ML20212E789
| ML20212E789 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 08/01/1997 |
| From: | Backus R BACKUS, MEYER & SOLOMON |
| To: | Shirley Ann Jackson, The Chairman NRC COMMISSION (OCM) |
| Shared Package | |
| ML20212E774 | List: |
| References | |
| NUDOCS 9711040062 | |
| Download: ML20212E789 (3) | |
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B ACKUn, MC YER, SOLOMOtt ROOD & BR ANCH AftonNrv$ AT LAW ms LowtLL Sintti soH Mrvrn'
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" J "a^NCH m1 ne u u,, m D AN'N HOOD-T UC M E H r< s et 84 7 A sat at b August 1, 1997 AMENDED LETTER Hon. Shirley Jackson, Chairman U. S. Nuclear Regulatory Commission Washington, D.C.
20555-0001 Ret Great Day power Decommission funding Exemption
Dear Chairman Jackson:
Sinco my letter to you of July 20, 1997, concerning the abovo, I received the actual exemption issued on behalf of the Commission, which appeared in the Federal Register for July 29th.
Although this exemption contains some information that was not in the environmental assessment, the end result is the samot a
serious abdication of a regulatory responsibility on the part of the Commission's staff, now aoopted by the Commission.
- Moreover, I believe the Commission should be gravely concerned about the precodont this exemption will set.
Today, Great Day Power is, to my knowledqe, the only non " utility" nuclear plant owner.
However, as the Commission will be aware, the oncoming rush of utility deregulation in generation makes it probable that, in the very near future, a large number of nuclear plant reactors will be operated by entitles that are not electric utilities within the meaning of 10 CFR, 550.2.
If the one nuclear plant owner that is today clearly not in that category, Great Bay Power, is granted an exemption from decommissioning requirements, on what basis will the Commission resist granting wholesale exemption from decommission funding requirements for non-utility nuclear plant owners in tho emerging world of deregulated electric power gonoration?
The exemption also makes clear that, notwithstanding the staff's conclusion, waiving the exemption for a one year period does contravono the underlying purpose of the rule, contrary to the requirement of 10 CFR 550.12(b((ii).
The purpose of the rule is to insure that companies owning nuclear plants which are not regulated electric utilities have the financial capability to meet the decommissioning funding requirements associtted with their ownership of a nuclear plant as codified in 10 CFR 50.75.
The exemption finding concedes that Croat Bay Power has 9711040062 971020 PDR CONMS NRCC CORRESPONDENCE PDR l
insufficient working capital, even if combined with a partial guarantee from its former parent company to fully satisfy its decommissioning obligation should decommissioning occur within the exemption period.1 Despite this important concession, the rationale for the exemption states that based upon Great Bay Power's projected " income and cash flow", that the commission can assume that Great Bay will be able to meet its obligations during this period.
But the VGry purpose of the rule was to permit the commission to assure the public that non-utility owners would not have to rely on always doubtful projections of future revenues from power sales as being sufficient for decommissioning needs.
The fact that the estimates of future power costs are almost inevitably in error, and provide too frail a read on which to find assurance for nuclear decommissioning funding, is the very reason for requiring non-utility owners to provide external funding assurance.
In this regard, materials furnished by Great Bay Power indicate substantial reliance on the projection of future market prices for power provided by Lacapra Associates to the New Hampshire Public Utilities Commission, in connection with that. commission's
" Final Plan for Utility Restructuring". (See attached responses to staff queries.)
The commission should be aware that the Lacapra figures, which assumed a market price for power generation of 4.53 cents per kilowatt hour in 1988, are vigorously contested by the utilities, including Northeast
. Utilities, the principal owner of Seabrook, as being far too high.
In other words, the very figures that Great Bay Power relied on to convince the commission that its future market prices would be sufficiently conservative to meet its decommissioning obligation, are specifically disavowed as too high by the utilities whose subsidiary operates the station.
Again, the point is that projections of future power prices are not a sufficient basis to assure adequate decommissioning funding generally, or for' Great Bay Power in particular.
