ML20248D129
| ML20248D129 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 09/26/1989 |
| From: | Backus R BACKUS, MEYER & SOLOMON, SEACOAST ANTI-POLLUTION LEAGUE |
| To: | NRC COMMISSION (OCM) |
| Shared Package | |
| ML20248D106 | List: |
| References | |
| ALAB-920, OL, NUDOCS 8910040134 | |
| Download: ML20248D129 (27) | |
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s, 1Ot n ii u r>M Septemb,g g g8gggg UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION g;
%Q BEFORE THE COMMISSION
) Docket No. 50-443-OL In the Matter of )
) (Off-site Emergency PUBLIC SERVICE COMPANY OF ) Planning and Safety OF NEW HAMPSHIRE, et al. ) Issues)
)
(Seabrook Station, Unit 1 )
)
SAPL RESPONSE TO THE COMMISSION'S AUGUST 22, 1989 ORDER (REGARDING THE FINANCIAL QUALIFICATION OF THE SEABROOK UTILITIES)
INTRODUCTION 7' ALAB-920, the Appeal Board found prima facie grounds existed for the Commission to waive the rules which ordinarily foreclose a financial qualification review of Applicants who are regulated electric utilities. The Board did so because it found two unique circumstances existed for the primary Seabrook licensee which were not within the contemplation of the Commission at the time the revised financial qualification rule was finally adopted in 1984; namely, the bankruptcy of a utility-licensee, and the !
existence of the New Hampshire anti-CWIP law, barring rate recovery for PSNH in the absence of commercial operation. Since the Board found, based on the Commission's decision in CLI 88-10, that these circumstances were unique, and did undercut the rationale of the rule, it found it had to consider whether these factors could be safety significant. Since the issue now presented was operation of the reactor in excess of 5 percent 8910040134 890926 DR ADDCK05000gg3 l l
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rated power, for reasons set forth in 88-10, the Board did so find. Accordingly, the Board held a prima facie case to waive the 1984 financial qualification rule change to permit an inquiry into the financial capability of the Seabrook licensee had been established.
SAPL believes that the Appeal Board reached the correct decision, and that an inquiry into the financial capability of the Seabrook owners is required, both for the reasons stated by the Appeal Board, and because the bankruptcy of Public Service, and the defaults of other owners to the project in themselves require a financiai qualification review.
I. THE COMMISSION SHOULD DIRECT THAT THE FINANCIAL QUALIFICATION OF THE OWNERS BE SPECIFICALLY ESTABLISHIQ ON THE RECORD DUE TO THE PSNH BANKRUPTCY.
As the Appeal Board recognized, the purpose underlying the 1984 financial qualification rule change was that in the ordinary case (of a licensee which is a rate-regulated public utility),
that "all or a portion of the costs of construction and sufficient costs of safe operation [are recovered] through the rate-making process." 49 Fed. Reg. at 35748 (September 12, 1984).
Because of the bankruptcy of PSNH, there is now no rate setting process available to provide the anticipated surrogate process for demonstrating " reasonable assurance" that the funds for safe operation will be available. Indeed, when the NH PUC attempted to institute a rate proceeding in January of 1989, with PSNH under the jurisdiction of the Bankruptcy Court, it was
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J enjoined by the Bankruptcy Court. (See Attachment A, " Order Granting Preliminary Injunction Against Involuntary Rate Case, February 16, 1989").
Nonetheless, the Appeal Board has found, based on CLI 88-10, that the bankruptcy of PSNH alone does not require a case specific inquiry into the financial qualification of PSNH because, at some point after licensing, the present bar to rate recovery under the New Hampshire anti-CWIP will no longer prevent a normal rate-setting process. (The Appeal Board has found it likely that there could be a delay in the obtaining of those rate payer funds, during which time the safety concerns of operation above 5 percent of rated power would be significant. This issue is discussed at pages 5-12, infra).
However, it is a fact that the lead owner of Seabrook, PSNH, now finds itself mired in the Bankruptcy Court, and after 18 months has no approved plan for reorganization, and does not have access to the normal rate-setting process. There is no presently foreseeable date at which the bankruptcy will end, and permit the Commission or another rate-setting authority, to again assure ,
financial qualification through a normal rate-setting process. >
This alone should require a financial qualification inquiry into the capability of the lead Seabrook owner, and licensee.
In fact, the financial crisis that led to PSNH's bankruptcy has already impaired PSNH's ability to maintain its electrical system. On August 5, 1987, former PSNH president Robert Harrison
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threatened to cease providing hook-ups for new electrical customers, and stated as follows: )
i "Any additional commitments arranged by September 1 wil.1 be scheduled with construction proceeding as cash is available. Unless the present circumstances change, no commitments can be made for requests for new service received after September 1. Let me repeat that. The Company can make no commitments that it will be able to complete construction which will effect customers' service, unless cur present circumstances are corrected by September 1.
Second, we must drastically reduce our maintenance expenses. All maintenance projects are being deferred except where deferral will present unacceptable risks to service continuity. Unless this situation is corrected cuickly, the level of service customers have come to depend upon will deteriorate. (Emphasis added, Attachment B.)
Moreover, even though PSNH has, as a result of the automatic stay in bankruptcy, not had to pay post-petition interest on its unseccred debt, it finds itself financially threatened at the pre:sent time, as a result of claims being made in the Bankruptcy Court. In its most recent SEC report form 10-0 for the quarterly period ended June 30, 1989, PSNH states as follows:
"Nevertheless, the Company could encounter cash flow problems during the Chapter 11 case. The Company's construction expenditures for 1989-1993 are estimated at approximately $465 million, but could be significantly increased if the Company is required by environmental laws to make additional expenditures, particularly in response to legislation regarding acid rain.
Although the Bankruptcy Court had denied an earlier motion of the holders of the Company's Third Mortgage Bonds seeking to receive interest payments during the pendency of the Chapter 11 case, the Third Mortgage
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_li Bondholders have filed an additional motion seeking such payments, a hearing on which is scheduled for October 5, 1989. Any such additional expenditures would.be difficult to accommodate without eventually affecting the quality of utility service provided by the Company. The financial constraints under which the Company has been operating for the last several years have reduced operating budgets and restrained capital expenditures to the point that, should any substantial additional cash flow savings be required in the future, the Company might be. required to cease paying interest'on First Mortgage Bonds and General and Refunding Mortgage Bonds and such circumstances could erode support by the Company's-secured' creditors for continued funding of Seabrook's pre-operational expenditures. (Attachment C)
A hearing is necessary to determine the adequacy of PSNH's revenues, in light of bankruptcy expenses, claims being made in the Bankruptcy Court, and the inability or difficulty of obtaining rate increases as a result of the bankruptcy. Clearly, the Commission's historic requirement that its licensees demonstrate financial qualification, which is normally achieved by assumptions that the rate-setting process provides that financial assurance, do not exist in the case of the largest Seabrook owner, and Seabrook licensee, PSNB.
II. THE NEW HAMPSHIRE ANTI-CWIP LAW ALSO REQUIRES A SPECIFIC FINANCIAL QUALIFICATION INQUIRY INTO THE CAPABILITY OF PSNH.
Under the New Hampshire anti-CWIP law, RSA 378:30-a, PSNH cannot recover any part of its Seabrook costs, whether its financing, construction, or operating costs, until the Seabrook facility is actually providing service to customers.
