01-16552. In the Matter of Public Service Company of New Mexico (Palo Verde Nuclear Generating Station, Units 1, 2, and 3); Superseding Order Approving Modified Application Regarding Proposed Corporate Restructuring

I

Public Service Company of New Mexico (PNM) holds minority ownership interests (both owned and leased) in Palo Verde Nuclear Generating Station (Palo Verde) Units 1, 2, and 3, and in connection therewith is a holder of Facility Operating Licenses Nos. NPF-41, NPF-51, and NPF-74 for Palo Verde. The facility is located in Maricopa County, Arizona. Other co-licensees for Palo Verde are Arizona Public Service Company (APS) (owner or lessee of a 29.1 percent share of each of the three units), Salt River Project Agricultural Improvement and Power District (owner of a 17.49 percent share), El Paso Electric Company (owner of a 15.8 percent share), Southern California Edison Company (owner of a 15.8 percent share), Southern California Public Power Authority (owner of a 5.91 percent share), and Los Angeles Department of Water and Power (owner of a 5.70 percent share). APS is the licensed operator of the Palo Verde units. The remaining licensees hold possession-only licenses.

II

Pursuant to section 184 of the Atomic Energy Act of 1954, as amended, and 10 CFR 50.80, PNM filed an application dated March 3, 2000, requesting approval of the indirect transfer of the Palo Verde licenses, to the extent held by PNM, to a new holding company to be established, then proposed to be named Manzano Corporation (Manzano). Supplemental information on this application was forwarded to the NRC by PNM's outside counsel, Shaw Pittman, in letters dated August 14, August 17, and September 7, 2000. The new holding company was to be established to implement the public utility restructuring requirements of the New Mexico Electric Utility Industry Restructuring Act of 1999. The proposed restructuring of PNM would have encompassed the formation of Manzano and Manzano becoming the holding company for PNM, the transfer by PNM of its electric and gas transmission and distribution businesses to an affiliated company to be named “Public Service Company of New Mexico” (with PNM and such affiliated company being under common control by Manzano), and a change in PNM's name to Manzano Energy Corporation (Manzano Energy). By application dated April 26, 2000, APS requested approval, pursuant to 10 CFR 50.90, of proposed conforming amendments to reflect in the Palo Verde licenses the name change of PNM to Manzano Energy Corporation that would have occurred in connection with the planned restructuring. APS would have retained its existing ownership interest in, and would have remained the licensed operator of Palo Verde after the above restructuring of PNM, and otherwise would not have been involved in the restructuring. Similarly, none of the other co-licensees would have been involved in the restructuring of PNM. No physical changes to the facility or operational changes were being proposed in the applications filed by PNM and APS. Notice of the applications and an opportunity for hearing was published in the Federal Register on May 26, 2000 (65 FR 34370). No written comments or hearing requests were received.

III

By an Order dated September 29, 2000, the application regarding the proposed restructuring of PNM was approved, subject to certain conditions contained in that Order. To date, the proposed restructuring has not occurred. The application for conforming license amendments was also approved by the Order, but the amendments were to be issued and made effective only at the time the proposed restructuring action was completed, including in particular the name change of PNM.

Subsequently, by letters dated March 20 and May 15, 2001, from counsel for PNM, the Commission was informed that in March of 2001 the State of New Mexico enacted into law Senate Bill 266, “An Act Relating to Electric Utilities; Delaying Customer Choice Provisions and Implementation of the Electric Utility Industry Restructuring Act of 1999” (SB 266). With respect to PNM's proposed restructuring that was the subject of the September 29, 2000, Order, SB 266 does not affect PNM's plans to establish a new holding company for PNM. However, it delays until January 1, 2007, the start of customer choice in the retail electricity market, and, therefore, delays PNM's plans to separate its transmission and distribution assets into a new affiliate. Any such plans for separation will now be required to be refiled with the New Mexico Public Regulation Commission (NMPRC) by 2005, and approved by NMPRC by 2006.

