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PENNSYLVANIA PUBLIC UTILITY COMMISSION v. PHILADELPHIA ELECTRIC COMPANY. APPEAL DAVID M. BARASCH (07/18/89)

decided: July 18, 1989.

PENNSYLVANIA PUBLIC UTILITY COMMISSION
v.
PHILADELPHIA ELECTRIC COMPANY. APPEAL OF DAVID M. BARASCH, CONSUMER ADVOCATE. PENNSYLVANIA PUBLIC UTILITY COMMISSION, APPELLANT, V. PHILADELPHIA ELECTRIC COMPANY, APPELLEE



Appeal from the Order of the Commonwealth Court of Pennsylvania entered February 24, 1988 at No. 3204 C.D. 1985, reversing the Order of the Pennsylvania Public Utility Commission entered October 30, 1985 at Commission Docket Nos. P-830453, M-840375 and M-FACE 8408. Nix, C.j., and Larsen, Flaherty, McDermott, Zappala, Papadakos and Stout, JJ. Stout, Former Justice, did not participate in the decision of this case.

Author: Zappala

[ 522 Pa. Page 340]

OPINION

In this appeal, we are requested to review the Opinion and Order of the Commonwealth Court reversing the Order of the Pennsylvania Public Utility Commission (Commission) which had disallowed a $57 million rate increase. 114 Pa. Commw. 22, 538 A.2d 98. The proposed rate increase was necessary to offset energy replacement costs incurred as a result of the closing of the Salem and Peach Bottom nuclear power plants on two occasions each. The Commission denied the Appellee's request, finding that part of the energy replacement costs were caused by mismanagement. Furthermore, the Commission held that since one of the outages was caused by a manufacturing defect and that Appellee was in the best position to pursue redress against the manufacturer, no additional costs should be passed on to the ratepayer. Commonwealth Court reversed, holding that the Commission used an incorrect standard of care to evaluate Appellee's actions and that it was improper to impute a third party's negligence to Appellee under the

[ 522 Pa. Page 341]

    current record. Because of the important issues raised, we granted the Appellants' petitions for allowance of appeal.

The requisite facts are not in dispute. On February 22, 1983, while the nuclear reactor at Salem 1 was shut down for a scheduled refueling outage and as attempts were being made to restart the unit, the automatic protection system used to shut down the nuclear reactor failed. However, this failure went undetected until three days later when a second failure occurred. As a result of the second failure, the Nuclear Regulatory Commission (NRC) instituted an investigation which culminated in the Appellee paying an $850,000 fine and the scheduling of a target restart date of May 21, 1983. The NRC investigation uncovered inadequate operations with regard to maintenance and testing of current circuit breakers and related component parts, inadequate training of operators and overall station management. Prior to restarting, NRC required that the Appellee develop and demonstrate procedures to cure these problems. Although the actual restart had been set for April 29, 1983, it had to be cancelled due to Appellee's discovery of shellfish infestation in cooling water lines. Restart finally occurred on May 21, 1983.

The following year, on February 24, 1984, the Salem 1 generator failed. It appears that this failure was caused by the defective manufacturing of resins which surround the coils that protect the generator from the ill effects of vibrations. This power outage lasted until October 22, 1984.

In addition to the problems at the Salem plant, problems were being experienced at the Peach Bottom Plant also. Although originally shut down for refueling, this shutdown period was extended for almost eight months as a result of problems with cracking in pipes, reactor cavity overflow and difficulty in welding and valve joints. Similar problems occurred at a second Peach Bottom unit resulting in a shutdown from July 4, 1983 through December 3, 1983.

After extensive hearings before an administrative law judge, the Appellee's request for reimbursement of energy

[ 522 Pa. Page 342]

    replacement costs for the Salem 1 outage of February 1983 and February 1984 were disallowed. In addition, the judge determined that Appellee was responsible for seven days of outage at Peach Bottom Unit 3 and forty hours at Peach Bottom Unit 2. This finding excluded another $2.5 million from the requested rate increase.

On appeal to Commonwealth Court, that Court reversed, finding that the Commission had relied upon an improper standard of care in evaluating the Appellee's actions, that Appellee could not be denied reimbursement of energy replacement costs for Westinghouse's tortious conduct unless the Commission made a finding that Appellee had actual control over Westinghouse, that the NRC was dilatory in approving the restart for Peach Bottom Unit 2 and that the gasket leak in Peach Bottom Unit 3 was totally unforeseeable. Commonwealth Court then remanded the case ...


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