The Michigan Daily - Tuesday, May 8, 1984 - Page 7
Nuclear plants face bankruptcy
NEW YORK (AP) - Bankruptcy for
nuclear power utilities, talked about
only hypothetically four months ago, is
now an imminent threat to several
financially drained electric companies.
The bad news has continued and wor-
sened for the nuclear power industry:
" Construction work has been reduced
or stopped completely on several units.
" Governors have ordered studies to
determine whether the power from un-
finished plants is really needed and
whether the latest cost and time
estimates are credible. The data will
help the states decide if bankruptcy or
bailout is the lesser evil.
" State regulators have been more
tight-fisted than ever in granting rate
increases for electric utilities, forcing
utilities to borrow more tocover their
increasing costs.
" Common stock dividends have been
cut or eliminated.
For projects involving the four com-
panies throught to be in most danger of
bankruptcy-Long Island LightingeCo.,
Public Service Co. of New Hampshire,
Public Service of Indiana and con-
sumers Power Co. of Michigan-in-
terest charges on funds borrowed to
build the plants are as high as $1 million
per day.
Long Island Lighting and Public Ser-
vice of New Hampshire could be in
default on certain loan responsibilities
by the end of the month.
THE EFFECTS of such a bankruptcy
could include drastically higher elec-
tricity rates and an inability on the part
} of the utility to generate sufficient
power on peak days, possibly leading to
voltage reductions and brownouts. It
also could discourage companies from
locating or expanding in the area.
Consumers Chairman John Selby told
his company's annual meeting last
month that the Midland plants can't be
completed without approval and
assistance from state officials.
Consumers officials, in a lament ex-
pressed by other financially troubled
utilities, contend that unless adequate
rate increases are granted the com-
pany may be forced to file for
reorganization under federal bankrup-
tcy statutes.
IN NEW ENGLAND, one of 16 par-
tners in the beleaguered Seabrook
nuclear plants said Friday that the
project's main contractor is owed $22
million from unpaid February and
March bills and that an additional $23
million will be due by the end of May.
The main coal supplier for Public
Service Co. of New Hampshire, the lead
Seabrook owner, cut off shipments
nearly a month ago because Public
Service had failed to pay its bills. The
utility, which gets 31 percent of its elec-
tricity from its coal plant, said last
Wednesday it had a 60-day supply of
coal.
Meanwhile, six New England gover-
nors have hired a consultant to deter-
mine whether the latest cost estimates
for New Hampshire's Seabrook project
are accurate and whether the power is
needed enough to justify the drastic
steps that may be required to stave off
utility bankruptcy.
CRIS NIELSEN, the consulting
firm's president, said it would be im-
possible for his company's study to
recommend whether bankruptcy is bet-
ter or worse than a regionwide bailout
because of the "varying interests" of
the six New England states.
However, he added, "The infor-
mation we provide will certainly give
the states a foundation to make their
own choices." Nielsen said the study
would be presented to the governors
May 15.
Some Wall Street analysts are talking
about the potential for bankruptcy
almost as if it's inevitable.
"THE MARKET is prepared for the
possibility of the first bankruptcy in
this industry since the Depression,"
says a new Dean Witter Reynolds Inc.
analysis of utility companies. "The
market is not ignoring the potential."
As a result, common stocks of many
electric utilities - one third of those on
Dean Witter's list - have been selling
at or within 25 cents of all time lows
With prices depressed, some in-
vestors have been attracted to utility
stocks because of their unusually high
yields-the ratio of divident to stock
prices. But the Dean Witter report poin-
ted out that there are dangers in buying
the stock of utilities building nuclear
plants.
PUBLIC SERVICE of Indiana, for
example, reduced its dividends in
January from $2.88 to $1 because of
money woes caused by the Marble Hill
nuclear project.
Cit y won't
And the stock of Long Island Lighting
Co., owners of the Shoreham nuclear
unit, was yielding 20 percent when the
dividend was dropped altogether in
March.
While industry officials were predic-
ting in January that the worst was
over, the Dean Witter report notes that
financial difficulties don't necessarily
end when a plant gets completed.
