ML20247A063
| ML20247A063 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 09/07/1989 |
| From: | Dignan T PUBLIC SERVICE CO. OF NEW HAMPSHIRE, ROPES & GRAY |
| To: | NRC COMMISSION (OCM) |
| Shared Package | |
| ML20247A069 | List: |
| References | |
| CON-#389-9140 CLI-88-10, LBP-89-10, OL, NUDOCS 8909120033 | |
| Download: ML20247A063 (15) | |
Text
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'l ,.,q:n September '7',L 1989
. UNITED STATES OF AMERICA .g g _g .
before the OFF a: 2 .. . ;
NUCLEAR REGULATORY COMMISSION 00ChE i
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R P. A ht H
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In the Matter of )
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FUBLIC SERVICE COMPANY- ) Docket Nos. 50-443-OL OF NEW HAMPSHIRE, 31 11 ) 50-444-OL
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(Seabrook Station, Units i ) (Offsite Emergency and 2) ) Planning and Safety ' '
) Issues)
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APPLICANTS' RESPOMSE TO THE COMMISSION'S ORDER OF AUG. 22, 1989 STATEMENT OF THE CASE
-Under date of February 1, 1989, The Attorney General of The Commonwealth of Massachusetts (MAG) filed a Petition for a Waiver of or an Exception to the-Financial Qualification Rules for Full Power Operation ("the Petition"). Therein, MAG' sought a waiver of, or an exception to, the regulations which relieve electric utilities of the burden of demonstrating financial qualifications prior to the issuance of an operating license for full power operation. After receipt of responses to this and another filing,1 the 1 Under date of January 25, 1989, Seacoast Anti-Pollution League (SAPL) filed a documtnt styled:
" Motion to Accept Late-Filed Contentio1 on Financial Qualification in Response to l'RC Order FQ100COM,SB 8909120033 890907 3 DR ADOCK 0500
i Licensing Board issued a memorandum and order addressed to both pleadings.2 In dealing with MAG's petition the Licensing Board, 3 l
after describing the procedural standards which govern waiver !
petitions, pointed out that only two of the allegations made by MAG in his petition were factual in nature. Th9.se were the fact that the lead owner, Public Service Company of New Hampshire (PSNH) was in reorganization, and the fact that another owner, Massachusetts Municipal Wholesale Electric Company (MMWEC) was in default,3 the remainder of the allegations were viewed by the Licensing Board as being conjectural as to future events. LBP-85-10 at 301. After next reviewing the history of the financial qualifications CLI-8 8 -10 d' ("SAPL Motion"). This filing proceeded on the erroneous premise that the Commission had already granted a waiver of these regulations in its decision in Public Service company of New Hampshire (Seabrook Station, Units 1 and 2), CLI-88-10, 28 NRC 573 (1988) (hereafter referred to and cited as CLI-88-10).
2 Public Service Company of New Hamoshire (Seabrook Station, Units 1 and 2), LBP-89-10, 29 NRC 297 (1989) (hereafter referred to as "LBP-89-10").
3 A problem which no longer exists. Aeolicants' Advice to Commission, Attach A., cassim (April 24, 1989). This is the Advice to the Commission which transmitted the amended order of the Court in the PSNH reorganization which approved PSNH taking over the MMWEC obligations in settlement of certain claims of MMWEC. We simply do not understand why the Appeal Board persisted in assuming that the MMWEC problem was still extant inasmuch as the Advice was brought to their attention. In any event, as we read ALAB-920, nothing of substance turned upon that 'rroneous premise. See ALAb-920 at 23 as quoted i.fra at 5.
i
. rule, LBP-89-'10 at 302-03, the Licensing Board went on to
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hold that MAG had not made the required crima facie showing, LBP-89-10 at 303. .In essence, the Licensing' Board held that, while MAG had shown that there was uncertainty as to what entity would eventually own PSNH's share of Seabrook, there had been no factual showing that whoever finally did own it would not be able to recover sufficient operating expenses to assure safe operation. 14 Furthermore, there had been no showing that prevented the Licensing Board from applying the ;
1 presumption that such costs would be allowed in rate making after a full power license issued. Id. Finally, and as a separate ground for its holding, the Licensing Board stated its view that the gravamen of MAG's complaint, that Applicants would cut corners out of a desire to save. money hhd been succinctly rebutted by the following points made in an affidavit by the President of The New Hampshire Yankee Division of PSNH (I!EY) : 4 Tnere will be resident inspectors on site who will not tolerate shortcuts; modern license conditions are too constraining and too difficult to amend to permit such practices; PSNH has only one vote out of five on the Joint Owners' Executive Committee; and the management of NHY, not the Joint Owners' Executive Committee, nakes the 1
decisions on safety related issues and plant shut down. LBP-89-10 at 304. On the foregoing basis, the Licensing Board denied certification of MAG's petition to the Commission.
