ML20247F431

on Appeal from Decision of Board (LBP-89-19),dtd 890308.* Decision Should Be Affirmed on Basis That Uncertainty of Future Ownership of Applicant Share Does Nothing to Establish Necessary Prima Facie Case.W/Certificate of Svc

ML20247F431
Person / Time
Site:	Seabrook
Issue date:	05/19/1989
From:	Dignan T PUBLIC SERVICE CO. OF NEW HAMPSHIRE, ROPES & GRAY
To:	NRC ATOMIC SAFETY & LICENSING APPEAL PANEL (ASLAP)
References
CON-#289-8667 LBP-89-19, OL, NUDOCS 8905300081
Download: ML20247F431 (18)

Text

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j a 1 98 UNITED STATES OF AMERICA .

NUCLEAR REGULATORY COMMISSION M-before the ATOMIC SAFETY AND LICENSING APPEAL BOARD

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In the Matter of )

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PUBLIC SERVICE COMPANY ) Docket Nos. 50-443-OL i OF NEW HAMPSHIRE, et al. ) 50-444-OL

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(Seabrook Station, Units 1 ) (Offsite Emergency and 2) ) Planning Issues)

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ON APPEAL FROM A DECISION OF THE ATOMIC SAFETY AND LIC2NSING BOARD (LBP-89-19 ) DATED MARCH 8. 1989 APPLICANTS' BRIEP Thomas G. Dignan, Jr.

George H. Lewald Kathryn A. Selleck Jeffrey P. Trout Jay Bradford Smith Geoffrey C. Cook William Parker Ropes & Gray ll One International Place Boston, MA 02110-2624 (617) 951-7000 counsel for Applicants h

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8905300081 890519 PDR ADOCK 05000443 G PDR 1se

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TABLE OF CONTENTS TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . 11 STATEMENT OF PRIOR PROCEEDINGS AND FACTS . . . . . . . . 1 ARGUMENT . . .. . . . . . . . . . . . . . . . . . . . . . . 7 I. The Uncertainty as to the Future Ownership of

.the PSNH Share Does Nothing to Establish the Necessary Prima Facie Case. . . . . . . . . . 7 II. MAG's Argument Concerning Recovery of Costs as Well as Expenses.is Based Upon a Misreading of the Commissions Language and a Misunderstanding of What Costs will be Involved if a New Entity Takes Over the PSNH Seabrook Share. . . . . . . . . . . . . . . . 8 III. The Combination of Factors Which MAG Relies Upon Does not Provide His Prima Facie Case. . 10 IV. SAPL's Burden of Proof Argument is Totally Misplaced. . . . . . . . . . . . . . . . . . . 11 V. SAPL's Lower Power Level Argument is Without Merit. . . . . . . . . . . . . . . . . . . . . 11 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . 12

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TABLE OF AUTHORITIES

- Cases Pub 1'ic' Service Comoany of New Hampshire (Seabrook Station, Units 1 and 2), CLI-88-10, 28 NRC 573 (1988) . . . . . . . . . . . . . . . . . . . 3, 10, 12 Public Service Comoany of New Hamoshire-(Seabrook Station,. Units 1 and 2), ALAB-895, 28 NRC 7 (1988) . 10 Public Service Comoany of New Hamoshire (Seabrook Station, Units 1 and 2),'LBP-89-10, 29 NRC (March'8, 1989) . . . . . . . . . . . . . . . . . . 2-5 Regulations 10 CFR.5 2.732 . . . . . . .- . . . . . . . . . . . .. . . . 11 10 CFR S 2.758.. . . . . . . . . . . . . . . . . . . . . . 11

- 10 CFR S 50.80 . . . . . . . . . . . . . . . . . . .. . . 8 49 Fed. Reg. 35747'(Sept. 12, 1984) . . . . . . . . . . 8, 9 i

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L-May 19, 1989 UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION before the ATOMIC SAFETY AND LICENSING APPEAL BOARD

)

In the Matter of )

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PUBLIC SERVICE COMPANY ) Docket Nos. 50-443-OL OF NEW HAMPSHIRE, gt al. ) 50-444-OL

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(Seabrook Station, Units 1 ) (Offsite Emergency and 2) ) Planning Issues)

)

