Virginia Elec. and Power Co. v. Division of Consumer Counsel, Office of Atty. Gen.

• Decision Date: 18 April 1980
• Docket Number: No. 791583,791583
• Citation: 220 Va. 930,265 S.E.2d 697
• Parties: VIRGINIA ELECTRIC AND POWER COMPANY v. DIVISION OF CONSUMER COUNSEL, OFFICE OF ATTORNEY GENERAL and State CorporationCommission. Record
• Court: Virginia Supreme Court

Page 697

265 S.E.2d 697

220 Va. 930

VIRGINIA ELECTRIC AND POWER COMPANY v. DIVISION OF CONSUMER COUNSEL, OFFICE OF ATTORNEY GENERAL and State CorporationCommission.

Record No. 791583.

Supreme Court of Virginia.

April 18, 1980.

Evans B. Brasfield, Richmond (Richard D. Gary, Hunton & Williams, Richmond, on brief), for appellant.

Anthony J. Gambardella, Jr., Asst. Atty. Gen., Donald G. Owens, Richmond (Marshall Coleman, Atty. Gen., Lewis F. Minter; Edward L. Flippen; Denton C. Roberts, Richmond, on briefs), for appellees.

Before I'ANSON, C. J., and CARRICO, HARRISON, COCHRAN, POFF, COMPTON and THOMPSON, JJ.

I'ANSON, Chief Justice.

In this appeal, Virginia Electric and Power Company (VEPCO) challenges the State Corporation Commission's disallowance of a fuel cost adjustment reflecting fuel costs incurred because of a shutdown of the Surry Number 2 nuclear unit for 9.6 days in November 1977. The Commission determined that the shutdown was caused by a leak in a steam generator tube, that the energy replacement cost resulting from the outage was $4,696,766, and that the cost charged to Virginia jurisdictional customers through VEPCO's fuel adjustment clause was $3,287,736. The Commission ruled that VEPCO's evidence failed to support the reasonableness of the additional fuel costs incurred and ordered that $3,287,736 be refunded to Virginia customers in the form of a credit through VEPCO's 1979 fuel cost adjustment clause. Claiming that the Commission incorrectly applied the governing principles of law, VEPCO contends that the leak in the steam generator tube resulted from human error, rather than imprudent management. In addition, VEPCO asserts that the duration of the outage was dictated by an entirely independent problem, a leaking pressurized valve, and that it should be allowed to recover the fuel costs associated with this concurrent problem.

Subject to review by the Commission, electric utility companies are authorized to pass along to consumers increases in their fuel costs. See Code §§ 56-249.3, -249.4, and -249.6. Because nuclear energy is substantially cheaper than other sources for generating electricity, VEPCO and other electric utility companies attempt to maximize the use of their nuclear generators. Whenever nuclear generators are being serviced, VEPCO's fuel costs increase. These increases are reflected in its fuel adjustment clause.

Prior to 1977, VEPCO's Surry Nuclear Units 1 and 2 began experiencing a high number of forced shutdowns due to the denting and subsequent cracking of steam generator tubes because of corrosion of the tube support plates. These tube failures result in the leakage of radioactive coolant from the primary system of the generating unit into a non-radioactive secondary system. Such tube leakage requires a forced shutdown, at which time the defective tube is located and plugged to prevent additional leakage.

In conjunction with Westinghouse Electric Corporation, VEPCO devised a plan to avoid such tube failures. The developed program included a computer prediction of areas where tube failures would be likely and an instrument probe of only those areas. ¹ In probing the tubes, field operators use an Eddy Current probe, which generates an electrical signal producing an oscilloscope picture recorded on magnetic tape. This signal is also recorded on a strip chart, on which field operators mark the identity of the probed tube. The tape and strip chart are then reviewed by an interpreter, who is responsible for determining whether further investigation of a tube is warranted. To minimize the duration of an outage, the interpreter works long hours during inspections. He reports his findings on an Eddy Current Test Sequence data sheet. Substantially dented tubes (those not allowing passage of a .610-inch probe) are then plugged, and slightly dented tubes (those not allowing passage of a .650-inch probe but allowing passage of a .610-inch probe) are scheduled for reinspection at the next scheduled shutdown.

In March 1977, pursuant to VEPCO's new inspection program, workers inspected the steam generator tubes at the Surry Unit Number 2. In September 1977, another inspection of the tubes at this unit was conducted, and the unit was brought back into service on October 12. On November 18, VEPCO was forced to shut down operations at Surry Unit Number 2 because of a leaking steam generator tube in its "A" generator. This unit was inoperative for 9.6 days. The leaking tube, R5C26 (row 5, column 26), had been probed in March 1977. Since that inspection revealed that this tube was slightly dented, it had been scheduled for reinspection in September. No inspection of R5C26 took place in September, however. Although no strip chart or oscilloscope trace existed for tube R5C26, the interpreter incorrectly noted that it had been examined and was determined to be "O.K." According to VEPCO's Director of Nuclear Operations, the interpreter "just probably was going too fast and it was a long day and he put down data that did not exist." A total of 6,144 tubes was scheduled for inspection in September; this total included 421 tubes examined in March and scheduled for reinspection because of the March probe results.

After the shutdown, VEPCO instituted a procedure for double-checking tube inspections. The new procedure involves a comparison of the strip charts and the Eddy Current Test Sequence data sheet. Furthermore, the new procedure also calls for greater scrutiny of tubes determined to be slightly dented.

Code § 56-249.4(B) ² requires the Commission to "review and evaluate" information concerning fuel cost adjustments and to disallow any increases that "cannot be supported" by testimony received at the quarterly hearings and by information submitted by the utility. The parties to this appeal agree that the Commission is empowered to disallow any expenses resulting from managerial inefficiency, waste, imprudence, or abuse of discretion. See West Ohio Gas Co. v. Public Utilities Commission, 294 U.S. 63, 72, 55 S.Ct. 316, 321, 79 L.Ed. 761 (1935); Norfolk v. Chesapeake, Etc., Tel. Co., 192 Va. 292, 311-13, 64 S.E.2d 772, 783-84 (1951). ³ VEPCO contends, however, that the Commission did not properly apply this principle in this case.

In its opinion of November...