[WPRT 107-3]
[From the U.S. Government Publishing Office]
107th Congress WMCP:
1st Session COMMITTEE PRINT 107-3
_______________________________________________________________________
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
__________
WRITTEN COMMENTS
on
TEMPORARILY SUSPENDING THE DUTY ON CERTAIN STEAM OR OTHER VAPOR
GENERATING BOILERS USED IN NUCLEAR FACILITIES
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
MAY 14, 2001
Printed for the use of the Committee on Ways and Means
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHILIP S. ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
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C O N T E N T S
----------
Page
Advisory of May 4, 2001, announcing request for written comments
on temporarily suspending the duty on certain steam or other
vapor generating boilers used in nuclear facilities............ 1
______
McDermott International Incorporated, Bruce N. Hatton, letter and
attachments.................................................... 2
Nuclear Energy Institute, Marvin S. Fertel, letter............... 4
Pinnacle West Capital Corporation, Robert S. Aiken, letter and
attachments.................................................... 7
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
May 4, 2001
No. FC-7
Thomas Announces Request for
Written Comments on Temporarily
Suspending the Duty on Certain Steam or
Other Vapor Generating Boilers Used in
Nuclear Facilities
Congressman Bill Thomas (R-CA), Chairman, Committee on Ways and
Means, today announced that the Committee is requesting written public
comments for the record from all parties with an interest in the
possible amendment of the HTSUS by altering subheading 9902.84.02
(permanent listing at 8402.11.00), Watertube boilers with a steam
production exceeding 45 t per hour, for use in nuclear facilities, to
become temporarily duty-free. The Committee is not asking for public
comment on other duty suspensions at this time.
BACKGROUND:
Energy costs have risen to alarming levels resulting in hardship
and blackouts in parts of the country. Perhaps hardest hit have been
people and businesses in California, who are looking for ways to
increase immediately the capacity to generate electricity. Suspending
the duty on boilers used in nuclear power plants will directly help the
operators of nuclear power plants and increase their efficiency and
generating capacity. In particular, nuclear plants that provide
electricity to California are intended to benefit from the proposal, as
well as other states purchasing boilers. The provision could be
included at a later date in ``The Electricity Emergency Act of 2001,''
introduced by Rep. Joe Barton (R-TX), for the purpose of providing
relief to electricity users this year. The current rate of 4.9 percent
was enacted in last year's Public Law 106-476, ``Tariff Suspension and
Trade Act of 2000.'' Last year's duty reduction of 4.9 percent is due
to expire on December 31, 2003, at which time the rate will return to
5.2 percent. The language follows:
(a) IN GENERAL.--Heading 9902.84.02 of the Harmonized Tariff
Schedule of the United States is amended----
(1) by striking ``4.9%'' and inserting ``Free''; and
(2) by striking ``12/31/2003'' and inserting ``12/31/
2006''.
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date noted on label, by the close of business, Monday, May 14, 2001, to
Allison Giles, Chief of Staff, Committee on Ways and Means, U.S. House
of Representatives, 1102 Longworth House Office Building, Washington,
D.C. 20515.
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McDermott International Incorporated
Arlington, Virginia 22209
May 14, 2001
Allison Giles
Chief of Staff
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, DC 20515
Re: Request for comments on temporary suspension of duty on nuclear
facility boilers
Subheading 9902.84.02/Permanent subheading 8402.11.00
Dear Ms. Giles:
McDermott International is strongly opposed to the proposed
temporary suspension of tariffs on certain steam or other vapor
generating boilers used in nuclear facilities as referenced in the
above subheadings. Such action would appear to be contrary to the
guidelines for tariff reductions which are established within the
committee.
McDermott is a leading energy services and manufacturing company
providing engineering, procurement, and manufacturing of equipment and
project management for customers involved in the production of energy
and in other industries. Babcock & Wilcox is a subsidiary of McDermott
that manufactures power generation systems, including steam or other
vapor generating boilers used in nuclear facilities. McDermott's North
American facilities, inclusive of those of Babcock & Wilcox are located
in Alliance, Ohio; Barberton, Ohio; Cambridge, Ontario, Canada;
Ebensburg, Pennsylvania; Harbour Island, Texas; Lancaster, Ohio;
Melville, Saskatchewan, Canada; Morgan City, Louisiana; Mt. Vernon,
Indiana; West Palm Beach, Florida; and West Point, Mississippi.