In other words, although the commission has correctly found that Great Bay Power is not an electric utility because it lacks cost based rate regulation, it has now used the very absence of rate regulation as a basis for being treated precisely the same as a rate regulated utility.
The conclusion that the exemption does not undermine the purposc of the regulation is wholly without
'Although the exemption is now for one year, whereas the environmental assessment discussed five years, the difference is irrelevant to the analysis and, moreover, it is foreseeable, if not inevitable,that there will be a succession of "one year exemptions" extending into the indefinite future.
2
support in fact or in logic.
It is, therefore, arbitrary and capricious.
Finally, the exemption refers to creat Bay Powor's " good faith" in attempting to obtain a suroty bond.
A " good faith" offort to attempt to comply is not the equivalent of compliance, and does not provido assurance of the public health and safety.
" Good faith" accompaniod by substantial complianco might be sufficient.
" Good faith" with no compliance is not.
Tho Commission must revisit this ispuo.
If the Commission declinos to insist that Great Bay Power pro-fund its obligations, one of the funding assurance muthods provided for in the regulations, then it should demand that an equivalent method of assuring funding is provided.
As I previously suggested, this could be a requiremont that one or more of the joint owners, who are rato regulated, commit to mooting Great Bay power's obligation for decommissioning.'
The Commission could also domand that Great Bay Power soll or transfor its share to a rate regulated owner, if it is unable to comply with the Commission's i
lawful requirements.
What the Commission cannot do, without being arbitrary and l
capricious, is what it has donos simply abandon the regulatory requiremont, on the blatantly unsupportable claim that doing so is lawful because it does not " undermine the purposo" for the regulation.
Beyond any question, the Commission's exemption does undermine the very purpose of the regulation:
the assuranco of the funding for the thorough and snfo decommissioning of the nuclear reactor at Soabrook w"aa nooded.
Very truly yours, lobert A.
ckus RAB/acw cc:
Governor Joanne Shahoon Congressman Ed Markey Congressman Joe Kennedy Georgo Iverson SAPL H.J.
Diaz, Commissioner Grota J. Dicus, Commissioner Edward McGraf figan, Jr., Commissioner Kenneth C.
Rogers, Commissioner Douglas Patch, Chairman, NHMDCFC 2Soveral of the joint owners on at least two occasions in the past provided construction financing for a defaultirq owner during the Seabrook construction, tcking back a debt os
.gation.
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June 16,1997
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Mr. Albert W. De Agazio Project Manager Nuclear Regulatory Commission OWFN, Room 1412D 14 C7 Rockville. MD Re:
Great Bay Power Corporation
Dear Mr. De Agazio:
On June 4.1997 Grew Bay Power Cosporation filed a " Supplement to Great Bay Power Corporation's Petition for Partial Reconsideration of Exemption Order to Submit Requested Cost Data and to Request, in the Altemative, a Funher Exemption" with the NRC.
After a preliminary review, the NRC staff responded with thre: inquiries:
a)
What is the meaning of the term "Decomminioning Accretion Expense" as it appears on the financial submittal of BayCorp Holdings. Ltd., the parent corporation of Great Bay?
i b)
Why were the actual results for the final quarter of 1996 less than those projected in Great Bay's forec.sst dated October 10.19967
'. I' c)
Why are the financial projections protTered by Great Bay considered conservative and artamable?
Great Bay respectfully responds to these inquiries in Atte :hment "A" hereto.
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- SHAW. PITTMAN. PoTTs 0 TCoweCloct
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Mr. Alben W. De Agazio June 16.1997 Page 2 We tmst this additional infonnation will enable the statY to either promptly determine that Great Bay is an " electric utility" as defined in 10 CFR f 50.2 or to grant the extended exemption requested, "in the alternative" by Great Bay.
Rypectfuity.
