ML20236X812
| ML20236X812 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 12/08/1987 |
| From: | Atomic Safety and Licensing Board Panel |
| To: | |
| References | |
| CON-#487-5117 OL-1, NUDOCS 8712100286 | |
| Download: ML20236X812 (88) | |
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O UNutD STATES NUCLEAR REGULATORY COMMISSION IN THE MATTER OF:
DOCKET NO: 50-443-OL-1 50-444-OL-1 PUBLIC SERVICE COMPANY OF ON -SITE l
NEW HAMPSHIRE, et al'.
EMERGENCY PLANNING-( Seabrook Station, Units 1 and 2) l l
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ORAL ARGUMENT 1
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LOCATION:
BETHESDA, MARYLAND PAGES: 1 - 86 DATE:
DECEMBER 8, 1987
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i Heritage Reporting Corporation l
O(Retal Reporters 1 20 L Street. N.W.
Wastungton. D.C. 20005 O~
87"'100286 871208 PT ADOCK 05000443 T
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UNITED STATES NUCIEAR REGULATORY COMMISSION ATOMIC SAFETY AND: LICENSING APPEAL PANEL 2
3 In the Matter of:
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4 PUBLIC SERVICE COMPANY OF
) Nos. 50-443-OL-1 NEW HAMPSHIRE, (SEABROOK STATION,
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50-444-OL-1
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UNITS 1-& 2)
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- Tuesday, 8
December 8, 1987 1
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U.S.
Nuclear Regulatary Commission 4340 East-West Highway 10 Bethesda, Maryland il 12 The above-entitled matter came on for hearing, i
13 p,ursuant to notice, at 10:00 a.m.
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14 BEFORE:
HONORABLE ALAN S.
ROSENTHAL HONORABLE THOMAS MOORE 15 HONORABLE.HOWARD A. WILBER
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16 APPEARANCES:
17 On behalf of the Interveners, Town of New Hampton, New England Coulition on 18 Nuclear Pollution, Seacost Anti-Pollution I
League:
19 ROBERT A.
BACKUS, ESQ.
20 Backus, Meyer & Solomon 116 Lowell Street i
21 Manchester, New Hampshire 03105 22 PAUL EACHERN, ESQ.
Shaines & McEachern 23 25 Maplewood Avenue.
Portsmouth, New Hampshire 03801-24 25 t
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APPEARANCES:
(Continued) 2 On behalf of the Applicant:
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3 THOMAS G. DIGNAN, JR.,
ESQ.
Ropes & Gray 4
225 Franklin Street Boston, Massachusetts 02110 5
On behalf of the NRC Staff:
6 GREGORY ALAN BERRY, ESQ.
7 Office of the Executive Legal Director q
Nuclear Regulatory Commission 8
Washington, D.C.
20555 10 i
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1 PR0CEEDINGS 2
JUDGE ROSENTIIAL:
Good morning.
This Board'is.
3 hearing oral argument today on the appeal'of' Interveners, Town 4
of Hampton, New England Coalition.of-Nuclear Pollution and 5
Seacoast Anti-Pollution League from the Licensing Board's i
6 August 20,'1987 memorandum =and order in this operating license i
7 proceeding involving the Seabrock Nuclear Facility, j
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In that memorandum'and order, the. Licensing Board' 9
denied those interveners' petition to waive certain Commission 10 regulations to the extent necessary to-require.the applicants-
.1 to demonstrate their financial. qualifications, to operate and-12 to decommission the'Seabrook Facility.
l 13 The argument is governed by the terms of our
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14 November 13, 1987 order and as supplemented'by our November 25 l
15 order granting the interveners' motion to divide oral argument
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16 between counsel.
And, as provided in the November 13 order, 17 each side has been allowed one hour'for'the' presentation of l
18 argument.
The appellants will be heard, first, and may, if
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19 they so desire, reserve a reasonable portion of their time for 20 rebuttal.
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21 It is further noted in that order the members of this 22 Board are fully familiar with the' Licensing Board determination.
23 under appeal as well as-with the appellate' positions of:the 1
For this reason,1 counsel' I'
24 parties as developed in their-briefs.
25 should proceed directly to the heart of the issues. raised by:
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the appeal and I might add.in that. connection that I know of no 2
constitutional or statutory requirement that counsel use their 3
full time.
4 I will now call upon counsel for the respective 5
parties to introduce themselves formally for the record and I 6
will start with counse! for the interveners.
7 MR. BACKUS:
Judge Rosenthal, I am Attorney Robert A.
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Backus with the firm of Backus, Meyer & Solomon, appearing on 9
behalf of the Seacoast Anti-Pollution League. /'
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10 MR. MCEACHERN:
If the Board please:
My name is Paul' l
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11 McEachern of Portsmouth, New Hampshire, with the firm of I
l 12 Shaines & McEachern, eppearing for the Town of Hampton, New 13 Hampshire.
14 JUDGE ROSENTHAL:
All right, now, gentlemen, as noted 15 in our November 25 order, we would appreciate it if you would 16 advise us as to how you have divided the points to be put 17 forward on behalf of your clients.
Mr. Backus, you want to?
18 MR. BACKUS:
Yes, Mr. Chairmen Rosenth61, I will lead 19 off the argument here and I am going to discuss basically two 20 issues.
The first one that the Licensing Board erred in l
21 determining that-the waiver application should not be granted 22 because, in this case, the rule does not serve the purposes for 23 which it was promulgated.
And, secondly, I am going to discuss j
l 24 a certain problem I see with the even-handedness of the staff i
25 approach on this as compared with what happened on the attempt
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1 to shrink the emergency zone from 10 milen to 1 mile.
I don't 2
think we have received equal treatment on these two waiver 3
petitions.
Those are two points I am going to discuss..
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JUDGE ROSENTHAL:
All=right.
Mr. McEachern.
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MR. MCEACHERN:
Your Honor, I am going to be very j
6 brief and I am going to discuss'the special circumstances that 7
exist in this case warranting waiver of the rule.
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8 JUDGE ROSENTHAL:
All right.
Is there agreement as 9
to division of time on your side?
10 MR. BACKUS:
I think, Your Honor, I probably have-i 1
11 about 20 minutes thet I would expect.
My experience with this
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12 Board is that it is a very interactive process, so, I take that 13 in mind.
O 14 JUDGE ROSENTHAL:
All right.
l 15 MR. BACKUS:
I would think if there were no l
16 questions, there is no doubt that I will be, between i
17 Mr. McEachern and I, we would not be using a full hour.
We 18 would like to reserve some time for rebuttal.
19 JUDGE ROSENTHAL:
All right. Very good.
20 Applicants?
21 MR. DIGNAN:
Mr. Chairman, members of the Board, my 22 name is Thomas G.
Dignan, Jr.
I am a member of the firm of 23 Ropes & Gray, 225 Franklin Street, Boston, Massachusetts.
We 24 appear for the applicants J.n this matter.
25 JUDGE ROSENTHAL:
Thank you, Mr. Dignan.
Staff?
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MR. BERRY:
Good morning, Your Honor.
My name is-1 2
Gregory Berry.
It is my pleasure to appear before you on i
3 behalf of the NRC Staff.
With me today is Deputy Assistant 4
General Counsel, Edwin J.
Reis.
5 JUDGE ROSENTHAL:
Thank you.
I think perhaps before 6
commencing the argument, I ought to note that this Board has 7
been joined by Mr. Moore, who is on my right, who has-replaced 8
Mr. Edles, at least for the purposes of the matter which is j
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under consideration this morning.
10 With that, Interveners may commence their argument.
11 Mr. Backus?
12 MR. DIGNAN:
Your Honor, before Mr. Backus commences, 13 there was an indication from Mr. Backus that he was planning to 14 cover a point which I believe he suntmarized as a lack of staf f 15 even-handedness between two petitions.
I find that point 16 raised nowhere in the briefs filed-I don't think it is 17 relevant and I am totally unprepared on it.
18 Now, may I have the view of the Board as to whether I 19 have to be ready to respond to such an argument or not, because i
i 20 I flatly admit I am not.
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'l 21 JUDGE ROSSNTHAL:
Well, at this point, Mr. Dignan, I 22 think we will reFerve judgment.
I tend to think that there is
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23 at least substantial question as to the relevance of an 24 argument as to even-handedness.
And you make also the point 25 that there was no reference to this line of crgement in the
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1 Interveners' brief.
For one or both of these reasons, we may 2
decide to essentially put that argument to one side, in which 3
case, there would be no occasion for you to respond.
4 If, for some reason, we feel constrained to consider 5
an argument along that line, you assuredly would be given an 6
opportunity to respond in writing.
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Mr. Backus.
8 MR. BACKUS:
Good morning.
If I might, Mr. Chairman 9
and members of the Board, be permitted just a brief l
10 introductory comment.
It strikes me as quite extraordinary, 11 Chairman Rosenthal, since you and I and Mr. Dignan have been so 12 long involved in Seabrook-related caser how the two issues that 13 dominate the Seabrook issue today have gone back over a decade O
14 or more.
And those two issues, of course, are the one that i
15 brings us here today, the issue of financial qualifications; i
16 and the other issue, of cuurse, is the one we are now 17 litigating:
whether or not emergency planning can provide i
18 reasonable assurance of safety at the Seabrook site.
19 We revisit, in a sense, here today what you discussed 20 in ALAB-422 10 years ago in the discussion of financial 21 qualifications then.
Much of the discussion of the majority 22 opinion in that case underlay the thinking in the current NRC 23 rule on financial qualification that brings us here.
i 24 I suggest, Mr. Chairman, that the issue we have to I
25 discuss here today is whether or not, given the circumstances O
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1 that faces the lead applicant'here and the largest owner of the-2 Seabrock Facility, Public Service Company of New1 Hampshire, it.
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3 is now necessary to take a look at the financial qualifications 4
of that utility.
5 As I said, my purpose here is to ' di;, cuss whether or.
6 not the application on the current rule on emergency planning 7
serves the purposes of that rule.
On this, I would like-to go 8
to the Licensing Board opinion, itself, on page 7 becauseLI 9
think the Licensing Board did correctly state the purpose of 10 the current emergency planning rule.
11 They said the purpose of the rule'was to exempt 12 operating license applicants from the financial qualification 13 requirement because the rate-setting process assure that funds L O 14 needed for safe operation would be available.
15 That was the premise of the financial-qualification 16 rule we now have that was put in place in 1984.
I think it is-17 very important to point out that in putting that financial 18 qualification rule back in, in the form we now have it,'in the 19 limited form we now have it, the Commission did not find.that 20 it could dispense with the financial qualification requirement 21 on the grounds l'c was unrelated-to safety.
22-That was the suggestion that was made to them.
There 23 were many comments that said tliat that was a factorithat should 24 lead them to abolish the financial qualification requirement.
25 The Commission did not adopt that.
There.is,.'in fact,:a
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concurring opinion by Chairman Zech specifically saying'the 2
rule does not proceed on the basis that there is no connection i
3 between financial qualification and safety..
4 JUDGE ROSENTHAL:
I think we understand that, I
5 Mr. Backus.
The rule is based, is it not, on the premice that 6
state public utility commissions will insure that the utilities 7
within their jurisdiction will have sufficient funds available 8
to them to operate in a safe manner the nuclear facilities 9
which those utilities own.
Now, that is the premise.
10 On what basis does your petition establish a prima i
11 facie case that in this instance that premise is unwarranted?
12 MR. BACKUS:
It this instance, for the first time, we 13 have a commission with a traditional. rate-setting process and, t) 1 14 even though we have a commission with that traditional rate-15 setting process, we have a utility applicant, the largest owner 16 of a major nuclear facility that is in default.
The l
17 rate-setting process has not done what the founders of this 18 rule assumed would be done on a genetic basis.
The exception 19 is here.
l 20 JUDGE ROSENTHAL:
First of all, at the time you filed j
I 21 their petition, your c?ients filed their petition, there was j
l 22 not a default.
Am I right about that?
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23 MR. BACKUS:
That is correct.
j 24 JUDGE ROSENTHAL:
Now, was your petition at any point 25 amended to bring these new facts into play or are we supposed j
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to take official notice of what is transpiring in New Hampchire 2
in terms'of the payment by Public Service of ite' financial 3
obligations or what?
I mean we have a petition before us, 4
denied by the Licensing Board, appealed by your clients from 5
that denial, which rests, as I understand it, solely upon a 6
particular filing on the part of the utility.
Am I correct:
7 about that?
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MR. BACKUS: 'Yes.
9 JUDGE ROSENTHAL:
Okay.
Now, why -- why-sh?uld we 10 take into account, even assuming its relevance, the default?
11' MR. BACKUS:
Well, I think, Mr. Chairman, we could go 12 through the exercise of refiling our petition and bring it up 13 to date, but there is just no doubt:about it.
I think you
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14 should take notice of it.
15 The default of Public Service Company which occurred 16 on October 15th became final on November-15th'and'there have 17 subsequently been. additional defaults.
It is widely known, 18 widely reported in the public press, in the financial _ press.
19 And there is just no question about it.
120 JUDGE ROSENTHAL:
Assume that is correct.
21 MR. BACKUS:
Indeed,.it was on the ABC Nightly News 22 as-the first utility default in history, 23 JUDGE ROSENTHAL:
Well, I don't watch the ABC' Nightly 24 News.
Maybe th'at is a concession'against interest, but let me 25 ask you this:
Let's assume that we both can and should take i
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1 official notice of Public Service's default on certain 2
obligations I think it was on October 15th, what relevance does 3
that have to the matter at hand?
Does that establish as a 4
matter that we can take official notice of that this utility 5
will not have sufficient funds to operate safely at low power?
6 MR. BACKUS:
It establishes that this utility does 7
not have funds to meet its legally mandated requirements and is 8
not meeting them at this time.
9 JUDGE ROSENTHAL:
Well, it is not paying perhaps its 10 bond holders, but does it necessarily follow from that that the 11 company does not have sufficient funds available to operate 12 safely?
13 MR. BACKUS:
It doesn't necessarily establish that.
O 14 Of course not.
But it suggests that that could be the case.
I 15 This utility, Mr. Chairman, as you know, has paid no common or 16 preferred dividends for three years.
Fine.
That is not a 17 requirement.
Presumably, dividends are at risk.
