HL-3436, Comment on Draft NUREG/BR-0058,Rev 2, Regulatory Analysis Guidelines of Us Nrc. Agrees W/Comments Provided by NUMARC

Comment on Draft NUREG/BR-0058,Rev 2, Regulatory Analysis Guidelines of Us Nrc. Agrees W/Comments Provided by NUMARC

ML20058N076
Person / Time
Site:	Hatch, Vogtle
Issue date:	12/21/1993
From:	Beckham J GEORGIA POWER CO.
To:	Chilk S NRC OFFICE OF THE SECRETARY (SECY)
References
FRN-58FR47159, RTR-NUREG-BR-0058, RTR-NUREG-BR-58 58FR47159-00013, 58FR47159-13, HL-3436, LCV-0221, LCV-221, NUDOCS 9312210239
Download: ML20058N076 (54)

Text

_ _ _ _ _ _

Georgia Power Company QDD

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Docket Nos. 50-321 50-424 HL-3436 50-366 50-425 LCV-0221 Mr. Samuel J. Chilk Secretary of the Commission U.S. Nuclear Regulatory Commission Washington, DC- 20555 ATTENTION: Docketing and Service Branch Comments on Draft NUREG/BR-0058, Revision 2

" Regulatory Analysis Guidelines of the U. S. Nuclear Regulatory Commission" (58 Federal Reaister 47159 of September 7. 1993)

Dear Mr. Chilk:

Georgia Power Company has reviewed the draft HUREG/BR-0058, Revision 2,-

" Regulatory Analysis Guidelines of the U. S. Nuclear Regulatory Commission," published in the Federal Register on September 7,1993. In accordance with the request for comments, Georgia Power Company is in total agreement with the NUMARC comments which are to be provided to the NRC.

Should you have any questions, please advise.

Respectfully submitted, 0 Y d.T.Beckham,Jr.

JDK/jdk 9312210239 931221 PDR NUREC ~

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Georgia Power h(g U. S; Nuclear Regulatory Commission Page.Two cc: Georuia Power Company C. K. McCoy,-Vice President, Vogtle Electric Generating Plant.

'J. B. Beasley, General Manager:- Vogtle Electric Lenerating Plant.

H. L. Sumner,.Jr., General Manager - Plant Hatch U. S. Nuclear Reaulatory Commission.- Washinaton. [C K. N. Jabbour, Licensing Project Manager - Hatch

- D. S. Hood, Licensing Project Manager -' Yogtle U. S. Nuclear Reaulatory Commission. Roaion II-S. D. Ebneter, Regional Administrator L. D. Wert,. Senior Resident-Inspector.--Hatch-B. R. Bonser, Senior Resident Inspector - Vogtle

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Lcv'-022 I S00THERN NUCLEAR 0PERATING C0MPANY INTER 0FFICE MEM0RANDUM Date: 07-Oct-1993 01:24pm CDT-From:- Jerri D. Krienke Dept: Tech. Serv. Licensing Services Tel: 8-821-5742 T0: STEVE J. BETHAY SNC T0: JAMES A. BAILEY SNC TO: BRAD L. MOORE SNC cc: CHARLES R. PIERCE' SNC cc: BEN J. GEORGE SNC

Subject:

Regulatory Analysis Guidelines of.the USNRC; NUREG/BR-0058 R2 The NRC is making available for public comment its draft " Regulatory Analysis Guidelines of the U.S. Nuclear Regulatory Commission,"

NUREG/BR-0058, Revision 2. This document, last issued in 1984, is the Commission's policy-setting document with respect to regulatory analyses and has applicability for regulatory actions affecting all NRC licensees.

The objectives of revising the guidelines are to incorporate: (1) the NRC's accumulated experience with implementing the previous guidelines; (2) changes in NRC regulations and procedures since 1984, especially the backfit rule (10 CFR 50.109) and the Policy Statement on Safety Goals'for the Operation of Nuclear Power Plants; (3) advances and the refinements in-  :

regulatory analysis techniques; (4) regulatory guidance for Federal l agencies issued by the Administrative Conference of the United States and '

the Office of Management and Budget; and (5) procedural changes designea l to enhance NRC's regulatory effectiveness.

NUMARC is preparing an industry response to the request for comments.

They are relying on the appropriate NUMARC advisory committees and industry organizations to develop an initial draft industry response, i They have scheduled to forward the initial draft comments to' NUMARC .

members for review and comments by November 5, 1993. Upon receipt of the initial draft, we will forward this to you for your review. The comment period expires December 6, 1993.

A copy of the federal register notice, SECY 93-167, and the " Regulatory Analysis Technical Evaluation Handbook" has been forwarded to you. If you have not recieved your copies, please let me know.

Thanks!

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TO: NUh1 ARC Administrative Points of Contact

SUBJECT:

NUMARC Coordination ofIndustry Comments on the Draft " Regulatory Analysis Guidelines of the U.S. Nuclear Regulatory Commission,"

NUREG/BR-0058, Revision 2 The NRC staff has proposed a revision to its Regulatory Analysis Guidelines. The September 6,1993, issue of the Federal Register (Vol. 58, Number 171, Pages 47159 through 47160), stated that the NRC is making the draft guidelines available for public comment for a period of 90 days. Enclosure 1 is a copy of the Federal Register Notice (FRN). It includes a summay of the major positions taken by, and objectives of, the.

proposed revision. The comment period expires on December 6.1993.

The purpose of this letter is to infonn you of our plans for preparing a coordinated  ;

industry response to the request for comments. In order to facilitate effective use of l industry resources, we are not soliciting comments from the broad membership at this i time. Rather, we will rely on the appropriate NUMARC advisory committees and industry organizations for assistance in developing an initial draft indust:y response. At that point, we will request your review and comment. 4 i

The following process is anticipated:

. By October 15,1993, NUMARC will develop and distribute an initial draft 3 industry comment package to APCS.

. By November 5,1933, NUMARC members will review and provide cominents on the initial draft industry comment package to NUMARC.

. By November 22,1993, NUMARC will distribute to APCS the " final draft" industry comment package for information and possible endorsement. ,

. By December 6,1993, NUMARC will file industry comments with the

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NRC.

. - NUhiARC Administrative Points of Contact

/ September 9,1993 Page 2 Admittedly, the three-week NUhiARC member review period of the draft comment package is shon. For that reason we are informing you of our plans and providing copies of the relevant NRC staff materials as soon as practical.

Enclosure 2 is a copy of NRC hiemorandum SECY 93-167, " Regulatory Analysis Guidelines of the U.S. Nuclear Regulatory Commission," dated June 14,1993. It contains a copy of the draft guidelines and the basis for several of the major positions taken by the NRC staff. Additionally, we have requested a copy of the draft " Regulatory Analysis Technical Evaluation Handbook," NUREG/BR-0184, mentioned in Enclosure 1, and will distribute copies to you as soon as we receive it.