4 Affidavit of Edward A. Brown (February 13, 1989).
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MAG appealed, and, in a' decision issued August 21, 1989,5 the Appeal Board, stating t>at its decision was mandated by this Commission's decisian in CLI-88-10,6 reversed the Licensing Board and certified MAG's. petition to this: Commicsion. Basically, the Appeal Board began by stating that, based upon its reading of a memorandum with respect to the law of New Fampshire supplied by Applicants:
"[W]hether the regulatory' delay is relatively brief or. extended, the fact remains that it is highly probable that, for some interval at least, Seabrook would be operating above the five-percent level (perhaps significantly so) with no additional revenues flowing to Public Service attributable to the Seabrook facility itself." ALAB-920 at 22-23 (footnote omitted).
In so holding, the Appeal Board accepted, at'least for purposes of its discussion, the view of New Hampshire counsel who. wrote the memorandum, that the anti-CWIP prohibition under.New Hampshire law would cease to have effect as soon as the facility is providing net generation to the grid.7 In a footnote appended to the above-quoted portion of the decision, the Appeal Board noted that in CLI-88-10, this Commission had recognized that regulatory rate-making delay 5 Public Service Comoany of New Hampshire (Seabrook !
Station, Units 1 and 2), ALAB-920, 30 NRC (Aug.
21, 1989) (hereafter referred to as "ALAB-920" and cited to the slip opinion).
6 ALAB-920 at 3, 28.
7 ALAB-920 at 20, 22.
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p did not undercut the rationale that rate setting would provide adequate funds, but went on to say.
"But, as we have also seen, the Public Service bankruptcy and the anti-CWIP statut e were factors that were not taken into account in the assessment in 1984 of the significance of regulatory delay."8 The Appeal Board then went on to state:
" Applying CLI-88-10 to this factual setting, it is not difficult to conclude that the same 'special circumstances' discerned there are equally present here:
Public Service remains in a bankruptcy proceeding, the anti-CWIP statute will still have an effect upon the utility's revenues when and if a full power authorization is forthcoming; and (insofar as we have been told) the Massachusetts Municipal Wholesale Electric Company, inter alia, continues to default on its project payments.
Inasmuch as the Commission determined in CLI-88-10 that, in combination the first two of those 'special circumstances' undercut the rationale for the 1984 financial qualifications rule, we reach what the Commission deems to be the ultimate ' critical issue': is there evidence of a significant safety problem
- -warranting a waiver of the 1984 rule."9 8 ALAB-920 at 23 n. 46.
9 ALAB-920 at 23. MAG never made the argument relied upon by the Appeal Board, and on oral argument, initia11/ repeatedly disavowed it:
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"[Mr. Traficonte) I indicated that that petition ar.d the logic of that petition assumes that at full-power operation, anti-CWIP will have no impact on the situation.
"We are not basina our claim on a vesticial impact of anti-CWIP." App. Tr.
(July 12, 1989) at 30 (emphasis added).
f
"[A)s I indicated, we're not hancina our hat on that hook, although it seems quite_ clear to me that there's a gap, and there's an interim period of operation without any opportunity ~to pass those costs into rate base." Id. at 41 (emphasis _added).
o ***
" JUDGE ROSENTHAL: Well, do you? You have stressed the fact that you're not relying upon the anti-CWIP statute. I'm sort of curious as to whether, as 9 secondary or back-up argument,-you would rely on it if in fact the merc issuance of the full-power license would not kick the anti-CWIP statute out.
"MR. TRAFICONTE: Certainly I would rely on it if it' turns out to be a lenathy oeriod of time or any significant Deriod of time and there turned out to be significant interim costs, and there's no possibility of ratina those costs and collectina revenues to cover them.