ON APPEAL FROH A DECISION OF THE ATOHIC SAFETY AND LICENSING BOARD (LBP-89-19) DATED HARCH 8, 1989 APPLICANTS' BRIEF STATEMENT OF PRIOR PROCEEDINGS AND FACTS Under date of January 25, 1989, Seacoast Anti-Pollution League (SAPL) filed a document styled: " Motion to Accept Late-Filed Contention on Financial Qualification in Response to NRC Order CLI-88-10" (" Motion"). The ultimate aim of the motion was to have the record reopened to litigate the following contention:

"The Seabrook Applicants have not demonstrated that they can provide reasonable assurance that they either have or can obtain the necessary funds to l

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safely operate the Seabrook plant, contrary to the requirements of 5182(a) of the Atomic Energy Act and 10 CFR 550.33(f)(2), and 5 50. 57 (a) (4) . "

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 k 'ver 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 these filings by the Applicants 1 and the Staff,2 the Lice 1: sing Board issued a memorandum and order addressed to both pleadings. Public Service Company of New Hamoshire (Seabrook Station, Units 1 and 2), LBP-89-10, 29 1 Acolicants' Response to Seacoast Anti-Pollution Leacue's Motion to Accept Late Filed Contention on Financial Qualification in Response to NRC Order CLI-88-10 (Feb 7, 1989); Applicants' Response to massachusetts Attorney General's Petition for a Waiver of or an Exception to the Financial Qualification Rules for Full Power Ooeration (Feb.

13, 1989).

2 NRC Staff Resoonse to SAPL's Motion to Accept Late Filed Contention on Financial Qualification in Response to NRC Order CLI-88-10 (Feb. 10, 1989);

NRC Staff Resoonse to Massachusetts Attorney i General's Petition for a Waiver of or an Exception to the Financial Qualification Rules for Full Power l Operation (Feb. 21, 1989).

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NRC (March 8, 1989) (hereafter referred to as "LBP-89-10" and cited to the Slip Opinion).

In LBP-89-10, the Licensing Board began by denying SAPL's motion on the obvious ground that it attempted to raise a late-filed contention which is precluded from litigation by the Commission's regulations. LBP-89-10 at 3-

5. The Licensing Board then went on to address MAG's petition. The Licensing Board began by describing the procedural standards which govern waiver petitions, LBP-89-10 at 5-9, summarizing the requirements as follows:

" . . . the party requesting a waiver of or exception to a Commission regulation must establish a prima facie showing (1) that 'special circumstances' exist which (2) ' undercut the rationale' of the rule sought to be waived and (3) a waiver is needed 'to address a significant safety problem on the merits.' See CLI-88-10, supra, slip op. at 27-28."3 Next the Licensing Board pointed out that only two of the ]

l allegations made by MAG in his petition were factual in nature, viz., the fact that the lead owner, Public Service Company of New Hampshire (PSNH) was in reorganization, and the fact that another owner, Massachusetts Municipal l

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3 LBP-89-10 at 7. The citation in the quote is to Public Service Company of New Hamoshire (Seabrook Station, Units 1 and 2), CLI-88-10, 28 NRC 573, 597 (1988).

Wholesale Electric Company (MMWEC) was in default,4 the remainder of the allegations being conjecture as to future events. LBP-89-10 at 7-9. Then, after reviewing the history of the financial qualifications rule, LBP-89-10 at 9-11, the Licensing Board went on to hold that MAG had not made the required prima facie showing, LBP-89-10 at 11-14. 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. LBP-89-10 at 11-12. Furthermore, there had been no showing that prevented the Licensing Board from applying the presumption that such costs would be allowed in rate making after a full power license issued. LBP-89-10 at 12-

13. Finally, and as 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 had been succinctly rebutted by the following points made in an affidavit by the President of The New 4

A problem which no longer has immediacy.

Applicants' Advice to Commission, Attach A., passim (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.

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c' Ham' p shire Yankee Division of PSNH (NHY):5 there will be resident inspectors on site who will not tolerate shortcuts; modern-license conditions are too constraining and too

' difficult to change 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, makes the decisions on safety related L issues and plant shut down. LBP-89-10 at 13-14. On the foregoing basis, the Licensing Board denied certification of MAG's petition to the Commission.