Any questions regarding the backfitting issues discussed in the FRN or guidelines should be addressed to either Bob Bishop or hiike Kirk of the NUhiARC staff. All other questions on the positions taken in these two documents, or our plans, may be directed to either Tony Pietrangelo or Dave hiodeen.

Sincerely, l

,{' / N f .--.-

William H. Rasin ,

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WHR/DJhi/rs Enclosures c: NUhiARC Board of Directors (w/o enclosures)

NUhiARC Executive Points of Contact (w/o enclosures)

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' Enclosure 1-

'e FedIral Register / Vol. 58. No.171 / Tuesday. Sept mber 7.1993 / N;tices '47159 NUCLEAR REGut.ATORY Regulatory Research. Mail Stop NLS-COMMISSION 129. U.S. Nucleat Regulatory Commission. Washington. DC 20555 Regulatory Analysis Guidelines; . telephone:(301) 492-3763.

Assuance, aWW SUPPLEMENTARY INFORMaTION:

AGENCY: Nutlear Regulator)

Ba und Commission.

ACTION: Notice. The Guidelines are being reissued to fulfill the objectives identified above, suMMaRr:The Nuclear Regulatory The NRC plans to publish the Commission is making available for Guidelines in both draft and final form.

public comment its draft " Regulatory in many respects employing a process Analysis Guidelines of the U.S. Nuclear consistent with the development of a Regulatory Commission." NUREC/BR- - rule or policy statement. Since this is 0058. Revision 2 (Guidelines).This the NRC's policy setting document with document. last issued in 1984, is the respect to regulatory analyses,it Commission's policy-setting document contains a number of pobcy decisions with respect to regulatory analyses and that have broad implications. As a has applicability for regulatory actions result. issuance of this draft will allow affecting all NRC licensees.The the Commission an opportunity to hear objec'ives of revising the Guidelines are from the public on these implications to incorporate: and issues.

(1) The NRC's accumulated esperience with implementing the Discussion previous Guidelines: - Some of the positio_ns taken in the (2) Changes in NRC regulations and draft Guidelines represent depanures procedures since 1984, especially the from current practice have never been backfit rule (10 CFR 50.109) and the formalized. or differ from positions Policy Statement on Safety Goals for the industry has taken. In recognition of Operation of Nuclear Power Plants (51 this, the NRC has identified the FR 30072, August 21.1986); following issues for specific attention (3) J < ances and refinements in and would welcome public comment on regJatory analysis techniques: each of these issues:

14) Regulatory guidance for Federal (1) Guidoneefor oddressing safety agencies issued by the Admmistrative goc 1 considerations in the regulatory Conferena of the United States and the - onalysis.The position taken in the draf:

Office of Management and Budget - Guidelines is consistent with the (OMB); and approach described in SECY-91-270 (5) Pmoedural changes designed to .. Interim Guidance on Staff enhance NRC's regulatcry affectsveness. Irnplementation of the Commission's DATES:The comment period expires on Safety Goal Policy," of August 27,1991 December 6.1993. Comments received The proposed procedure is based on the -

after this time will be considered if it is use of a change in core damage practical to do so but assurance of probability rather than an absolute consideration cannot be given except for number and involves certain criteria for comments received on or before this staff action.

date. (21 The treatment of voluntary actions ADDRESSES:To receive a copy of the in NRCiegulatory onelyses. Voluntary draft "ReEulatory Analysis Guidelines of licensee actions or programs may

_the U.S. Nuclear Regulatory already be in place that, to some degree.

Commission." NUREG/BR- 0058. already achieve some of the objectives Revision 2. requests should be in ,

sought by the proposed change.The writing to the U.S. Nuclear Regulatory approach taken in the draft Guidelines Commission. Washington. DC 20555, is to encourage industry voluntary Attention: Distribution and Mail initiatives. but also to recognize that Services Section. A copy is also there may be cases where good cause available for inspection or copying for a exists to consider codification of such fee at the NRC Public Document Room. safety practices.

2120 L Street NW. (Lower Level). For the purpose of performing the Washington. DC. regulatory analysis weighing of values -

Mail written comments to the . and impacts for such actions. the draft Regulatory Publications Branch. . Guidelinesinclude the position that.

Division of Freedom ofInformation and with certain exceptions.no credit Publications Services. Office of should be given for the voluntary Administration. U.S. Nuclear Regulatory actions taken by licensees. The intent of Commission. Washington.DC 20555. this position is that the regulatory FOR FURTHER INFORMAYl0N CONTACT: policy should not inhibit regulatory Brian Richter.Offim of Nuclear requirements to be established when

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s 471 0 Federal Register / Vol. 58. No.171 / Tuesday, September 7,1993 / Notia s averted onsite costs should be included higher ratio of values to impacts will ru.t soh.nta v pryams are non-uruform necessarily ensure a higher net value.

in the value impact anc!ysis as a across all hcenwes or w hen suc h Further, the ratio needs to be developM positise attnbute in a net salue programs coc!d eas;!y dissipate by formulation (value minus impact), or as with greater care than the net value bcenwe action alone. perhaps without measure because its numencal value NRC's knouiedge Furtnermore if credit a cost offset when results are displayed can be statistically biased and varv is provided fcr soluntarv initiatises and as a(6)ratio.

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The present wonh voluotson < widely depending on the calculatior.al thus values and impacts associated with approach employed. For these reasons.

future health and safety effects er ? . if the ratio is used,it is to be view ed as the proposed regulatory action a e tw reduced, meaningful health and safdy regulatory analyses. The pcsitir 2 ipplemental and not as a replacemer.t improvements could remain uncodifiedhealth in theanddraft Guidehnes is that fut :'

safety effects should be for the net value method, and voluntary in nature. Absent a serious safety concern, these initiatives subject to p esent worth consideration, Public Comment in the same manner and at the same rate The NRC is interested m receiving would not be 51' ect to enforcement on as impacts. The objective is to the part of the ,%C. How ever, when determine the amount of money needed public comments on any aspect of the voluntary actions are known to eust draft Guidelines. Given the applicability today that is equivalent (taking account of the Guidelines to decisions affecting which are not reflected in the base case value-impact results a sensitivity of return on investment) to the dollar value of future health and safety effects all NRClicensees. comments from all analvsis is to be performed and value- such that all such effects, regardless of categories of licensees are requested. To impact results also displayed with facilitate the public comment process.

credit for voluntary actions. It is when they occur, are equally valued the staff has also prepared two recognized that voluntary actions that throughout the regnatory analysis.