Suspension of the 4.9% duty to 2003 and the 5.2% duty from January
1, 2004 through the end of 2006 on certain steam or other vapor
generating boilers used in nuclear facilities would result in
substantial loss of revenue to the U.S. Treasury. Enclosure 1 is an
excerpt from the U.S. International Trade Commission report last year
to the House Ways and Means Committee. The potential amount of customs
duty loss stated in this report for the period 2000-2005 exceeds $30
million. This is far in excess of the revenue neutral criteria utilized
by the Committee in judging the merits of a tariff suspension.
To further support the ITC Report, in calendar year 2000, dutiable
imports into the U.S. were $96,208,070. At the applied rate of 5.2%,
revenue to the U.S. Treasury was $5,002,819. This would have been lost
had the duty suspension been in effect. Again, this amount cannot be
considered revenue neutral. Through February 2001, there has been a
further dutiable import from Italy amounting to $23,415,000. At the
applied duty rate of 4.9% in effect in 2001 this translates to a duty
of $1,147,000. This also would be lost if the duty suspension being
considered in the Ways and Means Committee was enacted into law, and
the duty loss in 2001 for this import alone exceeds the revenue neutral
criteria.
Enclosure 2 details dutiable and potentially dutiable imports into
the U.S. of vapor generating boilers used in nuclear facilities that
are expected to be imported into the U.S. during the 2001-2005
timeframe. Per the enclosure, a number of these projects have already
been awarded to overseas manufacturers. Excluding the Italian import
earlier this year, there are already-contracted imports on nuclear
boiler contracts for six units that are expected to enter the U.S.
between 2001 and 2005. They aggregate $256 million in imports with a
duty totaling $12.7 million. In addition, and also noted on Enclosure
2, are as-yet-unawarded but potentially dutiable imports of $400
million which are expected to enter into the U.S. by 2005. Total duty
on these is expected to be an additional $20.7 million. This revenue to
the U.S. Treasury of $33.4 million would be lost if the duty suspension
being considered by the House Ways and Means Committee is enacted.
Nuclear boiler contracts are often awarded on a supply, remove and
install basis. The company awards the overall contract and then
contracts with a nuclear boiler manufacturer for the supply of the
equipment. The contract price for the overall contract, including
removal and installation, is often public knowledge. However, the price
just for the equipment is often not made public. But, there are only a
few major models of nuclear boilers in the U.S. and by knowing the
pricing of nuclear boilers at another plant with the same basic model
of boilers, one can closely approximate the pricing of nuclear boilers
at a plant where the pricing of the boilers is not publicly known. We
have used our extensive knowledge of nuclear boiler models at specific
plants to complete the pricing shown on Enclosure 2.
A second criteria of the House Ways and Means Committee in
reviewing possible tariff suspensions deals with U.S. production.
Babcock & Wilcox maintains the capability to manufacture steam or other
vapor generating boilers for use in nuclear facilities at our plants in
Cambridge, Ontario, Canada; Mt. Vernon, Indiana and Barberton, Ohio. We
have performed significant nuclear boiler manufacturing work in our
U.S. facilities (component fabrication, component installation, heavy
assembly, final inspection and testing). There are a number of upcoming
nuclear plants requiring replacement nuclear boilers, for which the
U.S. facilities are the only ones capable of performing the work. This
is principally a size issue. We conduct virtually all of our research
and development in the United States. Our North American manufacturing
requires significant procurement of U.S. sourced materials and
services--14 suppliers in 12 states. We also undertake extensive
manufacturing of boilers for non-nuclear use in the United States. Our
ability to manufacture boilers for nuclear use in the United States
will depend on how future orders develop and the duty of HTSUS
Subheading 8402.11 remaining at current levels only through 2003.
A temporary duty suspension would have an adverse economic impact
on U.S. suppliers to Babcock & Wilcox. Over the past 3 years, Babcock &
Wilcox's operations in Cambridge, Ontario have issued purchase orders
to U.S. suppliers exceeding $8 million. These purchase orders were
strictly issued against Babcock & Wilcox's nuclear boiler contracts.
