Indian Point 2 Outage Mismanagement Settlement_04NY14413

8/9/2019 Indian Point 2 Outage Mismanagement Settlement_04NY14413

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STATE OF NEW YORKPUBLIC SERVICE COMMISSION

At a session of the Public ServiceCommission held in the City of

Albany on February 11, 2004

COMMISSIONERS PRESENT:

William M. Flynn, ChairmanThomas J. DunleavyLeonard A. WeissNeal N. Galvin

CASE 00-E-0612 - Proceeding on Motion of the Commission toInvestigate the Forced Outage at ConsolidatedEdison Company of New York, Inc.'s Indian PointNo. 2 Nuclear Generating Facility.

Petition of Certain Members of the New YorkState Legislature Regarding Indian Point No. 2Outage.

ORDER ADOPTING TERMS OF JOINT PROPOSAL

(Issued and Effective February 12, 2004)

BY THE COMMISSION:

INTRODUCTIONOn February 15, 2000, a steam generator tube ruptured

in the Indian Point No. 2 Nuclear Generating Facility (IP2),

forcing Consolidated Edison Company of New York, Inc. (Con

Edison or the company) to shut down the plant. The plant did

not resume operations until January 29, 2001, after the steam

generators had been replaced. 1

On March 17, 2000, a number of Assembly Members filed

a petition seeking an order staying the operation of Con

Edison's fuel adjustment clause and commencing an investigation

1 On September 6, 2001, ownership of IP2 was transferred to asubsidiary of Entergy Corporation. Case 01-E-0040, JointPetition of Consolidated Edison Company of New York, Inc., andEntergy Nuclear Indian Point 2, LLC, for Authority to TransferCertain Generating and Related Assets and for Related Relief,Order Authorizing Asset Transfer (issued August 31, 2001).


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into the company's operation of IP2. On March 30, 2000, the

Commission instituted this proceeding 2 to examine the causes of

the outage, including events preceding the outage, to determine

whether Con Edison's practices were reasonable and prudent, and,

more particularly, whether the company's decision to postpone

the replacement of the steam generators was reasonable and

prudent. 3 During the extended outage of IP2, higher cost

replacement power had to be purchased. If the company's

operation of the plant was found reasonable, replacement power

costs would have been recovered from customers in rates.

Otherwise, some or all of those costs, possibly totaling as much

as $290 million, 4 would have been borne by the company.

A number of prehearing conferences were held between

May 2000 and November 2002 addressing a variety of issues,including the scope of the proceeding, scheduling, discovery

disputes, and other matters. During the pendency of the

proceeding, extensive discovery, including the disclosure and

review of "thousands, if not tens of thousands, of documents,"

was undertaken by Staff of the Department of Public Service

(Staff) and its consultants, as well as by the numerous other

active parties. 5 Among the areas investigated, Staff and the

other parties reviewed the operation and maintenance of similar

nuclear power plants, examined industry and trade group studies,

Nuclear Regulatory Commission notices, rulings and findings,

Westinghouse Corporation analyses of conditions at IP2, and

Institute of Nuclear Power Operations and similar inspection

reports concerning IP2. Staff also interviewed company

personnel assigned to or with oversight responsibility for IP2.

2 Case 00-E-0612, Order Instituting Proceeding (issued March 30,

2000).3 Ultimately, the scope of this proceeding included four IP2

outages between 1997 and 2000 (Procedural Ruling (issuedMarch 15, 2001)). Transcript (Tr.) 249-425.

4 Staff estimated that its litigation position was worth amaximum of $290 million (Staff Statement in Support of theJoint Proposal, p. 21).

5 Id., p. 3.


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Many thousands of hours have been spent by the parties, the

company, and Staff, which estimates its efforts alone at more

than 10,000 hours.

Following unsuccessful settlement attempts during the

summer of 2000, the parties determined in November 2002 that the

resumption of negotiations would be appropriate. Notice of

settlement discussions, dated November 19, 2002, was served on

all parties in accordance with 16 NYCRR 3.9. Settlement

discussions continued through the Fall of 2003, and, on

December 2, 2003, a Joint Proposal 6 was filed for Commission

review, executed by all but one of the active parties, and

otherwise unopposed.