(7) The dollor/ person-em value to be supplemental documents that will be are a part of an overall industry usedin NRCregulatory analyses. A provided along with copies of the draft commitment mth appropria.e fcllow up recommendation on the dollar / person- Guidelines.The first is a paper that evaluations could be subject to special discusses the various arguments for the rem value has not yet been developed treatment on a case by case basis. and further review and analysis is treatment of averted or site costs and the (31 The mrerest rote for discount rotel second discusses the present worth to be used m present wonh calculations. necessary. In the interim, the position valuation of health and safety effects.

The position taken in the draft taken in the draft Guidelines is that A draft of the " Regulatory Analysis continued use of $1000/ person-rem Guidelines is that under most Technical Evaluation Handbook,"

(1993 dollars)is acceptable as a NUREG/BR-0184 (Handbook), a circumstances the discount rate specified in the latest version of OMB conversion factor for all offsite replacement for "A Handbook for Value-consequences of severe power reactor Circular A-94 should be used in NRC accidents, and as a reference point or impact Assessment"NUREGICR-35f,8.

regulatory analyses. This circular was also is available upon request.The most recently updated on November 10. baseline in applications when offsite Handbook provides detailed guidance i 1992, and specifies the use of a 7 consequences are not involved, such as '

for occupational exposure, non-power on performing regulatory analyses and percent real (i.e., adjusted to eliminate should be useful in better understanding the effect of expected inflation) discount reactor accidents, and in ALARA rate.although the use of a 3 percent real determinations associatedregulatory with cleanup how NRC analyses.The policy will Handbook, be applied in rate for sensitivity analysis purposes is of contaminated sites.The document which will reflect positions established also proposed. Finally,in unique also permits the use of alternative circemstances when the regulatory values to portray the range of values that in the draft Guidelines, is in an earlier re sonably could be selected as the developmental stage and will be analysis considers consequences that finalized upon receiving public occur over a timeframe in excess of 100 dollar / person-rem conversion factor.

(8) The value impact resuhs to be comments on the draft Guidelines.

years, the draft Guidelines indicate that displayed in NRC regulatory onelyses.Dated at Rockville Maryland, this 31st dav

'a 7 percent interest rate should not be l used. In these instances, the regulatory The position taken in the draft of August.1993.

I' Guidelines is that the value impact For the Nuclear Regulatory Comrnissinn.

analysis should display results to the I decision maler m two ways. First, on a result should be com uted and b N' displayed in the regu atory analysis as Secretaryofthe Commission.

present worth basis using a 3 percent a net value (summation of positive and real rate, and second, by displaying the ITR Doc. 91-21708 Filed S-3-93. 8.45 am]

negative attributes). This will provide values and impacts at the time in which an absolute measure of the proposed osuwacootrom m they are incurred with no present worth action, and selection of the alternative conversion.

(41 Analyses andinformation with the larEest net value will ensure [ Docket No.60-278) necessary to scrisfy the bocifit rule and/ the largest societal gain from among the alternatives analyzed.The use of the net Philadelphia Electric Co., Public or CRGR review.The position taken in Service Electric and Gas Co., Delmarva the draft Guidelines is that preparation value measure is prescribed by OMB in its regulatory analysis guidance. Power and Light Co., Atlantic City of a regulatory analysis in confonnance NRC regulatory analyses may also Electr6c Co.--Peach Bottom Atomic I with the Guidelines meets the backfit include results displayed as a ratio in Power Station, Unit 3; Esemption rule and the provisions of the CRGR charter without a need to prepare recognition that,in certain I circumstances, relative measures such separate submissions. as ratios may also be useful to the The Philadelphia Electric Company.

(5) The treatment of ovened onsite et al. (PECo. the licensee), is the holder costs in NRC regulatory analyses. In the decision maker. This is particularly true of Operating License No. DPR-56, past, industry has challenged the when prioritizing a large collection of which authorizes operation of the Peach inclusion of averted onsite costs and has proposed actions in the presence of a argued that it can distort the meaning of cost constraint. However.

that the use of ratios is problematic steadyOMB cautions state reactor Bottom rore power levelsAtomicPower Stat the value-impact ratio. The position not in excess of 3293 megawatts because selecting an alternative with a taken in the draft Cuidehnes is that

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t~s .' October 18,1993 1 TO: NUMARC Administrative Points of Contact

SUBJECT:

Draft Industry Comments on the Dran " Regulatory Analysis Guidelines of the U.S. Nuclear Regulatory Commission," NUREG/BR-0058, Revision 2 l

l In our letter to you dated September 9,1993, we informed you of our process and l

f schedule for the development ofindustry comments on the subject guidelines. Enclosed

! for your information and review is the initial draft ofindustry comments.

The dran comments primarily address several of the key issues the NRC staff raised with the Commission and highlighted in the Federal Register Notice (Vol. 58, No.

171, September 7,1993,47159-47160), as well as other issues we believe to be important to regulatory analyses. These issues include the following:

1. Guidance for addressing safety goal considerations in regulatory analysisffr C .

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2. The treatment of voluntary actions. f 1

3. Application of 10 CFR 50.109. [~

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4. The treatment of averted onsite costs. g l

5. The dollar / person-rem value to be used. '

6. Information requests under 10 CFR 50.54(f)

7. The proposed benefit-cost methodolgy.

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Please forward the draft comments to the appropriate personnel within your organizations for review. Per our schedule. we request that you forward any comments on this material to NUMARC. to the attention of Tony Pietrangelo (far  ;

l 202-785-1898L by Friday. November 5.1993. We will be distributing final draft industry comments for your information by November 24. Comments are due to NRC by j December 6.

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NUMARC'Adrainistrative Points of Contact October 18,1993 Page 2 L Please contact Tony Pietrangelo or Dave Modeen should you have any questions.  ;

,1 Sincerely,. i 2[ fEb William H. Rasin 1 ARP/rs a Enclosure c: NUMARC Board of Directors (w/o enclosure) i NUMARC Executive Points of Contact (w/o enclosure) - j

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. 1. GUIDANCE FOR ADDRESSING SAFETY GOAL CONSIDERATIONS . l 1

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) We support the use of a safety goal evaluation to determine as early as possible in -

l the regulatory analysis process whether there is a legitimate' safety concern and need for. j" j further analysis. The proposed process is a good start.- However, as explained in more -

detail below, we believe further NRC staff attention and perhaps discussion with the .

industry is warranted before finalizing the process and threshold values contained in J

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j Section 3.0 of the draft NUREG/BR-0058. '

j In 1986, the Commission issued its Safety Goal Policy Statement.' The objective -~

was to derme an acceptable level of radiological risk from nuclear power plant operation.-

In particular, the Commission indicated that current regulatory practice ensured - , l l

j compliance with the basic statutory standard of adequate protection. But, the Commission also concluded that current practices could be improved to providea better - .

l i means for testing the adequacy of current requirements and the poteritial change to such ]

l requirements.

