A Watchful Eye on the Black Ink
In the corporate boardroom in Reading, where the bottom line is black ink, the long view about Metropolitan Edison Co. was upbeat, for good reason. The darling of the system, the new nuclear unit No. 2 at Three Mile Island, had begun delivering power last Dec. 30.
As books are balanced and tax laws written, that date one day before the federal tax year ended would play an important role in the flow of black ink in Reading. By getting TMI 2 into service 25 hours before the new year, Met Ed saved itself upwards of $40 million in taxes.
For such decisions, corporate managers win praise. Met Ed's annual report took note of the tax advantages gained by putting TMI 2 into service. Walter M. Creitz, the graying company president who wears designer eyeglasses, wrote that that would make 1978 "a memorable year."
TMI 2 meant more to Met Ed and its parent holding company, General Public Utilities Corp. (GPU) of Parsippany, N.J., than just another marvel of modern engineering. It was the $180 million vehicle that would get Met Ed stockholders' return on their investment back up near the 13.6 percent level allowed by the state Public Utility Commission. In ledger books where black ink is measured in decimals, 1978 had not been all that good megawatt-hour sales were up about 7 percent, but revenues climbed only 2 percent. The rate of return on common stocks was 12.9 percent, down slightly from the 13.1 percent of 1977.
Met Ed is one of three electric companies that operate under the umbrella of GPU, and it owns half of the Three Mile Island complex. The other partners are Jersey Central Power & Light Co., and the Pennsylvania Electric Co. Among them, they provide most of the electricity used in Pennsylvania and New Jersey.
By getting TMI 2 into service before the end of the year, Met Ed, as principal operator of the plant, stood to gain in three ways.
Its pending rate-increase request with the state (a 19 percent boost took effect the day after the accident) hinged on getting the plant into operation. The sooner it went on the line, the sooner the new rate could be collected.
And there were two other considerations. The company was able to claim about $20 million for six months' federal tax depreciation by putting TMI 2 into service before the end of the year. And according to data Met Ed filed with the Federal Energy Regulatory Commission, it expected to gain between $17 million and $28 million in investment tax credits direct writeoffs.
Creitz conceded to reporters after the accident that Met Ed had gained tax advantages by getting TMI 2 into service in 1978. But he and John G. Herbein, his vice president for power generation, insisted that there had been no "rush" to beat the calendar at the expense of safety.
Yet, the record suggested questions. Between March 28, 1978, when the chain reaction began in the nuclear unit, and its December entry into commercial service, the plant had been shut down for repairs 195 of the 274 days 71 percent of the time. That was not typical of the industry as a whole, which reports about a 40 percent malfunction rate during early reactor operations. And during those 274 days, Met Ed found problems that were similar to those that occurred on the day of the Big Accident. Operating problems continued after the plant was put into service, but, Creitz said, they had nothing to do with a rush for money.
"We certainly never would have put it in service unless we were convinced it could be safely operated," Creitz said.
The NRC, in its preliminary reports, said that human errors as well as trouble with valves within the plant's cooling system were major contributors to the accident. Warning signals had shown up earlier. In January, TMI 2 was shut down for two weeks because of problems with the cooling system.
But the men at Med Ed apparently felt confident. The NRC had licensed the plant in February 1978 after a decade of hassling and citizen protests in Dauphin County. And in September, Deputy Energy Secretary John F. O'Leary had flown to Three Mile Island to dedicate the plant as another "success" in the nation's effort to wean itself from dependency on oil.
Success, of course, is relative, and the accident has dealt a severe blow to the electrical system's financial stability, even though Met Ed has $33 million of liability insurance on the plant. GPU has stopped all but the most critical construction work to conserve cash it may need for rehabilitation. GPU stock that was selling at 17 7/8ths before the disaster closed at 14 on April 6.
The bottom line still is written in black ink. Six days after the accident, GPU Chairman William G. Kuhns hastened to reassure stockholders. Public health and safety were being dealt with at the plant, he wrote in a mimeographed letter which included a lengthy report on the financial picture.
Kuhns' letter did not mention this among the steps taken to preserve Met Ed's fiscal integrity: The firm ruled that pregnant employees who were evacuated from the radiation danger area would not be paid for time away from work.
© Copyright 1979 The Washington Post Company