ML20214J530

Provides Conclusions Based on Review of Informing NRC That Shareholders Approved Restructuring Plan Creating Holding Company.Nrc Consents to Proposed Ownership of Util by CMS Energy Corp

ML20214J530
Person / Time
Site:	Palisades, Big Rock Point, 05000000
Issue date:	05/22/1987
From:	Virgilio M Office of Nuclear Reactor Regulation
To:	Buckman F CONSUMERS ENERGY CO. (FORMERLY CONSUMERS POWER CO.)
References
TAC-65118, TAC-65119, NUDOCS 8705280088
Download: ML20214J530 (5)

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'o UNITED STATES 8

NUCLEAR REGULATORY COMMISSION.

's WASHINGTON, D. C. 20655

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May 22, 1987 Dockets Nos. 50-155/255 Dr. Frederick Buckman Vice President Consumers Power Company 1945 West Parnall Road Jackson, Michigan 49201

SUBJECT:

CORPORATE RESTRUCTURING PLAN (TAC N05. 65118 & 65119)

Re:

Big Rock Point Plant, Facility Operating License No. DPR-6 Palisades Plant, Provisional Operating License No. DPR-20 By a letter dated May 6, 1987, you informed us that the shareholders of Consumers Power Company (CPCo) approved a restructuring plan creating a holding company.

Your letter stated that on May 22, 1987, CPCo will become a wholly-owned subsidiary of the new holding companyt CMS Energy Corporation (CMS or "the Holding Company").

You had previously, on April 16, 1987, submitted the details of the restructuring plan.

On May 21, 1987, you reiterated your earlier r'equest for our approval of this action by May 22, 1987, and asked us to reconsider our previous position that we could not approve the action prior to May 29, 1987.

We have reviewed the information contained in your letters dated April 16, 1987 and May 6, 1987 to ascertain that the proposed action:

(1) will not reduce funds available to CPCo to carry out activities under its Operating Licenses; (2) will not adversely affect the management of CPCo utility operations; and (3) will not result in CPCo becoming owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government.

Based on our review of the information provided in your letters and in CPCo's March 18, 1987 prospectus for CMS and Proxy Statement for CPCo, and CPCo's Annual Report to the Security and Exchange Commission, dated December 31, 1986, we have made the following determinations:

(1) Following the restructuring, CPCo will remain a public utility providing the same utility service as it did prior to the restruc-turing.

CPCo indicates in its application that the purpose of the restructuring is to provide increased financial and organizational flexibility to enhance company assets.

Utility and nonutility businesses would be more clearly separated than at present.

CPCo would maintain its focus on the public utility business.

CPCo indicates that the separation of utility and nonutility activities 8705280088 870522 PR ADOCK 05000155 PDR.

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would tend to insulate the utility from any adverse effects of nonutility activities.

In turn, the nonutility enterprises would have greater financing flexibility to enhance their activities and profitability,- without any impact on the capital-structure or credit of CPCo.' The nonutility enterprises could then pursue business opportunities which have the potential for enhancing the financial strength and operating results of the holding company according to CPCo.

I On May 11,.1986, we discussed the proposed restructuring with officials of the Michigan Public Service Commission (MPSC). -They' indicated that after the restructuring,- CPCo would continue to be regulated as to retail rates by the MPSC as at present.' Sales of electric power for resale would continue to be regulated by the Federal Energy Regulatory Commission (FERC). : Thus, they confirmed that there will be no change in CPCo's source of funds for operating its utility facilities,. including coverage of' operating costs and' eventual decommissioning costs of the Palisades and Big Rock Point Plants.

That source is the utility revenues derived from the 4

regulated rates charged,to utility customers. The MPSC will monitor the financial relationship between CMS and CPCo to, among other things, assure that utility resources are not siphoned off to non-l utility subsidiaries.

1 Utility capital. costs.(including any capital improvements.or additions to the nuclear units) would continue to be financed through a combination of internally generated funds (derived from customer' revenues) and security issues.

Long-term debt securities and any preferred stock would be issued by CPCo as at present. Additional

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issues of common stock to raise outside capital for CPCo, however, would be issued by the holding company. This is the usual financial relationship between a utility holding company and the utility sub-sidiary.

4 The NRC's explanation of its financial qualifications rule (49 Federal Register 35747, September 12,1984), is relevant to this case.

NRC stated that the rate regulatory process conducted by State i

public utility commissions (such as the MPSC in this case) and FERC l

provides reasonable assurance that utilities can obtain the funds to operate nuclear plants safely. As discussed above, the rate regula-tory process as it relates to CPCo and the funding of its-operating j

costs will not be disturbed by the proposed holding company arrange-i ment.

In conclusion, there will be no adverse change.(as a result of i

I the proposed restructuring) in CPCo's sources of funds for nuclear plant-operating, decommissioning and capital costs.

