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Calvert Cliffs row has BGE asking for more time

For more than four years, Baltimore Gas and Electric Co. and state regulators have been battling over who will pick up the half-billion-dollar tab left over from the 1989-1991 shutdowns of Calvert Cliffs nuclear power plant.

More than 20,000 pages of testimony and exhibits have poured into the Public Service Commission (PSC), which regulates utilities in Maryland. Millions of dollars have been spent preparing arguments. Roughly 60 days have been spent taking depositions, while a dozen days of hearings have been held through the years.

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Tomorrow, the two sides meet again. This time, a PSC hearing examiner is to decide just how much longer this case will last.

It is no small matter. The series of shutdowns cost BGE more than $450 million -- equivalent to $450 for each of BGE's 1 million customers -- to replace the power that Calvert Cliffs could not generate from May 1989 to May 1991. Ultimately, the PSC must decide who pays the bill -- the company or ratepayers, or a combination of both.

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Now it's BGE's turn to respond to two March studies -- conducted by the Office of the People's Counsel and the Public Service Commission -- criticizing its performance. It is expected to ask tomorrow for an additional seven months on top of the four months it was previously granted.

Its response will be in the form of a rebuttal against the two positions, which concluded that BGE should pay between $194 million and $450 million.

If the delay is granted, a decision by PSC hearing examiner O. Ray Bourland III would be moved back from late next year to mid-1996.

But the Office of the People's Counsel, which represents ratepayers before the PSC, is crying foul. It says the utility should have been able to anticipate the thrust of the People's Counsel study from the 300,000 documents that it requested from the company. That study, which took four years to complete, cost about $700,000 and was paid for by taxpayers.

"That lack of anticipation is a lot of bunk," said Christopher R. Cook, assistant people's counsel. "Were they asleep when all those pages were going through their offices?"

That argument does not sit well with the utility. BGE spokesman Arthur J. Slusark said the utility company was specifically told by the People's Counsel not to anticipate its case.

"They take nearly four years, all we are talking about is 11 months," Mr. Slusark said. "Let's be reasonable."

The spirited, if protracted, case traces its origins to early May 1989. That is when BGE found leaks in the equipment that regulates water pressure in the Unit 2 reactor at Calvert Cliffs in Southern Maryland, leading to its shutdown. A few days later, Unit 1 was also shut down.

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With a series of mechanical and safety problems to overcome, the plant's two reactors were closed for between 1,370 to 1,396 unit-days over the next two years, depending on which side's counting. (A unit-day equals one reactor being out of operation for one day.)

Contributing to the length of the shutdown was the fact that four months before the leak was discovered, the Nuclear Regulatory Commission put the Calvert Cliffs plant on its national "watch list" of operations needing special attention.

That designation, which was not lifted until February 1992, helped contribute to the downtime because of the additional demands the NRCplaced on BGE.

During the shutdowns, BGE paid $458 million to $550 million to buy electricity that would have been produced at the nuclear power plant.

BGE has already collected $395 million of the extra expense from ratepayers in the form of higher electric fuel rates -- the portion of an electric bill that traditionally reflects fluctuations in fuel prices, according to the Office of the People's Counsel. The remaining $155 million has not been collected, waiting for the outcome of the PSC case.

The question, however, is not what happened, but why it happened -- and mostly, how much of the blame should be heaped on BGE. The answer to that question will decide whether BGE shareholders or BGE ratepayers foot the bill.

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Depending on the outcome, BGE will refund about $300 million to ratepayers -- probably through reduced rates -- or raise the fuel rate again to collect the additional money.

As might be expected, the three parties in the case -- BGE, the PSC staff and the Office of the People's Counsel -- have agreed on little.

Each hired consultants who have come to different conclusions about how much BGE should pay. There is even disagreement on how long the reactors were out of service. While BGE and the PSC staff said the outage lasted 1,370 days, the People's Counsel said it is was slightly longer at 1,396 days.

An earlier study, completed for BGE in 1991, found the company had acted reasonably during most of the outage and only 84.5 days of the shutdowns should be laid at BGE's feet.

Using replacement cost figures that the company had previously suggested, this would mean the utility is responsible for about $30 million of the shutdown cost, less than the $35 million it set aside in 1991 in anticipation of the expense.