These vital suppliers are located in California, Connecticut, Maine,
Michigan, Missouri, Nevada, North Carolina, Ohio, Pennsylvania, Texas,
Virginia and West Virginia. As the duty suspension being considered by
the Ways and Means Committee would make Babcock & Wilcox less
competitive, then this could have a direct adverse impact on our U.S.
suppliers.
While the House Ways and Means Committee considers the suspension
of the U.S. duty under HTSUS Subheading 8402.11, U.S. competitors, such
as the European Union and Korea (a significant supplier), both maintain
duties on this product--2.7 percent and 8.0 percent, respectively. The
continued existence of duties in the EU and Korea coupled with the
concomitant suspension of duties on U.S. imports would undermine the
intent of NAFTA and encourage the migration of production from North
America to overseas.
As a final point, suspension of the duty on these boilers would
have absolutely no impact on the energy crisis in California or any
other state. It is the reliable supply of electricity that is crucial.
A tariff suspension, if it would have any impact at all, would be so
extremely minimal as to be invisible to the ratepayer.
In conclusion, the suspension of the duty on certain boilers
classified under HTSUS Subheading 8402.11 would adversely impact
McDermott International and its subsidiary Babcock & Wilcox and would
affect its production of such boilers in the United States. For the
reasons stated above, McDermott International and Babcock & Wilcox
oppose the suspension of the duty and request that these comments be
given formal consideration.
Sincerely,
Bruce N. Hatton
Vice President and General Manager
Enclosure 2--Expected Imports of Nuclear Boilers (2001-2005)
----------------------------------------------------------------------------------------------------------------
Expected Import Approx Import
Nuclear Plant Date Origin Value Duty
----------------------------------------------------------------------------------------------------------------
Kewaunee, Wis. Feb 2001 Italy $30m $1.5m
----------------------------------------------------------------------------------------------------------------
South Texas 2, Tex 2002 Spain $80m $3.9m
----------------------------------------------------------------------------------------------------------------
Sequoyah 1, Tenn 2002 Korea $40m $2.0m
----------------------------------------------------------------------------------------------------------------
Palo Verde 2, Ariz 2002 Italy $80m $3.9m
----------------------------------------------------------------------------------------------------------------
Prairie Island 1, Minn 2004 France $25m $1.3m
----------------------------------------------------------------------------------------------------------------
Potential Contracts for Delivery by End of 2005
----------------------------------------------------------------------------------------------------------------
Crystal River 3, Fla By 2005 Potentially dutiable $70m $3.6m
----------------------------------------------------------------------------------------------------------------
ANO 1, Ark By 2005 Potentially dutiable $70m $3.6m
----------------------------------------------------------------------------------------------------------------
Callaway, Mo By 2005 Potentially dutiable $65m $3.4m
----------------------------------------------------------------------------------------------------------------
Salem 2, N.J. By 2005 Potentially dutiable $55m $2.9m
----------------------------------------------------------------------------------------------------------------
Waterford 3, La By 2005 Potentially dutiable $70m $3.6m
----------------------------------------------------------------------------------------------------------------
TMI 1, PA By 2005 Potentially dutiable $70m $3.6m
----------------------------------------------------------------------------------------------------------------
Beaver Valley 1, PA By 2005 Spain $31m $1.6m
----------------------------------------------------------------------------------------------------------------
[An additional attachment is being retained in the Committee
files.]
Nuclear Energy Institute
Washington, DC 20006-3708
Hon. Bill Thomas
Chairman
House Committee on Ways and Means
Washington, DC 20515
We are writing in response to the Committee's May 4 request for
written public comments for the record from all parties with an
interest in the possible amendment of the Harmonized Tariff Schedule of
the United States by altering subheading 9902.84.02 (permanent listing
at 8402.11.00), Watertube boilers with a steam production exceeding 45
tons per hour, for use in nuclear facilities, to become temporarily
duty-free.
The Nuclear Energy Institute (NEI) submits the following statement
for consideration by the Committee and for inclusion in the printed
record. The statement briefly comments on the Miscellaneous Tariff and
Duty Suspension Act (P.L. 106-467). The statement also addresses a more
fundamental issue: the steam generator tariff is a detriment for the
U.S. electricity supply system at a time when electricity shortages are
limiting economic growth and impairing consumers' quality of life.
NEI coordinates public policy for the nuclear energy and
technologies industry, and participates in both the national and global
policy-making process. NEI's objective is to ensure the formation of
policies that promote the beneficial uses of nuclear energy and
technologies in the United States and around the world.