According to the March 20 and May 15, 2001, submittals, in light of SB 266, there have been several changes to the information provided in the March 3, 2000, application and supplements thereto. In summary, in contrast to earlier information provided in the March 3, 2000, application and supplements thereto, PNM was an “electric utility,” under the definition set forth in 10 CFR 50.2, in the year 2000, and expects to continue to be such until at least 2007, notwithstanding the establishment of a new holding company; the name of the company, which has already been formed, to eventually become the holding company for PNM is “PNM Resources, Inc.” and it will keep that name following its establishment as PNM's holding company. PNM will not change its name at this time.

The March 20 and May 15, 2001, submittals state that the establishment of the new holding company will have no effect on current decommissioning funding arrangements for PNM's share of decommissioning costs for the facility, and will not affect the technical qualifications of the licensed operator, APS. Previous information regarding the nationality of the holding company, its directors, principal officers, and shareholders provided in the March 3, 2000, application, and supplement thereto, remains valid, according to PNM. Also, PNM does not now intend to change its name, so the previously approved conforming amendments to the operating licenses to reflect a new name of the licensee are no longer required at this time.

Under 10 CFR 50.80, no license shall be transferred, directly or indirectly, through transfer of control of the license, unless the Commission gives its consent in writing. Upon review of the information submitted by PNM in its March 20 and May 15, 2001, submittals, and other information before the Commission, the NRC staff has determined that the proposed restructuring of PNM, as modified, described in the March 20 and May 15, 2001, submittals, will not affect the qualifications of PNM to hold the licenses referenced above to the same extent now held by PNM, and that the indirect transfer of the licenses, to the extent effected by the restructuring, is otherwise consistent with applicable provisions of law, regulations, and orders issued by the Commission, subject to the conditions set forth herein. The NRC staff has further found that license amendments approved by the Order dated September 29, 2000, are no longer appropriate in light of the modified proposed restructuring of PNM. These findings are supported by a Safety Evaluation dated June 25, 2001.

IV

Accordingly, pursuant to sections 161b, 161i, 161o, and 184 of the Atomic Energy Act of 1954, as amended, 42 U.S.C. 2201(b), 2201(i), 2201(o) and 2234; and 10 CFR 50.80, It Is Hereby Ordered that the Order dated September 29, 2000, is withdrawn and superseded in its entirety by this Order, and that the application regarding the proposed restructuring of PNM and corresponding indirect license transfers, as modified by the March 20 and May 15, 2001, submittals referenced above, is approved, subject to the following conditions:

1. PNM shall provide the Director of the Office of Nuclear Reactor Regulation a copy of any application, at the time it is filed, to transfer (excluding grants of security interests or liens) from PNM to its proposed parent, or to any other affiliated company, facilities for the production, transmission, or distribution of electric energy having a depreciated book value exceeding ten percent (10%) of PNM's consolidated net utility plant, as recorded on PNM's books of account.

2. PNM shall notify the Director of the Office of Nuclear Reactor Regulation in writing within thirty (30) days after PNM undergoes any change in status from an electric utility, as defined in 10 CFR 50.2, to a non-electric utility.

3. Should the restructuring of PNM, as described in the March 20 and May 15, 2001, submittals, not be completed by June 30, 2002, this Order shall become null and void, provided, however, upon application and good cause shown, such date may be extended. Any direct or indirect transfers of the Palo Verde licenses as held by PNM, to the extent effected by any further restructuring of PNM involving the separation of its transmission and distribution assets from its generation assets, are not being approved at this time and must be the subject of a new application for prior written consent.

This Order is effective upon issuance.

For further details with respect to this action, see the initial application dated March 3, 2000, supplemental application and submittals dated April 26, August 14, August 17, and September 7, 2000, the Safety Evaluation dated September 29, 2000, submittals dated March 20 and May 15, 2001, and the Safety Evaluation dated June 25, 2001, which are available for public inspection at the Commission's Public Document Room, located at One White Flint North, 11555 Rockville Pike (first floor), Rockville, Maryland, and accessible electronically through the ADAMS Public Electronic Reading Room link at the NRC Web site (http://www.nrc.gov).

Dated at Rockville, Maryland, this 25th day of June 2001.

For the Nuclear Regulatory Commission.

Samuel J. Collins,

Director, Office of Nuclear Reactor Regulation.