Summary

The nuclear accident at the Three Mile Island powerplant triggered a number of serious problems for the General Public Utilities Corporation, and affiliated companies, including a near financial crisis as they moved to purchase high-cost replacement power to maintain service to their customers. The companies must spend $500-600 million to decontaminate and repair the damaged nuclear reactor and related facilites while continuing to fund an additional $2 to 3 billion in capital expenditures to insure reliable electric service to their customers. GAO explored the financial alternatives for meeting the large costs and whether federal and state regulatory agencies effectively dealt with the situation. The corporation, through its extensive interconnections with other utility systems, was able to buy power to replace that lost from the Three Mile Island reactors, but the largely oil generated power had a high cost. This high cost of replacement power was not initially included in customers' utility rates and the companies had to find outside funding. Rate increases were finally approved by state regulatory agencies but the actual costs made it difficult for the companies to meet current expenses. Reduced earnings will likely affect the companies' ability to pay clean-up costs and maintain reliability. Regulatory controls over these activities are fragmented among three federal and two state agencies and provide no clear direction for planning clean-up, additional capacity requirements, and methods of financing.

The financial stability of the General Public Utilities system has been seriously affected by the results of the accident but recent state regulatory decisions have temporarily alleviated the system's cash flow problems and maintained the system's solvency. Removal of the Three Mile Island units from the companies' rate base considerations has an adverse impact on earnings needed to assure the system's future financial viability and the continuation of reliable power supplies. The Three Mile Island-2 accident has severely limited the system companies' ability to obtain funds from the capital market. The loss of earnings capability raises questions as to the system's ability to fund Three Mile Island-2 clean-up costs and needed generating capacity. Federal regulatory agencies have done little to expedite the system's recovery from the accident. Further examination of the Three Mile Island aftermath is warranted.