The anti-CWIP law is significant because, even if PSNH could attempt rate recovery for Seabrook while in bankruptcy, a doubtful matter as discussed at Part I, supra, it cannot do so as long as the anti-CWIP law applies.1 The anti-CWIP has been upheld by unanimous decision of the New Hampshire Supreme Court, and PSNH's attempt to have that decision reviewed and reversed by the United States Supreme Court has been denied. 130 NH 265 (1988) The Appeal Board found the New Hampshire anti-CWIP law to be significant, since there could be an indeterminate, and possibly extensive, period of time after PSNH might have been authorized for power ascension beyond 5 percent, but when no access to ratepayer funds for Seabrook costs would be available. It concluded that this provided a prima facie case for inquiry into PSNH's financial qualifications.2 Applicants / Staff respond by urging that all the Appeal Board's holding amounts to is an acknowledgment that some delay in rate recovery for Seabrook may occur, and that mere delay cannot be sufficient to permit a waiver of the financial qualification rules, since when the 1984 rule 1/ Pursuant to the Judicial Code, 28 USC 5959(b): "Except as provided in S1166 of Title 11, a trustee, receiver or manager appointed in any cause pending in any court of the United States, including a debtor-in-possession, shall manage and operate the property in his possession as such trustee, receiver or manager according to the requirements of the valid laws of the state in which such property is situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof."This section appears to clearly require PSNH, as debtor-in-possession, to comply with valid State laws, including, of course, the anti-CWIP law. l 2/ As argued at part 1 supra, SAPL believes that the Appeal Board's decision, insofar as it is based only on the problem of a delay between authorization to increase power levels, and the end of the bar of the anti-CWIP law, is far too narrow, and that the rule waiver should be granted for other reasons as well. ,
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change was promulgated, the Commission noted that there "could be a phase in and other such delays in recovery of the costs of construction and operation and that such delays did not upset the rationale that rate setting would provide adequate funds. CLI 88-10, 28 NRC at 598.
Indeed, the Applicants go on to suggest that the delay could be as little as 12 days, or "de minimus," since they suggest that j the bar of the anti-CWIP will fall as soon as the Seabrook plant is synchronized with the grid,'and is generating any amount of net power, for any length of time.
The Applicants / Staff are wrong both in their theoretical approach to the delay issue, and in suggesting that any delay would be "de minimus."
Applicants / Staff failed to note that the issue of the anti-CWIP bar is categorically and materially different from the delays in rate recovery provided by rate phase-ins or other deferred revenue recovery mechanisms. A phase-in can provide recovery of all costs, including costs prior to commercial operation, often with a return on the investment, but over a longer period. By contrast, the anti-CWIP law states that cost prior to actual commercial operation can never, in any circumstances, and no matter what, be recovered, unless and until commercial operation is achieved.
Thus, when the Commission, in adopting the 1984 rule change, stated, "Again, such phase-ins may affect short term profits, but does not affect recovery of operating expenses," (49 Fed. Reg. 35747 at 35749), it is talking about a very different situation
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from that faced by PSNH as a result of the New Hampshire anti-CWIP l'
law. Under the anti-CWIP. law, the regulator cannot even grant l emergency rate relief, otherwise available under RSA 378:9, so l
l long as the anti-CWIP law applies. (Appeal of PSNH,130 NH 265) l In short, unlike a phase-in, the anti-CWIP law is an absolute prohibition on recovery of costs, unless and until commercial operation is achieved. Without the anti-CWIP law, but even with a phase-in, recovery of at least some costs could occur before this point, and this is not permitted under the anti-CWIP law.
However, Applicants / Staff would further state that this distinction is of no importance, because the delay may be "de minimus" perhaps even a mere 12 days, the time they opine it may take to achieve power levels above 50 megawatts, thereby providing some minimal net power output.
There is absolutely nothing to suggest that the mere furnishing of net power for an instant, perhaps an hour or less, will suffice to permit PSNH's interest in Seabrook to be rate based, thereby permitting rate recovery. The intent of the anti-CWIP law was to return rate making in the State of New Hampshire to the. traditional "used and useful" principle, embodied in RSA 378:27. Under that principle, when a plant is "used and useful",
and therefore available for rate basing, is a question of fact.
(New Enoland Telephone v. State, 95 NH 253, 365 (1949) It is 4
extremely unlikely that New Hampshire regulators would conclude !
that the mere furnishing of net power would be sufficient to render the plant "used and useful" within the meaning of New Hampshire law.
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This issue has been faced by regulators in other jurisdiction'ns,'and SAPL has been unable to find any decision that authorizes rate basing of a plant based merely upon the furnishing of net power to the grid. In the most comprehensive decision available, the Missouri Public Service Commission, in dealing'with the Wolf Creek plant, found as follows:
"In light of the extensive record in this matter, the commission firmly believes that if a-nuclear-fueled electric generating plant is incapable of operation in accordance with design requirements, it cannot reasonably be considered ' free from deficiency' or
' absolutely finished' and, thus ' completed.'
Preoperational and start-up testing is a requirement to the determination that a nuclear. generating unit is capable of operation-in accordance with design
- requirements. Additionally, the commission believes that if a nuclear-fueled electric generating plant is incapable of successful completion of performance tests which activate warranties applicable to the nuclear steam supply system, it cannot reasonably be considered ' free from deficiency' or
' absolutely finished' and, thus, ' completed' and that satisfactory completion by actual test demonstration of the 250-hour full warranted output performance test of the nuclear steam supply system is a requisite to the determination that a nuclear generating unit is capable of operation in accordance l with design and contractual requirements, is
' free from deficiency,' ' absolutely finished,'
and ' completed.'
l Our findings appear to be consistent with decision in Office of Consumers' Counsel v Ohio Pub. Utilities Commission (Ohio Sup Ct 1979) 58 Ohio St 2d 499, 391 NE2d 311 and Re Southern California Edison Co. (1983) 55 PUR4th 537. IN Office of Consumers' Counsel v Ohio Pub. Utilities Commission, supra, the supreme court of Ohio overturned a commission order which selected the initial synchronization of the Davis-Bessie Unit No. 1 nuclear station to the Toledo Edison Company transmission system as the appropriate commercial operation or 'in-service' 1
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I criterion. The court found that (391 NE2d at 314, 315):
'While the initial synchronization of nuclear generating unit to its transmission system presents some indication that a generating facility is useful for purposes of supplying service to ratepayers, as the commission found, we conclude that, under the facts and circumstances at bar, the manifest weight of the evidence demonstrates that, at that date certain , the unit in question was undergoing start-up testing which was not completed until~ November 12, 1977. Until that time, it was unknown whether the unit's systems would function in an integrated manner and continue to do so in the proximate future.
'It would be inequitable to prematurely shift the risk of plant failure from the utility's investors to the ratepayers by the inclusion in the rate base of highly complex and innovative technology which has not been proven to be reasonably free from significant design or construction defects. The initial risk of failure is appropriately borne by the investors, who have undertaken the project and who will ultimately profit from its success.
It is only proper that their venture be found operational before they commence to recoup their capital outlays from the consumers.'
In Re Southern California Edison Co.,
supra, the California commission held (55 PUR4th at p. 573):
'B. COD [ Commercial Operation Date]
Criteria
'On June 14, 1982, the administrative law judge issued a ruling in this proceeding that the commercial operating date would occur when all initial start-up testing including the warranty run, had been successfully completed.
In Decision No. 82-09-111, in response to to Edison's petition for rehearing, we affirmed l the ALJ's ruling. It must be demonstrated to the staff's satisfaction that the plant will i
meet the criteria in an acceptance test of 200 hours0.00231 days <br />0.0556 hours <br />3.306878e-4 weeks <br />7.61e-5 months <br /> of continuous operation (the warranty run). We viewed the demonstration in the l
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acceptance test, that the. plant could meet the required criteria, to be the best indication-of the COD.
'At the July- 15,.1983, oral argument, Edison once again. renewed its request that the commission-reconsider its COD criteria.
' Edison argues that the requirement that the plant complete its 100 percent power level' testing.as well as the 200-hour warranty-run is too rigid and unrelated to what-should be considered for declaringLa plant.to be 'used and.useful.' Edison stated on July 15, 1983,
.that:it has. resumed power testing at the 100-per cent power level and that it would~soon complete'all of its tests at the 100 per cent power level as well as the warranty-run. In renewing its request for reconsideration of-the COD criteria at this late date Edison must be: concerned about the precedential nature of our COD criteria. We agree that our criteria are, rigid; however, we believe it was and is in the ratenavers' interest to set-hich.
standards to assure ourselves that the olant would be capable of producina power as planned; even though the delay in placing the plant into service may result in_somewhat higher costs to ratepayers in the long run.
