Early last Wednesday morning, a determined caravan of workers from Arizona Public Service Company trundled into the dusty, decrepit desert town of Tonopah on a special mission.

The crew, led by the utility's cellular-phone-toting public relations chief, had been urgently dispatched to retrieve thousands of internal APS documents that the company had dumped in a deserted building two years ago and forgotten.

But when the APS workers arrived, armed with power tools to drill locked file cabinets, they found that most of the documents were gone.

Two weeks earlier, the man who purchased the abandoned building and its contents from APS last November allowed New Times to retrieve the thousands of pages of reports, internal company memos and other APS files scattered throughout his building.

The files provide a rare, uncensored look into the chaotic and increasingly dangerous operation of the nation's largest nuclear power plant--the Palo Verde Nuclear Generating Station.

The documents, which date from the early 1970s to 1991, include a scathing 1989 performance audit conducted by a nuclear industry association, a variety of consultant recommendations, letters to and from federal regulators, internal APS memorandums, computer tapes, blueprints and radiological testing data.

They paint a picture of a facility in deep trouble.
The records reveal that, at least until several years ago, the state's largest industrial plant was habitually mismanaged, its equipment deteriorating and its employees poorly trained.

The result has been a steady series of accidents and unsolved problems at the plant--which has been fined nearly $2 million by federal regulators since it went on line in 1986.

How many of those problems continue to plague the plant is not known, because APS would not allow New Times to see more recent reports that might--or might not--show improvements the company has made in the past few years.

But other, publicly available documents make it clear that APS may be paying the price for its neglect and mismanagement at Palo Verde. The plant, designed to last 40 years, is running into critical and costly problems, most notably with premature cracking in more than 1,500 radioactive pipes.

APS may soon have to ask for rate increases to make hundreds of millions of dollars in repairs to cracked or corroded steam generator tubes which--if they burst--can cause radiation releases ranging from minor to disastrous.

Whatever problems APS faces now could probably have been avoided, or at least mitigated, if APS had listened almost ten years ago when outside inspectors and consultants began pointing out serious and deep-rooted problems at the plant.

@body:There is a shadow watchdog that keeps an eye on the nation's nuclear power industry. It is called the Institute of Nuclear Power Operations.

The private, Atlanta-based institute is funded by all of the utilities that run nuclear plants. It is supposed to serve as a collective pool of knowledge that plant operators can tap, learning from the experiences--and mistakes--of other plants.

Every 18 months or so, INPO sends inspectors to each of the nation's nuclear plants to evaluate safety, management and operations.

Unlike the Nuclear Regulatory Commission, which reports to the public and discloses its findings about plants, the institute works in virtual secrecy, just for the industry.

After it inspects a plant, the institute reports findings solely to the top manager of that facility. In Palo Verde's case, the reports are sent to Mark De Michele, APS' president and chief executive officer, and remain closely guarded within the company's upper-management ranks.

The NRC is not given copies of the INPO reports, although the federal inspector assigned to each plant is allowed to read the report.

State agencies such as the Arizona Corporation Commission, which sets rates for the power generated at Palo Verde, and the Arizona Radiation Regulatory Agency, which monitors radiation near the plant, do not get to see the INPO inspection reports.

The public, certainly, is not allowed to see them.
"We provide the report only to the utility," says Angie Howard, INPO's vice president of industry relations. "We do not comment publicly on those."
Judging by the INPO reports obtained by New Times, it is obvious why APS would not want the public to know the institute's low opinion of Palo Verde.

Although INPO has been accused, at times, of being too cozy with the industry that pays its salaries, the institute has been highly critical of Palo Verde's safety and operations. More critical, in fact, than NRC inspectors have been.

INPO's 1989 report on Palo Verde and other internal company documents from that time period paint a picture of a plant with serious safety and management problems.

The Palo Verde plant's top managers and supervisors, INPO found, did not have enough on-the-job experience to know how to run a nuclear plant properly. Key management positions turned over often, and many of the managers who ran the plant's three reactors did not have reactor operator licenses.


