ML20212J201

Safety Evaluation Supporting Transfer of Dl Ownership Interest in Pnpp to Ceico

ML20212J201
Person / Time
Site:	Perry
Issue date:	09/30/1999
From:	NRC (Affiliation Not Assigned)
To:
Shared Package
ML20212J153	List: ML20212J145 ML20212J158 ML20212J201
References
NUDOCS 9910050072
Download: ML20212J201 (5)

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( -t UNITED STATES l 8 a NUCLEAR REGULATORY COMMISSION E

• WASHINGTON, D.C. 2055H001

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SAFETY EVALUATION BY THE OFFICE OF NUCLEAR REACTOR REGULATION l FOR THE LICENSE TRANSFER FROM DUQUESNE LIGHT COMPANY TO THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND APPROVAL OF CONFORMING AMENDMENT PERRY NUCLEAR POWER PLANT. UNIT NO.1 DOCKET NO. 50-440 OPERATING LICENSE NO. NPF-58

1. LICENSE TRANSFER .

I Because of the numerous parties involved in this application, the following acronyms and abbreviations will be used; i CAPCO Central Area Power Coordination Group {

CEICO The Cleveland Electric illuminating Company l DLC Duquesne Light Company FE FirstEnergy Corporation FENOC FirstEnergy Nuclear Operating Company l

FERC Federal Energy Regulatory Commission IRS Internal Revenue Service NRC United States Nuclear Regulatory Commission OE Ohio Edison Company OES OES Nuclear, incorporated Penn Power Pennsylvania Power Company Perry Perry Nuclear Power Plant, Unit 1 PUCO Public Utility Commission of Ohio TE Toledo Edison Company 0 INTRODUCTION By application dated May 5,1999, CEICO, DLC, and FENOC requested approval for the direct transfer of the license for Perry, to the extent held by DLC, to CEICO. This application requests that the NRC, pursuant to 10 CFR 50.80, issue an order consenting to the Ucense transfer in connection with the transfer of DLC's 13.74-percent interest in Perry to CEICO, an existing  ;

owner of Perry.

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2.0 BACKGROUND

FE indirectly owns 86.26 percent of Perry through its subsidiaries, as follows: CEICO owns 31.11 percent, TE owns 19.91 percent, Penn Power owns 5.24 percent, and OE and OES together own or lease 30.00 percent. DLC, an electric utility not a corporate affiliate of FE, currently holds the remaining 13.74-percent ownership interest in Perry, which represents approximately 164 megawatts. The Perry operating license presently authorizes these electric utility companies to possess Perry as owners. FENOC, also an FE subsidiary, is authorized to operate Perry, but holds no ownership interest in the plant. (On December 2,1998, the NRC issued an Order Approving Application Regarding the Transfer of Operating Authority, pursuant to 10 CFR 50.80, consenting to the transfer of operating authority under the Perry license to FENOC.)

On October 14,1998, DLC and FE agreed, in principle, to the transfer of 1,436 megawatts of capacity owned by DLC, at eight (three nuclear and five coal-fired) generating units, in exchange for 1,328 megawatts of capacity at three coal-fired power plants owned by FE subsidiaries, Penn Power and CEICO, subject to the requested regulatory approvals. On March 25,1999, CEICO and Penn Power signed a Nuclear Generation Conveyance Agreement (Conveyance Agreement) with DLC, wherein DLC agrees to convey and CEICO and Penn Power agree to acquire DLC's ownership interests in Perry and Beaver Valley Power Station, Units 1 & 2.

(Beaver Valley Power Str. tion, Units 1 & 2, is addressed in a separate safety evaluation report.)

At the same time, DLC, CEICO, and Penn Power signed a Generation Exchange Agreement (Exchange Agreement), which provides for the transfer of CEICO and Penn Power wholly owned coal fired plants in Ohio and Pennsylvania to DLC. The three coal-fired plants will then be included in DLC's planned auction of its generating assets pursuant to a restructuring plan approved by the Pennsylvania Public Utility Commission on May 29,1998.