We believe'it would have been more detrimental to have allowed the olant in rate base after 20 per cent power tests or 50 per cent-power tests had been confronted with a series of plant shutdowns because of the need to repair flaws or defects in the olant. While the imposition of our rigid criteria in no way guarantees that the plant will operate without trouble, it does indicate that we have taken reasonable steps to assure all parties that flaws and defects will have been eliminated and corrected to the extent possible. With a satisfactory experience on SONGS 2, we may indeed agree that the criteria should be relaxed. We will be willing to have applicants reopen this issue in connection with SONGS 3 or any other nuclear power plant project.' (Emphasis added.)
The commission believes the risk that a plant constituting new and complicated technology will be incapable of operation in accordance with design requirements is a risk properly borne by the applicants' shareholders. The evidence presented by the commission staff in support of its proposed
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e criteria numbered 1, 2, 3, and 4 is convincing and the commission finds each of the four criterion to be both reasonable and appropriate for application in these dockets."
(63 PUR 4th 1 at 11, 12)
Accordingly, we submit that the Applicants / Staff are seriously in error when they suggest, based on nothing more than their interpretation of an opinion of local counsel for PSNH, that the delay in obtaining ratepayer recovery may be "de minimus." Indeed, as the Appeal Board plainly believed, not only is the delay categorically different from'the phase-in types of delays contemplated by the Commission when it adopted the 1984 rule change, the delay in this case could in fact be very substantial indeed, since it is highly unlikely that the Seabrook plant will be considered available for rate base treatment without at least completing its full power warranty run.
III. THE OTHEF OWNER DEFAULTS SHOULD R,EOUIRE b WAIVER OF THE FINANCIAL QUALIFICATION RULE AND REQUIRE SPECIFIC INQUIRY INTO THE SEABROOK OWNERS' FINANCIAL CAPABILITY.
The Appeal Board has acknowledged the Commission assumed for purposes of its discussion in CLI 88-10 that the defaults of certain other Seabrook owners would be deemed to " undercut the logic" of the 1984 rule change, but nevertheless failed to find that these owner defaults required a financial qualification review.
SAPL urges that this was error. After all, the fourth largest owner, MMWEC, owning 11.6 percent, has been in default {
since June of 1988, and another owner, Vermont Electric
Generation and Transmission Cooperative, Inc., has been in i
default for more than three years.
It is true that presently the MMWEC default is being met by payments from PSNH under a S30 million borrowing authorized by !
i the Bankruptcy Court, but evidence before the Court indicated that those funds may be exhausted in, or about the end of, the first quarter of 1990.
There is also infor . nation suggesting that the third largest owner, EUA Power Corporation, c.wning 12.1 percent, a company which has no ratepayer base, wi31 require new financing in May of 1990. There is no basis for assurance that this financing can be obtained.
In short, the present financial stress on the Seabrook owners appears likely to increase within the next several months, and this further establishes a prima facie case for the need for inquiry into the financial capability of the Seabrook owners.
It is no answer to say that these defaults affect only minority owners. The NRC has always required a demonstration of the financial capability of all the Seabrook owners. In Supplement 3 to the safety evaluation report issued by the Commission staff on March 14, 1975, the Staff was careful to i
review the financial qualification of each of the joint owners to fund its separate share of the plant. According to the Staff,
" based on our review of the financial information on the nine participating applicants representing 98.7 percent of total ownership, and subiect to a future favorable findina on the
s-owners of the residual 1.3 percent, we find the Applicants' financiallyfqualified to/ design and construct the Seabrook Station, Units 1 and 2. (Emphasis added, page 20-5)
CONCLUSION For the reasons stated herein, and in the separate filing on behalf of the Massachusetts Attorney General in which SAPL joins, the Seacoast Anti-Pollution League urges that the Appeal Board's decision in ALAB-920 be affirmed, but that the Commission order a financial inquiry on a broader basis than that authorized by that of the Appeal Board.
Respectfully submitted, By its Attorneys, BACKUS, ME ER & SOLOMON
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By: Cl ' - <
Robert A. Backus, Esquire 116 Lowell Street P.O. Box 516 Manchester, NH 03105 (603)- 668-7272 DATED: September 26, 1989 I
I hereby certify that copies of the within Seacoast Anti- l Pollution League's Response to the Appeal Board's Order of August '
22,1989 (Regarding Financial Qualification of Seabrook Utilities) have been forwarded by Federal Express to those on the attached service list indicated with an asterisk [*] and by ,
first-class mail, postage prepaid, to the remaining parties ce l the attached service list. ,
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Robert A. Backus, Esquire 1
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ATTACHMENT A
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l UNITED STATES BANKRUPTCY COURT f>
DISTRICT OF NEK HAMPSHIRE
- l. In re:
Public Service Company of New Hampshire, BR/!88-00043 Debtor-Public. Service Company of New Hampshire, ADVfB9-6 Plaintiff v.
State of New Hampshire.and State of New Hampshire Public Utilities Commission, Defendants-ORDER GRANTING PRELIMINARY INJUNCTION AGAINST INVOLUNTARY RATE CASE Public Service. Company of New Hampshire filed the " Motion of Public Service Company for Preliminary Injunction Against Involuntary Rate Case to Prevent Interference with Chapter 11 Case" on January 26, 1989, with supporting Declarations and with an "Ex parte Consented to Motion" for an order shortening time for the hearing on the Motion for Preliminary
- Injunction. This Court granted the Ex Parte Motion to shorten time and set the matter for hearing on February 10, 1989. Defendants filed objections to the Motion for Preliminary Injunction, and a hearing on the Motion was held on February 10, 1989, at which evidence and crguments were submitted in support of and against the Motion for Preliminary Injunction.
Based on the pleadings and other documents filed in this adversary proceeding and the record in this Chapter 11 case, on the evidence and arguments submitted at the hearing on the Motion, and on the Amended Findings .and Conclusions on Motion for Preliminary Injunction, entered February 16, 1989, and good cause appearing, it is
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, ' ORDERED:
The Motion for Preliminary injunction is granted, subject to l 1.-
the provisions of this. Order.
- 2. The State ~ of new . Hampshire and the State : of New -Hampshire '
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Public . Utilities Commission' are enjoined from proceeding' with or i otherwise continuing rate case DR 89-006 commenced January.11, 1989 (the-
" Rate Case") and . from proceeding with or othetvise - continuing any.
l proceeding within or related to the Rate Case, including the filing of direct testimony or documents and the holdings of- any hearings regarding temporary rates or permanent rates.
l 3. This Order does not preclude the conduct by the. Defendants of ordinary or , routine regulatory oversight and supervision of Public I ' ' Service Company, including filings, hearings, and orders related to the l
fixing of: Energy Cost Recovery Mechanism charges or the specific-investigation of specific components of rates based upon external events that may affect the rates charged or to be chstged by Public Service Company.
1 l 4. In the event the preliminary injunction granted by this Order is terminated, modified, vacated, or annulled, the rights, if any, of the Defendants to fix rates as of the dates that rates would have been fixed in the Rate Case but for this Order are specifically preserved, and this Order does not determine or affect any such rights.
- 5. The preliminary injunction granted by this Order shall continue in effect until- the entry of the final judgment or decree in the -
adversary proceeding, unless earlier terminated, modified, vacated, or annulled by subsequent order of this Court.
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,/ y February 16, 1989 I,/ M#
. Dated:
JAVJS'E. YACOS BANKRUPTCY JUDGE E8:_-_ _ ___ _.
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- d ATTACHMENT B j I !
STATD".D4T - R. J. IRRRISON
- AUGUST 5, 1987 j
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. I THANK YOU FOR JOINING US 7ODAY.