"This absence of nuclear operating experience impedes the ability of [Palo Verde] personnel to recognize and correct plant problems," INPO concluded.

Because of their relative inexperience at running a nuclear plant, INPO found, Palo Verde's managers had a tendency to seek easy answers when problems arose, rather than address underlying causes.

"The corporate organization fosters an attitude of solving problems on a 'quick fix' basis rather than developing lasting solutions," INPO reported.

Weak, inexperienced management, according to INPO reports and other internal company documents, was causing myriad safety and operational problems at the plant.

The documents show that:
Plant managers had not come up with an adequate procedure to ensure that warning signs were posted at all radioactive "hot spots" at the plant, so employees could take proper precautions.

The plant did not have adequate safeguards to keep highly radioactive particles from drifting about the facility. INPO reported that, in 1988, more than 450 "hot radioactive particles" were found at Palo Verde, "many of which were located in clean areas of the plant or on individuals."

The training employees received on operating the reactors was "significantly degraded," INPO found, because the simulator used for training did not mirror the actual reactor control rooms.

"Excessive" numbers of lights on the control panels in the real reactor operating rooms did not work properly, and therefore could not signal an alarm if the component they monitored failed. The lights--called annunciators--had not been fixed for three years after INPO first found the problem in 1986. In 1989, the control panels in Units 1 and 2 still had 81 annunciator lights that stayed on all the time, and an undisclosed number of others that flashed continuously, meaning they had been disabled.

Plant employees were simply not showing up for required training classes, but plant managers could not come up with a way to keep attendance records.

The plant was woefully behind in performing the normal maintenance needed to keep the plant operating safely. According to its 1989 report, INPO first warned APS about the problem two years earlier, but it had not been solved. Other internal company documents show that, as late as December 1990, plant workers had a backlog of more than 2,400 maintenance tasks waiting to be performed on Palo Verde's three reactors.

Because its maintenance scheduling was so far behind, the plant was not keeping up with potentially critical repairs ordered by the federal government. For instance, all of the nation's nuclear plants had been told in 1986 to increase their maintenance of check valves. Three years later, INPO found, the Palo Verde plant "had 25 check valve failures in 1988 and . . . the check valve failure rates for Units 1 and 2 are almost double the industry average."

Plant workers could not perform all necessary maintenance tasks because no one was sure what needed to be done. INPO found that many of the tags used to mark equipment needing service were wrong, or had simply been removed. As early as 1985, APS itself had found that 48 percent of the maintenance tags attached to equipment were wrong. By 1989, INPO found, the plant still did not have an adequate system to make sure the proper tags were placed on items needing repair or service.

Despite being warned about problems as early as 1985, by 1989 the Palo Verde plant still had not come up with a way to make sure the water it used in the steam generators was as clean as required. The dirty water apparently was creating "high corrosion rates" in some parts of the nuke's cooling system, including some pipes which--if they burst--could spawn a radiation leak. When INPO interviewed lab technicians who were supposed to monitor the cleanliness of the water, it found that most did not understand why it was important for the water to be clean.

Taken together, the findings from INPO--some of which are further detailed in internal company documents--show that for a lengthy period of time, the nation's largest nuclear plant was badly managed and badly maintained.

But most frightening, the documents show that in the first three years after the plant went on line, management established a clear pattern of not fixing problems when they were detected.

INPO found that recurring problems--such as dirty cooling water or broken control-panel lights--were not going away, despite the hundreds of proposals and recommendations that APS management would produce to explain how the plant was going to solve its problems.

"That's what they do," says Linda Mitchell, a former plant engineer and whistle-blower who won a judgment against the utility after she was harassed for reporting safety problems to the NRC. "They can write 5,000 pieces of paper about anything, but they never fix a fricking thing."
INPO was not alone in its harsh assessment of the plant.
In a March 1990 report, the Liberty Consulting Group echoed many of the conclusions INPO reached after its 1989 evaluation of the plant.


The Liberty report reiterated that the plant had spotty maintenance procedures and was not taking care of potentially critical safety and operating problems identified years earlier.