Sure.
"Acain our view of the matter is different, I think, because we see uncertainty -- we don't think that it's very likely that Public Service Company of New Hampshire is going to own this asset. Even if they do own it, we think it's very unlikely that it's going to be the law of New Hampshire.
"In our view, there seems to be an overemphasis on the New Hamoshire reaulatory statutes. CWIP and anti-CWIP, when we don't think that's the way it's going to - " Id. at 42 (emphasis added).
Later MAG stated that he did not wish to disavow the argument which he claimed had been made on appeal by SAPL and referred to the fact that on page 2 of his brief he had adopted all SAPL's arguments. It was this reference in MAG Brief at 2 n.1 upon which the Appeal Board pounced (ALAB-920 at 19 n. 33) in order to enable it to make the analysis it did. The problem is that the SAPL brief to the Appeal Board did not really make the argument that regulatory delay derived from the anti-CWIP law coupled with bankruptcy created special circumstances. Rather, SAPL argued that
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- C Turning to'this "criticallissue", the Appeal Board went' on to hold that,'indeed,'there-was evidence of a significant
-safety problem warranting a waiver.10 In so'doing, the
, q.
l Appeal: Board did not.even discuss the only piece of
" evidence" in the record on this ma'.,L2r, the Affidavit of g
E.A. Brown, or the portion of the Licensing Board decision Li which held this affidavit to be a second and separate: basis for its holding that the prima facie case had not been made.
7>
Rather, the Appeal Board apparently adopted the view of the interveners that the language of CLI-88-10 together with intuition established that if there were a bankruptcy in the t
there may be a delay in. reaching " commercial operation" which would result in the anti-CWIP law continuing to forbid rate recevery. SAPL Br. at 12-13. But, as noted earlier, the Appeal Board assumed that it was only net generation to the grid rather than commercial operation that was necessary. Thus, the adoption of the SAPL argument does'not save the day. Moreover,- even if one reads the SAPL argument made as encompassing the Appeal Board analysis, this ignores the fact that SAPL never Dresented this araument to the Licensina Board. See SAPL Motion cited n. 1, supra, passim.
It is axiomatic that an Appeal Board should not reverse a Licensing Board in an operating license proceeding on the basis of an argument never presented to the Licensing Board. Tyh (Hartsville Nuclear Plant, Units lA, 2A, 1B and 2B) , ALAB-4 63, 7 NRC 341, 348, reconsideration denied,'ALAB-467, 7 NRC 459 (1978) and cases there cited.
10 ALAB-920 at 24-28.
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picture the incentive to cut corners existed and the ability and willingness to do so could be assumed.11 Finally, the Appeal Board set out an " additional reason" for its holding. The thrust of this reasoning is not a model of clarity. It begins with what amounts to an accusation that the Staff, in persisting that it may still informally investigate the financial position of PSNH, is flouting this Commission's ruling as to its positions in CLI-88-10; it then goes on to say that the issue of whether financial qualifications is a material licensing issue "cannot be determined by the staff's answer to the ultimate quertion . . . "; it then recites the unchallengeable proposition that there cannot be any financial qualifications
. review without the rule waiver, and closes:
"Because,'like the Commission, we believe the ' utility's bankruptcy clearly signals that something very unusual and serious has occurred,' we think the unique circumstances under which the agency can review Public Service's' financial condition thus provide an additional reason for certifying the Attorney 11 The " intuition" portion of this analysis, on close examination is suspect. The theory is that utility management faced with the hypothesis that it cannot derive revenues from a nuclear power plant would cut corners in operating it in order to alleviate the financial strain caused by the inability to derive revenue from the asset. This is not logical. If ut ility management is unable to derive revenue from the operation of an asset, be it a nuclear power plant, or anything else, the incentive is to not operate it, rather than to operate it in an unsafe manner and lose the operating costs incurred.
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. -d' PO General's waiver petition to the Commission."12 Ifithis11ast statement is to be read as saying that i L : bankruptcy alone is enough to warrant a rule waiver, it is .1 contrary to prior decisions of both the Appeal Board and this Commission. If all'that is meant is that the Commission itself should have an opportunity'to decide the waiver question, then this adds nothing to the force of the reasoning of the substantive decision.
