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STATE OF NEW YORK

PUBLIC SERVICE COMMISSION

At a session of the Public Service


Commission held in the City of
Albany on February 11, 2004

COMMISSIONERS PRESENT:

William M. Flynn, Chairman


Thomas J. Dunleavy
Leonard A. Weiss
Neal N. Galvin

CASE 00-E-0612 - Proceeding on Motion of the Commission to


Investigate the Forced Outage at Consolidated
Edison Company of New York, Inc.'s Indian Point
No. 2 Nuclear Generating Facility.

Petition of Certain Members of the New York


State Legislature Regarding Indian Point No. 2
Outage.

ORDER ADOPTING TERMS OF JOINT PROPOSAL


(Issued and Effective February 12, 2004)

BY THE COMMISSION:
INTRODUCTION
On February 15, 2000, a steam generator tube ruptured
in the Indian Point No. 2 Nuclear Generating Facility (IP2),
forcing Consolidated Edison Company of New York, Inc. (Con
Edison or the company) to shut down the plant. The plant did
not resume operations until January 29, 2001, after the steam
generators had been replaced.1
On March 17, 2000, a number of Assembly Members filed
a petition seeking an order staying the operation of Con
Edison's fuel adjustment clause and commencing an investigation

1
On September 6, 2001, ownership of IP2 was transferred to a
subsidiary of Entergy Corporation. Case 01-E-0040, Joint
Petition of Consolidated Edison Company of New York, Inc., and
Entergy Nuclear Indian Point 2, LLC, for Authority to Transfer
Certain Generating and Related Assets and for Related Relief,
Order Authorizing Asset Transfer (issued August 31, 2001).
CASE 00-E-0612

into the company's operation of IP2. On March 30, 2000, the


Commission instituted this proceeding2 to examine the causes of
the outage, including events preceding the outage, to determine
whether Con Edison's practices were reasonable and prudent, and,
more particularly, whether the company's decision to postpone
the replacement of the steam generators was reasonable and
prudent.3 During the extended outage of IP2, higher cost
replacement power had to be purchased. If the company's
operation of the plant was found reasonable, replacement power
costs would have been recovered from customers in rates.
Otherwise, some or all of those costs, possibly totaling as much
as $290 million,4 would have been borne by the company.
A number of prehearing conferences were held between
May 2000 and November 2002 addressing a variety of issues,
including the scope of the proceeding, scheduling, discovery
disputes, and other matters. During the pendency of the
proceeding, extensive discovery, including the disclosure and
review of "thousands, if not tens of thousands, of documents,"
was undertaken by Staff of the Department of Public Service
(Staff) and its consultants, as well as by the numerous other
active parties.5 Among the areas investigated, Staff and the
other parties reviewed the operation and maintenance of similar
nuclear power plants, examined industry and trade group studies,
Nuclear Regulatory Commission notices, rulings and findings,
Westinghouse Corporation analyses of conditions at IP2, and
Institute of Nuclear Power Operations and similar inspection
reports concerning IP2. Staff also interviewed company
personnel assigned to or with oversight responsibility for IP2.

2
Case 00-E-0612, Order Instituting Proceeding (issued March 30,
2000).
3
Ultimately, the scope of this proceeding included four IP2
outages between 1997 and 2000 (Procedural Ruling (issued
March 15, 2001)). Transcript (Tr.) 249-425.
4
Staff estimated that its litigation position was worth a
maximum of $290 million (Staff Statement in Support of the
Joint Proposal, p. 21).
5
Id., p. 3.