Even so, BGE officially maintains that the full amount of power outage should be paid by its customers. "These were equipment problems," said Mr. Slusark, the BGE spokesman. "We don't agree with everything in the study."

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For example, concentrating on how BGE reacted to the problems that arose from 1989 through 1991, the study for BGE, conducted by a Connecticut consulting group, said most of the delays attributed to BGE were technical, such as failing to report a nitrogen leak or taking too long to formulate procedures to deal with possible problems at the plant.

The March study done for the PSC staff came to different conclusions, however. That study said portions of the shutdown stemmed from BGE's failure to heed earlier NRC directives and from ignoring problems.

"The fundamental problem was that BG&E; allowed known deficiencies and weaknesses to persist for too long without reasonable management responses and corrective actions," said the study, completed in March by Liberty Consulting Group, a Baltimore utility consulting group.

These deficiencies, according to the study, included lack of procedural compliance, poor communications with regulators, tolerance of long-standing equipment problems and inadequate and poorly managed engineering support.

Based on its analysis, Liberty said 516 days of the outage were BGE's fault and it should bear $194 million of the cost.

The study completed in March for the People's Counsel, the agency that represents ratepayers, goes even further. It said BGE could have significantly shortened the outage by taking earlier action. It also holds the utility company responsible for not suing Combustion Engineering Inc. for making the defective pressurizer that sparked the initial shutdown.

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The leakage, according to the People's Counsel report, was caused when Combustion Engineering reamed, or ground out, the interior of the pressurizer tubes.

If BGE had sued Combustion Engineering, it might have been able to collect as much as $100 million, according to Mr. Cook, the assistant people's counsel.

Instead, BGE decided not to sue because the problem occurred long past the warranty period and company officials did not believe Combustion Engineering was negligent, according to BGE testimony.

(Early last week, BGE did sue Sulzer Bingham Pumps Inc. and Bingham International of Portland, Ore., for $4 million, representing one week of replacement power costs in 1990. The lawsuit, filed in Baltimore County Circuit Court, claims the week-long shutdown stemmed from a defective reactor coolant pump seal.)

The People's Counsel report, conducted by an Illinois management consulting firm and submitted to the PSC on March 15, concluded that BGE was responsible for 1,127 days of the shutdowns, or about $450 million. That left about $100 million to be picked up by the ratepayers.

But whether customers will be forced to shoulder the bill remains anyone's guess. Despite four years already spent on the case and thousands of pages of testimony, the outcome is unclear.

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It will depend partly on how well the arguments of the People's Counsel and the PSC staff stand up to BGE's rebuttals and how the facts are interpreted by hearing examiner Bourland. The decision is then expected to go before the five-member Public Service Commission, which will hear the inevitable appeal.

The outcome could also be affected by who is appointed the next People's Counsel. That position has been vacant since mid-March when John M. Glynn, who had vigorously pursued the case since its beginning, was appointed a Baltimore District Court judge by the governor.

Looking elsewhere for guidance also provides little help. Each shutdown stemmed from differing causes, the practices and financial conditions of each company are unique and the opinions of each state's regulatory agencies vary.

Here at home, the history of the PSC in similar BGE cases also fails as a definitive guide. In 1983, the utility was allowed to pass along replacement power costs after a series of short outages were caused by the plant's emergency system unnecessarily shutting down the reactors.

But in a 14-day shutdown in 1985 -- caused by a rag being left in a cooling system -- BGE had to absorb half of the replacement power costs, or $4.2 million.

Perhaps more illuminating of the PSC's approach to such problems -- though to a much smaller degree -- was a case involving the coal-fired C. P. Crane Unit No. 2 plant near Chase. In that case, a PSC hearing examiner ruled that BGE management was responsible for a mechanical breakdown, and the company could not pass on $3.1 million of replacement power costs.

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But on appeal, the commission decided that ratepayers must shoulder 25 percent of the costs, or $771,250, because of "extenuating circumstances."

The decision, which is still in appeal, riled Mr. Glynn, the former People's Counsel. "If the commission can justify charging costs in this case, the law provides little protection to the public," he said. "There are always extenuating circumstances."


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