ALL OT YOU HAVE U:OCUBTEDLY HEARD ETERDOCE 70.THE VERY TAVORABLE l RESULTS OF THE RECDCT PRUDDOCE EVIEW CO!OUCTED IVR THE STATE Or hT4 EMPSHIRE NO ITS PUBLIC UTILITIES COMMISSION BY THE TEAM OT 700CHE ROSS RO NIELSD4-WURSTER. THIS REPORT UICERLI!ES THE IRONIC SITLETION THE PEOPLE OF NEW FAMPSHIRE AND PShH ARE IN: ON THE ONE HA!O, THIS-PUBLIC REPORT VALIDATES THAT STABRODK HAS BED 4 KTLL FANAGED. ON THE OTFER HAND, IT ALSO D'SHASIZES THE EALITY THAT SEAEROOK HAS BED 4 A POLITICAL FVOTBALL. NO EECAUSE IT'S BED 4 KICKED AROUND ALL THESE YEARS, ED".DOOUS DAPAGE HAS BED 4 DONE 'IO THE PEOPLE OT hTd HAMPSHIPI, THE STATE OT NEW HAPSSHIPI, RO PShH. THE PEOPLE OF NEW HAMPSHIRE kHO FAY HAVE BED 4 CONTUSED ABOUT SEAEROOK UNTIL NOW CAN, ONCE NO TOR ALL, KNOR TFAT SEAEROOK KAS A JOB KTLL-DDIE RC THAT THE PROBLEM IS A POLITICAL ONE - IARGELY TROM ACROSS OUR SOUTHERN BORDER. RO OF COURSE THE mat %GEMD4T Ata BOARD OF DIRECTORS OF PShH CAN TEEL
. HEARTDED BY THE " GRADE A" REPORT; hTVERTHELESS, kT ALL HAVE 70 LIVE WITH THE DAPAGE THAT'S BEEN DO 3.
THE OBJECTIVE OT OUR COPJRU HAS ALWAYS BED 4 TO FIET THE DERGY NEEDS OF A GRONING hT4 HAPSSHIRE IN A WAY THAT IS ETTICID4T, RELIAELE, R C COST ETTECTIVE. THAT'S OUR FRCATE FROM THE PUBLIC. kT BELIEVE THAT kT FAVE ACTED PISPONSIELY RC PRUDDCLY 70 FULTILL THAT VRCATE.
kT WILL NOT ABDICATE OUR RESPONSIBILITIES 70 POLITICIRCS OR TO
. PRESSUPI GROUPS. kT BELIEVE Tr%T 7EE PROPOSAL kHICH I WILL OUTLIhT IN A MOPINT SERVES THE EEST IhAr.AEST OF ALL PARTIES CONCER?CD, AND FIETS Tr%T RESPONSIBILITY.
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- THE 70UCHE ROSS RO NIELSD4-WURSTER REPORT VALIDATES FOR TrI PEOPLE OT hT4 HAPSSHIRE THAT PUBLIC SERVICE OT hT4 FAMPSHIPI ACTED PROPERLY RC PIASO: ABLY IN DECIDING 70 BUILD SEAEROOK, IN FRAGING THE CONSEUCTION OF TFAT PROJECT RO IN CARRYING OUT THE fit &NCING hTEDED 70 GET THE JOB DO E. THIS I!OEPDOENT STUDY WAS NOT SPONSOFID BY PSh3. RO IT IS NOT THE ONLY STUDY 70 CONCLUDE TET TFI COPJR&'S
. ROLE IN THE SEAEROOK PROJECT FAS EED4 A SOU:O 0:2. THE CWJ LDGE GROUP, A kTLL 77W4 CONSULTING TIRM, ALSO COPSLETED AN AUDIT OT PSNH'S ROLE WITH THE SEABROOK PROJECT. THIS AUDIT WAS DONE FOR OUR PAR 7NERS AT SEAEROOK - COPJANIES KTO COULD HAVE USED RU IEGATIVE TI!CINGS 70 SUE PSNH. ACAIN, 07ERhEELMINGLY, THEY TOU D TtmT PShH HAD DO:C A GOOD JOB IN FRAGI!G THE SEABRODK PROJECT. TI! ALLY, PICKARD, LORE R O CARKICK, A RESPECTED CALITOPRIA-EASED DGIht.t.xI!G CONSULTING TIEM, PIACHED SIMILAR FI!OI!GS, AS I REPORTED 70 YOU IN THIS ROOM
l OVER A YEAR AGO. IN SUM, THREE FAJOR REVIEWS OF PUBLIC SERVICE OF ND4 HAMPSHIFI TA!aGEMDU OF THE SEABROOK PROJECT, DOhT FOR THFIE SEFAEATE l l PARTIES, HAVE GIVD4 US AN "A" GRADE ON OUR PERTOFFAMCE. NONE OF THESE h 1
} REPORTS SHOULD BE A SURPRISE: SEABROOK WAS BUILT RIGHT CfJF IN THE 1 l
OPEN, COER THE FULL SURVE1LIANCE OF THE PUBLIC, THE PIGUIA70RS RO THE PIDIA.
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THIS SERIES OF I!OEPDODC ASSESSMDUS SHOULD PUT TO PIST ONCE RO FOR ALL THE ALLEGATIONS OF INCOPJETDiCE RO MIST %!AGEMDiT kHICH FAVE BED 4 7DSSED ABOUT OVER THE PAST DECADE. RO OF CCFJRSE THEY FIRELY UNDERGIRD THE CRESAP-MCCORMICK AUDIT, kTICH GAVE VERY HIGH 1%RKS 70 f OVERALL COPERU PATEGLMDU.
AS YCfJ CONSIDER THIS REPORT, PLEASE KEEP IN MIND THAT THE REVID4 TFAM OF IUJCHE ROSS Am NIELSD4-WURSTER IS AMONG THE MOST RESPECTED .
BUSINESS GROUPS IN 1.T COUNIM. 700CHE ROSS HAS DONE A CONSIDERABLE l AMOUNT OF WORK FOR TdE STATE OF hTW HAMPSHIRE OVER THE YEARS, AND TO MY ENCh* LED 7E THEIR WORK HAS VIT TFI HIGHEST STROARDS. RO l
NIELSEN-WURSTER HAS PICEIVED SPECIAL PRAISE IN FICDU WEEKS FOR ITS PRUDDiCE REVIEWS - PFAISE FROM AN UNLIKELY SOURCE. A LEADING DJERGY CONSULTING COPSRU, BASED IN THE BOSTON AREA, PAS RECDULY REVIEh*ED THE PERFORMANCE OF FIRMS k'lO DO PRUDENCE KJDITS. THIS CONSULTING COMFRU, kHICH WAS UTILIZED BY THE ND4 ENGLAND GOVERNORS CONFERDJCE AT A TIFI GOVERNOR DUKAKIS WAS THE CONTEFINCE'S CHAIFFAN, HAS CONCLUDED THAT NIELSDi-WURSTER IS AMONG THE MOST COPJETDC FIRMS IN THIS FIELD.
SUIROOK IS SAFE, kTLL-BUILT. . .M O IT'S BEEN READY TO OPERATE SINCE OCIOBER 1986. SCON IT WILL HAVE BED 4 READY TO PROVIDE SERVICE FOR A FULL iTAR. AN EiFORTJ! ATE 7WIST OF FEDERAL IAW, THOUGH, AND THE USE OF A LOOPHOLE BY THE C07ER!OR OF PASS 7 CHUSEITS PREVDUS THE PIAt3 FROM OPERATING, MO NEd FAPJSHIFI STATE IAW SAYS kT HAVE 70 KEEP BORRCKING 10 P?Y FOR IT - EVDi THOUGH KT'VE DOhT EVERYTdING WE !%VE
, 70 DO TO GET IT OPERATING. kHAT A KASTE!