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CASE 00-E-0612

Many thousands of hours have been spent by the parties, the


company, and Staff, which estimates its efforts alone at more
than 10,000 hours.
Following unsuccessful settlement attempts during the
summer of 2000, the parties determined in November 2002 that the
resumption of negotiations would be appropriate. Notice of
settlement discussions, dated November 19, 2002, was served on
all parties in accordance with 16 NYCRR §3.9. Settlement
discussions continued through the Fall of 2003, and, on
December 2, 2003, a Joint Proposal6 was filed for Commission
review, executed by all but one of the active parties, and
otherwise unopposed.
The signatories to the Joint Proposal are Con Edison,
Staff, Office of the Attorney General Eliot Spitzer (Attorney
General), Honorable Richard L. Brodsky, Honorable Adriano
Espaillat, New York State Consumer Protection Board (CPB),
Public Utility Law Project, Inc. (PULP), City of New York (NYC),
Utility Workers of America, ALF-CIO Local 1-2 (Union), and the
Owners Committee on Electric Rates (OCER). On December 29,
statements in support of the Joint Proposal were filed by Con
Edison, Staff, Attorney General, CPB, PULP, Union, and OCER. In
addition, and in response to a December 18, 2003 Notice from the
Secretary soliciting comments, Consumer Power Advocates (CPA),
NYC, and the County of Westchester (Westchester), filed
statements supporting the Joint Proposal.7

Summary of Joint Proposal


As a general matter, the Joint Proposal includes
provisions by which Con Edison will refund or absorb a total of
$137.5 million of replacement power costs associated with the
outages investigated. The $137.5 million includes $89,543,663
in IP2 replacement power costs that were incurred by the company
but not collected in rates due to our August 9, 2000 order

6
A copy of the Joint Proposal is attached to this Order.
7
The transcript of this proceeding consists of 778 pages, and
three exhibits were entered into evidence.

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CASE 00-E-0612

prohibiting Con Edison from collecting replacement power costs


in accordance with the requirements of Chapter 190 of the Laws
of 2000.8 Under the terms of the Joint Proposal, Con Edison
would refund $45,456,337 of the replacement power costs it
collected from its customers during the outages and would waive
any claim to charge ratepayers for the $89.5 million of
replacement power costs, which were booked but not collected
from customers.
In addition to the refund and the company's agreement
not to seek reimbursement for incurred power costs, the Joint
Proposal requires Con Edison to provide $2.5 million to New York
State Energy Research and Development Authority (NYSERDA) to
fund incremental energy efficiency programs for Con Edison's
low-income customers. The proposal includes agreements that:
NYSERDA will meet with the parties to discuss and develop
appropriate programs; the fund will be apportioned between New
York City and Westchester County customers (88% and 12%
respectively); the New York City and Westchester programs will
run concurrently; the fund will be utilized to supplement not
supplant existing programs; NYSERDA will, at the request of any
active party, provide a quarterly report on the program; NYSERDA
will be entitled to collect up to a 7% administrative fee; and
NYSERDA will use its best efforts to exhaust the fund on
appropriate low-income energy efficiency programs within two
years of the date of the Commission order adopting the terms and
conditions of the Joint Proposal.
Finally, the proposal provides that, upon the
satisfaction of the above commitments, Con Edison will be
released and discharged from all claims and obligations that
were or could have been properly asserted in this proceeding,
including IP2 outages beginning January 25, 1997, October 14,
1997, August 31, 1999, and February 15, 2000.
In addition to the Joint Proposal and because NYSERDA
was not an active party, the resolution of the proceeding and

8
Case 00-E-1343, Proceeding Implementing Chapter 190 of the
Laws of 2000, Order Modifying Tariff and Mandating Refunds,
(issued August 9, 2000).

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CASE 00-E-0612

the approval of the Joint Proposal provisions concerning the


energy efficiency programs requires two additional documents.
The first is a letter dated January 8, 2004 from Peter Smith,
Acting President of NYSERDA to Jaclyn A. Brilling, Secretary to
the Commission in which NYSERDA indicates that it has reviewed
the parameters and guidelines set forth in the Joint Proposal,
has no objection to them, and agrees and assents ". . . to
accept the $2.5 million from Con Edison and to utilize the funds
in the manner prescribed by paragraph 4 of the December 2, 2003
Joint Proposal." Thus, NYSERDA has agreed to abide by the terms
and conditions in the Joint Proposal in return for receipt of
program funds from Con Edison.
In addition, to facilitate the intent that the funds
provided to NYSERDA be considered and treated as incremental
funds dedicated to additional low-income energy efficiency
programs, a separate letter agreement between Con Edison and
NYSERDA will be executed when the funds are transferred. This
letter agreement, intended to encumber the funds for the
purposes set forth in the Joint Proposal, is also an integral
part of the Joint Proposal. A draft of that letter, containing
final language as agreed upon among the active parties, Con
Edison, and NYSERDA, is included in the record as Exhibit 3.
Set forth below is a brief summary of the comments
submitted in support of the Joint Proposal, as well as a summary
of issues raised at the January 6 evidentiary hearing, followed
by our discussion.