(2) CPCo also states that the restructuring will have no significant effect on the management of CPCo utility operations.

The Chairman, 4

President and Chief Executive Officer of CPCo is also the Chairman,'

. President and Chief Executive Officer of the Holding Company.

CPCo's Vice President, Nuclear Operations, will retain-responsibility for i

nuclear operations, reporting to CPCo's Executive Vice President, Energy Supply, who in turn will continue to report to the Chairman, President and Chief Executive Officer of CPCo.

Officer responsibil-q ities at the Holding Company level will have no direct effect-on-j nuclear' operations.

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.(3)? Finally, CPCo states that the proposed restructuring will not result.

Lin CPCe becoming owned, controlled or dominated ~by an alien, a

-foreign corporation, or.a foreign government.- The.present common shareholders of CPCo will, in'the restructuring, become the common

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shareholders of the Holding Company in the same proportion in which they currently hold CPCo. common stock.. The Holding Company will become the sole-holder of the common stock of CPCo. ~CPCo is and will..

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s remain'a: Michigan corporation.

The Holding Company,zincorporated on-February 26 1987,!is also a Michigan corporation...In. addition, the-makeup of the Board of Directors of the Holding Company is-the same as the Board of Directors-of CPCo.

Therefore, the proposed restruc-turing will not result,in a new ownership, control,:or domination by an alien, a foreign corporation, or a-foreign government.

Based on the above determinations, we conclude:

(1), that the proposed action will not affect the qualifications of CPCo

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as a holder of the Palisades Plant and Big Rock Point ~ Plant licenses; and (2) that the proposed action is otherwise consistent with applicable.

provisions of law, regulations', and oiders issued by the Commission pursuant thereto.

Accordingly, the Commission hereby consents to the proposed ownership of CPCo a

by the CMS Energy Corporation.

Sincerely, I

Original signed by Martin J.<Virgilio, Acting Director.

Project Directorate III-l Division of Reactor Projects - III, IV,' V

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3 corporation, or a foreign government.

The present common share-holders of CPCo-will, in the restructuring, become the common share-holders of the Holding Company in the same proportion in which they currently hold CPCo common stock.

The Holding Company will become the sole holder of the common stock of CPCo.

CPCo is and wil remain a Michigan corporation.

The Holding Company, incorporated February 26, 1987, is also a Michigan corporation.

In a tion, the makeup of the Board of Directors of the Holding Compan is the same as the Board of Directors of CPCo.

Therefore, the p posed restruc-turing will not result in a new ownership, control or domination by an alien, a foreign corporation, or a foreign go rnment.

Based on the above determinations, we conclude:

(1) that the proposed action will not affee the qualifications of CPCo as a holder of the Palisades Plant an Big Rock Point Plant licenses; and (2) that the proposed action is othe ise' consistent with applicable provisions of law, regulation s and orders issued by the Commission pursuant thereto.

Accordingly, the Commission hereb consents to the proposed ownership of CPCo by the CMS Energy Corporation.

Sincerely, Martin J. Virgilio, Acting Director Project Directorate III-1 Division of Reactor Projects - III, IV, V

& Special Projects.

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Mr. Kenneth W. Berry Big Rock Point Plant and Consumers Power company Palisades Plant I

cc Mr. Thomas A. McNish, Secretary Jerry Sarno Consumers Power Company Township Supervisor 212 West Michigan Avenue Covert Township Jackson, Michigan 49201 36197 M-140 Highway Covert, Michigan 49043 Judd L. Bacon, Esquire Consumers Power Company Palisades Plant 212 West Michigan Avenue ATTN:

Mr. David P. Hoffman Jackson, Michigan 49201 Plant General Manager 27780 Blue Star Memorial Hwy.

M. I. Miller, Esquire Covert, Michigan 49043 Isham, Lincoln, & Beale 51st Floor Resident Inspector Three First National Plaza c/o USNRC Chicago, Illinois 60602 Palisades Plant J7782 Blue Star Memorial Hwy.

Big Rock Point Plant Covert, Michigan 49043 ATTN: Mr. Thomas V. Elward Plant Superintendent 10269 U.S. 31 North Charlevoix, Michigan 49720 Mr. Bud Heeres County Commissioner 303 Sheridan Charlevoix, Michigan 49720 Office of the Governor Room 1 - Capitol Building Lansing, Michigan 48913 U.S. Nuclear Regulatory Commission Resident Inspector Office Big Rock Point Plant 10253 U.S. 31 North Charlevoix, Michigan 49720 Regional Administrator, Region III U.S. Nuclear Regulatory Commission 799 Roosevelt Road Glen Ellyn, Illinois 60137 Nuclear Facilities and Environmental Monitoring Section Office Division of Radiological Health P. O. Box 30035 Lansing, Michigan 48909