THE DELAY IN OPEFATING SEABROOK IS DUE ONLY 'IO POLITICAL I!au-fERDiCE kHICH IS TOTALLY EEYOND THE CChTROL OF PShT. TdE FISULTS ISI l DEVASTATING FOR TFI PEOPLE OF NCd FAPISHIRE. FOR EACH DAY OF DEIAY, THE COPJR U'S SEABROOK COSTS INCREASE BY $1 MILLION. WITHOUT BEING ABLE TO GDCEFATE CASH THROUGH THE PRICE OF OUR PRODUCT, PShH IS FORCED
- 70 BORRCH 1ARGE AMOUNTS OF MONEY JUST 70 CONTItUE OPERATING. BECAUSE OF THIS, THE COPJRU'S LONG TERM DEBT N34 EXCEEDS $1.5 EILLION RCD THE I!GEFIST ON THAT DEST IS OVER $200 MILLION A YEAR. EACH YEAR, AFTER PShH PAYS ITS OPETATING COSTS, IT FAS $150 MILLION OR SO LEFT. OUT OF THAT $150 MILLION PStre MUST PAY $200 MILLION OR SO IN I!nuIST, ,
ANOTHER $80 MILLION 70 BUY RO INSTALL LINES RC POLES RO METERS R;D 701%INIAIN PCETR FIANTS k3ICH SERVE 21,000 ND4 CUS70PIRS A YEAR, RC
$60 MILLION FOR THE CASH COST OF CARRYING SFABROOK. N34, ASSUMING YOU DON'T FAVE RU PRINCIPAL OF FATURING DEBT 70 PAY, THAT'S ALL YOU HAVE TO DO: PAY $340 MILLION IN COSTS OUT OF $150 MILLION IN IU CS. H34 HAVE WE DONE IT? KT'VE DONE kHAT STATE IAW REQUIFID: BORRCHED HIGH INTEREST DEBT 'IO !%KE UP THE DIFFEFINCE. WE'VE BORR3sTD EVEN THOUGH CMhTRS Or 2/3 OF TPI NON-PShT PORTION OF SFABROOK UNIT 1 API ALFIADY l REFLECTING TIKT INVESTPINT IN PRICES THEY CHARGE THEIR CUSIOPIRS -
SOFI OF THEM RIGHT HEFI IN ND4 HAMPSHIFI!
l BUT kT HEFI IN h3 FAPJSHIRE CAN NO LONGER LOOK 70 WALL STFIET 70 SAIL US OUT FOR THE UNTORTU! ATE RESULTS OF TFI POLITICAL CAPIS RCD THE
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' .i , a REGUIATORY DELAYS. I!NES70RS ARE NO LONGER WILLING 70 BUY OUR BONDS, e BECAUSE THEY CA! COT BE ASSURED THAT THIS COPJMW WILL 3E ABLE 70 FIFAY THE PRINCIPAL MO THE IhTEREST. THE MESSAGE IS THAT AS LONG AS THE STATUS QUO REPAINS, KT ARE SIMPLY 10 LONGER hTLCOPI AT THE BORROKING
, WINDOW. THESE CREDITORS TEAR THAT WE CMCCT REPAY OUR DEBT BECAUSE hT SIMPLY DON'T HAVE TdE INCOPI 70 COVER TFAT DEBT. RECDC PROOT IS PPISCC IN OUR ATTEMST 70 SORROW $150 MILLION, kHEN TdE VAPIET WOULD ABSOP3 ONLY $100 MILLION - EVEN AT VERY HIGH INTEREST PATES.
BECAUSE POLITICIANS HAVE BED 4 UMILLING 70 OBJECTIVELY RELYZE, ACCOMMODATE, OR COMPROMISE OVER THE TUIURE SUPPLY OF ELECTRICITY IN NEW HAMPSHIRE, THE TINANCIAL kTLL-BEING OF PSNH IS IN DOUBT AND THEREFORE THE QUALITY OF LIFE IN NEW HAMPSHIRE IS TEREATDED.
IN ESSD4CE, POLITICIANS, BECAUSE OF THEIR ACTIONS OR I! ACTION, ARE ABOUT TO PAKE LIFE WORSE FOR THE PEOPLE OF hTd HAMPSHIRE.
TI!MLLY, BECAUSE OF TdE THREAT 70 THE QUALITY OF LIFE IN hT4 HAMPSHIRE AND BECAUSE POLIT 7,CIANS API DMIILING 70 DEAL WITH THE PIAL ,
PROBLEMS TET COMPOSE THAT THREAT, PSNH IS TACED WITH A CHOICE BETWEC4 7WO VERY STARK ALTER!&TIVES 70 DAY - KT MUST CHOOSE THE PATH TET BEST D45URES THAT THE THRTAT TO hTW HAMPSHIRE'S QUALITY OF LIFE IS EASED.
. THE FANAGEPINT AND BOARD OF PSNH HAVE ADOPTED A PROGRAM TFAT hT BELIEVE IS TdE MOST REA52aBLE ALTER!MTIVE GIVEN THE CIRCUMSTANCES.
IN PUTTING THIS PIAN 70GETHER OVER THE IAST TEW hTEKS, KT CALLED C4 SOPI OF THE BEST LEGAL MO FI!MNCIAL MI!OS IN THE COUICRY: FIRRILL f LYNCH MOD DREXEL BUPAHAM 1AMBERT AS tit &NCIAL ADVISERS AND THE hT4 YORK IAW TIRM OF CAHILL GORDON AND REI!OEL FOR CONSTITUTICAL ADVICE, COMBI!ED WITH BOSTON-BASED ROFES RO GRAY TOR SECURITIES COUNSEL RD SULLOh%Y, HOLLIS RC SODEN FOR D:PERTISE IN hT4 HAPSSHIRE LAW. THESE EXPERTS, AND OTHERS, HAVE PUT 70GETHER A PIR4 THAT THEY UENIMOUSLY ENDORSE. IT HAS SEVEPAL KEY COMPONDUS:
f 1. hT API TODAY ASKING THE PUBLIC UTILITIES COMMISSION FOR AN
- j. DERGDJCY RATE INCTIASE AVERAGING $7.93 PER MOhTH, OR 26R PER DAY, FOR THE TYPICAL HOUSEHOLD. DESPITE THIS INCPIASE, OUR PRICES WILL STILL BE LOKER THAN IF THE PATHWAY 2000 PLAN HAD BED 4 IMPLEMDCED ON SCHEDULE. NO LOWER THD4 THEY WOULD BE l IT hT PURSUED MW OTHER PISPONSIBLE COURSE OF ACTION EXAMINED BY FRAGEPINT RO OUR I!OEPDODE ADVISOR. BASICALLY, OUR TILING - COPIES OT kHICH WILL BE DISTRIBUTED - SETS FORTH THE COPJRW'S FI!GNCIAL SITUATION IN TULL DETAIL. IT OUT-LINES WHY THERE IS NO ALTERNATIVE EXCEPT 70 INCPIASE PRICES, CONCLUDES THAT THE ANTI-CWIP 1AW AS APPLIED 70 PShH IN ITS j
CUREDC CIRCUMSTANCES AMOUNTS 70 AN UNCONSTITUTIOEL TAKING OT OUR PROPERTY, RC PROVIDES BACKGROU:0 04 A PICDC 1ROMARK l.
DECISION BY THE U.S. COURT OF A? PEALS IN WASHINGTON. LET PI EPJHASIEC ONCE AGAIN THAT EVD4 WITH THIS INCPIASE, OUR RATES WILL BE BELOW WPIPI THEY WOULD HAVE BED 4 GOER THE PATHWAY I 2000 SCHEDULE REQUNCED A YEAR AGO. IT IS I!OEED IRONIC THAT WE HERE IN NEW HAMPSHIRE API GOING 70 PAY TOR A PIANT THAT l
SITS IDLE. IT'S IDLE NOT BECAUSE hT WANT IT TO BE, BUT BECAUSE IT SERVES TFE POLITICAL ASPIRATIONS OF GOVDtCR DUYAKIS 70 KEEP IT IDLE. THIS RATE INCREASE FOR THE PEOPLE OT hT4 HAPSSHIRE IS NOTHING LESS THAN A TYPICAL "DUYAKIS TAX". -
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- 2. TURTHER, THE COMPMW PETITION ASKS THE PUBLIC UTILITIES COMISSION 70 I?72DIATELY FORWARD 70 THE ND4 IKMPSHIRE SUPREPI COURT A QUESTION Or IAW ON kTETHER THE STATE'S MUI-CWIP IAW, A STATUTE TET HAS PROHIBITED THE COMPMU TROM DETPAYING SOFI OF THE COSTS OF SEABROOK WITH REVDCUE FROM CUS7OMERS, IS UNCONSTITUTIO!aL AS APPLIED TO PShH IN 7ODAY'S l CIRCUPITANCES. ONCE AGMN, kT BELIEVE TET THE RErDU TEDERAL COURT OPINION CIARITIES THIS SITUATION RC REAFFIRMS OUR CASE. IT EMPFASIZES THAT THE POKER 'IO REGUIATE IS NOT THE PCETR TO DESTROY.