NEI members that operate pressurized water reactors (PWR) to
produce electricity must import steam generators because there has been
no U.S. manufacturer since 1999. Of the 103 nuclear power reactors that
generate 20 percent of U.S. electricity, 69 are pressurized water
reactors. These companies seek the elimination of the steam generator
tariff to produce electricity more economically and more reliably.
NEI encourages the Committee to suspend the tariff on steam
generators because there is no U.S. supplier, thus it does not injure
U.S. industry, and because it is in the best interest of U.S.
consumers.
Several regions of our nation have encountered significant power
shortages, which have led to brownouts or rolling blackouts in recent
weeks. Projections are for these trends to continue throughout the
summer. There is no short-term solution to increase electricity
production, however it would be illogical to preserve a tariff on an
imported manufactured good that enhances reliability, reduces power
generation costs and increases the production of electricity.
There is no current capability to produce steam generators in the
United States, nor does there appear to be any plans to develop a
domestic capability in the near future. Westinghouse, the last U.S.
manufacturer of steam generators, ceased production at its Pensacola,
Fla., facility in 1999. With no domestic alternative to importing steam
generators, U.S. electric companies are subject to a tariff that is
unnecessary.
Our country's electricity shortages will become even worse if U.S.
electric companies face delays in the acquisition of new steam
generators. Additionally, electricity prices will unnecessarily rise if
the industry doesn't have access to an open competitive market for
steam generators.
Steam generator replacement is a normal part of maintaining a well-
run nuclear power plant. Thirteen nuclear power reactors are planning
to replace 34 steam generators during the next five years. Steam
generator replacements are scheduled for nuclear power plants in
Arizona, Georgia, Maryland, Minnesota, Missouri, North Carolina, South
Carolina, Tennessee, Texas and Wisconsin. As demand for power
increases, it is imperative that the steam generator replacement
process be made more efficient, cost-effective and free of impediments.
With no domestic capability to produce steam generators, U.S.
electric companies are forced to import them. Steam generator prices
from abroad range from between $10 million and $25 million for each one
of these important components. At that cost, the 4.9 percent tariff for
each steam generator is $500,000 to $1.25 million--and some companies
must replace up to four steam generators. Therefore, replacement could
cost as much as $100 million, and the tariff would be an additional $2
million to $5 million.
Last year, Congress adjusted the tariff on steam generators from
5.2 percent to 4.9 percent in the Miscellaneous Tariff and Duty
Suspension Act (P.L. 106-476). This change did little to ease the
burden U.S. nuclear reactor owners must bear for importing these
components.
Congress was unable to remove the tariff because of restrictions
that prohibit such action if the industry-wide tariff exceeds $500,000
and if there is opposition to the removal of the tariff. However,
because there is no U.S. capability to manufacture steam generators for
nuclear power plants, it is unreasonable to burden our domestic nuclear
energy industry and electricity consumers with any tariff on these
components. Because no domestic steam generator manufacturer has
existed since 1999, it is also reasonable for this Committee to apply
the elimination of this tariff to steam generators delivered on or
after January 1, 2000.
BWX-Canada, a subsidiary of New Orleans-based McDermott
International, is the only North American producer of steam generators.
Although this facility is an important supply source for U.S. industry,
BWX-Canada has not met all of U.S. demand, so U.S. electric companies
must import steam generators. Furthermore, BWX-Canada does not have
agreements with previous U.S. steam generator manufacturers to produce
all types of steam generators used in our nation's nuclear power
plants.
McDermott International has stated that removal of the tariff would
be contrary to provisions of the North American Free Trade Agreement
(NAFTA). Congress and the committees of jurisdiction (Finance and Ways
and Means) on this issue last year rejected concern about NAFTA by
approving a tariff reduction, albeit limited because of congressional
budget concerns regarding the Miscellaneous Tariff and Duty Suspension
Act as a whole. In fact, NAFTA was never intended to be a trade
protection agreement, and certainly was not intended to harm U.S.
industry and electricity customers. Congressional budget concerns have
been alleviated so Congress should eliminate the tariff.
National energy policy initiatives are encouraging improved
efficiency and production of domestic electricity sources. Steam
generator replacement dramatically improves efficiency, increasing
production by as much as 50 megawatts at large reactors. Eliminating
the tariff on steam generators should be among the policy initiatives
this Committee undertakes to promote affordable, reliable consumer
electricity, U.S. energy security and diversity of energy supply.