18 They are now not paying a legally obligated debt 19 requirement.
I 20 JUDGE ROSENTHAL:
Are they paying their employees who 21 are maintaining the facility?
Are they paying their suppliers?
22 These are all facts that are outside of this record.
23 MR. BACKUS:
Let me tell you something.
24 JUDGE ROSENTMAL:
My point simply is even if, as you l
25 suggest, I can and should take official notice of their
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default, there are many facts gcing to the question of whether 2
they have got sufficient funds available to operate safely that 3
I simply ~couldn't take official notice of and they are not in 4
any portion of the record that is before us on this appeal.
5 MR. BACKUS Well, Mr. Chairman, the purpose of the 6
rule I think was misstated in our brief and is correctly. stated l
7 in the Licensing Board opinion.
The purpose of the rule was to j
8 say:
We don't need case-by-case adjudication of the financial 1
9 qualification of utility applicants because on a generic basis, i
10 we can assume that the rate setting process will assure that, i
11 reasonably assure thet those utilities will have the necessary 12 funds.
That is not the case in regard to Public Service l
13 Company of New Hampshire.
And that is what the default proves.
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14 At this time, in the State of New Hampshire, Public 15 Service Ccmpany is seeking to have a 7-year old statute 16 declared unconstitutional.
We have an Anti-CWIP statute up 17 there. And a hearing before the Supremo Court, New Hampshire 18 Supreme Court, on that next week.
At which time, they seek to 19 have a 7-year old statute declared unconstitutional.
20 And they say, in their filings with the SEC that it 21 is essential to have a 7-year old statute declared 22 unconstitutional for them to survive.
They say, in addition, 23 they have to have a certain debt restructuring plan, a swap of I
l 24 equity for debt, as an essential second element to their 1
25 survival plan.
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And the third element to their survival plan, 2
Mr. Chairman, and this is I think very directly pertinent to 3
the question you just asked, is a severe cut-back in their 4
maintenance expenses.
5 Back on August 5th, when Mr. Harrison, the President 6
of Public Service Company, was announcing the attempt to come 7
up with a survival plan to stay out of Bankruptcy Court, he set l
8 out this three-part rescue plan:
to declare the Anti-CWIP 1
9 statute unconstitutional and a 15 percent rate increase.
That l
10 was one leg of the stool.
The second leg was the debt 11 restructuring and the third leg of the stool was a cash 12 conservation program.
And he said this stool would not stand 13 up unless all three legs were firmly in place.
O 14 One of these legs is already gone the debt l
13 restructuring plan has been withdrawn and is no longer before 16 the Public Utilities Commission, 17 On the third leg, which is directly relevant to the 18 question that I think concerns you and what you're asking, 19 Mr. Harrison said, and I've got copies of his statement I can 20 furnish:
Second, we must drastically reduce our maintenance 21 expenses.
All maintenance projects are being deferred except 22 where deferral will present unacceptable risks to service 23 cortinuity. Unless this situation is corrected quickly, the 24 level of service customers have come to depend upon will 25 deteriorate.
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JUDGE MOORE:
Well, Mr. Backus, I accept what you say 2
for the sake of argument.
But none of this appears in the 3
petition and in that sense, isn't it all premature?
On what
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basis are we, who can only operate with a record, to conclude
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that you have established a prima facie case that the purpose 6
of the rule hasn't been met when not one word of what you have 7
told us this morning appears in your petition or was before the 8
Licensing Board?
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MR. BACKUS:
Well, all of this can be provided by 10 means of refiling the petition.
What we did have with the l
11 petition, Judge Moore, was the 8-K.
The 8-K said that it was 12 going to be extremely difficult for this utility to avoid a j
I 13 bankruptcy filing.
That's what it said.
That is before you.
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I 14 And I am telling you that the facts that cannot be disputed' I
15 illustrate that that was not as the, I think the Ljcensing
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1 16 Board talked about barren speculation.
It is not barren l
17 specy1atinn.
It is what is happening.
18 We have an unprecedented event in the State of New 19 Hampshire with the utility.
20 JUDGE ROSENTHAL:
Which has not as yet produced a 21 bankruptcy.
Now, as I uruerstand it, the default occurred in 22 mid-October.
The creditors who were the subject of that 23 default could have put Public Service in bankruptcy at the end 24 of a 30-day period.
And, apparently, elected at that time not 25 to do so.
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1 Now, it may or may not be that Public Service will at 2
come subsequent point find itself in bankruptcy and it may or 3
may not be that if they are in bankruptcy, that it will almost i
4 assuredly follow that they will not have sufficient funds to l
5 operate the plant safely.
I don't know whether that is the 6
case because I can tell you, Mr. Backus, among the many fields 7
of law that are a total mystery to me is bankruptcy.
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In any event, as of today, they are not in I
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bankruptcy.
10 MR. BACKUS:
And I suggest that that is not the l
11 relevant point.
12 JUDGE ROSENTHAL:
All right.
What iu?
13 MR. BACKUS:
The bankruptcy is, I suggest, a kind of
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l 14 formality here.
They are functionally in bankruptcy.
They are j
15 defaulting on their legal obligations.
They are unable to pay 16 their debts as they come due or have chosen not to pay their 17 debts as they come due.
That is a functional bankruptcy.
18 JUDGE ROSENTHAL:
The debts that they are not paying, 19 they are not paying, that they are legally obligated to pay but 20 are not paying, as I understand it, have nothing to do with the 21 operation of this plant in a safe manner Those are bond 22 interest payments; are they not?
23 MR. BACKUS:
Indeed. But I think the premise of the 24 emergency planning requirement that we historically had and 25 have back in this limited form, now, as I started out my (G
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argument has to assume as' refiled by the Commission in 1984',
2 that there is some concern about safety for a utility that is 3
having such difficulty meeting its obligations that it is not 4
making its bond payments.
5 JUDGE MOORE:
You' referred --
6 MR. BACKUS:
And, as'I suggested in this statement I 7
just read from Mr. Harrison, which I can certainly furnish, 8
cutting back on its maintenance.
The current. delivery of
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9 service in New Hampshire'is being threatened by this utility's 10 financial condition.
11 JUDGE MOORE:
Accept for'the. sake of argument what 12 you say, but doesn't the rule under which you'are filing for.an 13 exception or a waiver of the financial qualification rule, 14 2.75(a) require that you establish in your petition a prima 15 facie case that the purpose.of the rule is not being fulfilled.
l 16 Now, you have given me a laundry-list and a. litany of 17 things that Public Service of New Hampshire-is not doing or 18 will not be doing. And then you said and you used the word that 19 these things suggest that the purpose of the rule,-that is, the 20 safe operation of the plant doesn't follow.
21 But "suggest" doesn't correlate with a prima facie 22 case.
Does it?
23 MR. BACKUS:
Well, the question is what is the 24 purpose of the rule.
The purpose of.the rule, as I understand.
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25 it was to say:
We don't want to bother with~ case-by-case 1
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.1' adjudications because basically the utilities are on cost'-
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plus'.
In theory, they are not;-but, in fact, they kind of.are.
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3 And being on cost-plus we can generally assume that they will
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have enough funds to administer their nuclear program 5
appropriately.
That process has not assured those funds in the I
6 case of Public Service Company of New' Hampshire 7
JUDGE' MOORE:
All right. Stop right there.
8 MR. BACKUS:
Therefore, we need'the. case-by-case 9
adjudication --
10 JUDGE MOORE:
Are you then saying that because you 11 have what you call an Anti-CWIP law in New' Hampshire and the 12 rate making process has not come into play, yet, that this 13 utility doesn't fall within the premise of the rule?
O 14 MR. BACKUS:
This utility does not: fall within the.
15 premise of the rule.
16 JUDGE MOORE:
Would it follow that every state that 17 has an Anti-CWIP law.would be in the same situation?
l 18 MR. BACKUS:
Oh, no.
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19 JUDGE MOORE:
Because the rate process has not yet j
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20 taken place?
21 MR. BACKUS:
Oh, no.
The unique. thing'about Public 22 Service Company of New Hampshire is that'it is a'small utility 23 with a big and over-budget nuclear plant.
That is the --
24 JUDGE MOORE:
I am not familiar with any nuclear j
25 plant in recent times that hasn't been over-budgeted and has l
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1 strained the financial resources of the utility or utilities 2 ~
that.was trying to build it.
3 MR. BACKUS:
Yes.
Thct's true.
They are all not 4
looking too great financially.
But Public Service,'70 percent 5
of its assets are Seabrook, a non-revenue producing asset as a 6
result of the New Hempshire Anti-CWIP law.
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JUDGE MOORE:
But there are two-thirds of the owners 8
of that plant are not Public Service of New Hampshire who, from i
9 all we know, from what you tell us in the petition, because you 10 never mention them, whose financial status, presumably, is l
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- fine, l
i 12 MR. BACKUS:
Yes.
Public Service has 35.6 percent of i
13 this plant.
The monthly budget at the plant, I understand, is O
14 S10,000,000 a month.
That means Public Service has got about a 15
$4,000,000 a month cash obligation to that plant.
There is no 16 indication anywhere that the other utilities are going to pick l
l 17 that up.
18 JUDGE ROSENTHAL:
Is there any indication --
19 MR. BACKUS:
They may be, if we have a hearing on 20 this, that that will be the answer.
But I think we are 21 entitled to say that on a prima facie basis, Public Service is 22 not meeting the purposes for which the rule was put in place.
23 They demonstrate that the traditional rate-setting process is 24 not providing the funds that they need to meet their legal 25 obligations.
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JUDGE MOORE:
But what does the rate-making process 2
have to do with the plant when that process doesn't come into 3
effect until the plant is completed and gone to full power.
4 MR. BACKUS:
The traditional way that utilities build 5
plants, as you must know, Judge Moore, is with allowance or 1
6 funds used during construction.
lf you have a utility that is I
7 not taking too big a plant, given its own financial strength, 8
that can be done.
Public Service thought that could be done 9
when we were back here in ALAB-422 with this Board.
That was 10 the way they were going to do it:
11 In this case, the process has not worked to permit 12 them to meet their legal obligations.
13 JUDGE MOORE:
Now, in papers that are attached to l
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14 your brief, but that were not before the Licensing Board, you 15 attach, although you make no reference to and certainly no 16 argument using these papers, Staff's -- I'm sorry.
The 17 Applicant's responses to the Staff's questions concerning:
How 18 are you going to finance low power operation?
Come up with the 19 funds for safe low-power operation?
20 Those responses by the Applicant seem to detail that 21 Public Service of New Hampshire does not have any shortage of 22 funds to insure the safe operation of low-power operations.
23 You have not contested those or in any way even challenged what 24 they say.
Yet, you filed those papers attached to your brief.
25 MR. BACKUS:
Well, I think my brother, McEachern, is
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s-1 going to speak more to that.
I do take. issue with the idea 2
that we, before we get to deal with a issue of financial
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3 qualification, we have to show that some necessary nuclear 4
grade valve was not purchased for the plant.
5 Obviously, we have no way of doing that.
I don't j
6 think the Commission, in requiring some look at financial 7
qualifications in some circumstances expected that we would j
l J
8 have to go that far.
9 I suggest to you:
It should be enough that we now 10 have a utility where the traditional rate-making process has 11 resulted in a situation where its legal obligations can't be 12 met.
13 JUDGE ROSENTHAL:
Does the Anti-CWIP preclude a l
14 utility from expending monies that it has in its possession to 15 support a low power or even full-power operation?
16 MR. BACKUS:
No, it doesn't. They can spend the 17 monies that way.
18 JUDGE ROSENTHAL:
So that the Anti-CWIP law is not 19 relevant here if -- this may be a big "if" -- but if Public 20 Service of New Hampshire has sufficient funds available to it 21 from whatever source to support a safe operation at low power.
22 Am I right about that?
23 MR. BACKUS:
You are right about that.
24 (Continued on next page.)
25
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Heritage Reporting Corporation (202) 628-4888
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1 21
(
1 JUDGE ROSENTHAL:
The question is have you made out 2
a prima facie case that this utility does not and will not-have 3
sufficient funds available to operate at low power safely, am I l
4 right about that?
j 5
MR. BACEUS:
All I can say, Judge Rosenthal, is that
)
6 we now have a situation where this utility is not meeting its 7
legal obligations, and is not maintaining its system to the 8
standards that it is itself believes are necessary for reliable 9
service, and that would at least cause me some great concern.
10 JUDGE ROSENTHAL:
Well, hypothetically, this utility 11 might sit back and default on all of its bond interest 12 obligations and yet have a large amount of money available for l
13 and use for the maintenance of low power?
i
()
14 MR. BACKUS:
That is perfectly true.
That is 15 possible.
It is definitely possible that they will choose not 16 to do that, and instead pay some other class of debt.that they 17 otherwise might not pay.
18 JUDGE ROSENTHAL:
But the burden was upon you to make l
19 out a prima facie case that the purposes of this rule were not l
l 20 being served and would not be served, and was it not your l
l 21 obligation to show at the very least that it was more probable l
22 than not that this utility would not have monies available for 23 low power operation?
l l
24 MR. BACKUS:
No, I do not think so.
That is not the l
l 25 way that I see the purpose of this rule.
The purpose of this i
7~
(_)
Heritage Reporting Corporation (202) 628-4888
22
(_)/
?
1 rule, as I say again, was to say that sa do not need case by 2
case adjudication where the rate making process which has 3
sometimes been called a kind of a cost plus arrangement is in 4
place.
5 Now there is available in the New Hampshire PUC 6
opinions at this time, which I think that you could refer to 7
because it is a published adjudicatory opinion, the New 8
Hampshire PUC's decision that the 15 percent icte increase that 9
they are now seeking, the emergency rate increase, cannot be 10 granted in traditional rate making processes, cannot be 11 granted.
12 Now if they strike down the anti-CWIP law in the New 13 Hampshire Supreme Court, they can go to non-traditional methods O
14 meaning CWIP.
But at this time, and I can provide that opinion 15 to you, the New Hampshire PUC has ruled that under traditional 16 rate making processes that rate relief is not cvailable for 17 this utility, and this utility is continuing defaults.
By the l
18 way, there is more than one default at this point.
There was 19 another default on December 1st.
20 JUDGE ROSENTHAL:
Now has the Public Utilities 21 Commission decided that Public Service is getting no rate 22 relief at this time?
i 23 MR. BACKUS:
They have decided that they cannot grant 24 the request of a 15 percent rate increase on traditional rate 25 making principles.