It is in the forgoing posture that this matter comes before the Commission.
ARGUMENT I. The Appeal Board Erred in Holding That CLI-88-10 Mandated, or Even Supported, a Holding that Requisite."Special Circumstances" Were Presented in the Case at Bar.
The Appeal Board holding amounts to a ruling that the existence of the bankruptcy coupled with any regulatory delay; that may follow the operation of New Hampshire's anti-CWIPL statute is enough to create the requisite "special-circumstances" for the rule waiver under CLI-88-10. This holding was made despite the fact that in CLI-88-10, this Commission stated:
"We think that it is apparent that PSNH bankruptcy and anti-CWIP, in combination, undercut this rationale. Under anti-CWIP the utility cannot, strictly speaking, specifically recover Any portion of the 12 ALAB-920 at 29.
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costs of low power testing. In most H* cases this may not be critical, given the-fact that utilities' generally have j- sufficient funds derived through rates to l- carry them through-temporary shortfalls and delays in rate recovery.' Indeed, the Commission recognized in its 1984 rulemaking that there could be chase-ins and other such delavs in recovery of-costs of construction or operation, and that such delavs did not unset the g rationale that rate settina would orovide adeauate funds. But here the utility's bankruptcy clearly signals that something very unusual and serious has occurred because of delays in rate increases --
the utility is unable to meet all its obligations to its creditors. We think-
-that the combination of these two circumstances, bankruptcy and the anti-CWIP statute does undercut the rationale for the 1984 rule.13 It is respectfully suggested that the Appeal Board fell into error by overlooking the significance of the tco po *. ions of the above-quoted language set forth with emphasis. The_first underscores the very different factual setting before this commission in CLI-88-10. There the Commission was faced with the possibility that a low power testing license would issue, and in the absence of a later operating license for a power level which could at least result in net generation to the grid, the low power operating costs, because of the anti-CWIP law, rather than simply being delayed, could never be recovered. The second portion of the quote set out with emphasis (this emphasis supplied) underlines the fact that the possibility of mere regulatory 13 CLI-88-10 at 598 (second emphasis supplied).
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b ' delay. combined with: bankruptcy does n21 present special b circumstances which-undercut the rationale of the 1984 rule..
As noted earlier,.the Appeal Board, in a~ footnote, attached no significance to this CLI-88-10 language on the basis that-bankruptcy and anti-CWIP laws were not taken into account at the time.of the'rulemaking cited.
r, The language of the rulemaking dealing with phase-ins etc. referenced in CLI-88-10 actually reads, in the original, as follows:
"The same reasoning applies to the comment'that rate base phase-ins and disallowances (portion of new plants either not allowed intoLthe rate base or phased in to the rate base ~over a period of time). affect the utility's recovery of operating expenses. Again,-such phase-ins may affect short term profits, kut does not affect-recovery of operatina expenses "14 It"could not be clearer -- regulatory delay is not deemed something which.affects recovery of operating expenses, the very expenses, the likelihood of the recovery of which, form the rationale and basis for the rule. In short, what the Appeal Board ignored was that if the assumption is that a license han issued which permits operation at a power level sufficient to allow eventual recovery of the operating costs involved, then one is back to the situation of simple regulatory delay which the Commission said was not sufficient 14 Elimination of Review of Financial Qualifications of Electric Utilities in Operating License Review and Hearings for Nuclear Power Plants, 49 F.R.
35747, 35749 (Sept. 12, 1984) (emphasis added).
to. undercut the rationale of the regulation. Put another way, the Appeal Board erred in viewing regulatory delay which may follow'the expiration of the legal anti-CWIP barrier as being some sort of a different type of regulatory delay than that which may take place in a jurisdiction which had no anti-CWIP statute. But " regulatory delay" is " regulatory delay" no matter what precedes.it. Because of its apparent belief that regulatory delay following expiration of an anti-CWIP prohibition was a separate and distinct class of regulatory delay,.the Appeal Board fell into error.
II. The Appeal Board Engaged in Speculation in Determining that Regulatory Delay of any Significance Would, Perforce, Occur.