In these times of uncertainty in some sectors of the energy market,
we need to do all we can to remove any impediments toward securing
much-needed electricity. It is incumbent on us to remove unnecessary
obstructions to increased electricity production. The just solution to
such an outcome is legislation eliminating the steam generator tariff.
Sincerely,
Marvin S. Fertel
NEI Senior Vice President, Business Operations
Pinnacle West Capital Corporation
Washington, DC 20006
May 4, 2001
To: David Kavanaugh
Office of Congressman Bill Thomas
From: Robert S. Aiken
Subject: Babcock & Wilcox Steam Generator Backlog
The attached letter from Carl Churchman, Director, Palo Verde Steam
Generator Replacement Project, dated April 27, 2001 provides specific
details to support the contention that the B&W Canada SG manufacturing
facility was backlogged and unable to meet the replacement schedule for
Palo Verde. And, therefore, it has been necessary for Palo Verde and
other nuclear plants to order SGs from manufacturing facilities in
other countries.
To summarize the key facts I offer the following as outlined in the
letter:
1. LPalo Verde management selected Ansaldo in Milan, Italy because
of two important factors--price and schedule.
2. LIn 1996, Palo Verde management after reviewing B&W Canada's
shop capability believed there to be a significant risk for a delay due
to the possible backlog in the manufacturing facility.
3. LThis proved to be correct when B&W Canada announced two years
later in 1998 that ``This contract . . . maintains a backlog of work
through the year 2002,'' after a new steam generator order was signed.
(See attached)
4. LThis backlog, as self-described by the B&W press release, is
buttressed by the announcement of the six replacement steam generators
for Duke Oconee Nuclear Station in 1999. (See attached)
5. LThe backlog is further supported by the phone call placed by
Jim Smith (General Manager of the steam generator fabrication shop at
B&W Canada) to Carl Churchman in June of 2000 when unbelievably he
attempted to drum up new business for the Canadian firm by offering to
contract with Palo Verde to manufacture the four replacement SGs for
units one and three for delivery in the 2006-2008 range. Remarkably, he
told Carl Churchman that the SGs would have to be fabricated in Korea
through a joint venture because the Canadian shop was at capacity and
B&W had ``no plans to pour millions of dollars into their Mt. Vernon
shop in Ohio.''
6. LThe attached documentation further demonstrates that the
Canadian plant is backlogged because B&W Canada is touting the fact
that they are ``exporting a billion dollars in business over the next
10 years and has 50% of the world market.''
7. LNuclear plants (such as Palo Verde), who have ordered
replacement SGs directly from fabrication plants in those countries for
price and schedule considerations shouldn't be penalized by having to
pay the 4.9% duty to have them delivered into the U.S.
I'll be pleased to answer any further questions you may have. Thank
you for your support.
Attachment
Pinnacle West Capital Corporation
Washington, DC 20006
April 6, 2001
To: David Kavanaugh
Office of Congressman Bill Thomas
From: Robert S. Aiken
Palo Verde Nuclear Generating Station is essential to the energy
security and day-to-day lives of citizens in the American Southwest,
including California. When the plant began operation in 1986, Energy
Secretary John Herrington called it the ``energy cornerstone of the
Southwest'' and a vital asset for generations to come. That was true
then, as it is today, with the added relevance underscored by the
ongoing energy crisis in California.
Palo Verde provides hope that the lights can stay on and that the
economy can remain strong and return to the levels we continue to
strive to achieve.
Every year for the last six years, Palo Verde has set successive
records for total generation. Last year, Palo Verde produced more than
30 billion kilowatt hours of electricity. The next largest producer--
the Grand Coulee Dam in the state of Washington--has topped out at 26.8
billion kilowatt hours (in 1997). And it is important to point out that
Palo Verde's production is not simply the result of its impressive
size--three identical units of nearly 1,300 megawatts (MW) apiece. It
is a testament of Palo Verde's sustained excellence since 1994. In the
past seven years, Palo Verde has attained three ratings of ``INPO 1.''
The Institute of Nuclear Power Operations (INPO) is the industry
organization formed after the accident at Three-Mile Island to define
and help bring about excellence in the operation of America's fleet of
more than 100 nuclear plants. INPO's top rating--``1''--is elusive and
much coveted.