The signatories to the Joint Proposal are Con Edison,

Staff, Office of the Attorney General Eliot Spitzer (AttorneyGeneral), Honorable Richard L. Brodsky, Honorable Adriano

Espaillat, New York State Consumer Protection Board (CPB),

Public Utility Law Project, Inc. (PULP), City of New York (NYC),

Utility Workers of America, ALF-CIO Local 1-2 (Union), and the

Owners Committee on Electric Rates (OCER). On December 29,

statements in support of the Joint Proposal were filed by Con

Edison, Staff, Attorney General, CPB, PULP, Union, and OCER. In

addition, and in response to a December 18, 2003 Notice from the

Secretary soliciting comments, Consumer Power Advocates (CPA),

NYC, and the County of Westchester (Westchester), filed

statements supporting the Joint Proposal. 7

Summary of Joint Proposal

As a general matter, the Joint Proposal includes

provisions by which Con Edison will refund or absorb a total of

$137.5 million of replacement power costs associated with the

outages investigated. The $137.5 million includes $89,543,663

in IP2 replacement power costs that were incurred by the company

but not collected in rates due to our August 9, 2000 order

6 A copy of the Joint Proposal is attached to this Order.7 The transcript of this proceeding consists of 778 pages, and

three exhibits were entered into evidence.


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prohibiting Con Edison from collecting replacement power costs

in accordance with the requirements of Chapter 190 of the Laws

of 2000. 8 Under the terms of the Joint Proposal, Con Edison

would refund $45,456,337 of the replacement power costs it

collected from its customers during the outages and would waive

any claim to charge ratepayers for the $89.5 million of

replacement power costs, which were booked but not collected

from customers.

In addition to the refund and the company's agreement

not to seek reimbursement for incurred power costs, the Joint

Proposal requires Con Edison to provide $2.5 million to New York

State Energy Research and Development Authority (NYSERDA) to

fund incremental energy efficiency programs for Con Edison's

low-income customers. The proposal includes agreements that:NYSERDA will meet with the parties to discuss and develop

appropriate programs; the fund will be apportioned between New

York City and Westchester County customers (88% and 12%

respectively); the New York City and Westchester programs will

run concurrently; the fund will be utilized to supplement not

supplant existing programs; NYSERDA will, at the request of any

active party, provide a quarterly report on the program; NYSERDA

will be entitled to collect up to a 7% administrative fee; and

NYSERDA will use its best efforts to exhaust the fund on

appropriate low-income energy efficiency programs within two

years of the date of the Commission order adopting the terms and

conditions of the Joint Proposal.

Finally, the proposal provides that, upon the

satisfaction of the above commitments, Con Edison will be

released and discharged from all claims and obligations that

were or could have been properly asserted in this proceeding,

including IP2 outages beginning January 25, 1997, October 14,

1997, August 31, 1999, and February 15, 2000.

In addition to the Joint Proposal and because NYSERDA

was not an active party, the resolution of the proceeding and

8 Case 00-E-1343, Proceeding Implementing Chapter 190 of theLaws of 2000, Order Modifying Tariff and Mandating Refunds,(issued August 9, 2000).


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the approval of the Joint Proposal provisions concerning the

energy efficiency programs requires two additional documents.

The first is a letter dated January 8, 2004 from Peter Smith,

Acting President of NYSERDA to Jaclyn A. Brilling, Secretary to

the Commission in which NYSERDA indicates that it has reviewed

the parameters and guidelines set forth in the Joint Proposal,

has no objection to them, and agrees and assents ". . . to

accept the $2.5 million from Con Edison and to utilize the funds

in the manner prescribed by paragraph 4 of the December 2, 2003

Joint Proposal." Thus, NYSERDA has agreed to abide by the terms

and conditions in the Joint Proposal in return for receipt of

program funds from Con Edison.

In addition, to facilitate the intent that the funds

provided to NYSERDA be considered and treated as incrementalfunds dedicated to additional low-income energy efficiency

programs, a separate letter agreement between Con Edison and

NYSERDA will be executed when the funds are transferred. This

letter agreement, intended to encumber the funds for the

purposes set forth in the Joint Proposal, is also an integral

part of the Joint Proposal. A draft of that letter, containing

final language as agreed upon among the active parties, Con

Edison, and NYSERDA, is included in the record as Exhibit 3.