"Some repeat equipment failures were indicative of a failure to determine and correct the root causes of the failures," was one of Liberty's conclusions.

The documents recovered by New Times end in early 1991, when they were put into storage and forgotten. The files do not reflect what APS may have done since then to correct the nagging problems at its plant.

Requests by New Times to see more recent reports--particularly reports from the INPO evaluations that have taken place since 1989--were turned down by APS.

But the Palo Verde Papers clearly show that--until 1991--APS had established a track record of not fixing problems involving safety, maintenance, radiation leaks and employee training once they were discovered.

And last year, an emergency shutdown of Palo Verde seemed to show that many of the management problems mentioned in previous audits had yet to be resolved.

On March 14, 1993, a tube carrying radioactive water ruptured in Unit 2, sending more than 44 gallons per minute of contaminated water into a steam generator. While Palo Verde operators were able to shut down the reactor with no offsite radiation release, the NRC found serious fault with plant managers. Among the problems:

Reactor operators misdiagnosed the event twice.
Operators had failed to replace a broken radiation monitor when it was discovered a week earlier. A working monitor might have aided operators in discovering the ruptured tube quickly.

Operators in the Unit 2 control room had been trained on a simulator that differed from the actual control room configuration. Consequently, they did not recognize some warning signs of the rupture.

During an earlier refueling, operators had discovered "an abnormal amount of crack growth in a steam generator tube" at Unit 2. But they did not bother to make a formal evaluation to determine whether the cracking posed a safety threat.

The NRC slapped Palo Verde with four notices that it had violated operating rules, but issued no fine in the steam-tube incident.

Interviews with top NRC officials at the plant also indicate that past management problems persist.

"They have got an organization that is cumbersome out here," says NRC senior inspector Ken Johnston. "They need to take a hard look at their work processes, to streamline them, make them more effective."
This continuing pattern of shoddy management and operation is especially ominous in light of critical problems the plant is known to face today.

@body:The Palo Verde Nuclear Generating Station is suffering from a crippling affliction that has forced several other nuclear power plants to permanently close.

How much the plant's past mismanagement may have exacerbated the problem is unclear. This much is certain, though: The heart of the facility is steadily being eaten away by corrosion.

Widespread and unchecked corrosion has already caused cracks in more than 1,500 radioactive steam generator tubes that were supposed to last through Palo Verde's 40-year life span.

Unless APS can stem that corrosive tide, the day will come when Palo Verde will be faced with a crucial decision: shut down, or spend hundreds of millions, possibly billions, of dollars to replace the faulty steam generating systems.

In the meantime, the two million residents downwind from the power plant face a steadily increasing risk if more and more steam generator tubes continue to develop cracks, government and private scientists who monitor nuclear energy plants say. If tubes burst, they can cause radiation releases. If several tubes burst at the same time, the plant's operators must institute emergency shutdown procedures that would likely result in radiation pouring into the atmosphere for several hours, says Robert Pollard, senior nuclear safety engineer for the Union of Concerned Scientists.

"The problem with running with cracked tubes is that it increases the risk of an accident," says Pollard.

At least one member of the Nuclear Regulatory Commission has expressed serious concerns over the increased number of cracking steam generator tubes showing up in nuclear power plants throughout the country.

"The concern is not a single tube leaking or even failing," says Nuclear Regulatory Commissioner Kenneth C. Rogers. Instead, what worries Rogers is the possibility that a number of tubes could slowly degrade at the same time. This is precisely the problem facing Palo Verde.


"Degradation would decrease the safety margins so that, in essence, we have a 'loaded gun,' an accident waiting to happen," Rogers told the International Symposium on Nuclear Power Plant Aging in an August 1988 speech.

That continuing corrosion sets up a scenario where a plant mishap could cause a failure of multiple steam generator tubes at one time.

There is no doubt that the integrity of 66,000 3/4-inch-diameter stainless steel tubes circulating through Palo Verde's three reactors is essential to safe operation of the plant. It was the rupture of just one tube that forced the 1993 emergency shutdown and unexpected radiation release in Unit 2.