Both MAG and SAPL filed notices of appeal from the Licensing Board's decision. In its brief on appeal, SAPL has acknowledged its procedural misstep, apparently concedes that its appeal is without merit in light of its procedural misstep and seeks only to have its brief considered in support ~of MAG's appeal, either as a party brief in support or as an amicus curiae brief. SAPL Br. at 7.

The arguments being made by MAG are not models of clarity, but as best we understand his position on this appeal it is as follows: The underlying basis of MAG's entire argument is encapsulated in footnote 3 on page 2 of his brief, wherein he states:

"CLI-88-10 is the ' law of the case' for the proposition that the bankruptcy of 5 Affidavit of Edward A. Brown (February 13, 1989).

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3 PSNH is a 'special circumstance' for purpose of the waiver. Id. at 29 [28 NRC at 597-98). Moreover, the Commission decided that safety shortcuts at full power present a 'significant. safety problem.' Id. at 32-33 [28 NRC at 600).

Therefore, the only question for the L

Board is whether the special circumstances of PSNH's bankruptcy and the fate of the Seabrook share ' undercut the rationale for the rule.'"

On the foregoing premise MAG then purports to set out two reasons why the rationale of the rule is undercut. The first reason is that since there is uncertainty as to where PSNH's ownership will eventually wind up after reorganization, there can be no assurance that the rate making vehicle will be available to provide the necessary funds. MAG Hr. at 4. The second reason is that under MAG's reading of the rationale for the rule, the costs of construction have to be recoverable as well as the expenses of operation, thus overall financial stability is the standard, and there is no assurance that the new owner will be financially stable. MAG Br. at 4-6. Finally, in what may or may not be a third and separate argument, MAG states that the combination of (1) the PSNH bankruptcy, (2) the resultant incentives to cut costs or exceed prudent levels of operation, (3) the uncertainty of who or what will own the PSNH share, and (4) the question of how rates will be set and at what levels all together serve to make a showing that the rationale for the rule has been undercut. MAG Br. at 6.

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1 SAPL makes'the same arguments as MAG, and, in addition, apparently makes two additional points. The first is an argument that because Applicants "must bear the burden of establishing their financial qualifications," the Licensing Board's decision represents an improper shifting of the burden of proof. SAPL Hr. at 10. In addition, SAPL argues that a problem could be created if the plant operates above

, 5% power level but at less than a power level which constitutes commercial operation. SAPL Dr. at 12-13.

It is in the foregoing posture that this matter comes before this Appeal Board.

ARGUMENT I. The Uncertainty as to tho Future Ownership of the INH Share Does Nothing to Establish the Necessary Prima Facie Case.

It is true that one can say that there is uncertainty as to who or what will be the equity owner of the share of Seabrook now owned by PSNH after the PSNH reorganization proceeding is completed. However, this adds nothing to the MAG case. What both MAG and SAPL ignore in their treatment of the " uncertainty" concept is the fact that an NRC operating license is not something that merely passes with the sale of an asset. When, as and if the ownership share of PSNH is acquired by another entity, that entity will have l

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to seek a transfer of the license under 10 CFR 5 50.80. In g

- the event that the transferee is a nonutility, there will have to be a showing on financial qualifications;"if the transferee is a utility there will not have to be any such showing. Thus, uncertainty as to future ownership is a "no-nevermind" as far as this petition is concerned.

II. MAG's Argument Concerning Recovery of Costs as Well as Expenses is Based Upon a Misreading ofothe Commissions Language and a Misunderstanding of What Costs will be Involved if a New Entity Takes Over the PSNH Seabrook Share.

In his brief, MAG quotes the following language from the Statement of Considerations which accompanied the promulgation of the current Financial Qualifications rule:

" case-by-case review of financial qualifications for all electric utilities at the operating license stage is unnecessary due to the ability of such utilities to recover, to a sufficient degree, all or a portion of the costs of construction and sufficient costs of safe operation through the rate making process."6 MAG pounces upon the words set forth with emphasis and argues

- that this language is to be read as a Commission statement that not only must there be assurance that the costs of safe 6

Elimination of review of Financial Qualifications of Electric Utilities in Operating License Review l and Hearings for Nuclear Power Plants, 49 Fed. Reg. 35747, 35748 (Sept. 12, 1984). (Emphasis added.)