! Since promulgation of the Safety Goal Policy Statement in 1986, the industry has; 1 i

observed the difficulty the NRC staff and the ACRS have experienced in attempting to

j identify appropriate implementation methods. In June 1989, the NRC staffpublished - 'l SECY 89-102, Safety Goal Imnlementation, which identified several key policy issues. l l

After careful consideration and approximately one~ year later, the Comminnion responded. .;

l i Subsequently, there have been several NRC staff proposals, ACRS comment letters and - ,

counterproposals regarding implementation of the Commission policy and guidance.  !

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i We believe the latest proposed staff approach for assessing the effectiveness of the j present regulations with respect to the Commission's safety goals, described in SECY l 232, Staff Am.. ach For Asse=cina the Ffhetivenece of the ".=.: Ramdatinne with j Respect to the Commienion's Rafetv Gamit is comprehensive and responsive to the' j Commission's directives. ' Ibis topic is of great interest and importance to the industry.

We look forward to interacting with the staff, primarily through.NUMARC's Regulatory l

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'Ihreshold Working Group, on this endeavor in the near future.

j 'Ihe remainder of our comments focus on those aspects of the SGP relevant to the issues described in the proposed Regulatory l Analysis Guideline. 'Ibese comments 'can be ' j i further. subdivided into three areas: existing plants generally meet the SGP;(2) risk:

sequences must be evaluated as an integral unit of core damage and containment _

performance; and (3) miscellaneous considerations. .dah?..' p-

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( l I Draft 10/15/93 I Page 1

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First, dh to the robust design, enhanced personnel training and procedural l

guidance and IPL9, there is little remaining that can be found to be cost-beneficiai believe the NRC staff should acknowledge that the existing plant population is acceptable i Ae. We believe there is little that can be economically justified .it existing p  ;

that could result in a profound change in their risk profiles. i i

Improvements in our undcrstanding of postulated severe accident phenomena, probability, and consequences over the past decade demonstrate that the existin '

regulations and regulatory practices, in combination with industry sponsored initia provide significantly less radiological dose risk to the public than what was pre

! considered to be acceptable. NRC studies, such as NUREG-1150 and the LaSalle '

probabilistic safety assessment (PSA), and industry studies, such as IDCOR an speJ.fic PSAs, are examples.

A recent industry report provided to the NRC staff as part of NUMARC's comments on the proposed rule change to 10 CFR Part 100, provided clear quantitative '

evidence as to the wide margin provided by current licensed plants in meeting the Quantitative Health Objectives (QHO) of the NRC Safety Goal Policy.

Therefore, complementary to the first point, the selection and application of threshold, or discriminator values established in the proposed NRC staff Safety Goal Policy implementation procedure, are considered crucial. We believe more thoug required regarding the use of quantitative measures of containment performance conjunction with the relevant core damage sequences and frequency values than t

' which currently is provided in the draft proposal.

In NUMARC 91-04, " Severe Accident Issue Closure Guidelines," the industry <

made a conscious decision to recommend not quantifying containment performance. )

Those values are less certain than results from the Level I portion of a probabilistic safe assessment. While we understand the NRC staffs desire to address contain performance rigorously, overemphasis or unilateral concentration on CCFP. valu reisdirect efforts and lead to inappropriate conclusions. It is imperative that the chan core damage frequency accompanying the CCFP for the sequences under review be assessed as a unit.

As a result, we believe the suggested evaluation process describe,d in Section 3.2 l l

are overly conservative and result in a decision matrix (Figure 3.2) tha(is more 7 l complicated than necessary. The NRC staff actions proposed in the tabular for top of Page 3.9 should not be based only on the estimated reduction in. core dam frequency. Correspondingly, the six boxes contained in Figure 3.2 can be reduced three, as follows.

Draft 10/15/93 Page 2

I l We recommend Figure 3.2 be revised to reflect that a threshold of 1.0E-6 per -

reactor year for the product of delta core damage frequency (ACDF) and conditional containment failure probability (CCFP) is a low enough discriminator and should serve as the basis for truncating further NRC staff analysis. As demonstrated by NUREG-1150 results, frequencies oflarge, early releases of approximately 1.0E-6 are still very conservative approximations of the actual Quantitative Health Objectives (QHO) of one-  ;

tenth of a percent of prompt and latent deaths from other sources.

A second threshold value of 1.0E-5 per reactor year for the product of ACDF and CCFP is recommended as well. It should be used as the value for distinguishing between those items that automatically wanant a value-impact assessment as compared to those that may warrant further assessment as a result of managementjudgement.

A proposed revision to Figure 3.2 that reflects the suggestions stated above is '

included at the end of this enclosure. We believe it appropriately simplifies the decision process by utilizing these threshold values to produce only three categories in Figure 3.2:

(1) proceed with value/ impact assessment, (2) management decision whether to proceed - .

with value/ impact assessment, or (3) no further action. The diagonal lines represent - j constant values for the likelihood of an event that represents any given event with a _ _;

combination of a damaged core and failed containment ofeither 1.0E-5 or 1.0E-6 per i reactor year.

Other miscellaneous comments we offer regarding this section of the proposed Regulatory Analysis Guideline are:

. The SECY 93-167 description also indicates no " final conclusion" with respect to ,

the large release definition. Yet, it appears evident from past deliberations that j there will not be such a dermition.

. Section 3.3.2, " Additional Consideration of Containment Performance" states "the use of a CCFP value of 0.1 is consistent with Commission guidance for -

evolutionary designs." Although this is to some degree true, there should be an accompanying statement regarding the Commission's admonition to the NRC staff that the CCFP as well as any other unique NRC staff formulations not become a de ,

facto safety goal.

i . Finally, the statement on Page 3.9 that "If the initiadve results in a small change in CDF (less than IE-5 per reactor year), the regulatory analysis should in general proceed only if an attemativejustification for the proposed action can be formulated" undermines the entire quantitative approach. It permits the

.l Draft 10/15/93 ,

Page 3

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substitution of unspecified alternatives after a quantification process has -l demonstrated small potential for an enhancement to plant safety. This is clearly l

inappropriate and casts doubt on the intentions of the NRC staff to utilize risk -l-insights and safety goals as a discriminator in determining how safe is safe eno l

This caveat should be removed.

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Decision I Whether to  ;

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Action IE-6 i IE-2 1.0E-1 y CCFP

. . :r Revised Figure 3.2 Draft 10/15/93 Page 5 l

2. TREATMENT OF VOLUNTARY ACTIONS IN NRC REGULATORY ANALYSES It is clearly in the interest of public health and safety for NRC policy to promote self-initiated licensee efforts that enhance safny. There are numerous examples where individual licensees and the industry have taken the initiative to address safety concerns and implement safety improvements. We believe NRC can encourage these types of voluntary actions and fulfill its regulatory responsibility while preserving the licensee's authority and responsibility to manage its resources effectively. It is in this context that we effer our comments on the treatment of voluntary actions in the proposed revision to the guidelines.  ;

The NRC's primary responsibility is to ensure adequate protection of public health and safety. In carrying out this responsibility, NRC monitors licensee activities to ensure l compliance with regulations. If the licensee fails to comply with a given regulation, th NRC may utilize enforcement tools to restore compliance. If a demonstrable problem or concem arises that threatens the level of adequate protection, the NRC considers the promulgation of additional regulations. We begin with this rudimentary discussion o NRC's primary role to help distinguish the concept of adequate protection from safety 1 enhancements.

