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PSE&G EXPECTS INSURANCE TO EASE FINANCIAL IMPACT OF SALEM 2 SHUTDOWN

PSE&G EXPECTS INSURANCE TO EASE FINANCIAL IMPACT OF SALEM 2 SHUTDOWN
 NEWARK, N.J., Nov. 13 /PRNewswire/ -- Public Service Electric and Gas Company (PSE&G) said today (Nov. 13) that it has extensive property and replacement power insurance coverage that should minimize the financial impact resulting from the forced shutdown of its Salem 2 nuclear unit.
 On Nov. 9, a failure, causing severe damage, occurred in an enclosure adjacent to the Salem 2's turbine generator. As a result, the unit was brought to a safe shutdown. At the time of the failure, the unit was operating at approximately 100 percent reactor power and routine monthly turbine trip testing was in progress.
 Preliminary assessment has revealed that the steam turbine sustained significant damage. In addition, there is apparent damage to the electric generator and condenser. The nuclear side of the unit was not affected, and there was no damage to safety-related equipment and no release of radiation. The cause of the failure is currently under investigation by PSE&G and the Nuclear Regulatory Commission.
 "At this time, we do not know how long the unit will be out of service or how much repairs will cost," said Robert J. Dougherty Jr., PSE&G's senior vice president-electric. "Before we can answer those two questions, it is extremely important for us to fully understand and document exactly what happened and what has to be repaired. Upon completion of the engineered disassembly of the turbine and generator during the next month, PSE&G will be better able to estimate the duration of the outage and the cost of repairs."
 Dougherty emphasized, however, that PSE&G has insurance coverage that should cover a substantial portion of the restoration and also replacement power costs. "This should minimize the financial impact on PSE&G and its customers as well as on the common stock shareholders of PSE&G's parent company, Public Service Enterprise Group Incorporated," Dougherty said.
 PSE&G and to co-owners of Salem 2 -- Philadelphia Electric Company, Atlantic City Electric Company, and Delmarva Power & Light Company -- have replacement property insurance coverage of up to the first $500 million (with a $1 million deductible) through Nuclear Mutual Limited of Delaware. There is additional property insurance up to $1.8 billion through other carriers.
 In addition, PSE&G and the co-owners have insurance for replacement power of $3.5 million a week for a year and lesser coverage for an additional two years through Nuclear Electric Insurance Limited of Delaware. PSE&G's share is $1.5 million per week for the first 52 weeks. The deductible is 21 weeks from the start of the Salem 2 outage.
 Between Nov. 9, the date of the unit's shutdown, and the end of the 21-week deductible period, PSE&G estimates that it may incur about $11 million in replacement power costs. This amount excludes replacement power costs that will be incurred in association with the planned refueling of Salem 2. Prior to the turbine failure and shutdown, PSE&G had scheduled to remove Salem 2 from service on Jan. 4 for approximately three months for refueling and routine maintenance. The associated replacement power costs for that period are already reflected in the utility's levelized energy adjustment clause approved by the New Jersey board of regulatory commissioners.
 PSE&G also said today that it does not expect the shutdown of Salem 2 will cause a financial impact on the company in 1991 under New Jersey's nuclear performance standard. In addition, PSE&G said the unit would have to be out of service through the third quarter of 1992 before it becomes concerned about a financial penalty in 1992 per the nuclear performance standard. This assumes its other four nuclear units -- Salem 1, Hope Creek, and Peach Bottom 2 and 3 -- operate as planned, including provisions for scheduled refueling outages and forced outages.
 Under the nuclear performance standard, PSE&G would be subject to a penalty if the combined capacity factor of its five nuclear units fell below 65 percent for the year. Conversely, it would receive a reward if the capacity factor exceeded 75 percent. There is neither a penalty nor a reward if the capacity factor falls between 65 percent and 75 percent. A penalty is tied to replacement power costs and PSE&G would, for example, be penalized 30 percent of replacement power costs, net of insurance recoveries, if the combined capacity factor for the year were to fall between 55 percent and 65 percent.
 Through Oct. 31 of this year, PSE&G's combined capacity factor was 72 percent and it was projected to be at about that level for the year.
 Dougherty said that, even with the shutdown of Salem 2 on Nov. 9, the capacity factor will still be in the 70 percent range, assuming PSE&G's other four nuclear units operate as planned for the balance of the year. "Until the Salem 2 shutdown, both units of Salem Generating Station had been performing extremely well, achieving a capacity factor of 80 percent through Oct. 31," Dougherty said.
 "In addition, because of the insurance coverage on replacement power costs, we would expect that incremental costs would be minimal," Dougherty said. "We think the regulatory structure in New Jersey, including the levelized energy adjustment clause and the nuclear performance standard, will provide for complete recovery of our costs."
 While the investigation of the incident at Salem 2 is under way, PSE&G said its Salem 1 and Hope Creek units, which are located adjacent to unit 1 in Lower Alloways Creek Townships, Salem County, N.J., were not affected and would continue operating. Both were at 100 percent power today.
 In addition, while the investigation is going on, PSE&G is attempting to determine what equipment it will need at the site to make replacements, if required. Dougherty said certain spare equipment is available on site or from the industry, PSE&G is surveying the industry for available and compatible equipment, he said. Equipment may be needed for Salem 2's turbine, generator and condenser, where most of the damage has apparently occurred.
 -0- 11/13/91
 /CONTACT: Neil Brown of PSE&G, 201-430-6017/ CO: Public Service Electric and Gas Co. ST: New Jersey IN: UTI SU: SM-OS -- NY079 -- 4100 11/13/91 16:27 EST
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Publication:PR Newswire
Date:Nov 13, 1991
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