Palo Verde has come to the forefront. And I must point out that
Palo Verde--located in the Arizona desert--is not for Arizona alone.
Its owners are based additionally in Texas, New Mexico and California.
In fact, more than a quarter of the interest in Palo Verde is owned by
California entities--Southern California Edison, the Los Angeles
Department of Water and Power and Southern California Public Power
Authority. Fully 27.3 percent of the electricity Palo Verde produces,
goes to California homes and businesses. That's nearly 8 billion
kilowatt hours a year, or enough for more than a million citizens.
It is clear that Palo Verde is an essential resource--especially
today--that must be kept strong and at the current level of excellence
and production. But that won't happen by itself. Ongoing maintenance
and upgrades are required.
The staff at Palo Verde has done an outstanding job in that regard,
at least according to standards set by INPO as well as the U.S. Nuclear
Regulatory Commission. But they need our help.
Like every other nuclear plant of its design and vintage, Palo
Verde needs new steam generators. They are required in Unit 2 simply to
maintain operation through the current license, which expires in 2026.
Units 1 and 3 will need new steam generators in the coming years as
well, if those licenses are to be extended.
Work is proceeding aggressively on the steam generator replacement
at Unit 2. The project will improve plant efficiency and increase
output by 55 MW. Without replacement of these components, the units
would soon lose output at the very substantial rate of 4.7 percent per
year and face a forced shutdown by 2010. As we complete the replacement
project and avoid the negative effects and accrue the benefits, the 27%
of the generation owned by California will be protected and increased.
But Palo Verde faces an unfair penalty. Steam generators are
produced in Canada, Spain, Italy and Korea. Ansaldo of Italy is now
building the steam generators for the Unit 2 replacement project, a
more than $40 million undertaking. No U.S. companies manufacture steam
generators on American soil. So you can see, Palo Verde has no other
choice.
Nonetheless, Palo Verde faces a `penalty' of approximately $2
million for this required, strategic and forward-looking undertaking. A
half-million dollars of this cost would go directly to California rate
payers. Today, a tariff of 4.9 percent is in place on the import of
steam generators into the United States.
The evidence clearly shows that this project is critical to the
energy future of California and the economy of the West and beyond. We
ought to be providing incentives for solutions to this crisis, not
hurdles that serve only to lengthen and exacerbate the situation.
What I propose, therefore, is a permanent repeal of the tariff
through 2012. This will allow relief to the Palo Verde Unit 2 steam
generator replacement project and provide the flexibility for the
owners of Palo Verde to move forward without penalty on steam generator
replacement for Units 1 and 3, if and when they decide over the next
few years.
The logic and priority is clear. I urge you to do all you can to
enact this tariff relief.
Thank you.
Graph 1--Owners of Palo Verde Nuclear Generating Station
------------------------------------------------------------------------
------------------------------------------------------------------------
Pinnacle West (Arizona Public Service) 29.1%
------------------------------------------------------------------------
Salt River Project 17.5%
------------------------------------------------------------------------
El Paso Electric 15.8%
------------------------------------------------------------------------
Public Service of New Mexico 10.2%
------------------------------------------------------------------------
California Owners:
------------------------------------------------------------------------
Southern California Edison 15.8%
------------------------------------------------------------------------
Southern California Public Power Authority 5.9%
------------------------------------------------------------------------
Los Angeles Department of Water & Power 5.7%
------------------------------------------------------------------------
Total California: 27.4%
------------------------------------------------------------------------
Graph 2
----------------------------------------------------------------------------------------------------------------
Plant Name Year Total Production
----------------------------------------------------------------------------------------------------------------
Palo Verde 1999 30,438,939
----------------------------------------------------------------------------------------------------------------
Palo Verde 2000 30,383,570
----------------------------------------------------------------------------------------------------------------
Palo Verde 1998 30,097,419
----------------------------------------------------------------------------------------------------------------
Palo Verde 1997 29,209,066
----------------------------------------------------------------------------------------------------------------
Palo Verde 1996 28,590,965
----------------------------------------------------------------------------------------------------------------
Grand Coulee Dam 1996 27,358,179
----------------------------------------------------------------------------------------------------------------
** Totals are in megawatt hours.
[Additional attachments are being retained in the Committee files.]