Summary of Parties Comments


All parties filing comments supported the adoption of
the terms and provisions of the Joint Proposal, alleging that
those terms fully met our standards for approval.9 Under those
standards, the parties argue, a mutually agreeable resolution to
this proceeding has achieved a balance among ratepayers, utility
investors, and the long term viability of the utility, and is

9
Case 90-M-0255, Procedures for Settlements and Stipulation
Agreements, Opinion No. 92-2 (issued March 24, 1992).

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CASE 00-E-0612

consistent with sound environmental, social, and economic


policies. In the view of all the parties, the Joint Proposal
produces results that are within the range of reasonable results
that would likely have arisen had the matter been litigated. In
addition, the parties note that our guidelines require that
weight be given to the fact that a settlement has been reached
among normally adversarial parties, and the exceptional breadth
of agreement and complete lack of dissent apparent here suggests
that this standard has been met as well.
Staff concludes that each of the four outages
investigated would require a lengthy and detailed consideration
of highly technical issues, as well as a "somewhat" subjective
application of the standard of care, in order to litigate the
prudence of the company's actions. As a general matter, Staff
expresses the belief that all of the outages could have and
should have been either avoided or reduced in duration; but it
also notes that its position includes a significant degree of
uncertainty. In contrast, Staff argues, the Joint Proposal
provides certainty, eliminates the need for further
administrative or court litigation, and provides benefits to
customers expeditiously. Regarding the potential range of
damages were the case litigated, Staff estimates possible
litigation outcomes between zero and $290 million. Based on a
consideration of its litigation risk and its likely success on
the merits, Staff believes that the proposed settlement,
containing $137.5 million of benefits for the ratepayers, is
fair and reasonable.10
Con Edison also endorses the terms and conditions of
the Joint Proposal, agreeing with the parties that the
Commission's guidelines for adopting such terms and conditions
have been fully met. The company's comments briefly review the

10
Staff Statement in Support of Joint Proposal, p. 21. Staff's
quantification of the possible prudence disallowance levels
does not include a consideration of the Attorney General's
issue which would hold Con Edison liable (assuming imprudence)
for the increased cost of electricity in the wholesale market
that was caused by the loss of IP2 generation in 2000.

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CASE 00-E-0612

defense it would have raised to the allegations summarized in


Staff's statement, and the company concludes that it might have
established its prudence with regard to each of the outages.11
In reaching the conclusion that the Joint Proposal was
acceptable on an overall basis, Con Edison noted that the risks
and costs of pursuing litigation, the advisability of seeking a
settlement to these complicated issues, and the risk of
litigating the novel position set forth by the Attorney General
regarding the impact of the IP2 outage on wholesale market
prices, all favor the adoption of the terms and conditions in
the Joint Proposal.
The Attorney General, CPB, and NYC also agree that the
settlement is just and reasonable, is in the public interest,
and meets all the criteria set forth by the Commission on which
settlement agreements may be accepted. The Attorney General
expresses the view that Con Edison would likely have been found
imprudent with respect to each of the investigated outages, but
notes that such results are not guaranteed given the
uncertainties inherent in this most complex litigation. He
also argues that Con Edison could have been liable for the
impact of IP2's outage on wholesale market prices, but again,
litigation risk, especially in light of the novel theory
regarding this adjustment, renders complete success on the
merits open to considerable doubt. The Attorney General
concludes that the settlement is within the range of reasonable
results that would be expected from a litigated proceeding; the
agreement encompasses a very broad range of normally adversarial
interests; and the provisions of the Joint Proposal would
benefit ratepayers by having refunds issued now rather than
waiting years for the outcome of administrative litigation and
possibly court appeals.
CPB agrees that the terms of the proposal are in the
public interest, specifically noting that the Joint Proposal
would result in ". . . a line item . . . on each ratepayer's