Set forth below is a brief summary of the comments

submitted in support of the Joint Proposal, as well as a summary

of issues raised at the January 6 evidentiary hearing, followed

by our discussion.

Summary of Parties Comments

All parties filing comments supported the adoption of

the terms and provisions of the Joint Proposal, alleging that

those terms fully met our standards for approval. 9 Under those

standards, the parties argue, a mutually agreeable resolution to

this proceeding has achieved a balance among ratepayers, utility

investors, and the long term viability of the utility, and is

9 Case 90-M-0255, Procedures for Settlements and StipulationAgreements, Opinion No. 92-2 (issued March 24, 1992).


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consistent with sound environmental, social, and economic

policies. In the view of all the parties, the Joint Proposal

produces results that are within the range of reasonable results

that would likely have arisen had the matter been litigated. In

addition, the parties note that our guidelines require that

weight be given to the fact that a settlement has been reached

among normally adversarial parties, and the exceptional breadth

of agreement and complete lack of dissent apparent here suggests

that this standard has been met as well.

Staff concludes that each of the four outages

investigated would require a lengthy and detailed consideration

of highly technical issues, as well as a "somewhat" subjective

application of the standard of care, in order to litigate the

prudence of the company's actions. As a general matter, Staffexpresses the belief that all of the outages could have and

should have been either avoided or reduced in duration; but it

also notes that its position includes a significant degree of

uncertainty. In contrast, Staff argues, the Joint Proposal

provides certainty, eliminates the need for further

administrative or court litigation, and provides benefits to

customers expeditiously. Regarding the potential range of

damages were the case litigated, Staff estimates possible

litigation outcomes between zero and $290 million. Based on a

consideration of its litigation risk and its likely success on

the merits, Staff believes that the proposed settlement,

containing $137.5 million of benefits for the ratepayers, is

fair and reasonable. 10

Con Edison also endorses the terms and conditions of

the Joint Proposal, agreeing with the parties that the

Commission's guidelines for adopting such terms and conditions

have been fully met. The company's comments briefly review the

10 Staff Statement in Support of Joint Proposal, p. 21. Staff'squantification of the possible prudence disallowance levelsdoes not include a consideration of the Attorney General'sissue which would hold Con Edison liable (assuming imprudence)for the increased cost of electricity in the wholesale marketthat was caused by the loss of IP2 generation in 2000.


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defense it would have raised to the allegations summarized in

Staff's statement, and the company concludes that it might have

established its prudence with regard to each of the outages. 11

In reaching the conclusion that the Joint Proposal was

acceptable on an overall basis, Con Edison noted that the risks

and costs of pursuing litigation, the advisability of seeking a

settlement to these complicated issues, and the risk of

litigating the novel position set forth by the Attorney General

regarding the impact of the IP2 outage on wholesale market

prices, all favor the adoption of the terms and conditions in

the Joint Proposal.

The Attorney General, CPB, and NYC also agree that the

settlement is just and reasonable, is in the public interest,

and meets all the criteria set forth by the Commission on whichsettlement agreements may be accepted. The Attorney General

expresses the view that Con Edison would likely have been found

imprudent with respect to each of the investigated outages, but

notes that such results are not guaranteed given the

uncertainties inherent in this most complex litigation. He

also argues that Con Edison could have been liable for the

impact of IP2's outage on wholesale market prices, but again,

litigation risk, especially in light of the novel theory

regarding this adjustment, renders complete success on the

merits open to considerable doubt. The Attorney General

concludes that the settlement is within the range of reasonable

results that would be expected from a litigated proceeding; the

agreement encompasses a very broad range of normally adversarial

interests; and the provisions of the Joint Proposal would

benefit ratepayers by having refunds issued now rather than

waiting years for the outcome of administrative litigation and

possibly court appeals.