()
Heritage Reporting Corporation (202) 628-4888 l
l
23 1
JUDGE ROSENTHAL:
What is the significance of that in 2
terms of the issue before us, does that mean that they might.
j 3
grant it on some non-traditional basis?
l 4
MR. BACKUS:
Yes, but cnly with a Supreme Court j
1 5
decision that they can do so.
That issue is before the Supreme l
6 Court to be argued next Tuesday or this Tuesday.
j 7
JUDGE ROSENTHAL:
The argument is coming up?
8 MR. BACKUS:
Deccmber 15th.
l l
l 9
JUDGE ROSENTHAL:
So the decision presumably is sti11 j
j l
10 sometime off, or has the court given any indication that it is 11 likely to expedite the decision?
12 MR. BACKUS:
There is some indication that it might j
13 be an expedited dedision.
But if it would happen before the I
O but it is possible.
14 end of the year, I would find surprising, 15 JUDGE ROSENTHAL:
I gather that the court did not 1
16 expedite the decision on the sirens.
I think that oral 17 argument was on October 7, is that right?
18 MR. BACKUS:
That is correct.
19 JUDGE ROSENTHAL:
Am I correct that that is still 20 undecided?
21 MR. BACKUS:
That is correct.
22 JUDGE MOORE:
Mr. Backus, back up just a moment, and 23 perhaps I have missed something.
But I understand what your-24 point is concerning what you perceive the purpose behind the 25 Commission's current financial qualifications rule.
Heritage Reporting Corporation (202) 628-4888
24 1
MR. BACKUS:
Yes.
2 JUDGE MOORE:
But I have apparently have missed how 3
you fulfill your obligation under the procedural Rule 2.758 and i
4 that you show that a prima facie case of the purpose of the i
5 financial qualification rule is not being met.
6 How do you precisely and detail'each cog on the 7
wheel, please, for me your prima facie case?
8 MR. BACKUS:
Our prima facie case is made in terms of i
9 reference to the petition by reference to the 8-K raising the
{
10 specter of bankruptcy for this utility.
And that is buttressed j
l 11 by the fact that we now have the PUC saying that the 1
12 traditional rate making methodologies do not provide a basis 13 for rate relief for this utility; and further buttressed, l
)
14 nuinber three, by the defaults, these events that have not 15 transpired since the Great Depression for any publicly held 16 utility corporation.
17 JUDGE MOORE:
Assuming that we accept that, are we 18 not required to send it back to the Licensing Board, so that j
39 the Licensing Board can take into account these factors that it
{
20 never has heard of and did not get a chance to view?
j 1
21 MR. BACKUS:
Well, the Licensing Board in my view 22 just did not think that we would even raise the serzous issue.
23 They talk about barren speculation about bankruptcy, and it is 24 a lot more than that.
I think that you have got to send it 25 back to the Licensing Board with a requirement that something
()
Heritage Reporting Corporation (202) 628-4888
25 1
be done about this.
That would be my suggestion.
2 One other point that I wanted to make, and then I am 3
going to let Mr. McEachern appear, or two other points, is this 4
idea that Judge Rosenthal and I guess that you, Judge Moore, 5
have been getting around to, that we have to comehow show that 6
they are actually not meeting the financial requirements for 7
nuclear safety.
8 And I can only say that I think that the purpose of 9
having some requirement for financial qualification is 10 something that goes beyond that.
I know that the example in 11 the rule says that, for example, if they are not making the 12 payments necessary for nuclear safety or the rate regulation 13 does not allow the cost of a nuclear plant, that that would be 14 an example.
1 15 But if we have a situation where a utility,, and this l
16 utility is in extremis and desperate men will do desperate 17 things, is cutting back on the maintenance budget und not 18 meeting the legal obligations to make debt payments, that 19 raises a concern that I do not think that we should have to 20 meet by pointing out that maybe they have not paid or that they 21 are not paying top dollar for their nuclear engineers over l
22 there.
23 JUDGE WILBER:
You are saying that in the financial 24 qualification rule that we have to address how they are 25 spending their money?
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Heritage Reporting Corporation (202) 628-4888 l
l
.l 26 1
MR. BACKUS:
No, you do not.
I think that'you have 2
to address that they have reasonable assurance of having the
)
3 funds.
I think that is still the premise of the rule.
And all l
l 4
that the Commission did in its 1984 rule change was say 5
normally you can assume that, because the rate setting process l
6 is a surrogate for that assurance.
It is not a surrogate for q
l 7
that assurance in the case of Public Service.
There le no 1
1 8
question about it.
9 JUDGE MOORE:
Are the other applicant New Hampshire 10 utilities?
11 MR. BACFUS:
There is only one other New Hampshire l
I 12 utility, and that is the New Hampshire Electric Cooperative, l
13 which has two percent.
The second largest owner of Seabrook, (3
14 Judge Moore, is United Illumiriating from the Connecticut area.
1 15 They have got 17.5 percent.
And I am not sure what their 16 financial strength is.
17 There is one utility that is already in bankruptcy, l
18 Eastern Maine Electric, which is not an owner itself but owns 19 through MMWEC, the Massachusetts Municipal Wholesale.
Another 20 utility, the Remote Electric Cooperative, is in default and has 21 been for several years.
Those are very small owners.
So in 22 addition to Public Service, there are other owners that are-in 23 financial trouble.
l 24 JUDGE ROSENTHAL:
But not the other big owners?
l 25 MR. BACKUS:
Not the other big owners.
Heritage Reporting Corporation (202) 628-4888
i 27
)
1 JUDGE ROSENTHAL:
Then why are they not relevant?
2 JUDGE MOORE:
Do they have to go before a Public 3
Ut' ities commicsion for their rate operating funds?
4 MR. BACKUS:
I am not sure.
I am not sure about the 5
. rate regulation.
MMWEC does not.
6 JUDGE ROSENTHAL:
The Public Service of New Hampshire 7
is, of course, the lead Applicant, and it may own the largest-
]
1 8
individual share of this plant, u.it still you have a number of l
9 other utilities that own significant portions, and in ij 1
1 10 combination own more than Public Service of New Hampshire owns, 11 and yet your petition makes no reference to them.
I mean we
~
l 12 are hearing all about how Public Service is in extremis, and we 1
13 de not hear one word about the financial qualifications or O
14 threat to the ability of these other utilities to maintain 15 their responsibilities.
16 MR. BACKUS:
There has been no demonstrated assurance 17 that these other utilitiec are going to pick up the 35.6 j
18 percent that Public Service has got if Public Servi.ce defaults 19 on its obligations.
l l
20 JUDGE ROSENTHAL:
You have nothing to believe chey 1
21 will not.
I 1
22 MR. BACKUS:
I have nothing to believe that they will 23 not or that they will.
But certainly, we are talking about l
24 financial qualifications of the applicant utilities.
1 25 Judge Rosenthal, it always used to amuse me.
We used
()
Heritage Reporting Corporation (202) 628-4888 l
l
1 l
28' O
s-1 to get these ownership changes as Seabrook went from back to 2
worse.
And it would be Green Mountain Power is going to sell 3
.6 percent to Central Vermont, and the staff would do an 4
exhaustive report on the financial qualifications of Green 5
Mountain Power as a transferee for.6 percent.
6 Now here we have got the largest owner which has 7
always been called a lead utility which still calls the New i
8 Hampshire Yankee outfit a division.
And the suggestion is so.
l l
9 what, it is only 35.6 percent.
That is a lot.
]
1 10 JUDGE ROSENTHAL:
You have taken a half an hour of j
11 your hour, Mr. Backus.
12 MR. BACKUS:
All right.
13 JUDGE ROSENTHAL:
So I would ask you to bear that in O
14 mind.
1 15 JUDGE MOORE:
One final question, Mr. Backus.
i 16 Is there any legal obligation on the part of the 17 other Applicants to provide any shortfall in operating funds by 18 Public Service of New Hampshire?
19 MR. BACKUS:
I do 3ot believe that there is a legal 20 obligation, but I am not absolutely sure about that.
I do not j
21 believe that there is.
They have done that in the case of the l
22 Vermont Electric which has been in default, but that is a very 1
23 small one.
1
?4 The last thing that I wanted to do.
I will waive the 25 argument about even-handedness, even though the staff 3
r\\_/
Heritage Reporting Corporation (202) 628-4888
I 29
,N )s 1
gave the --
2 JUDGE ROSENTHAL:
I do not quite see what the
)
3 relevance of argument along that line would be anyway.
The l
4 staff is a litigant before this tribunal And if they are
.1 5
even-handed, they are even-handed.
And if they are not, they 6
are not.
But it does not seem to me that that affects the l
7 merits of the cause which you are advancing.
But in any event, I
J 8
I gather that you are not going to press that point.
l l
1 9
MR. BACKUS:
I am not going to press that point, 1
i 10 except to say that waiver applications get a lot more attention a
11 from the staff when it is the utility that initiates them than j
i t
12 when it is us.
f
(
13 I just wanted to do one thing here, Your Honor, and
($)
l l
14 that is to quote from an argument before you, this panel, back 1
l l
15 on December 10, 1976 when the issue of financial qualification l
i 16 came up.
)
1 17 JUDGE ROSENTHAL:
This I take it is the colloquy 18 between Mr. Ferrar and Dignan to which you referred in the 19 filing with the Commisolon fairly recently.
I think that'we 20 are all aware of it.
Indeed, I was going to ask Mr. Dignan 21 about it when his time came.
22 MR. BACKUS:
All right.
Sometimes it is nice to have l
23 these long institutional memories that we get.
24 JUDGE ROSENTHAL:
Yes.
I must compliment'you on 25 that, Mr. Backus.
I had forgotten that colloquy entirely until t'!
Heritage Reporting Corporation (202) 628-4888
i 3
i
- t 30 1
you had reminded the Commission of it.
All. right.
Mr.-
~2 McEachern.
]
3 MR. MCEACHERN: 'Thank you very much, Mr. Chairman..
3 d
4 My name is Paul McEachern for'Hampton.. The issue before~you is 5
not what the financial capacity of the Public Service' Company' l
- i 6
of New Hampshire is at'thisLpresentetime, but the issue is
]
7 whether or not a prima facie case has been made out'by,our G
petition before the Licensing Board'as'to whether.we'should 9
inquire. inquire into their financial. capacity.-
10 The' sworn statement submitted with that petition.
i 11 of Mr. Harrison, president of the company, contains.a sentence 12 that says, "Should an adequate plan," and he'is talking'about i
13 an adequate financial reorganization plan, "not be developed O
14 and placed into effect.before the end.of 1987,'it will bei i
15 difficult if not impossible for_tho' company to avoid.
l 16 proceedings under the Bankruptcy Code."
17 On December 8th, today, we get.the Christmas holiday 18 coming ur, a this month, and.all we have got to.do.is wait a-19 few days.
And that statement will inoicate that.this company.
20 by its own admission is in bankruptcy.
21 I guess that it is a question of how familiar this 22 Soard wants to become with the real world, or whether or not 23 you are satisfied to have an artificial construct of-what is 24 happening out there.
I suggest.to you 25 JUDGE ROSENTHAL:
I.do not think, Mr.'McEachern, at
(
Heritage Reporting Corporation (202) 628-4888
_ _ _ - _ =
31
()
1 least from my standpoint that it is a matter of familiarity 2
with the real world.
The question at_ hand is whether the 3
Public Service Company of New Hampshire and its coowners will l
4 have sufficient monies available to operate this plan at low 5
power and in a safe manner.
I am not up in New Hampshire, and' 6
I am not familiar with the books of the Public Service Company 7
of New Hampshire.
8 And it seems to me that the obligation that your i
l 9
clients have, if they are seeking a waiver of this rule, is to 1
10 establish a prima facie case that this company will not have 11 the monies available; or if they have the monies available, 12 will not devote them for the purpose of safe operation at low 13 power.
14 MR. MCEACHERN:
I understand what you are saying, and i
15 I disagree with you as to that being the issue.
The issue is 16 not whether they will have the monies, but the issue is whether 17 or not this Board should inquire into whether or not they have 18 the monies, and that they are entirely different issues.
19 JUDGE ROSENTHAL:
All right.
20 The issue, is it not, is whether there is a 21 sufficient showing that the utility will not have the montes 22 available to warrant a waiver of this rule?
23 MR. MCEACHERN:
Whether or not a prima facie case has 24 been made.
25 JUDGE ROSENTHAL:
Now the prima facie case here, I
)
Heritage Reporting Corporation (202) 628-4888
ll 1 gather that you regard the prima facie case as b'ingithe 8-K' e'
1 2
statement, right?
]
\\
3-MR. MCEACHERN:-
I certainly do.
\\
4-JUDGE ROSENTHAL:
Standing by itself?
l 1
5 MR. MCEACHERN:-
Absolutely.
l 6
JUDGE ROSENTHAL:
Without anything more?'
l l
7 MR. MCEACHERN:
Absolutely.
The. fact that they are-q l
8 in bankruptcy now and not paying their bills,:and the fact that-
- )
9 they are going to have a S120 million shortfall next year, and q
1 10 that we have got an anti-CWIP law that says that.you cannot get' l
11 rates at low power, all of that is interesting.
12 JUDGE ROSENTHAL:
Mr. Moore asked Mr. BackusLabout 13 the attachment to the Intervenor's appellate brief which O
14 contained the responses of the Public Service of New Hampshire 15 to certain questions posed by the staff.
16 Now what purpose did you have in mind in' appending l
17 that response to your brief?
18 MR. MCEACHERN:
To point out the irony that the staff l
19 took the position that they.need not make this_ inquiry.
And 20 yet on their own sui sponte, they make detailed qdestions to 21 the Applicant as to how they are going to get the money to 22 decommission the plant at low power.
And,it also interesting 23-that the Applicant responded that by maintaining a' positive 24 cash flow.
Well, how they do that is that they do not pay some 25 bills at the present time.
()
Heritage Reporting Corporation (202)1628-4888~
33 1
And we say that that deserves an inquiry.
You should 2
look into it.
Because if you are wrong, you will bring j
j 3
embarrassment to this Commission that has been unequaled in the 4
past.
Because we are going to have a nuclear power plant 5
listed as an asset in a bankruptcy of a utility.