As noted above, as one basis for its ruling, the Appeal Board held that it was highly likely that there would be some period (it did not speculate how long) when Seabrook would operate above 5% of power while there were no revenues i flowing to PSNH attributable to Seabrook itself. In analyzing the New Hampshire law to reach this result, the Appeal Board apparently ignored the fact that there is nothing in the New Hampshire statutes cited which precludes PSNH from filing, well in advance of actual operation at a power level above 5%, a request for a rate increase plus a ,
request for temporary rates in some form or other, thus assuring that the right to collect higher rates based on Seabrook operation will be in place as soon as there is l
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. issued any.above-5%-power license which permits operation in 7
such fashion as to result in net generation to the grid. As shown.in the Affidavit of Bruce L. Drawbridge, attached hereto as " Exhibit 1," assuming a normal power ascension, net h . generation to the grid is to be expected in a very short period of time after criticality is achieved (approximately 12 days). Drawbridae Aff., 11 4,6. Presumably one could argue that there is no assurance of revenues for that brief period, but at that point the argument reaches the area of de minimis.
In short,'the Appeal Board finding of likelihood of regulatory delay sufficient to cause a problem is speculation. It is settled that speculation cannot be the basis for granting a petition for the waiver of a Commission regulation.15 III. The Appeal Board Erred, on This Record in Holding That There was " Evidence of a Significant Safety Problem Warranting a Waiver of the 1984 Rule."
In reaching the conclusion that there is " evidence of a I
significant safety problem",16 the Appeal Board did not even address the portion of the Licensing Board decision which l
rejected the existence of a significant safety problem on the basis of the affidavit of the President of New Hampshire 15 Public Service Company of New Hamoshire (Seabrock Station, Units 1 and 2), ALAB-895, 28 NRC 7, 25-26 (1988).
16 ALAB-920 at 23.
l T I Yankee.17 That affidavit made a number of points as to why )
the cutting of corners was unlikely, which points were adopted by_the1 Licensing Board.- These included the existence of-NRC onsite inspectors, the rigidity of license conditions as to maintenance in present day licenses, and the fact that PSNH has only one vote of five on the Executive Committee of the Joint Owners of Seabrook assuming that Committee could influence New Hampshire Yankee as the operator, which it cannot,-and the fact that New Hampshire Yankee, not the owners, makes the safety related decisions with respect to plant operations and shutdowns. Even assuming, the Appeal Board can, gyb silentio, reject the resident inspectors and rigid licensing requirements on the theory that these are generic to all plants and thus presumably not grounds for holding that there is no safety question given the fact that 1
the rule was not based on the concept that there is no relationship between safety and financial qualifications,18 17 LBP-89-10 at 303-04.
18 ALAB-920 at 25. The Appeal Board clearly was correct in its assertion that "while the Commission noted that a case might be made that there is no connection between the agency's financial review and safe plant operation, it specifically declined to foot the rule on such a conclusion." However, the actual words of the declination are instructive on the issue of whether a "significant" safety problem is, in fact, here involved:
"The NRC has found strong indications in the public comments, and especially in the NERA report, that a rule eliminating financial qualification review at all stages of the licensing proceeding is supportable, at least
the fact that the owner in bankruptcy has no ability to force its will directly or' indirectly on the operator of Seabrook o is not generic and cannot be ignored and was not rebutted.
In short. the " evidence" in this record is that there is no significant safety problem, and the Appeal Board erred in
, holding.otherwise.
L CONCLUSION The Petition should be denied.
Respectfully submitted, YW 7_ _ M- -r _ L Tliomas ~G.' WHJfiEn, Jr.
George H. Lewald Jeffrey P. Trout Jay Bradford Smith j Geoffrey C. Cook William L. Parker Ropes & Gray One International Place Boston, MA 02110-2624 (617) 951-7000 Counsel for Applicants for regulated utilities, on the basis of the lack of any proven link between financial qualification review and safety given the Commission's long experience in regulating utilities, the data in the NERA report, and the further public comment. Sinc s: , le Commission has had less experient.e eith and less information on the subject or non-utility licensees, and since the Commission has indicated that it would not issue a final rule on this basis without a further opportunity for public comment, the Commission is not relying on this premise for the current rule.
The Commission does, however, note that there is some suonort for the Proposition that, for electric utilities, there is no connection between the Commission's finaD2ini qualification review and safe operation of a facility. 49 F.R. at 35751 (emphasis added).
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