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J operation will be recovered, but also costs of construction and that therefore that what the rule hssumes is that the I rate making process will produce what MAG calls "overall financial stability." MA2 Br. at 4-5. To begin with, MAG misreads the intent of the language. All the Commission was doing in the quoted language upon which MAG relies was des.ribing the rate making process and principles. It is true that rate making does generally provide for recovery of "all or a cortion of the costs of construction" (erphasis added), but this is not what the Commission was relying upon in passing the rule as is evident from the following where the Commission stated that its:

" concern is that reasonablg and prudent costs of safelv maintaining and operatina nuclear plants will be allowed to be recovered through rates. This concern does not extend to any level of profit or rate of return beyond those operatina expenses. The Commission's concern is with safe operation, not profits."7 It could not be clearer that construction costs, which contribute to rate base, and therefore the basis .for return or potential profit, played no part in the Commission's analysis which led to the passage of the current regulation.

Prescinding from all of the foregoing, MAG also has missed the fact that even if capitalized costs were required to be demonstrated to be recoverable, if the PSNH share is 7 49 Fed. Reg. at 35749.

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l acquired'by another entity, the only costs involved will be the price the new entity paid for the asset, not the full construction cost of Seabrook Unit No. 1. In short, there is no substance to MAC's second reason.

III. The Combination of Factors Which MAG Relies Upon Does not Provide His Prima Facie Case.

As noted earlier, MAG seems to argue that the combination of four factors in the picture operate together to undercut the rationale of the rule. 'rhese aret (1) the PSNH bankruptcy, (2) the allegedly resultant incentives to cut costs or exceed prudent levels of operation, (3) the uncertainty of who or what will own the PSNH share, and (4) the question of how rates will be set and at what levels.

MAG Er. at 6. the problem is that factors 2-4 are nothing more than derivatives of factor number 1, the bankruptcy of PSNH. And both this Appeal Board and the Commission have flatly held that the bankruptcy of PSNH alone does not make the prima facie case.8 l

8 I Public Service Comoany of New Hampshire (Seabrook {

Station, Units 1 and 2), ALAB-895, 28 NRC 7 (1988)

Eublic Service Comoany of New Hamoshire (Seabrook Station, Units 1 and 2), CLI-88-10, 28 NRC 573, 598 (1988).

IV. SAPL's Burden of Proof Argument is Totally. Misplaced.

SAPL seems to complain, as noted earlier, that there has been an improper shifting of the burden of proof. SAPL l

argues that the Applicants have the burden of demonstrating theirl financial qualifications, rather than'SAPL and MAG having to demonstrate a lack thereof. SAPL apparently continues to operate under the misapprehension that a rule waiver.has already been granted. Under the rule, the Applicants have.no burden of establishing financial

. qualifications.- No such inquiry is allowed. SAPL and MAG are trying to get an order certifying to the Commission that they have made a prima facie case for an exemption to the regulations under 10 CFR S 2.758. As such they are the

" proponent of an order" and have the burden of proof. 10 CFR 6 2.732. There has been no improper shifting of the burden of proof.

V. SAPL's Lower Power Level Argument is Without Merit.

SAPL argues that the prima facie case can be made by virtue of the fact that there exists the possibility that

-Se6 brook will operate at a level of more than 5% but less than what the rate maker may decide is " commercial operation," and therefore the rate making concept would not be available at assumed by the regulation. The problem with-I __ _ _ _ _ _ - -_ _ __ _ _

this argument is that if there is any attempt to license Seabrook Unit No. 1 to operate at a level of less than full power, the Commission can easily condition such authority iu a manner satisfactory to it as it did in the case of low power testing.9 CONCLUSION The decision of the Licensing Board should be affirmed.