CPB agrees that the terms of the proposal are in the

public interest, specifically noting that the Joint Proposal

would result in ". . . a line item . . . on each ratepayer's

11 Con Edison's Statement in Support of the Joint Proposal,pp. 6-11.


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bill enumerating the refund." 12 CPB also argues that the Joint

Proposal is consistent with the economic and social policies of

New York State and the Commission and that adopting the

provisions of the Joint Proposal would help reduce energy costs,

both for the general body of customers and through the

$2.5 million dedicated to low-income energy efficiency programs.

CPB also notes that the Joint Proposal has garnered support from

the company, consumer representatives, labor groups, the

legislature, and a number of other State agencies. It concludes

that the Joint Proposal ". . . represents a reasonable

compromise of divergent goals." 13

NYC states that it is fully supportive of the Joint

Proposal and believes that its adoption would be in the best

interest of all parties and the general public. It notes thatthe proposal is the product of extensive fact finding by the

Department and the other active parties, and that protracted

negotiations were necessary to resolve all of the complex

issues. The Joint Proposal, according to NYC, is a

comprehensive settlement of all issues, which were both complex

in nature and remote in time. The age of some of the challenged

actions date to the mid-1980s, adding significantly to the

litigation risk. NYC also specifically supports Staff's

conclusion that the Joint Proposal represents a reasonable value

for the case, taking into account litigation risk and the cost

of replacement power occasioned by the outages. 14 As a final

matter, NYC notes that Con Edison's business has considerably

changed since the 2000 outage, including the fact that the

company has sold its generating stations. NYC urges the

Commission to approve the terms of the Joint Proposal.

The County of Westchester and the Union also support

the adoption of the terms and conditions in the Joint Proposal.

12 CPB Statement in Support of the Joint Proposal, p. 4 discussedinfra).

13 CPB Statement in Support of the Joint Proposal, p. 5.14 City of New York Statement in Support of the Joint Proposal,

p. 3.


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According to the Union, both the present and the prospective

elements of the company's and ratepayer's financial positions

were balanced in the development of the Joint Proposal; normally

adversarial parties reached agreement only after a lengthy

negotiating process, including approximately three years of

investigations; and litigation would have involved significant

risks for both the ratepayers and the company in terms of delay,

uncertainty, and additional litigation costs. The County of

Westchester, noting the active part it took throughout this

proceeding, including a substantial commitment of resources to

discovery and preparation for evidentiary hearings, concludes

that the Joint Proposal meets the standards of appropriately

balancing the interest of the ratepayers and those of the

company, demonstrating support from normally adversarialparties, and being based on an adequate record.

PULP, OCER, and CPA also urge the Commission to adopt

the terms and conditions of the Joint Proposal. OCER contends

that the Joint Proposal is in the best interest of the public

generally and the signatories in particular. It concludes that

the Joint Proposal offers significantly greater benefits than

costs, especially when one considers the extensive litigation,

the probability of success, the complexity of the issues, and

the inconvenience and delay that would likely result in its

absence. PULP similarly reviews the standards adopted by the

Commission for such agreements and concludes that those

standards have been fully met. The Joint Proposal, according to

PULP, represents a rational and fair resolution of the issues,

and it notes, in particular, its support of the $2.5 million

dedicated to the implementation of additional low-income energy

efficiency programs. The Joint Proposal therefore recognizes,

according to PULP, the special needs of low-income households

and deliberately take steps to deal with the problem on more

than a short-term basis. PULP also emphasizes the provision

that requires these funds to be used to create new, incremental

low-income conservation programs rather than replacing or

providing funds for existing or threatened programs.


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CPA indicates its support for the Joint Proposal as a

reasonable solution for mitigating the excessive costs borne by

consumers as a result of the prolonged outages of IP2.

Regarding the proposed refund, CPA recommends that the amount of

the refund be listed as a separate line item on customers' bills

to allow them to clearly see the actual amount of the

settlement. 15 CPA also recommends that the funds to be

transferred to NYSERDA be utilized for energy efficiency

programs and not for load aggregation studies or pilot programs.

Such programs, CPA contends, face significant implementation

challenges and tend to provide less long-term value than efforts

such as energy efficient window replacements.

