, , holding company structure retains the utility as a discrete and wholly separate entity that will function in the same fashion as it did prior to restructuring.

Based upon the continuity of SDG&E's nuclear organization and management described above, the staff finds that the proposed restructuring will not adversely affect SDG&E's technical qualifications or the management of its nuclear plants.

4.0 ANTITRUST Section 105c of the Atomic Energy Act of 1954, as amended (the Act), requires the Commission to conduct an antitrust review in connection with an application for a license to construct or operate a utilization or production facility under Section 103 of the Act. Here, although Mineral Energy Company may become the second tier parent of SDG&E as a result of the proposed I

restructuring, and thus ma SONGS units held by SDG&E,y indirectly filed the ap)lication acquire control of by SDG&E the not does licenses for the indicate that Mineral Energy Company will )e performing activities for which a license is needed. Since approval of the application would not involve the issuance of a license, the procedures under Section 105c do not-apply, including the making of any "significant changes" determination. In addition, no changes to the existing antitrust license conditions are being proposed, and no changes i

will occur as a result of the restructuring of Enova. Accordingly, there are no further antitrust matters that must be considered by the Comission in connection with the SDG&E application.

5.0 FOREIGN OWNERSHIP Information before the staff indicates that one percent or less of both Enova's and Pacific's voting stock are held by foreign accounts, and that under the proposed restructuring plan, one percent or less of Mineral Energy Company's stock will be held by foreign accounts following'an exchange of Enova and Pacific shares for Mineral shares. The NRC staff does not know or have reason to believe that either Enova or the proposed parent company.

Mineral Energy Company, will be owned, controlled, or dominated by any alien, foreign corporation, or foreign government as a result of the proposed restructuring.

6. 0 - ENVIRONMENTAL CONSIDERATION Pursuant to 10 CFR 51.21 and 51.35, an environmental assessment and finding of no significant impact was published in the Federal Reaister on June 1,1997 (62 FR 35532).

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-- e 7,0 CONCLUSIONS In view of the foregoing, the staff concludes that the pro >osed restructuring of SDG&E's parent company, Enova, through the proposed com)1 nation with Pacific, to form a new holding company Mineral Energy Company, will not-i adversely affect SDG&E's financial or technical qualifications with respect to-the operation and decommissioning of the SONGS units. - Also, there do not appear to be any problematic antitrust or foreign ownership issues requiring further consideration related to the SONGS licenses that would result from the proposed restructuring or the transactions to facilitate such a restructuring.

Thus, the proposed restructuring will not affect the qualifications of SDG&E l

as a holder of the licenses, and the transfer of control of the licenses to the extent ef fected by the proposed restructuring, is otherwise consistent with applicable provisions of law, regulations, and orders issued by the Commission. Accordingly it is concluded that the application regarding the proposed restructuring should be approved.

Principal Contributors: R. Wood M. Davis Date: August 29, 1997

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