11
Con Edison's Statement in Support of the Joint Proposal,
pp. 6-11.

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CASE 00-E-0612

bill enumerating the refund."12 CPB also argues that the Joint
Proposal is consistent with the economic and social policies of
New York State and the Commission and that adopting the
provisions of the Joint Proposal would help reduce energy costs,
both for the general body of customers and through the
$2.5 million dedicated to low-income energy efficiency programs.
CPB also notes that the Joint Proposal has garnered support from
the company, consumer representatives, labor groups, the
legislature, and a number of other State agencies. It concludes
that the Joint Proposal ". . . represents a reasonable
compromise of divergent goals."13
NYC states that it is fully supportive of the Joint
Proposal and believes that its adoption would be in the best
interest of all parties and the general public. It notes that
the proposal is the product of extensive fact finding by the
Department and the other active parties, and that protracted
negotiations were necessary to resolve all of the complex
issues. The Joint Proposal, according to NYC, is a
comprehensive settlement of all issues, which were both complex
in nature and remote in time. The age of some of the challenged
actions date to the mid-1980s, adding significantly to the
litigation risk. NYC also specifically supports Staff's
conclusion that the Joint Proposal represents a reasonable value
for the case, taking into account litigation risk and the cost
of replacement power occasioned by the outages.14 As a final
matter, NYC notes that Con Edison's business has considerably
changed since the 2000 outage, including the fact that the
company has sold its generating stations. NYC urges the
Commission to approve the terms of the Joint Proposal.
The County of Westchester and the Union also support
the adoption of the terms and conditions in the Joint Proposal.

12
CPB Statement in Support of the Joint Proposal, p. 4 discussed
infra).
13
CPB Statement in Support of the Joint Proposal, p. 5.
14
City of New York Statement in Support of the Joint Proposal,
p. 3.

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CASE 00-E-0612

According to the Union, both the present and the prospective


elements of the company's and ratepayer's financial positions
were balanced in the development of the Joint Proposal; normally
adversarial parties reached agreement only after a lengthy
negotiating process, including approximately three years of
investigations; and litigation would have involved significant
risks for both the ratepayers and the company in terms of delay,
uncertainty, and additional litigation costs. The County of
Westchester, noting the active part it took throughout this
proceeding, including a substantial commitment of resources to
discovery and preparation for evidentiary hearings, concludes
that the Joint Proposal meets the standards of appropriately
balancing the interest of the ratepayers and those of the
company, demonstrating support from normally adversarial
parties, and being based on an adequate record.
PULP, OCER, and CPA also urge the Commission to adopt
the terms and conditions of the Joint Proposal. OCER contends
that the Joint Proposal is in the best interest of the public
generally and the signatories in particular. It concludes that
the Joint Proposal offers significantly greater benefits than
costs, especially when one considers the extensive litigation,
the probability of success, the complexity of the issues, and
the inconvenience and delay that would likely result in its
absence. PULP similarly reviews the standards adopted by the
Commission for such agreements and concludes that those
standards have been fully met. The Joint Proposal, according to
PULP, represents a rational and fair resolution of the issues,
and it notes, in particular, its support of the $2.5 million
dedicated to the implementation of additional low-income energy
efficiency programs. The Joint Proposal therefore recognizes,
according to PULP, the special needs of low-income households
and deliberately take steps to deal with the problem on more
than a short-term basis. PULP also emphasizes the provision
that requires these funds to be used to create new, incremental
low-income conservation programs rather than replacing or
providing funds for existing or threatened programs.