Despite NRC commissioner Rogers' concerns, government records show the NRC has assumed an accommodating role when regulating nuclear utilities with cracking steam tubes.

The agency may relax a rule requiring utilities to plug--that is, literally quit using--cracked tubes once corrosion progresses to a certain point. Currently, the tubes must be plugged if corrosion penetrates more than 40 percent of the tube's wall--a wall that is less than 1/20 of an inch thick.

"Because so many utilities are having so much corrosion . . . they have asked the NRC to relax the criteria," Pollard says. "And the NRC is proposing to do so."
Under newly proposed standards, Pollard says, utilities would have to plug far fewer cracked tubes--tubes that are under more than 2,200 pounds per square inch of pressure. Such a move, he fears, increases the risk of multiple steam tube ruptures that could result in large radioactive releases.

NRC records show APS is scrambling to find ways to reduce the growth rate of corrosion-caused cracks in its steam generator tubes. But so far, there is no definitive cure for the problem. Theories on the cause of the cracks range from improper water chemistry to manufacturing flaws in the tubes.

With no corrosion cure in sight, the nuclear power industry and the NRC have grown to accept cracked steam generator tubes as a routine part of plant operations, NRC records show.

In fact, APS no longer guarantees it can operate the steam generators without cracked tubes. Instead, the utility tells the NRC it doesn't expect enough of the tubes to burst during operating cycles to pose a significant radiation exposure threat. But everyone clearly expects new cracks to develop.

Once the plant goes down for refueling or inspection, APS checks for cracked tubes and simply plugs the damaged tubes, effectively removing them from service. But this finger-in-the-dike approach to nuclear energy can only last so long.

NRC resident inspector Ken Johnston says plugging the tubes reduces the amount of cooling water flowing around the reactor core. This, in turn, forces the utility to lower reactor temperatures, reducing the amount of electrical output.

This cycle eventually reaches a point where the nuclear plant operator faces an economic decision: Either replace the steam generators or shut down in the face of dwindling electrical output, Johnston says.

The steam-tube cracking has become so serious in Palo Verde Unit 2 that APS can now operate it only for six months, at 86 percent of power, before shutting down to check the tubes. The unit was designed to operate at full power for 18 months between routine refueling shutdowns.

Each Palo Verde nuclear unit has two steam generator systems, each containing 11,012 steam generating tubes. Steam generator number 2 in reactor Unit 2 already has 741 tubes plugged because of cracking. APS' original safety analysis for operating the steam generator at 100 percent of power assumed no more than 400 of the tubes would be plugged, Johnston says.

But the NRC allowed APS to continue operating Unit 2 at 100 percent of power after the utility submitted a revised safety plan, Johnston says.

APS, however, has elected to operate Unit 2, as well as its other two units, at just 86 percent of power over the next few months.

The steam tube corrosion problem has spread to Palo Verde 1 and Palo Verde 3, as well. Johnston says 325 of the 22,000 steam tubes in Unit 1 have been plugged while 266 tubes in the steam generators in Unit 3 have been plugged because of corrosion-related problems.

New cracks have also been found in Units 1 and 3. APS has announced it may shut down the two units for inspection after only six months of their current 18-month operating cycles.

Palo Verde's tube problems are different--and worse--than those faced by other U.S. nuclear plants. Most nukes have suffered steam tube cracks at points where they intersect support brackets. The Palo Verde tubes are cracking in the middle, between brackets, in an area known technically as the freespan.


Such midspan cracking poses an added risk, Pollard says, because there are no brackets to act as clamps on the tubes as cracks deepen.

"If the tube starts to crack in the freespan, there is nothing to restrain it from bursting open," Pollard says. APS and the consortium of utilities that built Palo Verde never expected to be faced with the costly scenario of replacing steam generators. The utilities were so confident of the plant's basic design that its massive cement containment buildings do not include doors large enough for a replacement steam generator assembly.

If APS is forced to remove the deteriorating steam generators, it will have to blast a hole through the side of the steel-reinforced containment structure.

Or, as APS spokesman Mark Fallon euphemizes, "We would have to open an entryway on the side of the containment building."

