Stanley Ragone, executive vice president of Virginia Electric & Power Co., today admitted that he and other Vepco officials assumed the price of uranium would be relatively stable when they entered into ill-fated, long-term supply contracts with Westinghouse.
Assumptions about the future price of uranium are believed by Westinghouse attorneys to be crucial to the company's defense in the complicated breach of contract case being tried here before U.S. District Court Judge Robert R. Mehrige Jr.
In his cross-examination of Ragone, Westinghouse lawyer William R. Jentes is trying to convince the court that the increase in the price of uranium from $7 and $8 a pound called for in the Vepco contracts to $26 a pound represented a contingency neither party anticipated and one that entitles Westinghouse to be excused from its contracts under the Uniform Commercial Code.
Vepco nine other major utilities are asking the court here to force Westinghouse to fulfill the contracts in question despite its claim that unforeseen events made them "commercially impracticable." Westinghouse cites the Arab oil embargo, an international uranium cartel and various governmental actions as the unforeseen events that forced the market price of uranium up to $26 a pound by Sept. 8, 1975, when Westinghouse announced it could no longer fulfill its contracts. Vepco has three disputed uranium supply contracts with Westinghouse, one signed in 1972 and two signed in 1974, and is seeking delivery of the uranium called for or enough in damages to buy the same amount now on the open market at more than $40 a pound.
During Jentes' cross-examination of Ragone, which began yesterday and will continue Tuesday when court resumes. Ragone admitted as internal utility documents were presented that Vepco officials assumed prior to signing the contracts that the price of uranium would not rise any faster than the general rate of inflation. Evidence was introduced indicating that Ragone had testified before the Virginia Corporation Commission that in 1974 that Vepco expected the prices of uranium to go up only to between $10 and $15 a pound through the early 1980s, and that they expected "even better" availability of uranium in the future.
In an opening statement to the court on the Vepco into its contracts. Westinghouse was "open and above broad" in its negotiations and had identified its supply problem "at an early date," he said.
In addition, Page claimed the fact that Westinghouse took "specific exceptions" to the terms Vepco wanted in the 1072 contract - and they were not included - indicated that Westinghouse was making no assurances of supply, no representations of inventory, and was not undertaking "any unusual contractual obligations" over and above the terms stated in the contract.
Vepco had originally wanted its supplier, but Westinghouse had refused to "certify" its reserves and to "assure" Vepco of delivery.
Vepco, "despite a warning from its counsel," went ahead and signed the contracts without the assurances it now says it received, Page contended. However, the exceptions it took made it "impossible" for Vepco to have believed that Westinghouse had the uranium on hand, he argued.
The specifics of the 1972 contract also appeared to be in contention. Vepco claims it is a contract that, required it to purchase a minimum of quired it to purchase a minimum of uranium each year and allowed it to take up to a maxiumum amount, and that it could use the uranium for stockpile purposes. On the other hand, Westinghouse contends it was a contract that allowed Vepco to take "only" amounts of uranium it needed to satisfy its requirements each year.
Although it could have taken a maxiumum of 1.3 million pouns in 1975, Vepco had elected to take only 410.000 pounds, Page pointed out. Since Westinghouse abandoned the contracts in 1975, however, Vepco has continued to send letters each year notifying the would-be uranium suppliers that Vepco wants the maximum amount under the contracts the next year. "That is documentary proof that hope springs eternal," Judge Merhige said.
Page said the evidence would show that Vepco even turned down an offer of uranium at $8 at one point because it thought the price of uranium was going down.
Westinghouse attorneys claims Vepco officials knew before they signed the 1974 contracts that Westinghouse was having supplyproblems.