And people l
6 are going to come to this Commission and say, well, how did
]
I 7
that happen.
1 8
JUDGE ROSENTHAL:
Do we know what the consequences of I
9 the bankruptcy would be?
I have no background in bankruptcy at l
l 10 all.
And frankly, I am not terribly interested in delving into l
11 that field at this point.
But it is my impression, and correct 12 me if I am wrong, that in the minds of at least some alleged j
13 authorities in the bankruptcy laws and in the implications of a I
b I
D 14 bankruptcy, that if the Public Service of New Hampshire were to j
l 15 go bankrapt, that it would have no effect upon its operations.
I 16 That is what some people seem to believe.
Now I do not know if l
l 17 that is right or wrong.
j i
18 MR. MCEACHERN:
Analysts believe that Public Service 19 is a much better object of investment in bankruptcy than in its j
l 20 present condition, but that does not mean that Seabrook is j
21 going to continue to be operated by Public Service.
In all l
22 likelihood in any restructuring, it is going to be split off 1
23 from Public Service, because it is a terribly negative asset.
l 24 But this is the kind of inquiry that this Board l
25 should be making.
The people depend on you to plan and to'look Heritage Reporting Corporation (202) 628-4888 i
l 34 1
into the future.
1 2
JUDGE h00RE:
You answered Mr. Rosenthal's question 3
that your prima facie case was made out with the 8-K filing.
4 MR. MCEACHERN:
Absolutely.
5 JUDGE MOORE:
That the purpose of the rule, the 6
financial qualification rule, was not being met.
i j
7 Would you tell me, please,'what your understanding of 8
prima facie case means in 2.758 of the Commission's rules?
j 9
MR. MCUACHERN:
That there has been a showing that
)
1 10 special circumstances exist that defeat the purpose of the 11 rule.
And in this case, the special circumstances are the fact l
1 12 that New Hampshire does indeed have an anti-CWIP statute.
j l
13 JUDGE MOORE:
Define prima facie for me.
,O 14 MR. MCEACHERN:
It is a Latin word.
l i
15 JUDGE MOORE:
Does it not mean that you have l
l 16 established your case in each and every element that is
)
l l
17 necessary to establish, and that unless'it le rebutted that it 18 would stand alone?
j 19 MR. MCEACHERN:
No.
It means that it demonstrated a l
20 threshold level.
21 JUDGE MOORE:
Are you suggesting then that the 22 Commission's Rule 2.758 takes a much lesser showing than to 23 reopen a record, that the Commission in its wisdom in enacting 24 2.758 would have set up a standard that it is very difficult to 25 reopen a record in a proceeding but that it is relatively eacy
(
Ueritage Reporting Corporation (202) 628-4888
35
(
1 to toss out a Commission regulation?
2 MR. MCEACHERN:
Well, when the history of this 3
civilization is written, they can well look to the NRC rules to f
4 see how this civilization fell down on itself.
i 5
JUDGE MOOPE:
Counsel, I will not be here when the l
l 6
history of civilization is written, or at least I hope that I l
1 f
7 will not.
l l
8 MR. MCEACHERN:
I will not be here either.
i 9
JUDGE MOORE:
And I am just curious with the much 10 shorter term.
i 11 And that is that you are suggesting that it is a 12 lesser standard to set aside a Commission rule under 2.758 than i
t 13 for instance to reopen a record in one of these proceedings?
O 14 MR. MCEACHERN:
When the special circumstances exist, i
15 and we have shown that they exist.
1 l
16 JUDGE MOORE:
Okay.
Now to reopen a proceeding, you 1
l 17 have to show two things essentially.
That you have a j
l l
18 significant safety matter, and that'you could not have brought j
l 19 it up sooner.
Now showing that you have a significant safety l
20 matter at hand takes more than an allegation.
It has got to be i
i 21 backed up with evidence essentially.
]
22 Now at a minimum, does not a prima facie case suggest l
23 that you have got to back up your allegation?
24 MR. MCEACHERN:
And we have.
We have given you the 25 sworn statement of the president of the company saying that 1
A(_)
Heritage Reporting Corporation (202) 628-4888
1 1
1 36 1
they are going bankrupt, Thank you.
2 JUDGE ROSENTHAL:
Ghay.
Thank you.
All right.
We 3
will hear from the Applicants.
1 4
Do I assume, Mr. Dignan, that there has been an equal
]
I
.5 division of time between the Applicants and the staff?
6 MR. DIGNAN:
I offered the staff the majority of the j
l 7
time, and they would not take it.
l l
8 JUDGE ROSENTHAL:
I do not know what inference to 9
draw from that.
10 MR. DIGNAN:
Mr. Chairman, I am taking very seriously 11 the Board's admonition that the Board was thoroughly familiar l
l l
l 12 with the briefs and so forth.
And I confess that having now l
l 13 heard the oral arguments that I have very little to add to what i
O 14 I said in my brief.
l 15 I think that to the extent that. It came up, this
-)
16 business of not meeting legal obligations and the default, I 17 would poi.nt out to the Board that what happens when you default l
18 on the interest payments and what would happen in a bankruptcy l
19 has one effect that is real.
It puts the company awash in 20 cash.
I mean if you are not paying the interest on your heavy 21 debt, you have got a lot of cash around.
~
i 22 And the questions of the Board are quite germane.
l 23 That there is absolutely no showing here that the Public 24 Service is not meeting in full its obligations under the joint 25 ownership agreement with respect to Seabrook, which is the only l
Heritage Reporting Corporation (202) 628-4888
37
(
1 thing that is of relevance here.
I 2
JUDGE MOORE:
Mr. Dignan, do the other owners, the 3
other two-thirds owners and Co-Applicants, have a legal 4
obligation to pick up Public Service of New Hampshire's 5
shortfall if they cannot come up with their operating expenses?
6 MR. DIGNAN:
Judge Moore, as long as you understand 7
this to be an answer of a lawyer who does not profess expertise i
8 in the interpretation of these contracts.
But my understanding 9
is no, that there is no such legal obligation.
However, I do
)
10 not want that to be thought of as an admission by those other 11 utilities, j
12 JUDGE MOORE:
I understand that, although I am l
l 13 surprised that you would let your client write arcane language i
O 14 into such contracts.
15 But what do those contracts say about default in 16 operating?
l 1
17 MR. DIGNAN:
Again as I have said to you, my j
l 18 familiarity with the contract is very little.
I have always j
i 19 been the gun carrier, if you will, the litigator here, and 20 there are other lawyers better qualified.
But my l
t 21 understanding, or I have been advised by those in my office who 22 are more familiar, that there is nothing in the contract which 23 would legally require the other owners to pick up the 24 situation.
But as a practical matter, that is what would 25 happen and indeed it has happened in a small default.
I have i
p)
(
Heritage Reporting Corporation (202) 628-4888 i
I
...___..___.__._.m___.
i 38 1
no idea and can make no representations to you with respect to 2
that.
3 JUDGE MJORE:
That was a default on interest 4
payments.
5 MR. DIGNAN:
There was a small utility that decided 6
to stop making its payments, and the small amount was something 7
made up by the others.
8 JUDGE MOORE:
Those were construction expenses or 9
operating expenses?
10 MR. DIGNAN:
They were monthly payments into the 11 project, yes.
i 12 JUDGE ROSENTHAL:
Let me ask you this, Mr. Dignan.
13 Mr. Backus, whose memory is a lot _better than mine, called the I
(
14 Commission's attention to a colloquy between you and my former j
j l
15 colleague Ferrar back some I guess almost to the day eleven j
16 years ago in which you suggested to Mr. Ferrar that if a 1
1 17 utility were bankrupt or I think near bankruptcy that that 18 would be cause to deny a license.
19 Now I am sure that when you made that statement that l
20 you had no idea that eleven years later that the Public Service 21 of New Hampshire would be in the financial condition that it is 22 in, and in addition would not have an operating license.
23 But what about that statement?
24 (Continued on next page.)
25
)
Heritage Reporting Corporation (202) 628-4888
.i
'I i
1
'39-T
?
1 MR. DIGNAN:
You'have me at one advantage, and that.
2 is that I don't have the actual colloquy in front.of me,'but I J
.l 3
do recall it basicclly..
ButLif I1 recall'the context of that,.
u 4
it was in the construction permit setting, and I think I went.
]
5 on-to say, indeed, no utility.would be'trying to build a plant 6
if it was in bankruptcy.
l 4
7 The setting is that the plant'is built.. The plant is 1
8 built with, I respectfully suggest as long as.we are'~ going X:
'1 9
the record here, with an enviable quality assurancefrecord, and.
1 10 extraordinary SALP performance;-it's. built, it's ready to go.
11 We're now at the cperating level,'and the Commission'has
- l 12 recognized through this rule, in a case-by-case adjudicationLof l
J 13 the financial qualifications.
(
t 14 So I think there it's entirely'different setting in
)
15 which I was talking.tu 10. Ferrar, and what we're taJking.about.
16
- today, 17 If Public Service.be near bankruptcy now, and let's j
18 assume for purposes of discussion that they are, as I'said,
.]
19 what will happen is if they went into' bankruptcy, the 20 bankruptcy estate relieved of obligations to buying all this 21 will a wash in cash.
There will be plenty.of cash to cover i
22 operating expenses until such time as the plant goes on line, 23 at what time the rate-setting authority will take over.
24 JUDGE ROSENTHAL:
Well, you tell vs this, you:tell us-25 this, but that's attorneys talk.ing, not --
-i 4
Heritage Reporting. Corporation (202),628-4888
J l
I 40
(
MR. DIGNAN:
X'the record.
2 JUDGE ROSENTHAL:
-- the' witness.
But my problem 3
frankly is this.
.4 When the Commission promulgated that rule,'I would i
5 suspect that its members had no idea that within a matter of f
6 two or three years one of.the principal. owners of a nuclear j
7 power plan would be confronted.with the spector of' bankruptcy.
l 8
Now why.isn't this unusual development, and-i 9
apparent.1y it's been a long time since any significant utility 10 has been confronted with this possibility, why isn't this l
11 development enough for us to' send this thing up to.the 1
12 Commission and say, Commission, you're the ultimate arbiter as' i
d 13 to whether the rules should be waived..But we have a rather O
14 unusual situation here,.one. seemingly not contemplated when you' 15 enacted the rule, and so we're going to let you decide whether i
i 16 this situation warrants the financial qualifications inquiry 1
)
17-that these Interveners are seeking.
18 MR. DIGNAN:
Well, the question'is whether or not one l
19 assumes that the Commission had'in mind that it was'an unusual 20 event to have a reorganization.
21 As I pointed out in.my brief, the Shoreham Licensing 22 Board decision that I thought was'quite well reasoned, pointed 23 out that that did not seem to be what the Commission was-24 concerned with.
They spelled out the one situation that was of 25 concern to them which was an indication where the attitude of' Heritage Reporting Corporation (202)'628-4888
41 1
the rate regulator, the rate regulator indicated an 2
unwillingness to cover operating costs, and that is not the t
t 3
same thing as saying that the utility, why the utility is 4
headed into reorganization.
5 It seems to me the prime facie showing the Commission 6
would be interested in, and you would want to send it up on, is 1
7 that they had been some showing that the PUC, faced with 8
whatever entity is running this plant at the time, whether it 9
be Public Service of New Hampshire, or Public Service in
]
t 10 reorganization, or it be some new entity that came out of 11 reorganization, was unable or unwilling to cover the operating i
12 costs of the plant, and there simply no such showing in this j
13 record.
I O
14 JUDGE MOORE:
Mr. Dignan, assume for the moment that j
l 15 you have a constitutional anti-CWIP law so you don't ever get 1
16 to whether the Public Service Commission would permit funds to
]
17 be -- the rate pairs to be charged for -- to provide funds for l
18 safe operation; assume for the moment that.
19 MR. DIGNAN:
I'm not sure I understanding.
I I
20 JUDGE MOORE:
That you have a constitutional 21 anti-CWIP law.
22 MR. DIGNAN:
A constitutional anti-CWIP law does not 23 prevent the rate regulator from putting Public Service's
)
24 ownersilp share in the rate base.
It just says they won't do j
25 it until it goes to 100 percent of power.
J l
l Heritage Reporting Corporation (202) 628-4888 i
l I
42 1
JUDGE MOORE:
Okay, assume --
l 2
MR. DIGNAN:
Or until it goes into commercial l
3 operation.
4 4
JUDGE MOORE:
All right, assume that.
Now, how can 5
you ever then show under 2.758, under the scenario you just
)
6 recite, a waiver of the financial qualifications rule?
7 MR. DIGNAN:
I don't think you can in this setting, 8
Your Honor.
I don't.
I thought your --
9 JUDGE MOORE:
Yeah, if they came in and said, Public 10 Service of New' Hampshire does not have sufficient operating i
11 funds to operate this plant safely at low power, you can't 12 inquire under the -- seek a waiver under the financial 13 qualification rules to inquire into that, in your opinion?
O#
14 MR. DIGNAN:
I don't think you can make it, no.
15 JUDGE MOORE: Okay.
l 16 MR. DIGNAN:
Really, I don't.
I think your 17 observation is quite cogent that the CWIP law has two edges to 18 it, as so many things do when use them in argument.
They uant 19 to force the CWIP law to show how difficult my client's j
l 20 situation is, but your observation was exactly right, Judge l
I 21 Moore.
The rate process, as long as that law stays in the 22 books, can't operate to give you any revelation of what that 23 Commission is going to do with respect to full power operation.
l 24 JUDGE MOORE: So in your opinion then, you cannot seek 25 a waiver of the financial qualifications rule --
Heritage Reporting Corporation (202) 628-4888
l 43 1
MR. DIGNAN:
In this. setting'.
1 2-JUDGE MOORE: -- even with a demonstration ~that-Public.
3 Service of New Hampshire does not have sufficient funds to t
4 operate safely at low power?
L 5
MR. DIGNAN:
Yeah, I think that'would be --
6 JUDGE MOORE: Okay.
7 MR. DIGNAN:
Because I don't see how you could make j
8 it.
Maybe I'm missing something;here, but I don't see how.the 1
9 demonstration could possibly be made with CWIP on the. books in-1 l
'10 the setting that I understand the. Commission was disturbed 11 about, which is that the'regulat'or will be unwilling to provide
)
1 12 operating costs when the plant is at full power or commercial q
l 13 operation.