There are no plans to replace the faulty steam generators immediately, Fallon adds. But . . .

"Certainly, it is a future option."
@body:There is little doubt Palo Verde management has entered a decisive and potentially dangerous period of operation. How management performs can literally determine whether the nuke plant must be permanently mothballed to avoid economic or physical meltdown.

But the track record of APS' managers, as reflected in the Palo Verde Papers, hardly inspires confidence that operations at the power plant will suddenly begin to proceed smoothly.

The Papers are, themselves, a telling example of APS' mismanagement of the nuclear facility. Thousands of pages of internal nuclear plant operation records--including detailed performance audits never formally reviewed by the NRC and never intended for public dissemination--now are stored at New Times.

The saga of the wayward documents dates to 1980, when APS contracted with Phoenix businessman Bill Myers to build the $7.1 million Palo Verde Inn. The inn, located in the desolate, I-10 truck-stop town of Tonopah, housed construction workers who built the remote nuclear power plant.

The utility couldn't have picked a more isolated and surreal location to build the workers' dormitory.

Tonopah's most notable business, then as now, is a 1940s-era truck stop featuring cheap torquoise jewelry, filthy rest rooms, inexpensive, chicken-fried luncheon specials and a clientele of local desert rats who have no other place to go than Tonopah Joe's.

Entertainment possibilities diminish from there.
After Myers built the sprawling, two-story inn, he contracted with APS to manage the facility.

Myers intended the building to last a long time. He hoped to get it back from APS after the nuclear plant was built, but a bitter contract dispute erupted. He and APS ended up in court. Myers won, but hasn't collected, a $1.8 million judgment from APS, which the utility has appealed. Myers also was ordered to sell the inn to APS, which he did in 1991.

APS then let the inn fall into disrepair, opting to use it as a storage facility for discarded office furniture. APS spokesman Fallon says the utility moved nearly 1,200 pieces of furniture into the building in 1992 after a new office complex was completed at the power plant.

Fallon says APS employees were supposed to remove important files from their offices before the file cabinets and desks were transferred to the inn for storage.

"We didn't intend to leave documents in the Palo Verde Inn," he says.
Nevertheless, reams of internal plant documents were left in the numerous files and slowly were scattered about the inn. The files even survived a mysterious fire that erupted near the administrative offices of the inn last fall.

Late last year, APS finally sold the building to a group of Texas investors for $57,000. The sales documents included an unusual provision that "buyer and seller acknowledge and understand that the personal property currently stored within the building on the sale property shall be conveyed to buyer as part of the transaction."

The documents at the inn would never have come to the attention of New Times if it hadn't been for Myers' bitter battle with APS. Myers, who owns property surrounding the inn, kept a close eye on the building, noticing all the documents scattered about.

He described his feud with APS, and the bizarre collection of records left inside the inn, to an elected official during a discussion at the Phoenix Country Club. That official called New Times. The new owners of the inn gave the paper access to the records.

The Palo Verde Papers contain information APS obviously didn't want in the public domain.

APS historically has kept a tight lid on the internal operations at Palo Verde. The company's public relations office carefully spins news releases to downplay any mishap at the plant. Coverage by local daily newspapers of the numerous foul-ups at the plant have been, to speak charitably, timid.


The company is so obsessed with keeping tight control on information released from the plant that it has publicly acknowledged retaliating against employees who lodged safety complaints with the NRC. The commission is currently conducting an investigation into APS treatment of whistle-blowers, several of whom say a federal grand jury will convene on the matter later this year.

Staying true to form, Fallon initially downplayed the significance of the document cache, saying they were unimportant records. But he also made it clear the company would like the records back.

"Although the documents are nothing more than personal files of current and past employees, we feel it would be prudent to recover them," the APS spokesman said Thursday.

By Friday, APS had decided that recovery would be prudent, indeed.
Fallon called an owner of the Palo Verde Inn, asking that the documents in New Times' hands be returned to him, so he could release them to APS. Then Fallon called New Times, asking when the documents would be returned.

And then he phoned again, suggesting that publication of the Palo Verde Papers might have legal repercussions.

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