Opinion ID: 1778943
Heading Depth: 1
Heading Rank: 4

Heading: nuclear fuel inventory costs at river bend

Text: The Company began to stockpile uranium in the early 1970's to ensure that it would have enough fuel to power the four nuclear power plants which it originally planned to build. However, when the Company's plans changed, and three of the four units were canceled, the Company retained more uranium than was needed to fuel the remaining facility at River Bend. The Commission found the retention of this excess uranium imprudent and disallowed the fuel clause charges associated with the uranium storage. The district court affirmed the Commission's Order as to the entire $3.597 million in refunds arising from the Company's imprudence in retaining nuclear fuel for River Bend. In his oral reasons for decision the district judge found that the Commission had a reasonable basis to make a ruling, stating that at some point in the last number of years, it became obvious that the price was dropping, and therefore, the PSC is correct, that at some point in time the excess should have been sold off, and the benefit should have gone to the ratepayers. For the reasons that follow, we agree with the trial judge's ruling and affirm this portion of his order. The Company argues that the Commission committed legal error in its prudence review by viewing the Company's actions through impermissible hindsight. Rather, the Company asserts that the Commission should have adopted the hearing examiner's recommendation and found its actions prudent. After hearing testimony from expert witnesses from both the Company and the Commission Staff, the hearing examiner found the Company's management of its nuclear fuel reserves prudent because the market projections that were available at that time forecasted an increased price for uranium. Documents and testimony introduced through Mr. Frank B. Rives, the Director of Nuclear Fuels at Entergy Operations, Inc., the Company's expert witness, support that the decision to store excess uranium rather than retaining it was prudent due to the market predictions of a dramatic price increase to $90.00 per pound. The Company argues that the hearing examiner's recommendation was correct because had the projections materialized, retention rather than reduction of its nuclear inventory would have been prudent. The Company further argues that the Commission can only arrive at a finding of imprudence by the use of impermissible hindsight in its consideration of the Company's decision to retain the fuel as it is only with hindsight that the Commission could expect the Company to know that the market would not escalate but actually drop. The Commission rejected the hearing examiner's recommendation, stating that the hearing examiner's conclusion was unsupported by the record and erroneous because he relied on his undocumented recollections of testimony given in other cases in the 1970's that uranium was in short supply, and his conclusion was based on the wrong time period, i.e. the early 1970's. Rather, the relevant time period under review by the Commission is after the Company decided not to build the other reactors, after the Three Mile Island accident, in the late 1970's and early 1980's, when there was an ample supply of uranium. Additionally, the Commission found that the Company failed to carry its burden of proof. The Commission properly stated Louisiana law requires GSU to demonstrate that it had a reasonable process for its nuclear fuel procurement decisions. After its review of the record, the Commission found that the Company made no attempt to carry its burden of demonstrating the reasonableness of its actual decision making processes below. The Company provided no evidence to support the prudence of its decision not to dispose of more uranium after three of its nuclear units were canceled. Order U-19904-D at p. 17. The Company provided no studies, memoranda, or other documents to support the prudence of its decisions, during the relevant time period. Discrediting the opinion of Mr. Frank Rives, the Company expert, the Commission found that Mr. Rives admitted to being unfamiliar with the Company's decision making processes during the time period under review, and that he did not know who made the decisions, and did not have any personal knowledge of the Company's assumptions or expectations as to the benefit or detriment of holding onto excess uranium. Id. at 17. Mr. Rives was the only witness for the Company on the issue of the Company's decision making processes during the relevant time period, after the cancellation of the three nuclear plants. No other testimony was introduced to illuminate the Company's reasons for acquiring additional uranium under existing commitments, or for retaining fuel in an amount in excess of its needs once the other three plants were cancelled. Thus, the Commission concluded that the Company had not carried the burden of establishing that it acted as a prudent utility with respect to decisions regarding nuclear fuel acquisition and retention. The Commission emphasized that the Company's nuclear fuel costs, during the review period, were higher than those of virtually every other utility in the country. Order U-19904-D at p. 16. River Bend had an average nuclear fuel cost of 13.01 mills per kilowatt hour, approximately two mills higher than the next highest unit with a capacity equivalent to that of River Bend, and almost more than double the mean fuel cost of all the units in the country. Ibid. Therefore, the Company's customers paid for $21 million more in nuclear fuel costs than they should have. The Commission Staff's expert witness, Mr. Lane Kollen, Vice President of J. Kennedy & Associates, Inc., an economic utility consulting firm, quantified the excess expense caused by retention of excess uranium at $3.597 million. Based on the Company's failure to demonstrate a reasonable basis for its nuclear fuel retention decisions, the Commission found imprudence and disallowed the related fuel charges. Reluctantly relying on Mr. Kollen's quantification of the associated expenses, the Commission wrote Mr. Kollen's recommendation is modest but ultimately held [t]he modest disallowance proposed by Mr. Kollen is accepted, and the Commission will disallow excessive fuel costs of $3.597 million associated with the Company's canceled nuclear units and speculation in the uranium market. Order U-19904-D at p. 18. After our extensive review of the record, we agree with the trial court's determination that the Commission had a reasonable basis upon which to rest this disallowance and we find no errors of law. Further, we find that the Commission's decision was not arbitrary, capricious or an abuse of authority; and we therefore affirm.