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CASE 00-E-0612

CPA indicates its support for the Joint Proposal as a


reasonable solution for mitigating the excessive costs borne by
consumers as a result of the prolonged outages of IP2.
Regarding the proposed refund, CPA recommends that the amount of
the refund be listed as a separate line item on customers' bills
to allow them to clearly see the actual amount of the
settlement.15 CPA also recommends that the funds to be
transferred to NYSERDA be utilized for energy efficiency
programs and not for load aggregation studies or pilot programs.
Such programs, CPA contends, face significant implementation
challenges and tend to provide less long-term value than efforts
such as energy efficient window replacements.
Finally, the issues that were raised at the January 6,
2004 evidentiary hearings should also be mentioned. First, the
Joint Proposal (p. 1) recites Westchester County as a signatory
to the agreement. Based on Westchester County's comments filed
January 16, it appears that the County fully supports the
proposal, but is not in fact a signatory.
A second issue was raised by CPA,16 which requests that
customers be advised on their bills of the specific credit that
they are receiving. The Joint Proposal states: "A statement
will appear on bills explaining that the customer has received a
credit related to the IP2 Prudence Proceeding."17 Con Edison
indicates that it may not be possible to include individually
calculated, separate line items for these refunds on its bills.
However, the company did indicate that it should be possible to
include within the bill a message to the consumer identifying
the refund on a per KWh basis and explaining how the individual
refund could be calculated. The Administrative Law Judge noted
on the record that the customer should be provided either an
individually calculated credit on the bill or the information
necessary for the customer to be able to calculate the credit.18

15
CPA's Comments in Support of the Joint Proposal, p. 2.
16
Tr. 775-760.
17
Attachment, p. 3.
18
Tr. 760.

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CASE 00-E-0612

Another issue arose at the hearings concerning


paragraph 5 of the Joint Proposal in which Con Edison is to be
released and discharged, conditioned upon the satisfaction of
the "above" commitments. As the record shows,19 the intent of
that provision was to provide a complete release to Con Edison
once the company completed its Joint Proposal commitments. The
document might be read, however, to suggest that Con Edison
would not be released or discharged until after NYSERDA had
satisfied its commitments, possibly two years or more in the
future. Con Edison indicated that such an interpretation was
not intended by the parties and that the actual intent of the
parties, that Con Edison be released once it completes its
financial commitments, should be reflected in the Commission's
adoption of the terms of the Joint Proposal.

DISCUSSION
We have consistently found that the terms and
conditions of a Joint Proposal are in the public interest and
may be adopted if the following standards are met:

A desirable settlement should strive for a


balance among (1) protection of ratepayers,
(2) fairness to investors and (3) the long term
viability of the utility; should be consistent
with sound environmental, social and economic
policies of the Agency and the State; and
should produce results that were within the
range of reasonable results that would likely
have arisen from a Commission decision in a
litigated proceeding.

In judging the settlement, the Commission shall


give weight to the fact that a settlement
reflects the agreement by normally adversarial
parties.20
An unusually broad range of "normally adversarial"
interests have either executed the Joint Proposal or are
otherwise fully supporting it. The parties supporting the
19
Tr. 772-775.
20
Case 90-M-0255, Procedures for Settlements and Stipulation
Agreements, Opinion No. 92-2 (issued March 24, 1992),
Procedural Guidelines for Settlements, p. 6.

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CASE 00-E-0612

proposal in this proceeding include elected officials,


representatives of state agencies and local governments, IP2's
unionized work force, consumer groups, and the company. As
Staff notes, every active party to the proceeding agreed with
the proposed resolution, and no party or other member of the
public has criticized the Joint Proposal in any way.
We also find that the provisions in the Joint Proposal
provide significant benefits to ratepayers regarding replacement
power costs that were included within rates or which the company
would have included in rates in the absence of this
investigation. From the investors' and utility management's
perspective, the agreement finalizes all of the company's
operational obligations with regard to IP2, which has now been
sold, and limits the company's liability to slightly less than
half the total potential exposure of $290 million. Therefore,
adoption of the terms of the Joint Proposal would assist the
company in shifting its focus to the future and closing the book
with regard to its operation of IP2. Accordingly, a fair and
reasonable balance of ratepayer and investor interests has been
established.
We further conclude that the Joint Proposal is
consistent with the policies of this Commission and the State.
The alternative to the Joint Proposal is litigation that
threatens to be extremely complex, expensive, and lengthy,
requiring substantial efforts by numerous parties, including a
number of governmental agencies and subdivisions. So long as
such significant assets would be tied up litigating the merits
of these claims, the parties could not as easily address current
problems and plan for the future. The Joint Proposal frees
those considerable resources, allows a future focus to be more
completely supported, and eliminates what could have been months
or years of litigation over the reasonableness of decisions made
a decade or more ago.
Finally, in considering Staff's description of the
strength and uncertainties of its position, as well as Con
Edison's summary of its defenses and acknowledged risk, we
conclude that the results contained in the Joint Proposal are