- 3. IN ADDITION, THE COMPMW WILL SEEK 70 RESTRUCTUPI SOFI OF ITS DEBT IN A PIAN JOIhTLY DEVELOPED WITH VIERILL LYNCH MC DRE72L BURNHAM IAMBERT. THE PIAN INCLUDES A VOLUNTARY EXCHANGE OF NEW SECURITIES FOR CERTAIN OUTSTANDING DEBT SECURITIES.
IF THERE'S NU DOUBT AS TO kHAT THIS PROPOSED EXCl%NGE IS, LET PI j
) PAFI IT CLEAR: IT'S AN ATTD?PT 70 OBTAIN THE BENEFITS OF BANKRUPTCY WITHOUT AC7UALLY FILING CHAPTER 11 RO PDALIZING OUR CUS7DPIRS IN THE PROCESS. REPIMBER, THOUGH: THE ACCEPTANCE OF OUR PROPOSAL BY OUR )
CREDITORS PAY BE DEPDCDU UPON PROMPT PATE FILIEF.
W ET'S THE ALTERNATIVE TO OUR PLAN? UNFORTUNATELY, Ir NO ACTION IS TAKEN ON THIS SET OF REQUESTS, STEADY DuuIOPATION IN THE COMPNU'S ABILITY 'IO FUNCTION WILL LEAD QUICKLY NO INEVITABLY TO A BANKRUPTCY TILING. SERVICES kHICH CUS70PIRS AND THE STATE OT hT4 HAMPSHIRE NOW TAKE FOR GRANTED 1%Y BEGIN TO BE PFASED DCHN WELL BEFOPI
- THAT DATE.
BECAUSE WE ENOR THE PUBLIC UTILITIES COMISSION MUST 1mVE TIPI TO f CONSIDER OUR FIQUEST, WE imVE ALREADY BEGUN 70 TAKE STEPS TO AVOID ]
l RUNNING OUT OF CASH. FOR EXAMPLE, WE 1mVE CURTAILED OUR CURPINT j CONSTRUCTION PROJECTS AND IhTDC 70 CONTINUE ONLY WITH THOSE PROJECTS j kHICH API ABSOLUTELY NECESSARY TO PROVIDE SERVICE 'IO CUS70PIRS OVER THE NEXT FEW MOhTHS.
THERE WILL BE 10 TURTHER WORK ON CONSTRUCTION NECESSARY TO PREPAPI TOR NEEDS BEYOND TFAT TIFI. ALL CONSTRUCTION IS BEING DEFERRED KYEPI DETERPAL WILL NOT PRESDiT UNACCEPTABLE RISKS 'IO SERVICE CONTINUITY.
PPISDU COMITPINTS WILL BE SCFIDULED RC COMPLETED. N W ADDITIO!AL I COMMITMDUS ARRANGED BY SEPTEMBER 1 WILL BE SCHEDULED WITH CONSTRUCTION PROCEEDING AS CASH IS AVAIIABLE. UNLESS THE PPISDC ,
CIRCUMSTR4CES CHANGE,10 COMMITMDCS CAN BE PADE FOR REQUESTS FOR hT4 SERVICE PICEIVED AFTER SEPTEMBER 1. LET VI REPTAT THAT. THE COPJR U CAN PAKE NO COMMITPINTS THAT IT WILL BE ABLE 'IO COMPLETE CONSTRUCTION WHICH WILL ATTECT CUS70PIR SERVICE, UNLESS OUR PPISDU CIRCUPITM4CES ARE CORRECTED BY SEPTDGER 1.
SECO!D, WE MUST DRASTICALLY REDUCE OUR FAINTD%NCE EXPDiSES. ALL PAINTD&NCE PROJECTS ARE BEING DEFERPID EXCEPT WHERE DEFERFAL WILL PTISDJT UECCEPTABLE RISKS 70 SERVICE CO!UINUITY. UNLESS THIS SITUATION IS CORRECTED QUICYJY, THE LEVEL OF SERVICE CUS70 PIPS HAVE COPZ 70 DEPDC UPON WILL DETERIORATE.
THIRD, OUR PAYROLL EXPENSE IS BEING PIDUCED. IN ORDER 70 DO SO, WE HAVE INITIATED AN EARLY RETIREMDU INCDCTIVE PROGRAM RO WILL LEAVE
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'g I UNTILLED MOST OF THE POSITIONS VACATED AS A RESULT. WE HAVE C TERMIt&TED MA!U CONTRACT, TD1PORARY, AND SUMPIR PERSONNEL AND KT HAVE F'
ALSO DEFEHRED ALL ADMINISTRATIVE PROGRAMS AND PROJECTS WHICH ARE NOT DIRECTLY AND IMPIDIATELY NECESSARY 70 FURNISH OR SUPPORT CUS7OMER SERVICE. ..
WE MUST, THOUGH, AS MUST THE STATE AND THE PEOPLE OF THE STATE,.
TACE THE REALITY THAT TILING BANKRUPTCY MAY BE NECESSARY. IT THE REGULA70RY AND JUDICIAL PROCESS DOES NOT RESPOND QUICKLY ENOUGH 70 OUR REQUEST, THE COMPRW WILL HAVE NO CHOICE BUT M SEEK PROTECTION TROM
~ ITS CREDI7 ORS. FOR THAT REASON, kT HAVE BEGUN THE PROCESS OF. .
- DETERMINING WHAT THE BEST STRATEGY WOULD BE FOR THE COMPANY AND ITS.
CUSTOMERS, SHOULD SUCH A FILING BE NECESSARY. IT'S NO SECRET THAT OTHERS HAVE IDOKED AT THE SITUATION AS kTLL. THE STATE OT hT4 HAMPSHIRE, FOR EXAMPLE, COMMISSIONED A REFORT SEVERAL YEARS AGO BY A
- LEADING IAM TIRM IN MANCHESTER. THIS REPORT WARNED THAT, AND I QUOTE,
" BANKRUPTCY WILL PROBABLY NOT BE A PANACEA". THAT IS A CONCLUSION kHICH MOST SUCH SWDIES HAVE REACHED. FOR EXAMPLE, SEVERAL YEARS AGO,.
L EXPERTS AT THE CONGRESSIONAL RESEARCH SERVICE UNDER700K A SWDY OT UTILITY BANKRUPTCY AND CONCLUDED TFAT THE COSTS M THE' CONSUMER ROSE, 4
AND ROSE SHARPLY, IN EVERY HYPOTHETICAL CASE THEY CONSTRUCTED. IT
- SHOULD BE CLEAR kTY THAT'S THE CASE. AS THE SWDY DONE FOR THE STATE OF hT4 HAMPSHIE POIhTED OUT, "THE PURPOSE OF A BANKRUPTCY PROCEEDING HAS BEEN TO REHABILITATE THE DEB 7OR IN A WAY WHICH PROVIDES THE FAXIMUM REWRN TO ITS CREDITORS". IN OTHER WORDS, IN BANKRUPTCY THE INTERESTS OF THE CUS10MERS ARE A " DISTANT SECOND". DEAN VILES OF THE TFANKLIN PIERCE LAW CDITER RECDVTLY VERIFIED THIS kHD4 HE REPORTEDLY SAID, "WE CAN'T 1DOK AT THIS AS A BANKRUPTCY PROBLDi. THIS IS A PEOBLEM FOR THE STATE CF hT4 HAMPSHIRE."