The subject of adequate protection was discussed at length in SECY-89-375, Adecuate Protection As It Relates To Safety Goals ACRS and NRC SinfTPositions.

Adequate protection was considered equivalent to the terms, "with no undue risk to health and safety" and "in full compliance with the regulations." It is also noted in this l

SECY that , " requirements imposed by a process that considers costs, however, cannot l

legally be part of the statutory standard of adequate protection." It follows that NRC enforcement actions should be strongest when adequate protection is not being met when a licensee fails to comply with regulations. It also follows that voluntary actions should not be a substitute for regulation when adequate protection is threatened. This would amount to an abrogation of NRC's shtutory responsibility.

In contrast, safety enhancements, by definition, go beyond the level of protection provided by the current body of regulations. 'Ihe terminology used in the guideli

" substantial additional protection." The principal reason given for NRC codification of voluntary actions that enhance safety is to provide a basis for enforcement action. In effect, the guidelines are saying that enforcemect action may be necessary because' s is not being enhanced sufficiently by the licensee. At this point, the distinction between adequate protection and incremental improvements in safety is lost, because the adequate protection has been redefined. This is the primary cause ofinstability in the Draft 10/15/93 Page 6

i

i.  ;

.j regulatory process. Additionally, the need for enforcement basis should not be the l f driving factor behind the promulgation of additional regulations. The primary factor, 'l consistent with NRC's statutory responsibility, should be adequate protection of public q g

health and safety.

l I

i The codification of voluntary actions also undermines the licensee's responsibility- l and authority to manage plant operationi. One of the key functions ofmanagement is to _

allocate resources consistent with changing needs and priorities. The ability to shift' 1 priorities and resources as circumstances may require is essential for management to! l fulfill its responsibility, particularly with respect to a voluntary program. By codifymg a - ]

) voluntary program or practice in regulation, the NRC has effectively assumed :

i i management's function. In 1989, the NRC itself concluded in NUREG-1395, Regulatory

]

Impact Survey, that NRC dominates licensee resources. We believe that codification'of-l j voluntary actions is one of the key mechanisms responsible for this domination.

To strongly encourage voluntary licensee actions that enhan'ce safety, we believe 1 the policy discussed in the proposed guidelines must be. modified. First, prior to {

) proceeding with rulemakings and the supporting regulatory analyses that seek safety; j

l l enhancements beyond adequate protection, licensees should W.rovided the opportunity j j to assess and respond accordingly to the particular issue. - Second, ifNRC believes that l

proceeding with the rulemaking process is appropriate, full credit should be given in the j j _

l supporting regulatory analysis for voluntary licensee actions that achieve the desired :

l j safety enhancement. By doing so, the regulatory analysis would accurately reflect -

whether the proposed regulation adds value or not.

~

Besides encouraging voluntary actions, the policy recommended above would :

begin to draw an important distinction between the responsibilities of the regulator and those oflicensee management. We believe that over the years this division of responsibilities has become indistinguishable. Providing clarity to these responsibilities .

would certainly help to avoid duplicative efforts and result in more efficient use ofboth industry and NRC resources. -

a Finally, we are compelled to offer specific comments on the quantification _of incremental values and impacts for the baseline case of the regulatory analysis. The -

proposed guidance, calling for the exclusion of both the reduction in consequences anj the costs incurred by licensees in implementing the voluntary action, amounts to stacking -

the deck to ensure that the proposed requirement is justified by the analysis.: In short, we - 1 can think of no principle of economics that would support this practice. .

Draft 10!!5/93 - I Page 7

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3. APPLICATION OF 10 CFR { 50.109 i i

r i  !

Under 10 CFR & 50.109, a backfit is defined as "the modification of or addition toi f '

systems, structures, components, or design of facility ... or the procedures or organ 1 '

l required to design, construct or operate a facility; any of which may result from a nel amended provision in the Commission rules or the imposition of a [new] regulat6ry s li position interpreting the Commission rules ...." The backfit rule includes within its s any means used by the NRC "to create an obligation upon licensees to change th The rule .

construction or operation of a facility ...." (49 Fed. Reg. 47024,47035 (1985)) ,

specifies that such an obligation may not be imposed unless (1) it is necessary to assl adequate protection; (2) it is necessary to bring the facility into compliance with itsi license or tlic rules or orders of the NRC, or into conformance with written commitments -

l l by the licensee; or (3) there is a substantial increase in the overall protection1 health and safety, and the direct and indirect costs ofimplementation are justified in view l of the increased protection.

-- -i

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In the introduction to the proposed Regulatory Analysis Guidelines (NUREG/BR . j 0058, Rev. 2), the NRC states that the Guidelines will be used in the evaluation of ^

l proposed actions by the NRC that may be needed to protect public health an :l further explained that the evaluation is intended to aid the NRC in~ determining whe the proposed actions are needed and to provide a clear and'well-documented exj of why a particular action was recommended. In principle, the result of that analysj which will be documented as a Regulatory Analysis, is fully consistent with the type of analysis that must be conducted to satisfy the requirements of 10 CFR { 50.109.'

J However, in direct conflict with that principle is the statement in the proposed j Guidelines { 4.1.2, Back/it Rule Concerns, which states that a Regulatory Analysis mal not be needed depending on the type of backfit the proposed action might ,W If -

l the Regulatory Analysis is being done for a proposed regulatory action which has no 1

backfit implications, it follows directly that any discussion regarding the applica  !

{ 50.109 is not appropriate. On the other hand, if there is a qwiaa about the ,

of f 50.109 to a proposed regulatory action, a Regulatory Analysis'(or some !

similar analysis to satisfy the requirements of f 50.109) must be conducted to ens l

the proposed action is properly characterized in the i 50.109 context and that fuj cvaluations, as may be appropriate, are conducted. The purpose and process of the j proposed Regulatory' Analysis would satisfy the requirements for an analys j under { 50.109 to enable an appropriate justification to be'documengd regardingj 6 50.109 applies to a proposed regulatory action.' 'Ihus, consistent with both NR l regulations and the purpose of the Regulatory Analysis Guidelines, f 4.1.2 shou revised to provide that a Regulatory Analysis conducted pursuant to the Guide Draft 10/15/93 Page 8 4 1

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i satisfy the requirements of & 50.109, and. funher, that a Regulatory Analysis shouid be conducted of any proposed regulatory action which must be evaluated pursuant to

{ 50.109.