Finally, the issues that were raised at the January 6,

2004 evidentiary hearings should also be mentioned. First, theJoint Proposal (p. 1) recites Westchester County as a signatory

to the agreement. Based on Westchester County's comments filed

January 16, it appears that the County fully supports the

proposal, but is not in fact a signatory.

A second issue was raised by CPA, 16 which requests that

customers be advised on their bills of the specific credit that

they are receiving. The Joint Proposal states: "A statement

will appear on bills explaining that the customer has received a

credit related to the IP2 Prudence Proceeding." 17 Con Edison

indicates that it may not be possible to include individually

calculated, separate line items for these refunds on its bills.

However, the company did indicate that it should be possible to

include within the bill a message to the consumer identifying

the refund on a per KWh basis and explaining how the individual

refund could be calculated. The Administrative Law Judge noted

on the record that the customer should be provided either an

individually calculated credit on the bill or the information

necessary for the customer to be able to calculate the credit. 18

15 CPA's Comments in Support of the Joint Proposal, p. 2.16 Tr. 775-760.17 Attachment, p. 3.18 Tr. 760.


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Another issue arose at the hearings concerning

paragraph 5 of the Joint Proposal in which Con Edison is to be

released and discharged, conditioned upon the satisfaction of

the "above" commitments. As the record shows, 19 the intent of

that provision was to provide a complete release to Con Edison

once the company completed its Joint Proposal commitments. The

document might be read, however, to suggest that Con Edison

would not be released or discharged until after NYSERDA had

satisfied its commitments, possibly two years or more in the

future. Con Edison indicated that such an interpretation was

not intended by the parties and that the actual intent of the

parties, that Con Edison be released once it completes its

financial commitments, should be reflected in the Commission's

adoption of the terms of the Joint Proposal.

DISCUSSION

We have consistently found that the terms and

conditions of a Joint Proposal are in the public interest and

may be adopted if the following standards are met:

A desirable settlement should strive for abalance among (1) protection of ratepayers,

(2) fairness to investors and (3) the long termviability of the utility; should be consistentwith sound environmental, social and economicpolicies of the Agency and the State; andshould produce results that were within therange of reasonable results that would likelyhave arisen from a Commission decision in alitigated proceeding.

In judging the settlement, the Commission shallgive weight to the fact that a settlementreflects the agreement by normally adversarialparties. 20

An unusually broad range of "normally adversarial"

interests have either executed the Joint Proposal or are

otherwise fully supporting it. The parties supporting the

19 Tr. 772-775.20 Case 90-M-0255, Procedures for Settlements and Stipulation

Agreements, Opinion No. 92-2 (issued March 24, 1992),Procedural Guidelines for Settlements, p. 6.


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proposal in this proceeding include elected officials,

representatives of state agencies and local governments, IP2's

unionized work force, consumer groups, and the company. As

Staff notes, every active party to the proceeding agreed with

the proposed resolution, and no party or other member of the

public has criticized the Joint Proposal in any way.

We also find that the provisions in the Joint Proposal

provide significant benefits to ratepayers regarding replacement

power costs that were included within rates or which the company

would have included in rates in the absence of this

investigation. From the investors' and utility management's

perspective, the agreement finalizes all of the company's

operational obligations with regard to IP2, which has now been

sold, and limits the company's liability to slightly less thanhalf the total potential exposure of $290 million. Therefore,

adoption of the terms of the Joint Proposal would assist the

company in shifting its focus to the future and closing the book

with regard to its operation of IP2. Accordingly, a fair and

reasonable balance of ratepayer and investor interests has been

established.

We further conclude that the Joint Proposal is

consistent with the policies of this Commission and the State.

The alternative to the Joint Proposal is litigation that

threatens to be extremely complex, expensive, and lengthy,

requiring substantial efforts by numerous parties, including a

number of governmental agencies and subdivisions. So long as

such significant assets would be tied up litigating the merits

of these claims, the parties could not as easily address current

problems and plan for the future. The Joint Proposal frees

those considerable resources, allows a future focus to be more

completely supported, and eliminates what could have been months

or years of litigation over the reasonableness of decisions made

a decade or more ago.