FURTHER, THE STUDY DONE FOR THE STATE ALSO NOTES THAT THE -
BANKRUPTCY CODE PROVIDES FOR THE SALE OF PROPERTY BY THE BANKRUPT COMPANY. CANDIDLY SPEAKING, NWOhT ECOGNIZING THAT THE COMPMW HAS ABOUT 150 FIGAWATIS OF PRODUCTION CAPACITY OUTSIDE THE STATE OT hT4
- HAMPSHIRE, CAPACITY THAT PRODUCES SOFI OF THE COPJM W'E CHEAPEST POWTR, WOULD HAVE TO CONCLUDE THAT ONE ALTERNATIVE WOULD BE 70 SELL THIS LOW-COST CAPACITY AND EPAY AS MUCH OF THE DEBT AS POSSIBLE. OT
- COURSE, THAT WOULD EXACERBATE THE EXISTING PORER DEFICIT IN hT4 HAMPSHIPI. WE ALREADY AE SHORT OF CAPACITY BY 150 FIGAWATIS. IT THE BANKRUPT COMPMN SOLD OTF TPAT 150 FIGAWATIS Or CHEAP CAPACITY, kHICH MIEC WELL HAPPD4, PSNH CUS70rIRS WOULD BE 300 FIGAWATIS SHORT OF CAPACITY. WE WOULD BE SCFRELING TO PROVIDE CAPACITY TOR OUR CUSTOPIRS AT A TIFI kHD4 NEW DJGLAND IS FAPIDLY GROWING AND DEMA! DING MORE ELECTRICITY. BUT THOSE kTO ADVOCATE BANKRUPTCY GLOSS OVER THIS TYPE OF POTD4TIAL RESULT - THEY FORGET THAT THE PUF. POSE OF BANKRUPTCY IS NOT 70 HELP THE CUS70PIR. IT'S 70 SATISTY THE PEOPLE kHO HAVE LENT THE b EY.
FINALLY, BECAUSE WE ARE ALREADY SO SHORT OF CAPACITY IN hT4
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D4GIAND,' I AM ANNOUNCING TODAY THAT THE COMPANY ALONG WITH OTHER hT4 D4 GLAND UTILITIES HAS BEGUN 70 CONTACT A NUMBER OF ITS BUSINESS CUS7OMERS TO OTTER INCENTIVES FOR THEM 70 LIMIT USE OF THEIR ELECTRICITY AT CERTAIN PEAK HOURS UNTIL THE END OF SEPTEMBER. WE ARE DOING EVERYTHING WE CAN, WITHIN THE BOUNDS OF THE IAW AND REASON, 70 HANDLE THIS POKER DEFICIT SITUATION MO FIET CUSICI*IR hTEDS.
HOWEVER, IT SELT-SERVING POLITICIANS SABOTAGE THIS EFTORT BY
> : e , " ' Hi , .,
iTRYING 70 IGORE.THE SITUATION, 'OR IT CERTAIN SPECIAL'I!CEREST GROUPS BELIEVE THAT THEY CAi4 SOMEHOW OBLITERATE SEABROOK BY EXACERBATING THE -
N ,' COMPANY'S TINANCIAL PR BO LEMS, AS THEY DELIBERATELY HAVE IN THE PAST, fU THEY ARE OPERATING ON ERRONEOUS NO UNJJST PREMISES. OUR REQUEST IS 70 HAVE A FAIR SOLUTION OF PSNH'S PROBLEMS SO THAT THE COMPANY CAN
' CONTINUE TO SERVE ND4 HAMPSHIRE. THE TIME HAS COPE FOR SUBSTM UIVE ACTION 70 REPLACE HIGHLY POLITICIZED RHEIORIC.
THE TIPI HAS COME FOR THE CITIZD4S OF THE STATE TO DECIDE. DO YOU WA!U 70 TRUST THE PEOPLE OF PUBLIC SERVICE Or NEW HAMPSHIRE, .YOUR NEIGHBORS AND TRIDCDS, THE PEOPLE YOU KNOW, THE PEOPLE hHO HAVE BED 4 BRINGING YOU DEPENDABLE, RELIABLE SERVICE FOR THE LAST 60 YEARS? OR DO YOU WANT 70 TOLLOW CERTAIN POLITICIANS kHO HAVE THEIR OWN AGDCDA RO HIGHER POLITICAL ASPIRATIONS, POLITICIANS WHO BROUGHT US INIO THIS SITUATION AND WHO OFFER NO REAL WAY 70 GET OUT. hT THINK WE KNOW THE ANShTR; OPINION SURVEYS TELL US THAT 80% Or OUR CUSIOPERS VIEW PShH TAVORABLY. AND THE PERCDUAGE VIEWING PShH VERY TAVORABLY HAS JUPJED BY. OVER 50% IN THE LAST 18 MONTHS...A CLEAR RESPONSE 10 THE VARIETY OT-NEW PROGRAMS hT HAVE BED 4 INTRODUCING.
l TRANKLY, I WOULD NOT BE SURPRISED IF THESE PEOPLE hTO RATE PShH SO HIGHLY HAVE PAD ENOUGH'OF THOSE POLITICIANS:
- MASSACHUSETTS POLITICIANS IN WASHINGTON kHO RIDICULE AND INSULT THE QUALITY OT SEASROOK WORKERS AND THEN SECRETLY l
7WIST OUR ARMS TO PUT THEIR POLITICAL CRONIES ON THE SEABROOK PAYROLL. HERE'S ONE EXAMPLE - A LETTER TROM CONGRESSMAN ED FARKEY.
- PRESIDDUIAL CM;DIDATES kHO HIDE BEHIND kHAT THEIR HARVARD GRADUATE STUDENT ADVISERS ADMIT IS. . .I' QUOTE. . . "AN .
" ILLEGITIMATE USE OF THE TLAW IN THE TEDERAL PROCESS hTICH 1
PUTS 7HE OTHERWISE hTLL-IhTDUIONED UTILITY AT THE MERCY OT OPPORTUNISTIC STATE AND LOCAL GOVEP& INT." l
- POLITICIANS IN WASHINGION WHO CRITICIZE SEABROOK COSTS -- l kHILE GIVING LIP SERVICE 70 THE TEDERAL DEFICIT, kHICH OLTR THE LAST 3 YEARS WOULD HAVE BUILT 125 SEABROOKS.
j
- POLITICIANS kHO TIPORTEDLY DON'T KNW THE DIFTERD4CE BEIkTD4 A RILOWATT A!O A KIIDMETER, BUT TEEL FREE 70 FAKE SO-CALLED i LEARhTD COMMDUS ABOUT NUCLEAR TECH!CLOGY.
- POLITICIANS kHO PASS IAWS kHICH INCREASE OUR BORROWING COSTS, THD4 COMPIAIN ABOUT THE PRICE hT PAY FOR LOANS.
POLITICIANS WHO ARE SO USED 10 TINANCING THE TEDLTdL DEFICIT l BY RUNNING THE PRIhTING PRESSES 7 EAT THEY ASSUME THAT WE CAN BORROW TOREVER WITHOUT THE NEED TO REPAY. ]
- POLITICIANS kHO CRITICIZE THE PACE OF SEABROOK CONSTRUC- l 1
' TION, EVD4 THOUGH IT WAS THE THIRD-MOST QUICKLY COPSLETED Of 27 CURRDU NUCLEAR PIANTS.
IN SHORT, WE ARE FED UP. TED UP AT HAVING MET OUR COMMITnDU, YET BEING TORCED UO THE BRINK OF BANKRUPTCY. FED UP AT HAVING 70 VIET THE j
ENTRGY NEEDS OT ONE OF THE TASTEST-GRWING STATES IN THE COUNTRY l
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l . WITHOUT THE PROPER RESOURCES. FED UP AT DELAYS THAT ARE DEY :
POLITICAL PLOYS. TED UP AT WORKING HARD FOR 10 YEARS 70 PROVIDE A L
hTEDED SERVICE, ONLY 70 BE FORCED 70 WAIT. N O YES, FED UP AT HAVING l DONE A PRUDD4T JOB. . .BUT NOT BEING ALLCETD 70 CHARGE FOR IT. ALL OF THAT, AND THE PEOPLE kHO I BELIEVE HAVE BED 4 SERVED SO RESPONSIBLY BY l PSNH ARE NOW FORCED TO PAY A " TAX" - THE DUYAKIS TAX - PLUS FACE THE PROSPECT OF DETERIORATING SERVICE. NOW IS THE MOMD4T OF TRUIM.