Full power is a-shorthand for that.
And I don't
]
()
14 see in this setting how you could.
15 There is no question, as I'say now, _and again we're X 16 the record, but that's the way we've been going today, the 17 company -- the project is meeting its obligations.
The 18 suppliers are being paid.
19 JUDGE MOORE:
Well, what about these dire forecasts-l A
20 that were included in the 8-K statement,. including, as Mr.
21 Cackus stressed, statements going to maintenance?
22 MR. DIGNAN:
The maintenance statements that'Mr.
23 Harrison made, I believe if taken in context, had to do~with 4
24 the maintenance of the' system.
It had nothing to do with 25 maintenance of Seabrook.
Seabrook sits over there as a I
(
Heritage. Reporting Corporation (202) 628-4888
44 l
1 separate entity run by a separate division.
i 2
And as I say, I know of no evidence that Public l
3 Service is not meeting in full its obligations under the joint 4
ownership agreement.
5 JUDGE MOORE: You don't interpret the statement of l
6 considerations in the current financial qualifications rule 7
reciting that there are special circumstances, and then they i
l 8
use as an example, but they started out in that example by not j
l l
9 making it all-inclusive, that not being able to meet operating 10 expenses for safe operation of low power is a special l
11 circumstance --
12 MR. DIGNAN:
Well --
13 JUDGE MOORE:
that one should inquire into the 14 financial viability of this utility?
l i
15 MR. DIGNAN:
I think my answer to that is this, Your 1
16 Honor.
17 As I look at the statement of basis for the rule and 18 the coming of the rule, the rule as I read it and the statement 19 of basis was out there, there are a bunch of rate regulators 20 whose job it is is to regulate the rates of the utility.
And 21 history has taught us, the Commission, that the rate regulators 22 give operating costs to people, and therefore there is no r.eed 23 for a case-by-case adjudication.
I l
24 My understanding, or whether you take that one i
25 example of what was in the Commission's mind, was not the tO
(/
Heritage Reporting Corporation l
(202) 628-?888 i
i
'a 14 5 -
l O
'l situation of an applicant so much as it was the attitude of a
-i 2
rate regulator.
1 3
~ Let's understand something, now this.is something
]
4 else I said to various adjudicatory tribunals-11 or more-years 4
5 ago.
A rate regulator can cut the throat of a utility.
6 effectively anytime it wants to, and there is nothingJunique 7
about Seabrook in that sense, or Public' Service of New 8-Hampshire.
A rate regulator.that elected;to, let us say, walk; 9
away from its obligations under its' statute and so.forth, can 1
10 slaughter any -- an AAA utility can'be in trouble the next day.
11-The Commission'has always had tx) deal, by'the
- i 12 Commission I mean the Nuclear Regulatory, with the fact that it 13 does not have financial authority over its applicants'.
'I he O
14 states have always traditionally had that, or'some ofcthe.
15 plants are probably affected.by FdRC regulation instead."But 16 the rate-setting authority doesn't like.with this Commission..
17 But Public Service is not unique,-and what I think it 18 was concerned with is if.you.show us'a. case where you can-19 demonstrate that sitting out there is a state rate regulator, 20 or FERC on the federal side, or whoever has got the -- who is 21 simply not going to let this plant cover its. operating costs 22 for safety reasons, then bring.it to us and we'll look at it.
23 JUDGE ROSENTHAL:
Well, Mr. Backus referred ta) I 24 think the decision of the New Hampshire Utilities Commission to 25 the effect that it couldn't provide rate. relief in a-(
Heritage Reporting Corporation
'(202) 628-4888
46.
(
1 traditional manner; is that so?
What's the --
2 MR. DIGNAN:
You have me again at a disadvantage, 3
Your Honor.
I've been slightly busy with other matters in 4
Concord, and I'm not involved in the rate case.
But my 5
understanding of the rate case that's going on is it's an 6-emergency rate case, and that the statements that were made.ias 7
traditional emergency relief if that was made.
8 But I, frankly, am not' familiar with the record in l
l 9
that proceeding.
I attended no sessions of it, and I can make j
I 10 no representation to you about it.
11 JUDGE ROSENTHAL:
I could understand your position I 12 think a little more readily if we were talking about whether 13 we, this Beard, or the Licensing Board for that matter, should O
14 waive the rule, but that's not the question.
15 The question is whether we should serve up to the 16 Commission the question as to whether in the totality of these 17 circumstances there should be an inquiry into the financial 18 qualifications of this utility.
19 Now, offhand it seems to me that we have some very 20 unusual circumstances here.
I don't know of any other nuclear 21 utility, if I may use that term, that is confronted with the 22 situation that no. confronts Public Service of New Hampshire.
23 Now, why isn't that at least enough for the 24 Commission to take a shot at?
25 MR. DIGNAN:
All r).ght, now, in terms of getting j
i l
I Heritage Reporting Corporation (202) 628-4888
47 1
right down to whether you certify to the Commission, then I'm 2
going to come down to what the reg says.
And what the reg 3
says, 2.758, its prima facie case, and with all duo deference j
4 to my learned opponent, I happen to think I know what a prima j
5 facie case is.
And to jury lawyers, it means one that gets 1
6 over the rail.
It means that, as Judge Moore pointed out, it's j
l 1
7 one that, assuming it to be taken as true and unrebutted, the decision should go with you because all elements in the case l
8 l
9 are there.
10 JUDGE ROSENTHAL:
All right.
11 MR. DIGNAN:
This thing is an a prima, never mind a 12 prima facia, that's been served up to you.
13 So I think the short answer to why you shouldn't send O
14 it up to the Commission is, under no definition of. prima facie 15 case that I think is recognized --
16 00DGE ROSENTHAL:
Well, let me --
17 MR. DIGNAN:
-- they made one.
18 JUDGE ROSENTHAL:
Well, let me try that out for a 19 moment.
20 You dismissed Mr. Harrison's statement with respect 21 to maintenance on the ground that, well, that just applied to 22 maintaining the system.
Seabrook is a separate breed of cat, 13 and it has no application, is that --
24 MR. DIGNAN:
This is in the 8-K report?
25 JUDGE ROSENTHAL:
Yes.
Is that right?
Heritage Reporting Corporation (202) 628-4888
48 1
Now if in fact Mr. Harrison was concerned about there-I 2
being sufficient monies available, absent rate relief or.
l 3
whatever, to maintain the system, why'isn't it a reasonable 4
inference that in the same' set of circumstances there might.not Ij
.5 be sufficient monies available to maintain Seabrook at. low-6 operation, low-power operation?
7 MR. DIGNAN:
I'm having difficulty locating in the 8
8-K where that statement was made that Mr. Backus said was in 9
the 8-K.
'l 10 JUDGE ROSENTHAL:
Well --
I 11 MR.'DIGNAN:
Maybe he can help me.
j I
12 MR. BACKUS:
I think, Your. Honor, that the statement' l
13 I made was Mr. Harrison's statement of August 5th.
)
14 JUDGE ROSENTHAL:
Oh, excuse me.
15 MR. DIGNAN:
It's not in the 8-K.
i 16 JUDGE ROSENTHAL:
Okay,.it's not in thero.
I'm i
17 sorry, I withdraw it.
l 18 So then we've got the --
19 MR. DIGNAN:
You've'got the statement made.
I l
20 Mr. Chairman, you know, I've been in front of this i
1 21 agency and this Board, in particu. tar, for'too many years, and I 22 hope I have a reputation of total candor.
I am not sitting j
23 here telling you that in fact'Public Service'doesn't have 24 severe problems.
25 I am telling you that if we're going to take the
(
Heritage Reporting Corporation (202) 628-4888
1 49 1
words of a 2.758 prima facie case, this one doesn't do Jt.
2 Now if you want to send it back down there and let 3
them try again, they can try it again.
But, of course, if they 4
try it again, then we've also got the right to put in 5
affidavits to see whether there is a prima facie case made, i
6 including those of bankruptcy experts who can tell you what i
I 7
they think will happen, and they just haven't got a. prima facie 8
case.
9 JUDGE ROSENTHAL:
Now supposing that at some 10 subsequent point Public Service does go into bankruptcy, either 11 involuntary bankruptcy or on its own petition, do you think 12 that that on its face would establish enough to at least put it 13 up to the Commissicn as to whether the Commission wished the
()
i 14 financial qualifications inquiry?
4 15 MR. DIGNAN:
No, I do not, because as I said before, l
l l
16 I think what the Commission was dealing with was the attitude 17 of the rate regulator.
And if Public Service goes into some 18 sort of a reorganization --
19 JUDGE ROSENTHAL:
Well, they were worried about --
20 they were worried about the attitude of the rate regulator if 21 assuming, I think, that the company was solvent.
It seems to 22 me that when you add the factor of a company that's insolvent 23 that that may be a reason for the Commission to say, okay, here 24 we've got this very unusual factor.;
There hasn't been a major 25 utility that's gone bankrupt for umpteen years.
We certainly
[)
Heritage Reporting Corporation s-(202) 628-4888 4
A
~1 l
l 50 1
weren't thinking about thet in 1984.
We were focusing solely 2
on the matter of whether the regulators would produce the l
I 3
money, but we've got this extraordinarily unusual situation, j
j 4
and this is worthy, not necessarily, of a deterniination that j
S the company is not qualified financially, but certainly worthy l
I 1
6 of inquiry.
j i
l 7
MR. DIGNAN:
Again --
l 8
JUDGE ROSENTHAL:
And you don't see it that way i
9 particularly.
f 10 MR. DIGNAN:
Well, Mr. Chairman, if the standard that I
11 you're going to use is if the Appeal Board judges, or a 1
12 majority thereof think it is worthy of the Commission's inquiry 13 were going to send it up, I lose if the majority of you think O
14 it's " worthy" of the Commission's inquiry.
15 I understand the standard to be prima facia case.
16 JUDGE ROSENTHAL:
All right, but --
17 MR. DIGNAN:
And that's not what we've got here.
18 JUDGE ROSENTHAL:
All right, prima. facie case on 19 whether the rule serves the purposes for which it's intended.
20 MR. DIGNAN:
And the funny part of that is the 21 purpose -- one of ';he purposes the rule was to serve was to 22 avoid case-by-ce e adjudication of this issue, and of course 23 it's service that most admirably.
24 JUDGE ROSENTHAL:
But, again, again, Mr. Dignan, my 25 concern is that the Commission did not foresee this situation, O) k-Heritage Reporting Corporation (202) 628-4888
1
)
51 1
1 and I realize that --
2 MR. DIGNAN:
I don't know why Your Honor says they l
3 did not foresee it.
4 Now, I take that back having said it, because the 5
chairman of the Appeal Panel undoubtedly has an ability to 6
gauge what given Commission members are thinking --
7 JUDGE ROSENTHAL:
No, not at all.
far in excess of.mine.
[
8 MR. DIGNAti:
9 JUDGE ROSENTHAL:
'Not at all.
I mean, sometimes what i
i 10 the commissioners are thinking is a total mystery to me, 1
i l
11 probably more often than not.
But my point is --
}
12 MR. DIGNAN:
Well, there is nothing in that statement 13 of basis that tells me that the Commission was not thinking --
()
I 14 JUDGE ROSENTHAL:
Right.
)
i 15 MR. DIGNAN:
-- that a utility could go bankrupt.
16 JUDGE ROSENTHAL:
I infer that only from the fact l
17 that as of 1984, there had been a, what, several decados since 1
18 an electric utility had gone under.
Am I right about that?
19 That's the impression I had.
i 20 MR. DIGNAN The conventional wisdom is none has gone l
21 under si.nce the Great Depression.
22 JUDGE ROSENTHAL:
All right.
23 MR. DIGNAN:
So several decades.
24 JUDGE ROSENTHAL:
So that it wouldn't be unreasonable 25 for the Commission not to focus on the possibility of a utility
/
Heritage Reporting Corporation (202) 628-4888
1 1
1 52 1
going under, would it?
2 MR. DIGNAN:
I would not be unreasonable.
3 JUDGE ROSENTHAL:
All right.
And there was nothing 4
certain'.y in their statement of considerations that indicated 1
5 that they had thought about that, but had decided it was a "no, 6
nevermind".
7 MR. DIGNAN:
I would concur in that --
8 JUDGE ROSENTHAL:
All right.
9 MR. DIGNAN
-- just as I'm sure you will concur 10 there is nothing the other way either.
11 JUDGE ROSFNTHAL:
Sure, sure But that's when
-- it 12 just seems to me sometimes, at least, that when one is in doubt 13 as to whether the Commisalon meant this or that, or factored in 7,
14 this consideration or that, that the easiest way of dealing 15 with it is to send it up to the commissioners and say, 16
" Folks, you're the final arbiter as to what you had in mind in 17 that statement, and you can in this instance decide that the 18 rule should be waived, or you can decide that it shouldn't be 19 waived."
20 MR. DIGNAN:
Your Honor, if the Board elects to 21 exercise its authority in what I believe is 2.743, to refer a 22 matter to the Commission, then we shouldn't have come down here 23 to argue, because that standard is much different.
l i
24 I have conceded in front of licensing boards, I don't 25 know that I've ever had an occasion to concede it in front of.
(
Heritage Reporting Corporation (202) 628-4888 i
l
'53 I
1 this Board, but I would, that the 2.743 referral standard, if 2
I've got the right regulation in mind, is one of discretion, 3
and virtually absolute discretion in the tribunal.
4 And if the standard we're going to apply.is whether 5
two or three members, or all three members of this panel think 6
it's worthy of the Commission's attention, and essentially 7
exercise under whatever guise that 2.743 --
l 8
JUDGE ROSENTHAL:
No, no, I wasn't l
I 9
MR. DIGNAN:
-- I can't do with.it.
But if the j
10 standard is prima facie case, Your Honor, this one doesn't do i
l 11 it.
This is the kind of a thing that if somebody went to a j
12 federal court judge and said, I've got a prima facie case on 13 the basis of this, they would be laughed out of court.
There 14 is no prima facie case for all the reasons the Licensing Board j
i 1
l 15 articulated.
16 JUDGE ROSENTHAL:
All right, there wouldn't have been 17 a prima facie case even if Mr. Harrison's statement had been in 18 the 8-K rather than made subsequently at 19 MR. DIGNAN:
No, I don't think it would have, Mr.