The Conveyance Agreement and the Exchange Agreement would result in the exchange of nuclear and coal-fired generating assets. In addition, DLC's transfer would make Perry wholly owned and operated by FE-affiliated subsidiaries.

3.0 FINANCIAL QUALIFICATIONS The following financial qualification analysis is based on the information provided by CEICO, DLC, and FENOC in their Application for Order and Conforming License Amendment for Transfer of Interest in Operating License No. NPF-58 for the Perry Nuclear Power Plant, dated May 5,1999.

CEICO is a wholly owned subsidiary of FE. CEICO's purpose will remain the same as it is now, which is to engage principally in the generation, transmission, and distribution of electric energy to residential, commercial, and industrial customers in Ohio. CEICO is an electric utility within the definition set forth in 10 CFR 50.2. CEICO will continue to generate and distribute electricity and to recover the costs of this electricity through rates authorized by PUCO and by FERC.

Therefore, CEICO submits that it is not required to meet the requirements of 10 CFR 50.33(f) l l

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applicable to non-electric utility applicants. The staff finds that, based on CEICO continuing to l remain an electric utility after the acquisition of DLC's 13.74 percent of Perry, no further specific l demonstration of financial qualifications is needed.

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CEICO is already required to provide the Director of the Office of Nuclear Reactor Regulation a copy of any application seeking to transfer from CEICO any electric utility assets having a

' depreciated book value exceeding 10 percent of its consolidated net utility plant to any FE

. affiliated company by the " Order Approving Application Regarding Merger Agreement Between I

Centerior Energy Corporation and Ohio Edison Company," dated June 18,1997. This requirement will not be altered and will remain in force after the instant transfer has been completed.

On the basis of thc information submitted in the application of May 5,1999, the staff finds that j CEICO is financially qualified to hold the Perry license to the extent proposed in the application. J 4.0 TECHNICAL QUALIFICATIONS -

The technical management and nuclear organization of FENOC currently responsible for operating and maintaining Perry will continue to be responsible for the operation and maintenance of Perry after the asset exchange is complete, and will not change as a recult of the ownership transfer. The current Perry organization consists of four departments staffed by FENOC personnel: Perry Nuclear Power Plant; Perry Nuclear Maintenance; Perry Nuclear Engineering, and Perry Nuclear Services. These four departments report to the FENOC Vice President-Perry, who reports to the FENOC President and Chief Nuclear Officer. The asset transfer does not involve any change to these reporting relationships. The nuclear organization will continue to have direct lines of responsibility and authority. Although specific individuals may leave or join the nuclear staff, and/or titles or responsibilities may change, no changes will be the direct result of the acquisition of DLC's ownership interest by CEICO. The technical and administrative abilities of FENOC will remain essentially unchanged. Therefore, the technical qualifications of FENOC to carry out its responsibilities under the operating license will remain "

unchanged in connection with the subject license transfer.

The staff finds that the proposed acquisition of DLC's ownership interest in Perry by CEICO will not alter the technical qualifications of FENOC to cperate Perry.

I 5.0 ANTITRUST '

This application does not seek any changes to the existing Perry antitrust license conditions, other than removing DLC from them as an administrative matter. The Atomic Energy Act does

, not require or authorize antitrust reviews of post-operating license transfer applications. Kansas l Gas and Electric Co.. et al. (Wolf Creek Generating Station, Unit 1), CLI-99-19,49 NRC . slip op. (June 18,1999). Therefore, since the transfer application was filed after the issuance of the

' Perry initial operating license, no antitrust review is required or authorized.

~ 6.0 FOREIGN OWNERSHIP CEICO is a corporation organized and existing under the laws of the State of Ohio, and does business in Ohio. CEICO has provided the names and addresses of its directors and principal officers. According to the application, "All of CEl[CO)'s directors and (principal] officers are

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citizens of the United States. CEl[CO) is not owned, controlled or dominated by an alien, foreign corporation or foreign government." The NRC staff does not know or have any reason to believe otherwise.

7.0 DECOMMISSIONING FUNDING

The NRC has determined that the requirements to provide assurance of decommissioning funding and provision of an adequate amount of decommissioning funding are necessary to ensure the adequate protection of public health and safety.