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4. AVERTED ON-SITE COSTS (AOSC) 1 For more than a decade, the industry and NRC have debated over the appropriateness ofincluding AOSC in regulatory analyses. After review of this history and the basis for the latest position taken by the staff, the industry continues to believe ,

that AOSC should not be considered in regulatory cost benefit analyses. The primary rationale for our position is that fmancial risk management is within the purview of utility management. It is not the responsibility of NRC, whose primary role is to assure the adequate protection of public health and safety.

In our research to develop comments on the staffs proposed treatment ofAOSC, we came across a draft position paper on AOSC developed in the 1987 timeframe (prior to the incorporation of NUMARC) by an industry working group on Safety Goals and '

Cost-Benefit. This position paper was never submitted to the NRC due to a perception at that time that the staff was no longer supporting the inclusion of AOSC in regulatory analyses. The paper documents the basis for the conclusion that it is inappropriate for-NRC to consider AOSC in regulatory analyses.

We believe the position paper is more timely today than it was back then. It is attached as our principal comments on the consideration of AOSC in regulatory analyses.

Of note is the recognition of the need to preserve the distinction between the regulatory oversight responsibilities ofNRC with the responsibilities oflicensee management. We believe this division of responsibilities has been lost over the last several years and clearly needs to be reestablished. In light of the economic problems threatening the viability of our nation's second largest source of electricity, this message could not be more timely.

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Draft 10/15/93 Page 10

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NUCLEAR INDUSTRY POSITION PAPER i ON THE CONSIDERATION OF AVERTED ONSITE COSTS IN REGULATORY DECISION-MAKING l

Nuclear Utility Management and Resources Committee Working Group on Safety Goals and Cost-Benefit Draft 10/15/93 Page11

B .

I NUMARC POSITION STATEMENT ON AVERTED ONSITE COSTS Overview The question of whether or not it is appropriate for the NRC to include, and to mandate that others include, averted onsite costs (AOSC) of potential accidents at nuclear power plants in regulatory cost-benefit analyses (e.g., those called for under the backfit rule or the Commission's safety, goal policy) is currently the The Nuclear Utility Management and subject of considerable interest and debate.

Resources Committee (NUHARC) is opposed to the inclusion of AOSC in regulatory I cost-benefit analyses because such inclusion would:

divertNRCattentionfromitsprimaryresponsibility-assuringbhe (a) adequate protection of the public health and safety; (b) inject the NRC into the internal management, particularly the financial risk management, of nuclear plants, a role for which the NRC has neither the responsibility nor the authority; and thereby unnecessarily impede plant licensees from effectively carrying out their (c) primary respopsibility - the safe, reliable, and economic generhtien of nuclear power.

If the NRC does so intervene, it becomes a partner in management and should bear a part of the financial, legal, and ethical responsibility for the results of that management.

In the following paper, we describe why the AOSC issue is an important one and amplify our reasons for concluding that AOSC should not be included in regulato cost-benefit analyses. This position is in agreement with the view stated by the l

l Commission when it published its initial Safety Goal Policy Statement in 1983.

HUMARC strongly recommends that the Commission reaffirm that position.

i 1

3979HS6-A

I Backcround Over the last few years, the role of cost-benefit analysis has become incre However, some of the basic policy important in the NRC's decision-making process.

[

issues related to the NRC's use of cost-benefit analysis have not yet been Foremost among these is the question of whether or not it is resolved.

appropriate for the NRC to include, and to mandate that others include, a onsite costs (A05C)* of po,tential accidents at nuclear power plants in regulat -

cost-benefit analyses (e.g., those called for under the backfit rule or the l

Commission's safety goal policy) of proposed plant modifications.

Historically, the NRC has held that its interest in ** utility economic issues is

, be concerned

~

quite limited and that it must, by Congressional mandate The Commission first principally with effects on public health and safety.

expressed its opinion on the A05C issue in 1983 when it said in publishi initial Safety Goal Policy:

"The first Question (on which the Commission had earlier sought l

public comment] was whether reduction in the risks of economic '

losses due to plant damage and contamination outside the plant l should be considered as a ' benefit' in addition to the monetary f

The Commission decided that the aversion risk reduction benefit.

of economic losses should not be considered Instead,athe benefit in the ,;

implementation of the Commission's Safety Policy.

• A05C can be defined as the pgt of the nneite cos q'uestion. in the probability that such an accidenttheoccurs du life e_ time of the niant.

of the modification, A05C are probabilistic in nature; they represent The major reduction in the expected value of the onsite. Ifcosts of replacement, and replacement power during plant repair or replacement.

included in a cost-benefit analysis, A05C are usually treated as a bene combined with the other benefits considered (e.g., reduced offsite' exp Alternately, they can be treated as a negative cost and subtracted fr costs of implementing the modification.

• • The amended.

Congressional mandate referred to is the Atomic the A05C issue are discussed in the Appendix to this paper.

2 3979N56-A

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focus of the Commission's cost-benefit guidance should~be on ,

protection of public health and safety. The Commission believes .

that although aversion of economic losses may be considered (and  !

~

should be encouraged since it leads to greater conservatism) by .

nuclear power plant operators in their evaluations' of.the need for. j specific safety-related actions, it is not appropriate for'the- l Commission's Safety Goal Policy Statement to include specific l

requirements for such considerations." NUREG-0080,-Revision 1, l  ;

l Section IX (May, 1983)' i Both as a result of its safety goal evaluation program and in its comments-during l the discussions on revising the backfit rule, the NRC staff has recommended that [

the Commission change this view and' require that AOSC.be included.in cost-benefit i analyses of all proposed backfits. In enacting its recent revision of the backfit j rule, the Commission stated that it would readdress the.AOSC issue as part of its

! reconsideration of the safety goal policy. However, the issue was'not addressed l in the Commission's most recent Safety Goal Policy Statement (published in August 1986).

I The AOSC issue is a ve,ry real one. A review of-a number of HRC and utility cost-benefit analyses has shown:  :

1. The magnitude of AOSC is usually substantially larger (often by a factor of 10  ;

or more) than the magnitude of the other benefits, such as averted offsite. i exposure of the public, so that if included. AOSC usually' dominates the cost-

! benefit ratio.  ;

2. The inclusion of AOSC can influence the conclusions drawn from cost-benefit I analyses both absolutely-(by making some proposed modifications appear. cost-  !

effective which would not be so otherwise) and relatively (by changing the ~

cost-effectiveness of a proposed modification relative to those of..other .l 1

modificationsunderconsideration). l Because AOSC typically dominate the other projected benefits, it is quite possible that with their inclusion a proposed modification might appear cost-effective even 1

if its estimated public safety benefits were quite small or negligible. Thus, i l

! 3979NS6-A -3 l

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averted onsite costs could potentially be used as a powerfu1~ lever to impose l

modifications which are perceived as desirable but=cannot be justified otherwise l l

The Fundamental Issue

.l The rentral question concerning AOSC is whether or not it is ' appropriate for the '

NRC to include, and to mandate that others include, AOSC:in. regulatory cost- a While arguments pro and con on this question have been benefit evaluations. l couched in such terms as completeness of cost-benefit analyses'and to whomj AOSC benefits accrue, the disagreement really arises from fundamentally;differeI views of what is the appropriate point of separation between the responsibility- !