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CASE 00-E-0612

within the range of reasonable results that would likely have


arisen in a fully litigated proceeding.
Regarding the timing of Con Edison's release and
discharge, the Joint Proposal should be interpreted as noted
above. In addition, customers should be provided the most
specific notice possible on their bills regarding the amount of
the refund each receives, and Con Edison should consult in
advance with Staff and interested parties regarding its plans
and capabilities in this area. Finally, CPA's concern that
NYSERDA may dedicate the funds from this Joint Proposal to
aggregation programs seems misplaced. Low-income energy
efficiency programs are specified in the Joint Proposal, as is
the requirement for NYSERDA to discuss program details with the
parties in advance. Aggregation programs are neither mentioned
nor implied. We are confident that programs can be devised that
will be found by all parties to be appropriate.

CONCLUSION
Based on the above, we conclude that the Joint
Proposal is in the public interest, and we are hereby adopting
its terms and conditions, as clarified herein, as our order in
this proceeding.

The Commission orders:


1. The terms and conditions of the Joint Proposal
described herein and attached hereto are adopted, as clarified
herein, as the order of the Commission in this proceeding.
2. Subject to the completion of Con Edison's and
NYSERDA's commitments hereunder, this proceeding is closed.

By the Commission,

(SIGNED) JACLYN A. BRILLING


Secretary

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NEW YORK STATE
PUBLIC SERVICE COMMISSION
________________________________________________x
In the Matter of :
:
Proceeding on the Motion of the Commission to :
Investigate the Forced Outage at Consolidated Edison : Case 00-E-0612
Company of New York, Inc.’s Indian Point No. 2 Nuclear :
Generating Facility. :
:
Petition of Certain Members of the New York State :
Legislature Regarding Indian Point No. 2 Outage. :
________________________________________________x