Section 10 CFR 50.33(k) requires that an application for an operating license for a utilization facility contain information indicating how reasonable assurance will be provided that funds will be available to decommission the facility.

CEICO, OE, TE, Penn Power, and DLC recently filed decommissioning reports with the NRC {

under 10 CFR 50.75(f)(1) and are providing financial assurance for decommissioning their {

respective interests in Perry in accordance with those reports through external sinking funds in l which deposits are made at least annually. Following the transfer of the DLC ownership interest {

in Perry, the FE companies will continue to use the external sinking fund method and either l have funds available or make additional annual contributions sufficient to meet the NRC j minimum funding requirements in 10 CFR 50.75(c) consistent with the financial assurance l requirements of 10 CFR 50.75(e). In connection with the transfer of DLC's interest in Perry, j DLC will transfer the existing decommissioning funds of approximately $11.4 million for Perry as  !

of December 31,1998, and DLC will provide auditional decommissioning funding to cover the l

shortfall in funding for Perry as provided in Section 6.19, and specifically in Section 6.19.3, of the !

Conveyance Agreement. Subject to certain adjustments pursuant to Section 6.19 of the )

Conveyance Agreement, DLC will provide $21.6 million in additional funds for a total cf

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approximately $33 million. Both parties agree to use their best efforts to secure a tax-advantage transfer of all of DLC's decommissioning funds. If the necessary IRS rulings are not obtained, DLC will be responsible for ensuring that CEICO receives an equivalent amount of additional funding on an after-tax basis, as provided in Section 6.19 of the Conveyance Agreement. The staff finds the foregoing decommissioning funding arrangement acceptable, provided its completion is a condition to approval of the transfer.

ll CONFORMING AMENDMENT

8.0 INTRODUCTION

l In the application dated May 5,1999, the applicants also submitted a request for changes to the PNPP facility operating license. The requested changes would remove Duquesne Light l Company from the operating license.  ;

1 9.0 EVALUATION  !

The purpose of this proposed license amendment is to remove references to DLC in the license to accurately reflect the approved transfer. The amendment involves no safety questions, and is administrative in nature. Accordingly, the proposed amendment is acceptable. l l

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l . The Commission has ,ancluded, on the basis of the considerations above, that (1) there is reasonable assurance that the health and safety of the public will not be endangered by operation in the proposed manner, (2) such activities will be conducted in compliance with the Commission's regulations, and (3) the issuance of the amendment will not be inimical to the common defense and security or to the health and safety of the public.

10.0 STATE CONSULTATION

- In accordance with the Commission's regulations, the Ohio State official was notified of the proposed issuance of the amendment. The State official had no comments.

11.0 ENVIRONMENTAL CONSIDERATION

The subject application is for approval of the transfer of a license issued by the NRC and approval of a conforming amendment. Accordingly, the action involved meets the eligibility ,

criteria for categorical exclusion set forth in 10 CFR 51.22(c)(21). Pursuant to 10 CFR 51.22(b), 1 no environmental impact statement or environmental assessment need be prepared in i connection with approval of the application. I I

12.0 CONCLUSION

in view of the foregoing, the NRC staff concludes that regarding the proposed transfer of DLC's ownership interest in Perry to CEICO, CEICO is financially qualified to hold the license as proposed in the application, and the proposed transfer will not affect the technical qualifications of FENOC, the licensed operator of Perry. Also, there do not appear to be any problematic antitrust or foreign ownership considerations related to the Perry license that would recult from the proposed transfer. Thus, CEICO is qualified to hold the Perry license to the extent proposed in connection with CEICO's acquisition of DLC's ownership interest in Perry, and the transfer of the license is otherwise consistent with applicable provisions of law, regulations, and orders issued by the Commission, subject to a condition that the decommissioning arrangements set i forth in the application shall be implemented and fulfilled as discussed above in section 7.0 of j this safety evaluation. l Principal Contributor: M. A. Dusaniwskyj j Date: September 30, 1999  !

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