"SIMPLY NEARING the end of the
construction sysle is not enough to
cause an improvement in the fun-
damentals. A plant that has been com-
pleted must still be put in the rate base
and begin earning a current return of
investment.
"When the manufactured cost of the
product from new plant is a multiple of
the cost of the existing plant, regulatory
problems have a way of developing. An
election year does not improve that
process," according to Dean Witter.
Statistics support the growing con-
cern over tight-fisted regulatory rate
relief.
RATE INCREASES in 1983 totaled
$5.4 billion, a 29 percent drop from the
previous year and the lowest amount
raise stadium
since 1979, according to the Edison
Electric Institute, an electric utilities
trade group.
FFI said rate relief granted in the
fourth quarter of 1983 was about half of
1982's fourth quarter total.
The situation-at the twin-unit midland
nuclear plant' under construction in
Michigan is typical of the problems
faced in varying degrees by the
troubled nuclear utilities.
Last month, the board of directors of
Consumers Power, owners of the
Midland facility, voted to cut the com-
pany's dividend 45 percent.
At its new dividend rate, the Con-
sumers yield is 17 percent. But there are
serious questions how long the dividend
can be paid-and whether, given the
political and regulatory climate, the
utility can survive.
. "A worst case write-off scenario
would call for a $3.5 billion write-off on
a $3.2 billion equity base," according to
the Dean Witter report, written by first
vice president Judith Warrick.
The ratio is even worse, she said, for
public Service of Indiana, where the
worse case write-off scenario is $2.5
billion on a $1.4 billion equity base.
police fee
(Continued from Page 1)
Mayor Louis Belcher added that he wants to maintain good
relations with the University, and simply imposing the fee
might exacerbate tension between the city and the
University. Belcher said he wants to avoid the "open
warfare" existing between the University of Illinois and its
host city of Champaign-Urbana.
Jernigan also pointed out that the University already
contributes a great deal to the city by providing facilities for
the summer art fair in Ann Arbor and contributing to road
projects.
The tight vote was the culmination of an evening filled with
controversy.
Nearly a hundred people packed the Council chambers to
express their opposition to a resolution which would severely
limit the number of deputy voting registrars. The trouble was
that the resolution had never been introduced.
Actually, the resolution "regarding (the) deputy registrar
program," as the Council agenda put it, had to do with
setting up a committee to study the program.
SIX PEOPLE, responding to rumors that the resolution
would reduce the number of registrars from over 200 to about
30, voiced their opposition to such a resolution.
Referring to the number of people in the audience, Ann
Arbor resident Jean King said, "What you're seeing here is
an expression of how people feel about the franchise."
Each of the speaker's statements was followed by applause
and a chorus of "that's right!"
Another controversial topic was passed nine to two by
Council, but only after heated debate.
A zoning change regarding a proposed office building
partly owned by Belcher was passed after several Council
members expressed a concern that Belcher's business
interests could conflict with his civic responsibilities.
The proposed site, presently occupied by the Sun Bakery at
the corner of Liberty and Fifth, will face a public hearing
and another Council vote before work can begin.
Council also approved three resolutions authorizing
agreements with firms associated with Tally Hall to test the
structure during its construction.
The city will negotiate with McDowell and Associates to
test the foundation of the combination retail store area and
parking structure, and with Professional Service Industries,
Inc. to test the concrete to be used at the site. The firms will
receive a total of about $95,000 for their services, according to
Don Todd, a project engineer for the city.
Tally Hall, to be built on Washington Street behind the
Michigan Theatre, was designed by Walker and Associates,
who will receive about $35,000 for inspecting the eight-story
building as it is going up, Todd said.
Also last night, Council allowed the Count of Antipasto,
located at 1140 S. University, to expand its popular outdoor
sale of ! alcoholic beverages. The restaurant already had
permission from the city to sell alcohol at its 10 outdoor
tables, but it will now be able to sell alcohol at an additional
14 tables to be added onto the Church St. sidewalk.
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