JOINT PROPOSAL ON THE

INDIAN POINT 2 PRUDENCE PROCEEDING

December 2, 2003
Case 00-E-0612
JOINT PROPOSAL ON THE
INDIAN POINT 2 PRUDENCE PROCEEDING
The Parties to this Joint Proposal, which settles the issues in Case 00-E-0612, are:
Consolidated Edison Company of New York, Inc. (Con Edison), New York State Department of
Public Service Staff ("Staff"), Office of Attorney General Eliot Spitzer (OAG), Hon. Richard L.
Brodsky, Hon. Adriano Espaillat, New York State Consumer Protection Board (CPB), The
Public Utility Law Project of New York, Inc. (PULP), City of New York (NYC), County of
Westchester (Westchester), Utility Workers Union of America, AFL-CIO Local 1-2 (Union),
Owners’ Committee on Electric Rates (OCER), and such other Parties whose authorized
representatives have signed the execution pages. The Parties agree to the terms of this Joint
Proposal, which is to be presented to the New York State Public Service Commission
(Commission).
In a petition filed in March 2000, Assemblymembers Richard L. Brodsky, Ann Margaret
Carrozza, Adele Cohen, Adriano Espaillat, James Gary Pretlow, Roberto Ramirez, William
Scarborough, Ronald Tocci, Albert Vann, Eric Vitaliano, and Keith Wright requested that the
Commission examine the reasonableness of Con Edison’s actions regarding the operation and
maintenance of its Indian Point Unit No. 2 Nuclear Generating Facility (IP2), and, in particular,
the events leading to forced outage that occurred on February 15, 2000. Similar requests were
made by Westchester, NYC, and the State Senate.
After considering those requests, and issues identified during an investigation
immediately following the February 15 outage by the Department of Public Service, Department
of Health and State Emergency Management Office, acting collaboratively under the direction of
Governor Pataki, the Commission issued an Order Instituting Proceeding to Investigate Outage
at the Indian Point No. 2 Nuclear Generating Facility on March 30, 2000, instituting this
proceeding to investigate the circumstances surrounding the February 15 outage and other issues
relating to Con Edison’s management and operation of IP2.
Prehearing conferences were held before Administrative Law Judge Jeffrey E. Stockholm
on May 2, 2000, August 21, 2000, November 10, 2000, February 28, 2001, May 31, 2001, and
November 8, 2002, at which the scope of the issues to be addressed in this proceeding, the
schedule for the proceeding, discovery disputes, and other matters were discussed.
Settlement negotiations were conducted periodically in this proceeding in the year 2000
without success. After Staff and other parties spent thousands of hours conducting discovery,
reviewing documents, and analyzing the issues in this proceeding, a determination was made that
renewing settlement discussions would be appropriate. Accordingly, in accordance with the
Commission’s rules, all parties to this proceeding, and the Secretary to the Commission, were
notified by letter dated November 19, 2002 that settlement negotiations would recommence on
December 12, 2002. The negotiations scheduled for that date were adjourned at the request of
some parties to January 16, 2003. Additional settlement negotiations were held on January 29,
April 21, April 29, September 18, and September 24, 2003. Con Edison, Staff, OAG, Hon.
Richard L. Brodsky, NYC, Westchester, CPB, PULP, the Union, and OCER participated in some
or all of those meetings. All settlement conferences and negotiations were conducted in
accordance with 16 NYCRR § 3.9 and the Commission's Settlement Guidelines, set forth in
Opinion No. 92-2.1
As a result of their efforts, the parties have reached a comprehensive proposed resolution
of this proceeding, as follows:
1. Con Edison will refund or absorb a total of $137,500,000 of the replacement
power costs it incurred during the outages identified in paragraph 5, below, in the manner set
forth in the following paragraphs 2-4.
2. In accordance with the requirements of Chapter 190 of the Laws of 2000 (Chapter
190), on August 9, 2000, the Commission issued an Order prohibiting Con Edison from
continuing to collect IP2 replacement power costs associated with the February 15, 2000 outage.2
Chapter 190 was ultimately adjudged unconstitutional by the federal courts.3 During the time it
and the Commission Order remained in effect, customers did not pay Con Edison $89,543,663 in
IP2 replacement power costs, and the company has a claim for recovery of those costs. That
amount will be offset against the $137,500,000 settlement sum.

1
Cases 90-M-0255 et al., Opinion, Order and Resolution Adopting Settlement Procedures and
Guidelines, Opinion No. 92-2 (issued March 24, 1992).
2
Case 00-E-1343, Commission Proceeding Implementing Chapter 190 of the Laws of 2000,
Order Modifying Tariff And Mandating Refunds (issued August 9, 2000). Con Edison had
been collecting such costs in customer bills since the beginning of the outage.
3
Consolidated Edison Co. of New York, Inc. v. Pataki, 292 F.3d 338 (2002).

2
3. Con Edison will refund $45,456,337 to its customers by crediting their electric
bills for such total amount over a three month period beginning as soon as practicable, but in no
event later than 30 days, following the issuance of a Commission Order approving this Joint
Proposal. The refund will be distributed on a usage basis to all current customers, both full
service and retail access, to ensure equity between NYC and Westchester customers. A
statement will appear on bills explaining that the customer has received a credit related to the IP2
Prudence Proceeding. Because total usage and the credit per kwh will be estimated each month,
Con Edison will reconcile actual to estimated usage for the three month period and make the
appropriate adjustments, if any, during the following month to ensure that customers receive the
full amount of the refund.
4. Con Edison will provide $2,500,000 to the New York State Energy Research and
Development Authority (NYSERDA) to fund one or more energy efficiency programs for Con
Edison’s low income customers. Usage of the funds will be administered by NYSERDA and
governed by the following principles:
a. NYSERDA shall meet with Staff, Con Edison, CPB, PULP, NYC,
Westchester and any interested signatories to this Joint Proposal to discuss
NYSERDA’s existing low income energy efficiency programs no later
than 30 days after the date of the Commission Order approving this Joint
Proposal. NYSERDA shall then distribute to the participating parties for
review and comment a brief plan describing how the fund will be spent to
enhance one or more of these existing programs. Meetings among the
interested parties to discuss the plan should occur as expeditiously as
possible. After receiving this input from the parties, NYSERDA shall
determine how the fund will be allocated among its programs.
b. The fund shall be utilized to assist Con Edison low income customers
located in New York City and Westchester County in an 88% to 12%
ratio, respectively.
c The fund may be used for different purposes in New York City and
Westchester County, provided the programs run concurrently.
d. The fund has been established to supplement existing programs.
Therefore, it shall not be used to supplant existing funding for any