20 Chairman, because I'm confident, I am confident in my own mind 21 of when that statement was made what was meant by it.
And if 22 we had it in full context, I think it was clear.
There was a 23 bid dust-up up there because at one point Public Service 24 announced that it might stop hooking up new customers and so 25 forth, and he was talking about the maintenance of the electric
(
Heritage Reporting Corporation (202) 628-4888
_______m_________
i 54
()
1 system.
2 I have absolutely clearly in mind, Mr. Harrison has 3
never suggested in public, in a formal document or in any way 4
that Public Service is going to cut back on any obligation 5
which would threaten the safety of Seabrook.
6 And, you know, again, Mr. McEachern stood up here and 7
talked about how much of the real world do you want to talk 8
about.
Well, I'll talk about the real world any time.
This 9
utility has been chased 14 y9ars now that it's not financially 10 qualified, that it's not going to build a safe plant as a 11 result.
And as I've indicated to this Board, sitting up there, 12 facts you can officially notice is a constructed plant with a 13 quality assurance record that is the envy of most, if not all 14 of the industry, with a SALP rating that I wish a lot of other 15 clients of mine had, and there it is.
16 So they must know what they're doing.
They've got 17 the money to do it.
As far as I know, they're meeting all of 18 their bills.
My famous litmus test of financial qualification 1
19 is whether they are paying their legal bills on time, and I can 20 assure you they're doing that.
21 JUDGE ROSENTHAL:
Well, they come before anything 22 else.
23 MR. DIGNAN:
And I just don't see any evidence --
24 well, I think that would be a good policy for management to 25 follow.
I'm not sure that --
()
Heritage Reporting Corporation (202) 628-4888 2
l l
l l
L_
55 1
JUDGE ROSENTilAL:
Isn't there an attorney's lien 2
in --
l 3
MR. DIGNAN:
In the Bankruptcy Court only.
4 JUDGE ROSENTHAL:
Only in the Bankruptcy Court.
5 I thought it was a general attorney's lien that took j
6 precedence over material men and everybody else.
l 7
MR. DIGNAN:
That's true on the state side, too, I 1
8 guess.
J 9
JUDGE MOORE: Mr. Dignan, 10 there a set of facts that 10 you can posit where a 2.758 petition could be successful?
l 11 MR. DIGNAN:
Yes.
12 JUDGE MOORE: Against your client?
13 MR. DIGNAN:
Yes.
l 14 JUDGE MOORE: All right.
1 15 MR. DIGNAN:
If you had a statement from the Public 16 Utilities Commission that said, we have decided, for whatever 17 reason, let's say it was a political type statement, that under 18 no circumstances will we give Public Service Company rate 19 relief to pay for obligations at Seabrook or the operation of i
20 Seabrook once it goes on line.
21 Now I've overdramatized it, Your Honor, but somebody 22 could take a line of decisions from the Agency or formal public 23 pronouncements from the Agency in the nature of, you know, I 24 don't know whether they do it up there but I know the SEC makes 25 formal press releases that are precedent as well as their s)
Heritage Reporting Corporation (202) 628-4888
56
(
1 decisions, something like that, make a case out of it, and say 2
we've got a prima facie case.
3 JUDGE ROSENTHAL: That will never happen?
4 MR. DIGNAN:
I don't think with this Commission, no.
5 Who knows after somebody else gets elected what will happen.
6 JUDGE MOORE: It's your position that bankruptcy, the 7
act of someone filing for involuntary bankruptcy of your client 8
wouldn't do it per se?
9 MR. DIGNAN:
No, Your Honor.
10 JUDGE MOORE:
And you posit that that would mean that j
i f
11 the company would likely be, as you term it, "a wash in cash".
12 MR. DIGNAN:
They are now by missing the debt 13 payments.
O 14 JUDGE MOORE:
But if they go into bankruptcy, 15 doesn't the trustee have one obligation essentially, and one 16 obligation only, to conserve the estate?
17 MR. DIGNAN:
That's right.
18 JUDGE MOORE:
For the creditors.
19 MR.
LIGNAN:
And we have conceded in various filings i
l 20 it is conceivable -- well, first of all, understand, if they J
21 went into bankruptcy, and like Judge Rosenthal, I do not 22 pretend to have a deep knowledge of bankruptcy law. but,.first 23 of all, the likely thing probably would be a debtor in 24 possession situation.
I mean, there may not even be a j
25 trustee.
Heritage Reporting Corporation (202) 628-4888
57 1
But whether it be a trustee or a debtor in 2
possession, what's the primary asset of this company?
It's 3
Seabrook sitting out there.
So that -- and even if you assume 4
that what somebody wanted to do was spin the Seabrook operation 5
out into a separate entity and get Public Service being down 6
into being a distribution and transmission company'and so 7
forth, to make that asset an attractive thing to' sell, to.get 8
somebody to go along with that program, you've got to preserve l
9 Seabrook in a licensable condition.
10 So, while I would concur with you, if the thrust of 11 your question was, you know, a trustee may turn the switch off, 12 I think it highly unlikely..And more importantly, you then get 13 into the question of, you know, the real argument here is, is 14 there some threat to public safety that might happen,'and let's 4
15 keep in mind one thing.
16 Sitting out there is the NRC staff.
Now, let's I
17 assume there was an operating license out there and the plant 18 was running, and it was announced by the bankruptcy trustee, 19 "That's it, we're not going to give any more money to 20 Seabrook," the idea that there is going to be a threat to 21 public safety assumes that the staff is going to go to sleep 22 over there and not use all the powers it has under 2.206, l
23 including an immediate revocation or suspension of any license 1
24 that's out.
25 Your Honor, I think the financial qualifications of l
(
Heritaqa Reporting Corporation (202) 628-4888 3
1
.i
58 1
Public Service Company, and I say this with full understanding 2
of the seriousness with which one can conjure up, is a " n o,.
3 nevermind" at this juncture for Seabrook.
The money is either i
4 going to be there to hold this operation together until it gets 5
a full power license, or it isn't.
I think it is, one way or 6
another, and then the plant is going to run, and it's going to 7
generate cash.
And whether the Public Service --
i 8
JUDGS MOORE:
Assuming I accept 9
MR. DIGNANr
-- into bankruptcy or not is irrelevant.
1 10 JUDGE MOORE:
Assuming I accept your argument --
I I
11 MR. DIGNAN:
Yes.
l 12 JUDGE MOORE:
-- as to this petition, are there any l
13 bars if circumstances changed that would preclude this
(_)
i 14 intervenor from, or any other intervenor from filing another 15 petition at a later time?
16 MR. DIGNAN:
My understanding on 2.758 is it's always l
17 available to every party to an adjudication at any time.
18 JUDGE MOORE:
And so --
19 MR. DIGNAN:
Certainly, I've utilized it that way 20 myself.
21 JUDGE MOORE:
So none of the factors, or facts that 22 are alleged in this one would stand as res judicata or 23 collateral estoppel or anything in the future.
24 MR. DIGNAN:
As I understand, the only thing that 25 would be decided by this Board in this hearing would be that on Heritage Reporting Corporation (202) 628-4888 s
59 e~g
(/
1 the facts that were presented to you as you go down the line of 2
whether a prima facie -- chey don't make a prima facie case.
3 This does not preclude one from. coming back with these facts 4
plus, and saying, now I've got it, to the Licensing Board, and 5
starting its way back up.
j 6
JUDGE ROSENTHAL:
All right, everything that you tell 7
us about the consequences of a bankruptcy may be true, but, of 8
course, that again is attorney's talk.
9 MR. DIGNAN:
X the record.
j k
10 JUDGE ROSENTHAL:
And so that there might be some j
J 11 useful purpose if a bankruptcy to having that matter explored
{
12 on the record by people who are purported authorities in the 13 area of the consequences of a bankruptcy.
/~T
{
14 MR. DIGNAN:
Well, if they go into bankruptcy,
~
15 presumably if somebody is still interested in this on, they're 16 going to file a 2.758 with an affidavit.
I will have an
)
17 opportunity to reply, and then that's the record that will come I
18 up here, assuming the Licensing Board rules the same way it did 19 before.
20 If the Licensing Board sends it to the Commission, it 21 won't stop here.
It will go on out.
22 JUDGC ROSENTHAL:
Well, you've taken half of the one 23 hour2.662037e-4 days <br />0.00639 hours <br />3.80291e-5 weeks <br />8.7515e-6 months <br />.
24 MR. DIGNAN:
I see I have, Your Honor, and I'm 25 through.
Thank you.
Heritage Reporting Corporation (202) 628-4888
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1 JUDGE ROSENTHAL:
Okay, Mr. Barry.
ET3 2
(Continued on next page.)
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1 MR. BERRY:
Good morning, Your Honors.
My name is 2
Gregory Berry.
It is my pleasure to appear before you again 3
today on behalf of the NRC staff, and at this time to urge you 4
to affirm the Licensing Board's denial of the Intervenor's 5
petition for waiver of the Commission's financial qualification 6
rule.
7 Your Honor, the only issue properly before us today l
8 is whether the Iicensing Board correctly concluded that the l
l l
9 Interveners have failed to make a prima case that special 10 circumstances existed such that application of the Commission's 11 financial qualification rule in this instance would not serve i
12 the purpose for which the rule was promulgated.
I will confine 1
13 my remarks to a discussion of why the Board's denial of the O
14 waiver petition was correct.
15 JUDGE MOORE:
Mr. Berry, do you read the Commission's 1
16 financial qualification rule as narrowly as the Applicant, that 17 the only objective behind the rule was the mind set of the 18 various public rate making commissions at the state level?
19 MR. BERRY:
I cgree with much of what Mr. Dignan said 20 here.
The Commission stated in adopting the. regulation that 21 the purpose of it was to ensure that an Applicant had access to 22 the funding, adequate funding, necessary to operate a plant 23 safely.
And a regulated utility was exempted from that, 24 because it was assumed and understood that the rate making 25 process would assure that adequate funds would be available.
()
Heritage Reporting Corporation (202) 628-4888
I 62 I
e 1
So to that extent, I believe that is what the Commission was 2
concerned with.
i 3
JUDGE ROSENTHAL:
Why do you need to get over that 4
hurdle?
I gather that Mr. Dignan suggests that you would need 5
an explicit statement on the part of the Utilities Commission 6
that it would not provide the necessary funds to ensure cafe 7
operation.
8 Do you think that that explicit statement is 9
necessary, or do you think that one can get over the hurdle l
10 with something short of that?
11 MR. BERRY:
Well, I do not know that an explicit 12 statement to that effect is necessary.
But I do agree with Mr.
13 Dignan on the larger point that he made.
And the point is that O
I 14 in order to make out a prima facie case that the application of 1
15 the regulation would not serve its intended purpose that what 16 must be shown is that the regulators or the particular Public l
17 Utilities Commission will not allow the utility to recover.
l 18 JUDGE ROSENTHAL:
How do you show that, how do you 19 show that?
20 MR. BERRY:
I could give you an example, if you would l
21 like.
22 JUDGE ROSENTHAL:
Yes, give me an example.
23 MR. BERRY:
One example that would readily occur in 24 my mind is that say, for example, if you had in the State of 25 New Hampshire a law, or a policy, or a regulation of the Public t~.
Heritage Reporting Corporation 1
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63 O) k_
1 Utllity Commission that stated that the filing of the petition 2
in bankruptcy operates to preclude or to deny an Applicant from 3
receiving er recovering his costs through rates.
I mean there 4
has to be some connection between the action or the l
5 circumstance of the utility and the attitude of the regulator.
6 JUDGE MOORE:
Mr. Berry, is it your position as it is 7
the Applicant's that if this Intervenor in his 2.758 petition 8
had demonstrated that the Public avice of New Hampshire has 9
insufficient funds from current or2 rating revenues to safely 10 operate Seabrook at low power, and there was the anti-CWIP law 11 in place in New Hampshire, that he had not met his burden?
i 12 MR. BERRY:
I am sorry, could you repert your 13 question, Judge Moore?
)
14 JUDGE MOORE:
Is it your position as it is the 1
15 Applicant's that if this Intervenor in his 2.758 petition had 16 demonstrated not only that there is an anti-CWIP law currently 17 in place in New Hampshire that precludes recovering through the l
18 rate process any 2: ids for low power operation at this time, 19 and in addition he had shown that the Applicant does not have 20 current operating revenues sufficient to fund safe low power 21 operation, that a prima facie case was not made out?
22 MR. BERRY:
Well, and I would like to explain my 23 position.
24 JUDGE MOORE:
Well, start with a yes or a no, and 25 then explain it.
f3
(_)
Heritage Reporting Corporation (202) 628-4888
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N-1 MR. BERRY:
Yes, Your Honor.
I believe that the 2
Interveners may well have done so, if that is what had been 3
shown.
4 JUDGE MOORE:
So you do not read the rule nearly as j
l 5
restrictive as does the Applicant?
6 MR. BERRY:
I explained how the staff regards the 7
rule.
And we believe that what has to be shown, the staff-8 believes that what has to be chown is that there has to be some-9 connection between the attitude of the regulator and the 10 circumstances or action of the utility.
And I think that it is 11 well to keep in mind here in this particular case that'one, 7
12 there has not been a showing that the Applicant, or its f
l 13 Co-Applicants, or its co-partners are unable, or do not have 14 access to the funds, or have the adequate funding to maintain 15 the facility or to operate the facility safely.
16 JUDGE MOORE:
Let me try it this way.
17 Is it the staff's reading of the purpose behind the 18 financial qualification rule that the sole and the single basis 19 for that rule is essentially the attitude of the rate maker i
20 providing funds for the operation of the plant?
21 MR. BERRY:
Yes, that is.
22 JUDGE MOORE:
So safe operation has nothing to do 23 with it?
24 MR. BERRY:
Well, the rate maker and the rate making 1
25 process assures that you have the funds available to operate l
Heritage Reporting Corporation (202) 628-4888
65 tx 1
the plant safely.
That is the whole point of exempting a 2-regulated utility, because he is going to get funding from the 3
rate making process, and you do not have to inquire into its 4
financial qualifications or financial resources available to-5 operate the plant.
6 JUDGE ROSENTHAL:
Let me pursue that for a moment, 7
Mr. Berry.
8 Do I understand you to say that the only extent to 9
which a bankruptcv would be relevant would be the extent to 10 which the bankruptcy led the Public Service Commission of the 11 state to say that we are going to withhold funds?