RESPONSIBLE LEADERS CAN TAKE RESPONSIBLE ACTION, . AND ASSURE THAT kT PROCEED - NJD SUCCEED.
'I AM CONFIDDJT 7 HAT THE CUS70MERS AND PSNH WILL SUCCEED, BECAUSE kT VALUE THE QUALITY OF L7FE DEPDCABLE ELECTRIC POWIR HELPS PROVIDE
- TO ND4 HAMPSHIPI; BECAUSE kT KNOW WHAT'S RIGHT, AND kT HAVE I TRADITIONALLY TRIED 70 CHOOSE THAT PATH; AND BECAUSE KT M40W " LIVE l FREE OR DIE" DOESN'T FIAN "SOMETHING TOR NOTHING". . . BUT IT DOES FIAN
- kT WILL YAKE OUR CHOICES WITHOUT ASSISTANCE TROM THE MASSACHUSETTS STATE HOUSE.
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.; ATTACHMENT C
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SECURITIES AND EXCH ANGE COh1 MISSION WASHINGTON, D. C. 20549 l
FORM 10-Q ;
L/] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quanerly Period Ended June 30,1989 I ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCH ANGE ACT OF 1934 for the Transition Period From To Comrmssion File Number 1-6392 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE (Exact name of registrant as speci5ed in its chaner) 02 0181050 NEW HAMPSHIRE (1.R.S. Employe:
(State or Other Jurisdiction of Incorporation or Organization) Identi5 cation No )
1000 ELM STREET, MANCHESTER NEW H AMPSHIRE 03105 (Zip Code)
- (Address of principal executive oses)
I Registrant's telephone number, including area code (603) 669-4000 1
l l Indicate by check mark whether the registrant (1) has filed all reports required to be file d by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shoner period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes f No...
Indicate the number of shares outstanding of each of the issuer's classes of Common Stuk, as of the latest practicable date.
A Common Stock, $5 Par Value.42.138,072 shares outstanding at August 8.1989 t
- 5. .
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS i t
i The condensed financial statements as of June 30,1989 and for the three and six months ended June j 30,1989 and 1988 are unaudited and,in the opinion of management, include all adjustments (consisting .l only ofnormal recurring accruals) necessary for a fair presentation ofresults ofoperations for the period.
The condensed financial statements have been redewed by the Company's independent auditors whose report thereon appears on Page 21.
1 Capital Requirements and Liquidity j On January 28,1988,the Company filed a voluntary petition for protection under Chapter 11 of the 1 i' United States Bankruptcy Code. The Company is now operating its business as a debtor.in-possession. i See Notes 1 and 2 of the Notes to Condensed Financial Statements for a discussion of the Company's bankruptcy case, reorganization plans and other items related to capital requirements and liquidity.
F Cash Flow Concernr Dunng the Chapter 11 case to date, the Company has ceased paying interest h on all ofits unsecured indebtedness and on its Third Mongage Bonds and indebtedness secured by those Bonds, but is paying interest on its First Mongage Bonds and its General and Refunding Mongage Bonds and indebtedness secured by such Bonds. See Note 4 of Notes to Condensed Financial Statements. By not paying such interest, or any principal on any of its outstanding indebtedness, the Company has y generated sufficient funds intemally to satisfy its cash requirements. Assuming continued non payment of such debt service, continued moderate growth (about 4% annually) in the Company's level of sales, the continuance of the Company's present rate structure, and that there are no material additions to the Company's projected operating and capital expenditures, the Company estimates that it can satisfy its 1 cash requirements through the end of 1991 without additional extemal financing even if Seabrook does not become operational until as late as January 1991 and is not reDected in rates during the period.
Nevenheless, the Company could encounter cash Gow problems during the Chapter 11 case. The Company's construction expenditures for 1989-1993 are estimated at approximately $465 million, but '
could be signi5cantly increased if the Company is required by environmentallaws to make additional
- expenditur
- s, particularly in response to legislation reg arding acid rain. Although the B ankruptcy Coun I had denied an earliermotion of the holdets of the Company's Third Mongage Bonds seeking to receive I
interest payments during the pendency of the Chapter 11 case, the Third Mongage Bondholders have filed an additional motion seeking such payments, a hearing on which is scheduled for October 5,1989.
Any such additional expenditures would be difficult to accommodate without eventually affecting the /
i quality of utility service provided by the Company. The financial constraints under which the Company has been operating for the last several years have reduced operating budgets and restrained capital l expenditures to the point that, should any substantial additional cash Dow savings be required in the future, the Company might be requ'. red to cease paying interest on First Mongage Bonds and Ger'eral d
and Refunding Mongage Bonds and such circumstances could erode suppon by the Company's secured (
creditors for continued funding of Seabrook's pre-operational expenditures.
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.G;PIul'Bo11verk,III,.Chrmn. . ' $ Thomas M.. Roberts, John Traficonte, Esquire
/tomic . Safety and Licensing Commissioner Assistant Attorney General
! Board US NRC Onei Ashbu'rton r Place US'NRC' Washington, DC 20555. 19th'F1Sor
.~W shington, DC .20555 Boston, MA 02108
3 cp i-1 Robert R. Pierce, Esq. fJames R. Curtiss, CE[dthrCordo'nJ.Humphrey-S ~s l Atomic Safety.and Licensing Commissioner U.S. Senate Board US NRC Washington, DC 20510 e .US NRC .
Washington, DC 20555 (Attn. Gordon Mcdonald)
, Washington, DC' 20555-Thomas.S. Moore ,
Peter B. Bloch, Chairman Judith H. Mizner, Esquire US NRC Atomic Safety and 70 State Street Washington, DC 20555 Licensing Board Newburyport, MA 0.1950 US NRC.
Washington, DC 20555 Alan S. Rosenthal, Atomic Safety & Licensing Suzanne Breiseth.
US NRC ,
Board Panel Office of Selectmen 1 Washington, DC 20555 US NRC Hampton Falls, NH 03844 Washington, DC 20555 .
Howard A. Wilber N Docketing and Service Phillip Ahrens, Esquire US'NRC US NRC Assistant Attorney General Warhington, DC 20555 Washington, DC 20555 State House Station #6 Augusta, ME 04333
.NKenneth C. Rogers, Atomic Safety & Licensing / Thomas G. Dignan, Esquire
. Commissioner Appeal Board Panel Jeffrey P. Trout, Esquire
.US.NRC US NRC Ropes & Gray
. Washington, DC 20555 Washington, DC 20555 One International Place Boston, MA 02110-2624 NKenneth M. Carr, SAPL Diane Curran, Esquire Commissioner 5 Market Street Harmon, Curran & Tousley US NRC Portsmouth, NH 03801 1001 "S" Street, N.W.
Washington, DC 20555 Suite 430 Washington, DC 20009
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o' JNi
,Edwin J. Rais, Esquire Office of General Counsel US NRC h hington, DC 20555 q 9
Mr. Angie Machiros, Chrmn.
Town of Newbury Town Hall 25 High Street tiewbury, MA 01951
- Geoffrey M. Huntington, Esq.
Office of Attorney General State House Concord, NH 03301 Richard A.!Hampe, Esquire Hampe and McNicholas l
-35 Pleasant Street Concord, NH 03301 ,
Paul McEachern, Esquire Shaines & McEachern P.O. Box 360 Maplewood Avenue Portsmouth, NH 03801 Sandra Gavutis RFD 1, Box 1154 East Keningston, NH 03827
)
Charles P. Graham, Esquire l Murphy & Graham 33 Low Street Newburyport, MA 01950
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