1 Respectfully sGbmitted, om6s V Dignan, Jr.

George H. Lewald Kathryn A. Selleck Jeffrey P. Trout Jay Bradford Smith Geoffrey C. Cook William Parker Ropes & Gray One International Place Boston, MA 02110-2624 (617) 951-7000 Counsel for Applicants I

9 CLI-88-10, suora.

CERTIFICATE OF SERVICE I, Thomas G. Dignan, Jr., one of the attorneys for the Applicants herein, hereby certify that on May 19P 1989, I made service of the within dor.ument by mailing copies thereof, postage prepaid, to:

Alan S. Rosenthal, Chairman Howard A. Wilber Atomic Safety a.nd Licensing Atomic Safety and Licensing Appeal Panel Appeal Panel U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, DC 20555 Washington, DC 20555 Thomas S. Moore Mr. Richard R. Donovan Atomic Safety and Licensing Federal Emergency Management Appeal Panel Agency U.S. Nuclear Regulatory Federal Regional Center Commission 130 228th Street, S.W.

Washington, DC 20555 Bothell, Washington 98021-9796 Administrative Judge Ivan W. H. Joseph Flynn, Esquire Smith, Chairman Office of General Counsel Atomic Safety and Licensing Board Federal Emergency Management U.S. Nuclear Regulatory Agency Commission 500 C Street, S.W.

Washington, DC 20555 Washington, DC 20472 Administrative Judge Richard F. John P. Arnold, Esquire Cole Attorney General Atomic Safety snd Lic?nsing Board George Dana Bisbee, Esquire .

U.S. Nuclear Regulatory Assistant Attorney General Commission Office of the Attorney General Washington, DC 20555 25 Capitol Street Concord, NH 03301-6397 Administrative Judge Kenneth A. Judith H. Mizner, Esquire McCollom 79 State Street, 2nd Floor 1107 West Knapp Street Newburyport, MA 01950 Stillwater, OK 74075 Diane Curran, Esquire Robert R. Pierce, Esquire Andrea C. Ferster, Esquire Atomic Safety and Licensing Board Harmon, Curran & Tousley U.S. Nuclear Regulatory Suite 430 Commission 2001 S Street, N.W. Washington, DC 20555 Washington, DC 20009

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j. Adjudicatory File Sherwin E. Turk, Esquire L Atomic Safety and Licensing Office of the Executive Legal L Board Panel Docket (2 copies) Director U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, DC 20555 Washington, DC 20555 Atomic Safety and Licensing Robert A. Backus, Esquire Appeal Board Backus, Meyer & Solomon-u U.S. Nuclear Regulatory 116 Lowell Street E' Commission P.O. Box 516

[ Washington, DC 20555 Manchester, NH 03105 Philip Ahrens, Esquire Mr. J. P. Nadeau Assistant Attorney General ' Selectmen's Office Department of the Attorney 10 Central Road General Rye, NH 03870 Augusta, ME 04333 Paul McEachern, Esquire John Traficonte, Esquire Shaines & McEachern Assistant Attorney General 25 Maplewood Avenue Department of the Attorney P.O. Box 360 General Portsmouth, NH 03801 One Ashburton Place, 19th Flr.

Boston, MA 02108 Mrs. Sandra Gavutis Mr. Calvin A. Cannoy Chairman, Eoard of Selectmen City Manager RFD 1 - Box 1154 City Hall Kensington, NH 03827 126 Daniel Street Portsmouth, NH 03801 Senator Gordon J. Humphrey R. Scott Hill-Whilton, Esquire U.S. Senate Lagoulis, Hill-Whilton &

Washington, DC 20510 Rotondi (Attn: Tom Burack) 79 State Street Newburyport, MA 01950 Senator Gordon J. Humphrey Leonard Kopelman, Esquire One Eagle Square, Suite 507 Kopelman & Paige, P.C.

Concord, NH 03301 77 Franklin Street (Attn: Herb Boynton) Boston, MA 02110 Mr. Thomas F. Powers, III Mr. William S. Lord Town Manager Board of Selectmen Town of Exeter Town Hall - Friend Street 10 Front Street Amesbury, MA 01913 Exeter, NH 03833

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f-lr Ashod N. Amirian, Esquire Charles P. Graham,' Esquire l 145 South Main Street Murphy.and Graham 33 Low Street' P.O.. Box 38 Bradford, MA ..01835 Newburyport, MA 01950 Gary W.iHolmes, Esquire Richard A. Hampe, Esquire

' Holmes & Ells Hampe and McNicholas-47 Winnacunnet Road 35 Pleasant Street Hampton, NH 03842- Concord, NH-- 03301

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1 Thoinas G.71gnan, Jr.

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