3
program, whether from Con Edison, the System Benefit Charge, or other
sources. Also, all interest accrued on the $2.5 million will be added by
NYSERDA to the fund.
e. Upon the written request of any active party in this proceeding,
NYSERDA shall provide the party a quarterly report on the program
activities undertaken and expenditures made from the fund.
f. As soon as practicable, but in no event later than 30 days, after approval
by the Commission of this Joint Proposal, the $2.5 million shall be
delivered by Con Edison directly to NYSERDA and, upon such delivery,
Con Edison’s commitment under this Paragraph 4 shall be deemed to be
fully satisfied.
g. NYSERDA will be entitled to collect its standard administrative fee from
the corpus of the fund in an amount up to a maximum of 7% or $175,000.
h. NYSERDA will be requested to use best efforts to exhaust the fund on
appropriate low income energy efficiency programs within two years of
the date of the Commission Order approving this Joint Proposal.
5. In return for, and conditioned upon satisfaction of, the above commitments, Con
Edison will be released and discharged from all claims and obligations that were or could
properly have been asserted in this proceeding relating to its operation and management of IP2
from 1985 through the date of the plant’s sale in 2001, including, but not limited to, claims and
obligations relating to:
a. The outage from January 25, 1997 through March 17, 1997 relating to the
grit blasting of the steam turbines in 1995.
b. The outage from October 14, 1997 through September 10, 1998 relating to
the DB-50 circuit breakers and the management of IP2, generally.
c. The outage from August 31, 1999 through October 18, 1999 relating to the
reactor scram.
d. The outage from February 15, 2000, through January 29, 2001 relating to
the rupture of tube R2C5 in Steam Generator 24 and subsequent
replacement of all of the steam generators.

4
e. Additional payments made by Con Edison’s customers for energy during
the 2000-2001 outage as a result of the impact of the loss of IP2’s power
on the wholesale electric power markets, as identified by OAG.
6. Nothing in this Joint Proposal shall be construed as an admission by any party
with respect to the prudence or imprudence of any decision or action by Con Edison related to its
management and operation of IP2 or as to the remedies appropriate in any such case.
7. The parties agree and acknowledge that each provision of this Joint Proposal is in
consideration and support of all the other provisions, and expressly conditioned upon their
acceptance by the Commission. In the event that: (a) the Commission fails to adopt this Joint
Proposal according to its terms or adopts it with material modifications that are adverse to any
party; (b) this Joint Proposal or a Commission Order approving it, or any provision of either is
materially and unacceptably modified by a court order which has become final and non-
appealable and such modification is adverse to any party; or (c) a statute, rule, order or regulation
is enacted or issued by any federal, state, local or other governmental, regulatory or
administrative agency, commission, department or board that imposes liability on Con Edison for
any of the discharged claims or obligations enumerated in paragraph 5, above, then each of the
signatories to this Joint Proposal so adversely affected reserves the right to withdraw its
acceptance of this Joint Proposal, upon reasonable notice to the other parties, and to renegotiate
and, if necessary, to litigate without prejudice, any or all issues as to which the signatory agreed
in this Joint Proposal. Any signatory who so withdraws its acceptance of this Joint Proposal
shall not be bound by its provisions, and this Joint Proposal shall be null and void as to that
signatory.
8. The terms and provisions of this Joint Proposal apply solely to, and are binding
only in the context of, the purposes and results of this Joint Proposal. None of the terms and
provisions of this Joint Proposal may be cited or relied upon by any party hereto or any other
party in any fashion as precedent in any proceeding before this Commission, or before any other
regulatory agency or any court of law for any purpose except in furtherance of the purposes and
results of this Joint Proposal.
9. The parties hereto agree to submit this Joint Proposal to the Commission and to
individually support and request adoption by the Commission of the Joint Proposal as set forth
herein.