Allegheny Power 2011 Annual Report Download - page 72

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On October 1, 2011, Davis-Besse was safely shut down for a scheduled outage to install a new reactor vessel head and complete
other maintenance activities. The new reactor head, which replaced a head installed in 2002, enhances safety and reliability, and
features control rod nozzles made of material less susceptible to cracking. On October 10, 2011, following opening of the building
for installation of the new reactor head, a sub-surface hairline crack was identified in one of the exterior architectural elements on
the shield building. These elements serve as architectural features and do not have structural significance. During investigation of
the crack at the shield building opening, concrete samples and electronic testing found similar sub-surface hairline cracks in most
of the building's architectural elements. FENOC's investigation also identified other indications. Included among them were sub-
surface hairline cracks in the upper portion of the shield building (above elevation 780') and in the vicinity of the main steam line
penetrations. A team of industry-recognized structural concrete experts and Davis-Besse engineers has determined these conditions
do not affect the facility's structural integrity or safety.
On December 2, 2011, the NRC issued a CAL which concluded that FENOC provided "reasonable assurance that the shield building
remains capable of performing its safety functions." The CAL imposed a number of commitments from FENOC including, submitting
a root cause evaluation and corrective actions to the NRC by February 28, 2012, and further evaluations of the shield building. On
February 27, 2012, FENOC sent the root cause evaluation to the NRC. Finally, the CAL also stated that the NRC was still evaluating
whether the current condition of the shield building conforms to the plant's licensing basis. On December 6, 2011, the Davis-Besse
plant returned to service.
By letter dated August 25, 2011, the NRC made a final significance determination (white) associated with a violation that occurred
during the retraction of a source range monitor from the Perry reactor vessel. The NRC also placed Perry in the degraded cornerstone
column (Column 3) of the NRC's Action Matrix governing the oversight of commercial nuclear reactors. As a result, the NRC staff
will conduct several supplemental inspections, culminating in an inspection using Inspection Procedure 95002 to determine if the
root cause and contributing causes of risk significant performance issues are understood, the extent of condition has been identified,
whether safety culture contributed to the performance issues, and if FENOC's corrective actions are sufficient to address the causes
and prevent recurrence.
In light of the impacts of the earthquake and tsunami on the reactors in Fukushima, Japan, the NRC conducted inspections of
emergency equipment at U.S. reactors. The NRC also established a Near-Term Task Force to review its processes and regulations
in light of the incident, and, on July 12, 2011, the Task Force issued its report of recommendations for regulatory changes. On
October 18, 2011, the NRC approved the Staff recommendations, and directed the Staff to implement its near-term recommendations
without delay. Ultimately, the adoption of the Staff recommendations on near-term actions is likely to result in additional costs to
implement plant modifications and upgrades required by the regulatory process over the next several years, which costs are likely
to be material.
On February 16, 2012, the NRC issued a request for information to the licensed operators of 11 nuclear power plants, including
Beaver Valley Power Station Units 1 and 2, with respect to the modeling of fuel performance as it relates to "thermal conductivity
degradation," which is the potential in older fuel for reduced capacity to transfer heat that could potentially change its performance
during various accident scenarios, including loss of coolant accidents. The request for information indicated that this phenomenon
has not been accounted for adequately in performance models for the fuel developed by the fuel manufacturer. The NRC is requesting
that FENOC provide an analysis to demonstrate that the NRC regulations are being met. Absent that demonstration, the request
indicates that the NRC may consider imposing restrictions on reactor operating limits until the issue is satisfactorily resolved.
ICG Litigation
On December 28, 2006, AE Supply and MP filed a complaint in the Court of Common Pleas of Allegheny County, Pennsylvania
against ICG, Anker WV, and Anker Coal. Anker WV entered into a long term Coal Sales Agreement with AE Supply and MP for the
supply of coal to the Harrison generating facility. Prior to the time of trial, ICG was dismissed as a defendant by the Court, which
issue can be the subject of a future appeal. As a result of defendants' past and continued failure to supply the contracted coal, AE
Supply and MP have incurred and will continue to incur significant additional costs for purchasing replacement coal. A non-jury trial
was held from January 10, 2011 through February 1, 2011. At trial, AE Supply and MP presented evidence that they have incurred
in excess of $80 million in damages for replacement coal purchased through the end of 2010 and will incur additional damages in
excess of $150 million for future shortfalls. Defendants primarily claim that their performance is excused under a force majeure
clause in the coal sales agreement and presented evidence at trial that they will continue to not provide the contracted yearly
tonnage amounts. On May 2, 2011, the court entered a verdict in favor of AE Supply and MP for $104 million ($90 million in future
damages and $14 million for replacement coal / interest). Post-trial filings occurred in May 2011, with Oral Argument on June 28,
2011. On August 25, 2011, the Allegheny County Court denied all Motions for Post-Trial relief and the May 2, 2011 verdict became
final. On August 26, 2011, ICG posted bond and filed a Notice of Appeal. Briefing on the Appeal is concluded with oral argument
expected in May or June of 2012. AE Supply and MP intend to vigorously pursue this matter through appeal.
Other Legal Matters
In February 2010, a class action lawsuit was filed in Geauga County Court of Common Pleas against FirstEnergy, CEI and OE
seeking declaratory judgment and injunctive relief, as well as compensatory, incidental and consequential damages, on behalf of
a class of customers related to the reduction of a discount that had previously been in place for residential customers with electric
heating, electric water heating, or load management systems. The reduction in the discount was approved by the PUCO. In March
2010, the named-defendant companies filed a motion to dismiss the case due to the lack of jurisdiction of the court of common