12 MR. BERRY:
Well, I say that it certainly would be 13 relevant to that extent.
U,s 14 JUDGE ROSENTHAL:
And to any extent beyond that?
15 MR. BERRY:
Well, again if there were a petition 16 filed in bankruptcy at some point, it is going to be acted 17 upon.
We would have much greater information at that time as j
18 to the company.
l 19 JUDGE ROSENTHAL:
Well, tiot necessarily the day that 20 the petition is filed.
l 21 I am asking you what would your position be --
22 MR. BERRY:
The filing of the petition.
And I am 23 sorry if I cut you off.
24 JUDGE ROSENTHAL:
Well, the petition.
I am assuming 25 that a petition of bankruptcy is filed, either a voluntary l
Heritage Reporting Corporation (202) 628-4888
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i iS6 1
petition filed by the utility or an involuntary petition. filed 2
by a creditor.
The following day in comes the Interveners and-3 they say all right, here is our new petition-for a waiver of' 4
the financial qualification rule, and it is based on the fact 5
that this utility is now in bankruptcy, the appearance of;that..
6 What would be the staff's response to that petition, j
7 or. waiver?
8 MR. BERRY:
It wou'1d be the same as the response that f
9 the staff has made to the instant petition.
I 10 JUDGE ROSENTHAL:
And that is that it is not good:
11 enough?
12 MR. BERRY:
Right.
And.the filing.of a petition in-13
. bankruptcy in and of itself standing aloneLwould no't be 14 sufficient.
15 JUDGE ROSENTHAL:
But what they would have to show in i
16 addition is that the Public Service Commission is on record as 17 saying that because of this bankruptcy that we'are not going to 18 ensure that this utility has sufficient funds to operate the 19 plant, is that what you are telling me?
20 MR. BERRY:
Yes, sir, and that is the bottom line of 21 what the Public Utility Commission of'New' Hampshire has tofsay.
22 JUDGE MOORE:
Commissioner Berry, Injust have a 23 simple question.
24 At what point does your client's temperature; rise 25 sufficiently so'that they will inquire into this?
l
-l O:
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MR. BERRY:
Well, Your Honor, then I would' point out i
2 to you that even if the Commission noted and promulgated its 3
final rule on the subject of the instant petition that the 4
Commission does not intend to waive or to relinquish this 5
residual authority under Section 181 of the Atomic Energy Act.
6 which requires such additional information in individual cases 7
as may las necessary.
]
8 The. Commission, as has happened in this' case, and 9
that staff has inquired of the Applicants as to their financial 1
10 ability to carry on their obligations and to carry out the l
11 activities authorized by their permits and things.
What we areL 12 talking about here is whether we.should open up a. hearing and 1
i 13 explore in the context of an operating license proceeding an j
[\\
\\
14 issue that the Commission has stated should only be inquired
'l 15 into under very special circumstances.
16.
JUDGE ROSENTHALt-Let me ask you this, Mr._ Berry.
l 17 Do you think that I reasonably infer that when the 18 Commission promulgated this rule in 1984 that it'did not focus 19 at all upon the possibility of one of these utilities going 1
20 bankrupt, is that a reasonable inference on the basis of what 21 the Commission said and what the track record at that time was.
22 of utility bankruptcies?
23 MR. BERRY:
You see, I do not believe-that the 24 possibility or whether the Commission had in mind that in the l
l 25
' future that a utility may go into bankruptcy is dispositive.
Heritage Reporting Corporation (202) 628-4888
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JUDGE ROSENTHAL:
I do not think.that is responsive, r
2 Mr. Berry, to my question, i
3 The question that I would.like a response was whether 4
I was reasonable'in inferring that?
l j
5 MR. BERRY:-
I believe that you were reasonable in
)
,1 6
inferring that the Commission may not have been aware and.had
{
l 7
not contemplated that possibility at the time that it j
i 8
promulgated this rule.
9 JUDGE ROSENTHAL:
All right.
i 10 MR. BERRY:
But I believe that had the Commission-l 11 been aware that it was-possible or foreseeable that some 12 utility may experience or. incur. financial difficulties,-I.do
13 not believe that the rule would have been changed at all.
AV 14 JUDGE ROSENTHAL:
How do.you think_that it would' 15 play, as the old saying goes, in Peoria for the headlines to 16 read, "The Commission is not worried about-the financial l
17 qualifications of a. bankrupt utility to operate a nuclear power 18 plant," do you really thing that that is the kind of thing that.,
19 would instill confidence in the public at large about the
-i 20 Commission's concern for safe plant. operation?
~
21 MR. BERRY:
I have confidence that 1n this Appeal 1
22 Board when they would issue their opinion sustaining the 23 License Board in this proceeding that theylwould explain that 24 the Commission is concerned-about the financial qualifications 25 of the utility and they have the residual authority-to: inquire
. Heritage Reporting Corporation (202)~628-4888
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1 and assure themselves that a utility is fully capable of l
l l
2 meeting its obligations.
3 JUDGE ROSENTIIAL:
What is this residual authority 4
that we are talking about?
l l
5 MR. BERRY:
Under Section 182, they can ascertain and 6
ask ror information necessary to enable the Commission to 7
determine whether the application should be granted or denied.
I 8
JUDGE ROSENTHAL:
But they can go and ask for this j
l 9
information, but the issue cannot be litigated; a member of the
]
10 public who is concerned about the possibility that this 11 bankrupt utility may not be awash in cash has no opportunity to 12 raise this question, is that right?
)
i 13 MR. BERRY:
The issue can be litigated by any member
(:)
14 of the public provided that they meet the regulatory l
1 l
15 requirements.
The requirement is a demonstration that the l
16 application of the rule will not achieve the purposes for which 17 it was promulgated.
Now to the extent that a member of the 18 public or a party to the case can make and satisfy that I
19 showing, the issue will be litigated, or the matter will be 20 referred to the Commission.
21 JUDGE ROSENTHAL:
You are telling us in effect that 22 it is impossible.
You are saying if the member of the public 23 can get over the hurdle that it can litigate it.
And then.you 24 are telling us that the hurdle extends to a point in the sky 25 which no Intervenor could possibly go over.
O
(/
Heritage Reporting Corporation (202) 628-4888
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(~%
\\
1 MR. BERRY:
Well, I am not suggesting that the 2
etandard is easy, or that the standard is low, or that it 3
should be low.
I do not think that it should be.
The 4
Commission adopted this rule in part to avoid case by case j
5 litigation.
But if there is an extraordinary case and there is 6
an exception.
7 JUDGE ROSENTHAL:
Why is not bankruptcy an i
8 extraordinary case when as Mr. Dignan tells us in his 9
recollection that there had not been a utility go bankrupt 10 since the Great Depression which was some sixty years ago i
11 almost?
l 12 MR. BERRY:
Well, as I said, the filing of a petition l
13 in bankruptcy in and of itself is not extraordinary.
O 14 JUDGE ROSENTHAL:
It is in the utility industry, is i
15 it not?
16 MR. BERRY:
Well, it is not extraordinary within the 17 meaning of the regulations.
18 JUDGE ROSENTHAL:
Well, why not, why not, where in l
19 the regulations do you get that message?
I 20 MR. BERRY:
The staff reads the regulation, and the l
21 Commission's intent, and what the Commission was focusing on as 22 whether special circumstances are such that in a particular 23 case that the local Public Utility Commission will not allow 24 the total cost of operating the facility --
25 JUDGE ROSENTHAL:
I understand.
Mr. Berry, you do i
1 r"b)
Heritage Reporting Corporation j
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71 1
not have to read that again.
I understand.that.
ButLyou
~
2 conceded' awhile back that.I was fair in drawing the. inference 3
that the Commission had not focused upon the' possibility of 4
bankruptcy when it issued this regulation in.I think:lt was 5
1984.
6 Now if that is a fair inference, why is it not an 7-additional fair inference that had the Commission-focused on 8
this development that it would have regarded it as a 9
sufficiently unusual or special circumstance to' warrant a' 10 financial qualifications inquiry?
11' MR. BERRY:
And I will state again that had-the 12 Commission focused on the bankruptcy that I do not believe.and 13 the staff does not believe that the Commission would have-
. :)
i
(
14 regarded the filing of a petition in bankruptcy a special 15 circumstance.
16 JUDGE ROSENTHAL:
And why not?
17 MR. BERRY:
And the reason for that is when you read 18 the statement of consideration and the Commission's-19 consideration and concern when they passed this rule that what m
20 they stated was that when they looked to the rate making 21 process that there is no connection between the bankruptcy.
22 JUDGE MOORE:
Mr. Berry, let'us look at what the 23 Commission said.
In the statement of consideration in. Volume 24 49 of the Federal Register, 357.50,-the middle column, they 25 state and I quote, "The Commission believes that the record of O
Heritage Reporting. Corporation (202) 628-4888
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72
(
1 this rule making demonstrates generically that the rate process I
2 assures that funds needed for safe operation will be made l
3 available to regulated electric utilities.
Since obtaining 4
such assurance was the sole objective of the financial 5
qualification rule, the Commission concludes that'other than in 6
exceptional cases that no case by case litigation of the 7
financial qualification of such Applicants is warranted."
8 Now there must be more than one such exceptional 9
circumstance, because this is plural, "other than in 4
10 exceptional cases."
Yet you give me one.
That is the attitude 11 that the relative rate making body would deny funds.
12 Then again the only other relevant language in this 13 statement of consideration appears in the same volume, page O
14 357.51 in the first column.
And they say down at the bottom 15 starting in the middle of the paragraph, "An exception or l
I 16 waiver from the rule precluding consideration of financial 17 qualification in an operating license proceeding will be made 18 if pursuant to 10 CFR 2.758 special circumstances are shown.
19 For example, such an exception to permit financial 20 qualification review for an operating license applicant might 21 be appropriate where a threshold showing is made that in a 22 particular case that the local Public Utility Commission will 23 not allow the total cost of operating the facility to be 24 recovered through rates."
25 Once again, the Commission was speaking in the plural
/"T (J
Heritage Reporting Corporation (202) 628-4888
.73 1
1 for circumstances, special circumstances, and then they use one 2
example.
And the for example does not suggest in any norm of 3
regulatory or statutory interpretation that it is an 4
all-inclusive term.
Now I am just giving you the Commission's
-]
5 words.
6 Now how can you in the face of that where the
_j 7
Commission is. speaking in the plural talk only in the singular l
8 to me that there is one and only one situation in which a j
1 9
2.758 petition could ever succeed?
10 MR. BERRY:
Well, again I would just repeat and I 11 would just refer you back to my earlier remarks in my brief.
12 And again I think that what happened with respect to 2.758 is
]
13 that the Commission said yes, if a party can make out the
,'b 14 chowing required and specified under Section 2.758, then an 15 exception or a waiver of this' rule may be applicable.
j 16 And what is the showing required under St : tion 2.758?
1 17 It is not just special circumstances.
It is special 18 circumstances such that the application of the regulation will 19 not achieve the purposes for which the rule was promulgated.
]
20 Now the filing of bankruptcy, that may be a special 21 circumstance in the sense that it may be unusual, or 22 extraordinary, or uncommon.
But is it special or is it special 23 circumstances such that the application of the rule now will 24 not achieve its intended purpose?
I do not believe it is.
25 JUDGE ROSENTHAL:
Now that you are saying that you do k
Heritage Reporting Corporation (202) 628-4888
74 1
not believe it is, are you offering this as an authority in 2
bankruptcy law with the implications of a bankruptcy?
I am 3
hearing you, as I heard Mr. Dignan and as Dignan conceded, that 4
his remarks on this subject were extra-record.
I do not have 5
the foggiest notion as to what the implications of a bankruptcy 1
6 upon the cash flow or anything else might be.
7 MR. BERRY:
Like yourself and Mr. Dignan, I neither 8
am a specialist in bankruptcy or the bankruptcy code.
And l
9 quite frankly, Your Honor, I do not believe that it is my
]
10 burden or the staff's burden to come before you and demonstrate 11 how the bankruptcy code opern es.
I believe that it is the 12 burden of the movant, the pa tt who has the obligation to make I
13 our the prima facie case that the application of the regulation O
14 will not achieve its intended purpose.
That the Interveners 15 file the petition and come before this body and state that the 3
16 SEC 8-K filing in and of itself represents a special 17 circumstance, because it states that at some future time that 18 there is a possibility that this Applicant may go bankrupt.
19 And I believe that the burden therefore is on that 20 party making that representation to demonstrate that the filing 21 of that petition in bankruptcy is going to operate to deny the i
22 Applicants of funding from the rate making process.
23 JUDGE ROSENTHAL:
In short, in order to get the rule 24 waived, you have to establish the ultimate answer to the l
25 financial qualifications inquiry if there is an inquiry to be O
t/
Heritage Reporting Corporation (202) 628-4888
75 1
held.
Now that does not make much sense to me.
You are 2
telling me that you would have to show that in point of fact 3
that they are not financially qualified in order to get an 4
inquiry into whether they are financially qualified.
5 Do I understand that to be your position?
6 MR. BERRY:
You need to make a prima facie case that 7
that is the case.
You need to make the case, and.you have to 8
come forward with evidence or evidence that is of sufficient 1
9 probity that if unrebutted that it would be legally sufficient 10 to prevail and receive the relief requested.
We do not even 11 have that here, we are not there at all.
We just have a bare 12 allegation, Your Honor, that bankruptcy, a petition in 13 bankruptcy, may be filed sometime in the future, at the end of j
14 this year.
15 JUDGE ROSENTHAL:
Now that is a different question.
16 MR. BERRY:
But we do not have a showing of what will 17 be the consequences of it.
Bankruptcy does not mean that you 18 have no assets.
It does not mean that you have no access to 19 funuing at all.
As I understand it, there is a narrow and f
20 legal def_ ution of bankruptcy.
And as I understood it and as 21 I learned it, it is just an inability to meet all of your 22 obligations as they become due.
23 (Continued on next page.)
24 25 i
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l Heritage Reporting Corporation (202) 628-4888 l
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N
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1 MR. BERRY:
It doesn't mean that you don't have 2
money; it doesn't mean that you are penniless.