Finally, in considering Staff's description of the

strength and uncertainties of its position, as well as Con

Edison's summary of its defenses and acknowledged risk, we

conclude that the results contained in the Joint Proposal are


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within the range of reasonable results that would likely have

arisen in a fully litigated proceeding.

Regarding the timing of Con Edison's release and

discharge, the Joint Proposal should be interpreted as noted

above. In addition, customers should be provided the most

specific notice possible on their bills regarding the amount of

the refund each receives, and Con Edison should consult in

advance with Staff and interested parties regarding its plans

and capabilities in this area. Finally, CPA's concern that

NYSERDA may dedicate the funds from this Joint Proposal to

aggregation programs seems misplaced. Low-income energy

efficiency programs are specified in the Joint Proposal, as is

the requirement for NYSERDA to discuss program details with the

parties in advance. Aggregation programs are neither mentionednor implied. We are confident that programs can be devised that

will be found by all parties to be appropriate.

CONCLUSION

Based on the above, we conclude that the Joint

Proposal is in the public interest, and we are hereby adopting

its terms and conditions, as clarified herein, as our order in

this proceeding.

The Commission orders:

1. The terms and conditions of the Joint Proposal

described herein and attached hereto are adopted, as clarified

herein, as the order of the Commission in this proceeding.

2. Subject to the completion of Con Edison's and

NYSERDA's commitments hereunder, this proceeding is closed.

By the Commission,

(SIGNED) JACLYN A. BRILLINGSecretary


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NEW YORK STATEPUBLIC SERVICE COMMISSION________________________________________________x

In the Matter of ::Proceeding on the Motion of the Commission to :Investigate the Forced Outage at Consolidated Edison : Case 00-E-0612Company of New York, Inc.s Indian Point No. 2 Nuclear :Generating Facility. :

:Petition of Certain Members of the New York State :Legislature Regarding Indian Point No. 2 Outage. :________________________________________________x

JOINT PROPOSAL ON THE

INDIAN POINT 2 PRUDENCE PROCEEDING

December 2, 2003


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Case 00-E-0612JOINT PROPOSAL ON THE

INDIAN POINT 2 PRUDENCE PROCEEDING

The Parties to this Joint Proposal, which settles the issues in Case 00-E-0612, are:

Consolidated Edison Company of New York, Inc. (Con Edison), New York State Department of

Public Service Staff ("Staff"), Office of Attorney General Eliot Spitzer (OAG), Hon. Richard L.

Brodsky, Hon. Adriano Espaillat, New York State Consumer Protection Board (CPB), The

Public Utility Law Project of New York, Inc. (PULP), City of New York (NYC), County of

Westchester (Westchester), Utility Workers Union of America, AFL-CIO Local 1-2 (Union),

Owners Committee on Electric Rates (OCER), and such other Parties whose authorized

representatives have signed the execution pages. The Parties agree to the terms of this Joint

Proposal, which is to be presented to the New York State Public Service Commission(Commission).

In a petition filed in March 2000, Assemblymembers Richard L. Brodsky, Ann Margaret

Carrozza, Adele Cohen, Adriano Espaillat, James Gary Pretlow, Roberto Ramirez, William

Scarborough, Ronald Tocci, Albert Vann, Eric Vitaliano, and Keith Wright requested that the

Commission examine the reasonableness of Con Edisons actions regarding the operation and

maintenance of its Indian Point Unit No. 2 Nuclear Generating Facility (IP2), and, in particular,

the events leading to forced outage that occurred on February 15, 2000. Similar requests were

made by Westchester, NYC, and the State Senate.

After considering those requests, and issues identified during an investigation

immediately following the February 15 outage by the Department of Public Service, Department

of Health and State Emergency Management Office, acting collaboratively under the direction of

Governor Pataki, the Commission issued an Order Instituting Proceeding to Investigate Outage

at the Indian Point No. 2 Nuclear Generating Facility on March 30, 2000, instituting this

proceeding to investigate the circumstances surrounding the February 15 outage and other issues

relating to Con Edisons management and operation of IP2.

Prehearing conferences were held before Administrative Law Judge Jeffrey E. Stockholm

on May 2, 2000, August 21, 2000, November 10, 2000, February 28, 2001, May 31, 2001, and

November 8, 2002, at which the scope of the issues to be addressed in this proceeding, the

schedule for the proceeding, discovery disputes, and other matters were discussed.