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Counsel for Great Bay Power Corpola, tion Enclosures ec:
Frank Geunan Ted Feigenbaum (without Exhibit ".s')
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Attachment "A" 4
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- 1)
.What is the mesning of the term " Decommissioning Accretion Expense" as it ap;rars on the financial submittal of Bay Corp Holdinga. Ltd.. the parent l
corporation of Great Bay?
j Decommissinning Accreinn Expense Description i
i IJnlike any other utility in the nation, Great Bay already complies with the new proposed FASB rules for accounting for decommissioning. Great Bay currently recognizes the entire present value ofits future decommissioning liability on its balance sheet. This figure was $53.2 million as of 12/31/%. Since it is a present 3
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value number, this liability must' grow to reflect the passage of time until the j
actual time of decommissioning in 2026. Accordingly, Great Bay " accretes" a portion ofits decommissioning liability each year. Bis accretion is a non<: ash l
charge which recognires the Company's decommissioning liability in current year dollars over the license life of the plant. The accretion expense, however, does _
i not reflect the actual growth otShe funds in the decommissioning trust fund, ne accretion expense is an accounting rectual and not a reporting of the actual funds ;
deposited by the Company in the trust fund during the period. While it is true that the Decomminioning Liability and Decommissioning Trust Fund asset on the Company's balance sheet will equal one another at the end of the license lif,r, the j
[
- Decommissioning Liability grows at a steady escalation rate whereas the Trust Fund grows geometrically d':e to compounding. The Decommissioning Trust -
l j
Fund line item on the Company's balance sheet is a "real" number).dch reflects i
the actual dollar amount in the fund. By 2026._ the current Decommissioning L
Trust Fund of approximately $6.,7 million will " catch up," due to the annual l
contributions to the Trust Fund and compounding over time, and equal the Decommissioning Liability, which will have increased due to the annual accretion -
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expense. Contributions to the Decommissioning Trast Fund are not shown as an l
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" expense." but rather a use of cash on the Company's cash flow statement.
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. 2)
Why were the actual results for the final quarter of 1996 less than that projected
- [
on Great Bay's forecast dated October 10.19%?
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- The largest single reason for the ditTerential between the October 10,1996 projection and actual fourth quarter results was due to an acceleration of sne 1997 -
scheduled refueling outage from August 1997 to May 1997 due to reliability l
j ;
-concems of the New England Power Pool and the potential lack of generating j
espacity dunng the peak summer season. As a resuh, the cutage expense accrual l
and the nuclear fuel amonization were increased by $519,000.00 in the final t
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4-quaner of 1996c Other factors contnbut:ng to the dirTerence between the October projectior; and the actual higher costs were the SRCN s 50 54 fi requirement for t
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yvyc IQ 199 7 design twis documentation, which was not in the Seabrook budget as of October 1996, cert 4n Seabrook year-end material wnte-offs, and a catch up in billings by a
sendors.
3)
Why are the financial projections proffered by Great Bay considered conservative and attainable?
Exhibit "A" to this Attachment is a table' showing Wholesale Price Projections by various parties for calendu years 1998 2001. Included are the Low, Base and High p ojections submitted for the New. Hampshire Public Utilities Commission on January 3,1997 by Lacapra,Laociates. The LaCapra projec: ions are based on an analysis of the least cost combination of NEPOOL ger.erating sources, by hour.
l Lacapra identified the highest cost genenung unit that is chosen to operate by the l
Pool in each hour in the forecast years. That unit's vanable cost was defined by LaCapra as the " hourly energy clearing price." By definition, any unit with a variable cost below the '" energy clearing Mce" can successfully market its generated electricity. The vanable costs at Seabrook are significantly below all of the projections in Exhibit "A"; accordingly, Exhibit "A" demonstrates that Great Bay's wholesale price pmjections used in constructing the projections in Exhibit I to Great Bay's ? Supplement to Great Bay Power Corporation's Petition for Partial
- Reconsideration of Exemption Order to Submit Requested Cost Data and to Request, in the Altemative, a Further Exemption" are consenative and can be realized.
l The information in Exhibit "A" peninent to Great Bay is identical to some of the wruitiw, confidential, commercial and tinancial information contained in the unredacted s ersion of Edibit l' to Great Bay's June 4.1997 Supplement for which Great Bay requested propnetary wnhholding from public disclosure, and Great Bay's request for such w,thbolding dated June 3.
i# s equally applicable to it i
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