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Pennsylvania Utility Denied Return On Nuke Plant

April 25, 1985

HARRISBURG, Pa. (AP) _ The Pennsylvania Public Utility Commission on Thursday refused to permit Pennsylvania Power & Light Co. to earn a profit on its newly opened nuclear reactor.

In a 3-1 decision, the commission denied the utility’s request to earn a return on its investment in the Susquehanna Unit 2 reactor in its base rates, but said the company can charge customers for some plant-related costs.

The PUC said the $2 billion plant, which went on line in February, gave the company too much generating capacity for the needs of its 1 million customers.

Company officials said they were ″extremely disappointed.″

Jerry Caliendo, PP&L’s vice president and chief counsel for regulatory affairs, said the company request was conservative and reasonable.

The two nuclear reactors, located near Berwick, Pa., give PP&L ″an exceptionally strong capacity position and an efficient mix of fuel sources,″ he said. ″No one involved in the rate case challenged the prudency of our decision to build the plant.″

David Barasch, the state consumer advocate, said on balance, the PUC tried to dispense justice with its ″gutsy decision.″

″The PUC told stockholders that ratepayers are not going to write blank checks for all their investments,″ Barasch said.

He said he hoped a message was sent to other utilities that the PUC will not bail them out if their construction planning is off the mark.

″The commission has taken a long step back in the right direction to letting the utilities know there is a risk associated with the rewards that they reap,″ Barasch said.

The PUC awarded the company a 9 percent increase, or $121 million in new revenue when it had asked for $330 million, or 23 percent.

″I certainly think the public has a lot to be thankful for,″ Barasch said. ″But I don’t expect them to cheer a 9 percent increase.″

Commissioner James Cawley, who cast the only negative vote against what he called a ″punitive″ ruling, said the company deserved more. He agreed that Susquehanna Unit 2 gave PP&L too much generating capacity, but said that was the result of external forces, including energy conservation and the recent economic recession.

″Unless the commission is also willing to find that PP&L acted imprudently with regard to this generating station, (the PUC’s ruling) is neither reasonable nor fair,″ Cawley said.

The PUC allowed the company to recover from ratepayers the costs of operation, maintenance, depreciation, property taxes, debt interest and preferred stock.

Caliendo said PP&L would consider three options in light of the decision: an appeal to Commonwealth Court, an immediate request for additional rates or the sale of its extra capacity to another utility.

PUC chairman Linda Taliaferro suggested earlier this month that PP&L sell Unit 2 to Philadelphia Electric Co., which is building a second unit at its Limerick nuclear plant near Philadelphia. The PUC has blocked Philadelphia Electric Co. from raising outside capital to finish Limerick 2 and is currently investigating whether completion is in the public interest.

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