Those opposed to the and authority of the NRC and those of the plant licensee. -

inclusion of ADSC believe that the NRC's primary role is to assure adequate protection of the public health and safety; those favoring inclusion argue th  ;

AOSC represent a public financial benefit, and that assuring such public; bene' is also a proper function of the NRC. This latter view-is contrary both'to past  ;

Commission position (as noted above) and to the NRC's mandate under the Atom Energy Act (as discussed in the Appendix). i Reducing the risk of incurring the onsite costs of an accident _is not directly tied to reducing the r(sk of offsite exposures of the public.- Assessments of '

potential accidents have consistently shown that the accident sequences:wh dominate the likelihood of offsite exposure are generally not those which domina the likelihood of plant damage. The accident'at TMI is a' good example; it '

resulted in large onsite costs to the utility but' negligible offsite exposure to the public. Thus, the aversion of'onsite costs is essentially a question of. f utility financial risk management, not of enhancing public safety.-

^

i The nuclear industry wholeheartedly agrees that.it is vital to avoid repetitions Even if it has negligible impact on the public health and of accidents like TMI.

safety, the financial penalty of.such an accident particularly.to the Itcensee o the affected plant but also to all other licensees, make it imperative'that it'be avoided.

However, the issue here is not whether plant damaging accidents should be avoided, but rather the approptlateness of the NRC injecting itself into the-management of the utilities' financial risks by imposing plant modifications'o other regulatory measures which can only be justified on the basis of A05C.-

4 3979NS6-A

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j It would be inappropriate for the NRC to mandate a plant modification which was_

(

not projected to reduce significantly the safety risk to the_public or to. plant I workers, regardless of how cost-effective it might appear. If it did so. the NRC would be engaging in economic regulation, which is outside its scope of.

l authority. Therefore, unless a backfit proposed by the NRC can be-shown to offer-j a significant safety improvement, it should be dropped from further NRC l

consideration regardless of whether it appears cost-effective with or without I AOSC.

We believe this use of safety sig'nificance as the primary (but not only) test of a proposed plant modification is cons'istent with the-revised backfit rule, )

which we strongly support.

a l

It is well-recognized that ultimate responsibility for operating a nuclear plant safely lies with the licensee, and that it is the role of the NRC to provide.the necessary regulatory oversight to assure that he does so. The licensee is also

~

f responsible to see that the plant operation is^ reliable and economic; here'the j To regulatory oversight is the role of the PUC or similar state agency.

ef fectively meet this spectrum of responsibilities and its Mher internal objectives, the utility must be allowed the flexibility, within appropriate regulatory restraints, to allocate its' resources-and.to balance the relative l f actors (e.g., equipment quality, plant design, personnel training, maintenance, l t j l

organizational structur'e) as it sees fit. This reonires a. broad, integrated I spread of internal management actions.

It is beyond its responsibility.for the i i

NRC to intervene in this management, particularly on the basis of only one. (A05C)

To do so l of the many considerations that effective management must incorporate.

! would usurp part of the utility management's authority and impede its ability t'o tct effectively. If the NRC does intervene, through the vehicle of 'AOSC 'or-s otherwise, it becomes a partner in management and should bear part of the l

l financial, legal, and ethical responsibility for the results of that management.

The Need for Regulatory Stability One of the principal objectives of the development of the NRC's Safety Goal. Policy is to make the regulatory process more stable by defining a measure of "how safe

~

! is safe enough." Industry's strong support of this effort is largely predicated ,

on the assumption that the existence of such a benchmark will serve to' bring .a measure of control and predictability to the regulatory system. Other,recent'NRC l These i

' actions have also been directed toward increasing regulatory stability.

5 3979NS6-A l

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actions include the establishment of the CRGR, the revised Backfit Rule, the Severe Accident Policy, and the Commission's suggested legislation to reform t One NRC initiative of particular pctential for promoting licensing process.

regulatory stability is integrated scheduling of plant modifications.

The integrated scheduling concept arose from a recognition that in some recent years, NRC-mandated modifications have preempted all the resources av; many nuclear utilities for plant improvements. Thus, these mandated mod were accomplished to the exclusion of plant betterment projects identified by '

utilities.

A survey of licensees conducted by NRC Staff management in 1981 (reported in SECY-81-437) concluded "that the pace and nature Th'is of regula actions have created a potential safety problem of unknown dimensions."

First, unless they are considered in an conclusion reflected two concerns.

integrated manner, the overall net effect of a large number of mandated ch Second, utilities were being precluded might actually be a reduction in safety.

from addressing other issues which could improve safety, such as by increa availability or reliability of plant systems.

In response to these concerns, the NRC has been promoting the concept of integrated scheduling of plant modifications, under which utility-identified projects are prioritized for safety significance along with NRC-mandat individual modifications are then scheduled for implementation largely on the NRC has issued a generic letter (Generic basis of their safety prioritization.

Letter 85-07) encouraging all utilities to implement such a scheduling process voluntarily, and has required that its project managers maintain a prioritize i

schedule of regulatory requirements for each facility. The situation at pres is better than that reported in 1981, in part as a result of this initiative. .

Introduction of averted onsite costs, however, with the potential that this could swing decision-making in favor of additional mandated changes, Such an action would, in effect, artificially undo the improvement made to date.

increase the apparent safety cost-effectiveness of NRC-mandated This would run proje thereby bias the prioritized scheduling process.in the1r favor. ,

counter to the desire of both the industry and NRC to bring stability and certainty to the regulatory process while still m protecting the health and l of the public.

6 3979NS6-A l

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Other Arguments For and Against inclusion of AOSC Those who support the inclusion of AOSC in regulatory cost-benefit analyses have ~

In this section, we advanced s?veral arguments which should not go. unchallenged. '

While these rebuttals' support briefly state these arguments and then rebut them.

the NUMARC position that AOSC shouid not be included, they are subsidiary to the f act that inclusion of' A05,C would inappropriately inject the NRC into internal utility management.  :

1. Cost-benefit analyses will not be complete (fully comprehensive) unless l

averted onsite costs are included.