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Settlement negotiations were conducted periodically in this proceeding in the year 2000

without success. After Staff and other parties spent thousands of hours conducting discovery,

reviewing documents, and analyzing the issues in this proceeding, a determination was made that

renewing settlement discussions would be appropriate. Accordingly, in accordance with the

Commissions rules, all parties to this proceeding, and the Secretary to the Commission, were

notified by letter dated November 19, 2002 that settlement negotiations would recommence on

December 12, 2002. The negotiations scheduled for that date were adjourned at the request of

some parties to January 16, 2003. Additional settlement negotiations were held on January 29,

April 21, April 29, September 18, and September 24, 2003. Con Edison, Staff, OAG, Hon.

Richard L. Brodsky, NYC, Westchester, CPB, PULP, the Union, and OCER participated in some

or all of those meetings. All settlement conferences and negotiations were conducted in

accordance with 16 NYCRR 3.9 and the Commission's Settlement Guidelines, set forth inOpinion No. 92-2. 1

As a result of their efforts, the parties have reached a comprehensive proposed resolution

of this proceeding, as follows:

1. Con Edison will refund or absorb a total of $137,500,000 of the replacement

power costs it incurred during the outages identified in paragraph 5, below, in the manner set

forth in the following paragraphs 2-4.

2. In accordance with the requirements of Chapter 190 of the Laws of 2000 (Chapter

190), on August 9, 2000, the Commission issued an Order prohibiting Con Edison from

continuing to collect IP2 replacement power costs associated with the February 15, 2000 outage. 2

Chapter 190 was ultimately adjudged unconstitutional by the federal courts. 3 During the time it

and the Commission Order remained in effect, customers did not pay Con Edison $89,543,663 in

IP2 replacement power costs, and the company has a claim for recovery of those costs. That

amount will be offset against the $137,500,000 settlement sum.

1 Cases 90-M-0255 et al., Opinion, Order and Resolution Adopting Settlement Procedures andGuidelines, Opinion No. 92-2 (issued March 24, 1992).

2 Case 00-E-1343, Commission Proceeding Implementing Chapter 190 of the Laws of 2000,Order Modifying Tariff And Mandating Refunds (issued August 9, 2000). Con Edison hadbeen collecting such costs in customer bills since the beginning of the outage.

3 Consolidated Edison Co. of New York, Inc. v. Pataki, 292 F.3d 338 (2002).


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3. Con Edison will refund $45,456,337 to its customers by crediting their electric

bills for such total amount over a three month period beginning as soon as practicable, but in no

event later than 30 days, following the issuance of a Commission Order approving this Joint

Proposal. The refund will be distributed on a usage basis to all current customers, both full

service and retail access, to ensure equity between NYC and Westchester customers. A

statement will appear on bills explaining that the customer has received a credit related to the IP2

Prudence Proceeding. Because total usage and the credit per kwh will be estimated each month,

Con Edison will reconcile actual to estimated usage for the three month period and make the

appropriate adjustments, if any, during the following month to ensure that customers receive the

full amount of the refund.

4. Con Edison will provide $2,500,000 to the New York State Energy Research and

Development Authority (NYSERDA) to fund one or more energy efficiency programs for ConEdisons low income customers. Usage of the funds will be administered by NYSERDA and

governed by the following principles:

a. NYSERDA shall meet with Staff, Con Edison, CPB, PULP, NYC,

Westchester and any interested signatories to this Joint Proposal to discuss

NYSERDAs existing low income energy efficiency programs no later

than 30 days after the date of the Commission Order approving this Joint

Proposal. NYSERDA shall then distribute to the participating parties for

review and comment a brief plan describing how the fund will be spent to

enhance one or more of these existing programs. Meetings among the

interested parties to discuss the plan should occur as expeditiously as

possible. After receiving this input from the parties, NYSERDA shall

determine how the fund will be allocated among its programs.

b. The fund shall be utilized to assist Con Edison low income customers

located in New York City and Westchester County in an 88% to 12%

ratio, respectively.

c The fund may be used for different purposes in New York City and

Westchester County, provided the programs run concurrently.

d. The fund has been established to supplement existing programs.