And so 1
3 therefore, that is why I believe that the filing in ari of it l
]
4 itself of a petition in bankruptcy is not sufficient to 5
demonstrate that an applicant or licensee'is unqualified or l
1 6
unable to operate, to finance its activities in accordance with 7
the regulations and regulatory requirements. So, no, I would l
8 adhere to the position I have expressed in my brief'and'what I 9
have stated today.
I have not heard anything from the 10 interveners that would lead me to believe-that this petition 11 for waiver is any stronger now than it was when I read it 12 initially.
I do not believe a prima facie case has been made.
1 13 I understand their concern, but licensing boards are not Q#
14 authorized to waive the Commission's regulations simply because 15 a matter may --
l I
16 JUDGE ROSENTHAL:
Licensing boards aren't authorized 17 to waive the Commission's regulations at.all.
All they can do 18 is send it up to the Commission to let the Commission decide.
19 MR. BERRY:
Yoa are exactly right.
A licensing board 20 is not authorized to find a prima facie case simply because 21 something may be of concern to a party.
They have-to find that 22 there has been a prima facie showing that the application of 23 the regulation will not achieve its intended purpose.
I do not 24 believe that the Interveners have made that showing.
I believe 25 the Licensing Board correctly concluded that they had not made n(/
Heritage Reporting Corporation (202) 628-4888
77
(
1 a prima facie showing, and I believe that this Appeal Board, 2
for the reasons stated by the Licensing Board and by the staff 3
in its brief, and my remarks before you today, should affirm 4
that conclusion and dismiss this petition.
5 JUDGE ROSENTHAL:
Thank you, Mr. Berry.
There are 18 6
minutes of t.ime available for-rebuttal.
Are both of you 1
7 gentlemen planning to participate in the rebuttal or just you, 8
Mr. Backus?
9 MR. BACKUS:
I'm a suspect.
10 JUDGE ROSENTHAL:
All right, then, as you understand, j
11 the rules of rebuttal are, no new points.
You can only respond 12 to matters that were covered during the arguments of your 13 adversaries.
)
14 MR. BACKUS:
One of the points I was going to make l
\\
15 was brought out by Judge Moore's questioning, the example of I
16 how fou get past the 2.758 that is set forth in the regulation 17 has been elevated by my opponents to the sole way you get by 18 it.
19 What I do want to say is, I.just want to look at the 20 breadth of where the Applicant's argument here takes us.
21 Eleven years ago they said yes, if we were in bankruptcy or 22 close to it that would mean we were not financially qualified l
23 and wouldn't have a license.
24 Today they've said well, yes, my client is in 25 default, but that means we're better off, We're rolling in Heritage Reporting Corporation (202) 628-4888
78
}
1 cash.
Then they said, tomorrow, if we're in bankruptcy that 1
2 will be better yet because~then Seabrook will be a-valuable 3
asset and of course it will be protected.
(
4 If you put all that together, they have gone too far, H
5 haven't they, gentlemen?
I mean, the Commission does have a 1
6 financial qualification requirement.
And you said, Judge 1
7 Rosenthal, that the barrier for us in their view was up to the I
8
- sky, I think it's up to the moon as far as'they're concerned.
9 I think the only other thing I wanted to deal with was the 1
l 10 question of a prima facie case.
11 JUDGE ROSENTHAL:
What is your understanding?
You j
12 are a trial lawyer and you have been involved in, I assume, a 13 great deal of litigation in which the concept'of a prima facie O
k#
14 case has come forward.
What is your understanding of the i
15 meaning of the term?
I 16 MR. BACKUS:
My feeling of the-term is that it does l
17 mean that you have set forth sufficient facts so that, if i
18 unrebutted, you are going to win the issue.
That is my 19 understanding of it, although we once had a licensing board in L9 the Seabrook case that said that prima facie meant something 21 that would cause reasonable minds to inquire further.
There is 22 that language in the Hoyt Board's opinion on the one-mile zone 1
23 issue, you may recall.
But let me take the tougher definition, 1
24 from my point of view, that we have to meet established facts, 25 which, unless rebutted, establish that we are entitled to Heritage Reporting Corporation (202) 628-4888
i J
79 m
(_)
1 relief.
2 We have done that here.
We have a prima facie case 3
here.
It's a simple prima facie case, if you properly 4
understand what this rule was about.
This rule did not require
]
5 us to show that this utility would not pay particular bills at 6
Seabrook necessary to assure safety.
It required us to show 7
that the rate setting process which generically the Commission 8
found assures adequate funds, hadn't done it in a particular 9
case.
We've shown that.
I 10 JUDGE ROSENTHAL:
The argument that your adversaries I
11 advance, I think, is twofold.
12 First of all, they say that in a bankruptcy 13 situation, the utility is going to, by virtue of the process, O"
14 have enormous amounts of cash so that there can't be any 15 question from that standpoint that the utility will have the 16 monies available to maintain the plant safely and the staff 17 will be there to see to it that those monies are used for that 18 purpose.
19 And secondly, if I understand your adversaries 20 correctly, they are saying that there is absolutely nothing on 21 the table now from the Public Utilities Commission, or Service 22 Commission, whatever it's called, in New Hampshire, to indicate 23 that that Commission would deny the funds necessary to maintain 24 safe operation, assuming that additional rate relief were 25 required for that purpose.
^
N ')
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That seems to be their argument, that you haven't met 2
the prima facie showing obligation because of those 3
considerations.
Now, what is your response to that?
4 MR. BACKUS:
Well, I'm certainly.not going to repeat 5
what I just said, though I want it clear that is my position.
6 on the bankruptcy thing, it is clear that the~one 7
thing Public Service has said at every turn is that it is l
8 highly uncertain what will happen in bankruptcy.
I don't.think 9
that means ' hat it is unknowable.
But at this point, the 10 inquiry has not been made.
So that is, as Your Honor said, 11 lawyer talk, that they are going to have the money in i
12 bankruptcy.
f I
13 I think I know quite a lot about bankruptcy, because O
14 I have been looking at this issue for-a long time without our l
1 15 PUC.
It is a very interesting issue.
It's a nice field of j
l 16 law.
I may get into it.
There may be some money to be made in 17 it.
18 I think I know some things about it, and 1 think I
19 reasonable guesses could be made.
But it is certainly clear, I 1
1 20 think, the t when, as you've said, and the Commission in 1984 21 put this financial qualification requirement back in, in the 22 form it's in, they weren't contemplating that one of their 23 licensees was going to be on the verge of bankruptcy.
l 24 The other thing that answers this, I think, Your 25 Honor, in two ways, is if they are in bankruptcy, there is real i
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1 question about whether the attitude of the rate regulator 1
2 matters at all.
There is this theory that a Bankruptcy Court-3 may have some say about rate regulation.
I 4
There is a section in the Bankruptcy Code -- I can
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almost give it to you - 1 I
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JUDGE ROSENTHAL:
The Bankruptcy Court can fix rates?
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MR. BACKUS:
No.
But there is a suggestion that the i
8 Bankruptcy Court may not be able to fix rates but may have a 9
substantial influence on what the rates need to be.
There is a 10 whole lot of uncertainty out there. That is all I can say about 11 that.
I won't make any further representations or claim any
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12 great expertise.
And the company itself has said that.
j 1
13 Now, at the same time I sent the Commission the
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I 14 colloquy Mr. Dignan had with Member Ferrar back in 1976, I also I
15 sent down a data response to the company, Public Service 16 Company in New Hampshire sent to the PUC in the Emergency Rate i
17 Proceeding that's now underway, Docket 87-151, and if you have 18 read what I said about Mr. Dignan's colloquy, you perhaps read 19 this, too.
The question was, when would it be in the 20 customer's interest for PS&H to file bankruptcy?
21
Response
"Please see response to previous question."
Then it 22 goes on.
23 Furthermore, the ability to raise cash for future 24 service commitments during a Chapter 11 proceeding would be l
l 25 very limited.
Also, Chapter 11 would impact on service Heritage Reporting Corporation (202) 628-4888
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1 reliability'and the availabilitylaf power.
Some:PS&Hjassets 2
might be' required to be sold.off during a' bankruptcy, such^as 3
PS&H's share of its investments in Vermont Yankee.and. Maine.
4 Yankee, further exacerbating the current capacity deficit'-
So-5 forth and so on.
They've got their speculationsfabout'what 6
will happen in bankruptcy, and they include an; inability to 7
raise money'and' shortages.
8 Now,.I am not necessarily agreeing that that'is.what 9
would happen in bankruptcy, but it is a specter they'themselves 10 have raised.
11 JUDGE MOORE:
Mr. Backus, assume for'the moment that 12 your petition were granted by the Commission.
Aren't there two.
13 other hoops you have to jump through, because of the stay of O
14 this proceeding?
You have'to file and win on a motion to 15 re-open and secondly, you have to'put forth a. late-filed-16 contention on financial qualifications,'and. survive.that 17 five-factor test?
18 Now, the five-factor. test seems to me, just-19 speculating myself, that that can be met.
But don't you have 20 to meet a motion to re-open the record at this point'?
21 MP. BACKUS:
I'm not sure.
I'm not sure about that, L
l 22 Judge Moore I haven't looked that much at detail..
If it is 23 determined that the financial qualification rule obviating'a 24 case by case basis, is not to be applied in this' case,.I'm.not 25 sure we'd have to meet late filed criteria.
It seems to me A
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1 that we are. dealing with newly-arising events.
2 JUDGE ROSENTHAL:
Wait a minute.
Re-opening 3
criteria.
The record in the low power phase of the proceeding 4
is now closed, is it not?
5 MR. BACKUS:
Not quite.
We have the remanded issues 6
from this Board.
l 7
JUDGE ROSENTHAL:
Except for those.
But those l
8 remanded issues have nothing to do with --
9 MR. BACKUS:
Right.
i financial qualifications.
And 10 JUDGE ROSENTHAL:
11 let's assume, arguendo, that they are disposed of anyway by 12 that time.
i 13 Now, if you get your waiver, what that entitles you 14 to do I would suppose is to put forward a specific contention.
15 In order for that contention to be litigated, the record would 16 have to be ro-opened to accommodate the additional. contention.
17 Mr. Moore's question, if I understood it correctly, 18 was, wouldn't you be required to meet the criteria for 19 re-opening, which are generic criteria which apply any time.
20 JUDGE MOORE:
And then, don't you have to draw the 21 safety connection between financial qualifications and safety, 22 the thing that the Commission assumes in this rule?
i 23 MR. BACKUS:
I'm not sure.
24 JUDGE M(t<! ':
And if that is the case, shouldn't you 25 be providing that up front?
Heritage Reporting Corporation (202) 628-4888 L__..
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1 MR. BACKUS:
All I can say is, I have a little 2
problem with the statement as framed in terms of re-opening.
l 3
It was never opened.
4 JUDGE MOORE:
But the record is closed.
j 5
JUDGE ROSENTHAL:
The record is. closed.
j 6
MR. BACKUS:
Yes, but the record never dealt with l
7 this because the rule prohibited us from raising it.
We are in 8
a typical Catch-22, as we are so often, with the rules, if I 9
may say so.
This is, as Anatole France said, the law in its i
10 majestic equality, forbids the rich as well as the poor from 1
11 sleeping under the bridges.
I identify with that very much 12 representing an intervenor before this Agency.
l 13 Unless there are other questions, the only thing I O
14 had to offer was A, if the members of this Panel and the l
15 parties want copies of the Harrison statement I quoted, I have 16 them available.
And the second thing is, if the Board would 17 like, I can send down the PUC Order and Opinion saying that the 1
i 18 Commission was disabled from granting traditional rate relief, l
19 unless the anti-CWIP law is declared unconstitutional or i
20 interpreted not to apply to emergency rate increase.
1 21 JUDGE ROSENTHAL:
Well, you can make them available l
22 if you wish.
I have to say I am not'certain of the extent, if 23 any, to which we would take them in consideration, because they 24 are not actually part of.he record that is before us.
But 25 anything you wish to submit you may submit for what, in the
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vernacular, it is worth.
2 MR. BACKUS:
Okay.
The only other thing I would say 3
is it is interesting to me to hear the staff take the position 4
they do here, which I took to be even a bankruptcy petition 5
would not let them acknowledge that maybe they should support 6
our side on this issue.
7 And yet the staff in this case did write a letter 8
saying hey, folks, how are you going to raise the dough here 9
for the low power opere ion, and I understand, and Mr.-Berry 10 can confirm they wrote a similar letter back in June to Gulf 11 States in regard to Riverbank.
12 JUDGE ROSENTHAL:
If I understand the staff's 13 position correctly, Mr. Backus, the staff draws a distinction 14 between what it has to inquire into in performance of its 15 ongoing regulatory responsibilities and what can be litigated 16 in the context of the financial qualifications rule.
So they 17 would say that there is nothing inconsistent between the 18 position that they have taken here and their own inquiries of 19 various utilities with respect to financial status.
20-MR. BACKUS:
And what we call upon this Board to do, 21 as you have done in the past., Judge Rosenthal, is to make sure 22 this doesn't just become a staff game, that the citizens who 23 are going to be affected by this plant have a role to play.
24 JUDGE ROSENTHAL:
Thank you, Mr. Backus.
On behalf 25 of the entire Board, I would like to express our appreciation Heritage. Reporting Corporation (202) 628-4888
86 (A/
1 to counsel for an illuminating and spirit argument this 2
morning.
And on that note, the Appeal of the Interveners will' 3
stand submitted.
4 (Whereupon, at 11:55 a.m. the hearing was adjourned.)
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1 CERTIFICATE F
2 3
Th'is is to certify that the attachediproceedings before the 4
United ~ States Nuclear Regulatory ' Commission J.n the _ matter of:-
'5 Name:
Public Service' Company of New. Hampshire f
(Seabrook Station, Units 1 and 2) 6 H
7 Docket Number:
50-443-OL-1./ 50-444-OL-1 8
Place!
Washington, D.C.
9 Date:
December 8,'1987 10 were held as herein appears, and t;,,t=this is the; original-11 transcript thereof for the file of the United States Nuclear 12 Regulatory Commission taken stenographically by me and,_
13 ~
thereafter reduced to typewriting'by me or under the direction
()
and that the transcript is a 14 of the court _ reporting company, 15 true and accurate reco d of the fo going oceedings.
l 16
/S/-
1/L.
W3 1
it'
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17 (Signature typed):
Ann'LoquistV 18 Official-Reporter i
19 Heritage Reporting Corporation 20 4
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