ML20246C008
| ML20246C008 | |
| Person / Time | |
|---|---|
| Site: | Limerick  |
| Issue date: | 08/10/1989 |
| From: | Rader R CONNER & WETTERHAHN, PECO ENERGY CO., (FORMERLY PHILADELPHIA ELECTRIC |
| To: | NRC OFFICE OF THE SECRETARY (SECY) |
| References | |
| CON-#389-9063 OL-2, NUDOCS 8908240155 | |
| Download: ML20246C008 (6) | |
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LAW OFFICES CONNER & WETTERHAHN, P.C.
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August 10, 1989-gre o
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1 Docketing.and Service SecElon' j
United States Nuclear-Regulatory
.i Commission Washington, D.C.. 20555; In the. Matter'of Philadelphia' Electric Company (Limerick: Generating Station, Init 2).
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~ Docket.No. 50-353-OL-2 (Severe Accident Mitigation Design lte'rnatives)
Gentlemen:'
I Pursuant to our August 9,_1989 letter, enclosedfis the J
original, executed " Affidavit.of Raymond C.. Williams."
Sin
- rely, Robert M. Rader
' Counsel for Licensee-
' RMR : sdd '
. Enclosure cc:
Service List 8908240155 890810 7 PDR ADOCK 05000352 C
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UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of
)
Docket No. 50-353-OL-2
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Philadelphia Electric Company
)
)
(Severe Accident (Limerick Generating Station,
);
Mitigation Design Unit 2)
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Alternatives)
AFFIDAVIT Raymond C. Williams, being first duly. sworn, deposes and states that:
1)
He is Vice President - Rates of Philadelphia Electric Company.
He was elected Vice President of Rates in-1986 and in that position is responsible for all-rate filings with the Pennsylvania Public Utility Commission, the Maryland Public Service Commission and the Federal Energy Regulatory q
Commission.
He'is also responsible for' administration of-rate-tariffs and fuel adjustment calculations.
He is authorized to 1
make this affidavit; i
i 2)
In the NRC Staff Responue to Commission Questions ^
dated August"2, 1989, the Staff states that carrying charges in 1
'the form of Allowance for Funds Used During Construction (AFUDC) should not be considered a cost of delay..The NRC Staff also states that these carrying charges on the debt are' essentially a fixed cost that will be incurred'regardless of whether or not the reactor operates.
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3)
Further, the NRC Staff state's that' security, maintenance and operational costs' incurred while the plant is not permitted to operate should-not be viewed as incremental costs of the ascumed delay because comparable: costs would be incurred even if the unit were operating.
4)
The Company disagrees with the Staff position thatL
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the AFUDC and security, maintenance and operational costs are not costs of delay.
The Company-believes that its calculation of the costs of delay which included.these components is proper-and correct and should be-accepted by the Commission.
5)
The Staff is erroneous in its contentior that an increase in AFUDC accruals during the 18 month period of the assumed delay in commercial operation are-fixed costs which should not be considered attributable to.the delay..
The accrual of AFUDC continues until the start of commercial operation.
Thus, any delay in attaining commercial operation will cause the level of AFUDC accruals to increase. -Since-the level of AFUDC accruals is a component in the cost of-the.
l plant, any increa.se in the level of AFUDC.necessarily increases the total cost of the plant.
Whether this increase is ultimately recovered from' customers through rates or from shareholders does not change the fact that the cost of the I
plant has increased.
Accordingly, the full $573.6 million of j
i AFUDC claimed by the Company is, in fact, part of the $854.4 million cost of delaying commercial operation, i
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- 6)
Similarly, operational.and maintenance and security costs incurred prior to commercial operation.are capitalized.
As capitalized expenditures, these costs are part of the. total cost of the plant.
Thus, to the extent that'a delay in commercial operation increases the amount of the costs to be capitalized, it directly increases total plant costs.
Accordingly, the full $107.3 million. increase in operational-and maintenance and security' costs to be capitalized due to the delay is properly considered an increase in the cost of the plant.
7)
The Staff incorrectly asserts that it makes no i
difference in determining costs of delaying operation of Unit 2 whether AFUDC and other capitalized expenditures are ultimately-borne by ratepayers.or shareholders.
The denial of a: recovery from customers of funds expended for construction would ultimately increase the Companyis cost of. capital. -The 1
I pennsylvania-public Utility Commission has imposed a cap on the level of Limerick 2 construction costs which it will allow to be recovered in rates.
This cap'would definitely be exceeded-by the increased AFUDC accruals during the first fuel-cycle _for Unit 2-(18 months).
Thus, the assumed' delay would-almost certainly cause shareholders to absorb costs which would not otherwise have to be written off by the Company.
'The1 increased risk associated with this absorption of costs would ultimately increase the Company's overall cost'of capital, adversely I
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.. affect the ability of the Company to realize'a return on its
. operations, pay a fair return to stockholders and attract additional capital on reasonable terms.
8)
_Even' accepting the Staff's position for.the sake of' argument, the Staff's calculations significantly understate-the true cost of delay:
a)
_ Increased Financino Costs In order to finance the $S47 million of additional AFUDC accruals during the assumed 18 months delay'in commercial operations, the Company will have to issue new securities at a cost of $26 million during the 18 month period.. This will I
effectively increase the Company's after tax carrying charges l
l by an additional $52 million per. year, beginning with commerial operation and declining over the life of the plant.
b)
Operatino and Maintenance Expenses The Staff incorrectly contends that delay would not increase operational and maintenance expenses because these expenses would be incurred whether or not the plant is operating.
Approximately 40% of the operational and maintenance expenses relate to activities-that-would not be continued following' commercial operation (e.g. expenses associated'with retaining the necessary construction and startup personnel at the site).
Accordingly, at least 40% of the total operational and maintenance, or $43 million will be-solely attributable to the assumed delay.
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Thus, the NRC Staff's calculations of the costs of.
delay, even accepting their methodology, are understated by approximately $69.million during the 18 month delay period, and the carrying charges on the additional AFUDC of $52 million per year, an amount which would continue to accrue annually, yet decline over the life of the plant.
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I Subscribed and sworn to i
&b before me this o day.
of 9w3b
, 1989.
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No'tary Public
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NOTARIAL SEA' 1
I MELAME R CAMPANELLA Nc:ary Put!!C C.tv of Phdadelphia. Phila. Countf i
My Comm:ssion Exotres Feb. 12.1990 I l
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