Therefore, it shall not be used to supplant existing funding for any


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program, whether from Con Edison, the System Benefit Charge, or other

sources. Also, all interest accrued on the $2.5 million will be added by

NYSERDA to the fund.

e. Upon the written request of any active party in this proceeding,

NYSERDA shall provide the party a quarterly report on the program

activities undertaken and expenditures made from the fund.

f. As soon as practicable, but in no event later than 30 days, after approval

by the Commission of this Joint Proposal, the $2.5 million shall be

delivered by Con Edison directly to NYSERDA and, upon such delivery,

Con Edisons commitment under this Paragraph 4 shall be deemed to be

fully satisfied.

g. NYSERDA will be entitled to collect its standard administrative fee fromthe corpus of the fund in an amount up to a maximum of 7% or $175,000.

h. NYSERDA will be requested to use best efforts to exhaust the fund on

appropriate low income energy efficiency programs within two years of

the date of the Commission Order approving this Joint Proposal.

5. In return for, and conditioned upon satisfaction of, the above commitments, Con

Edison will be released and discharged from all claims and obligations that were or could

properly have been asserted in this proceeding relating to its operation and management of IP2

from 1985 through the date of the plants sale in 2001, including, but not limited to, claims and

obligations relating to:

a. The outage from January 25, 1997 through March 17, 1997 relating to the

grit blasting of the steam turbines in 1995.

b. The outage from October 14, 1997 through September 10, 1998 relating to

the DB-50 circuit breakers and the management of IP2, generally.

c. The outage from August 31, 1999 through October 18, 1999 relating to the

reactor scram.

d. The outage from February 15, 2000, through January 29, 2001 relating to

the rupture of tube R2C5 in Steam Generator 24 and subsequent

replacement of all of the steam generators.


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e. Additional payments made by Con Edisons customers for energy during

the 2000-2001 outage as a result of the impact of the loss of IP2s power

on the wholesale electric power markets, as identified by OAG.

6. Nothing in this Joint Proposal shall be construed as an admission by any party

with respect to the prudence or imprudence of any decision or action by Con Edison related to its

management and operation of IP2 or as to the remedies appropriate in any such case.

7. The parties agree and acknowledge that each provision of this Joint Proposal is in

consideration and support of all the other provisions, and expressly conditioned upon their

acceptance by the Commission. In the event that: (a) the Commission fails to adopt this Joint

Proposal according to its terms or adopts it with material modifications that are adverse to any

party; (b) this Joint Proposal or a Commission Order approving it, or any provision of either is

materially and unacceptably modified by a court order which has become final and non-appealable and such modification is adverse to any party; or (c) a statute, rule, order or regulation

is enacted or issued by any federal, state, local or other governmental, regulatory or

administrative agency, commission, department or board that imposes liability on Con Edison for

any of the discharged claims or obligations enumerated in paragraph 5, above, then each of the

signatories to this Joint Proposal so adversely affected reserves the right to withdraw its

acceptance of this Joint Proposal, upon reasonable notice to the other parties, and to renegotiate

and, if necessary, to litigate without prejudice, any or all issues as to which the signatory agreed

in this Joint Proposal. Any signatory who so withdraws its acceptance of this Joint Proposal

shall not be bound by its provisions, and this Joint Proposal shall be null and void as to that

signatory.

8. The terms and provisions of this Joint Proposal apply solely to, and are binding

only in the context of, the purposes and results of this Joint Proposal. None of the terms and

provisions of this Joint Proposal may be cited or relied upon by any party hereto or any other

party in any fashion as precedent in any proceeding before this Commission, or before any other

regulatory agency or any court of law for any purpose except in furtherance of the purposes and

results of this Joint Proposal.

9. The parties hereto agree to submit this Joint Proposal to the Commission and to

individually support and request adoption by the Commission of the Joint Proposal as set forth

herein.


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Indian Point 2 Outage Mismanagement Settlement_04NY14413

Documents

Transcript of Indian Point 2 Outage Mismanagement Settlement_04NY14413