The f act is that these analyses will not be complete even if AOSC are included. To keep any regulatory cost-benefit analysis manageable and not' commit more resources to it than are reasonable,-many factors which would be taken into account in a complete analysis are omitted. Omitted factors l typically include changes in plant availability and reliability; changes in l l

requirements for maintenance, surveillance, and personnel training; the. i financial impact of an accident'at one plant on-the licensees oflother plants; etc. Which factors are omitted, and hence the degree of completeness of the i

On the. basis of completeness, therefore, the analysis, is always arbitrary. i decision to include or not include AOSC is also arbitrary; on a more fur.da.nental basis, as described above, there are compelling reasons not to include them. .

2. Inclusion of AOSC is consistent with defense-in-depth, sitce it'will'&ssure I

that the industry gives sufficient attention to accident prevention and that f

protection of the public health and safety is not addressed solely through mitigation of the consequences of an accident. f NUMARC and the nuclear industry support the defense-in-dNth' philosophy l agree that attention must be given to both accident-prev'ention and conse l

mitigation. However .we do not agree that inclusion of AOSC is necessaryAsto assure that the industry gives proper attention to accident prevention. '

pointed out earlier, individual licensees and the industry as.a whole aware of the severe financial penalties to them of any plant damage accident, 7-3979NS6-A

This whether or not it represents a significant threat to public safety.

awareness is reflected by the numerous actions the industry has taken to These actions improve its performance and reduce the likelihood of accidents.

include:

The many self-initiated improvements in plant design, hardware, and (a) operation implemented by individual plant licensees.

, i The establishment of the Institute of Nuclear Power Operations (INPO),

(b) charged to set standards of excellence for the safe, reliable operation of nuclear plants and to assure that these standards are met.- .

The establishment of the Nuclear Safety Analysis Center (NSAC) to l (c) evaluate and resolve generic safety issues and, in cooperation with INPO, to analyze and learn the lessons from significant events at operating plants.~

The establishment of vendor-specific owners' groups, each of whose (d) members share operating experiences and cooperatively work to evaluate. issul and resolve problems that 'are common to plants of that vendor type.  ;

The establish ent of HUKARC as a means for promoting industry self-(e) regulation by developing industry commitments to resolve identified safety l issues and by helping to ensure coordination of industry actions toward self-regulation.

.1o* itimes to implement modifications are included in cost-

3. If the costs benefit analy;.s, it is only fair that the benefits of avoiding downtimes due i to accidents also be included. '

Withveryfewexceptions(e.g.,veryextensiveplantmodifications), estimates .

of implementation costs are based on the assumption that the modifications l

be implemente, d during downtimes already scheduled for~ otherL purp:

refueling). Thus, no downtime costs are typically inc1Eded'in i

the cost- 1 9

4 8

3979NS6 A i

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i benefit evaluations *, so that this argument for inc1: ding A05C is not=

)

applicable. 1 AOSC represent a reduction in the r4 costs of plant modifications; therefore,

4. -

they should be included in cost-benefit evaluations of those modifications.-

On the surface, this argument appears convincing. However, one must consider  !

the different nature of the costs involved. The direct costs of~impitmenting {

Were they not used for the a modification are real, out-of-rocket expenses; modification, they would be available to the licensee for other purposes.

On f i

the other hand, A05C (like other projected benefits of the modification) are -

One can never know whether a modification actually probabilistic in nature.

averts an accident and hence any onsite costs (i.e., if no accident occurs-after the modification, one can never know whether no accident would have occurred without the modification as well). Thus the licensee can never point l While to any money that the AOSC has made available for other purposes.

direct costs and AOSC are both expressed lin dollars and can be combined on paper to yield a " net cost," in fact they are fundamentally different in character. Including direct costs in cost-benefit analyses by no mea.s l dictates inclusion,ot AOSC. l Summary

)

In summary, HUMARC believes that it would not be appropriate for the NRC to include, and to mandate that others include, averted onsite costs in regulatory cost-benefit evaluations (e.g., those called for under the backfit rule or.the Commission's safety goal policy). Our principal reason for opposing their ,

I inclusion is that inclusion would (a) divert NRC attention from its primary responsibility - assuring the adequate protection of the public health and safety; (b) inject the NRC into the internal financial risk management of nuclear plants, a role for which the NRC has neither the responsibility nor the authority under i

• Note that we are dealing here with before-the-fact estimates of implementation costs. In some cases, after-the-f act analysis of an implementation may show that ,

additional downtime was required. Actual implementation costs, whether higher or lower than those estimated before the fact, of course do not affect the before-the-fact cost-benefit evaluation. .

! 9 3979NS6-A

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.l the Atomic Energy Act; and (c) thereby unnecessarily impede plant licensees from-l effectively carrying out their primary responsibility - the safe, reliable, and ,

We have seen no argument for inclusion of econnmic generation of-nuclear power.  !

AOSC, nor do we believe there is one, so' compelling as to offset this  !

inappropriate extension of the mission of.the'NRC. .l 4

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i APPENDIX .

THE LEGAL ISSUES

.I The Atomic Energy Act of 1954, as amended, charges the. Nuclear' Regulatory i Commission with regulating peaceful uses of' nuclear power to protect'the health' and safety of the public'and the common defense and security. The Act, however,. f retains for the states their traditional responsibilities, such as need for power,' f

[

reliability, costs, and related concerns. ..Those concerns are precisely.the ones which defir,1 the economic risks to the utility associated'with plant operation. .f Thus, it is inappropriate under the ~ Atomic- Energy Act for the Comission to' l j

consider such direct economic risks which are embodied in the notion of.'a_  !

consideration of averted onsite costs.  :

i

'Jnder the Atomic Energy Act, regulatory decisions are to be based primarily upon l consideration of the public health and safety and the common defense.and security.' lf j

as opposed to broader consideration of the "public interest" or "puolic convenience and necessity." 420.S.C. 2077(c),2077(d).2133(b),'2201(b).'See, l

e.g., Power Reactor Development Company v. Electrical Union, 367 U.S. 396-j Thus, the Commission has no general mandate to promote or regulate (1961).

'l against a public interest or public welf are standard, and, except in an indirect l

sense, has no regulatory authority based _on regulation for.the public. welfare.

This limitation has been consistently recognized by the Commission in both its 1

promulgation of regulations and in litigation..

l For example, the Commission rulemaking proceedings exempting certain public utilities from financial qualification review reflectJthe Commission's view of the {

limits on its jurisdiction as well as a recognition that consideration.of:a =

l utility's financial position was not justified unless it could be shown that-a J

licensee's financial- qualifications had'an impact on health and safety concerns.

Because'the Commission concluded that in many. instances there was no relationship.

~

between a financial qualification' rule and the.' ability of.'a public utility to operateanuclearpowerplantsafely,theruleswererelaNd;)Theprimaryfocus; oftheCommission'sauthority-health"abdsEfety'-wasconMstentlyreiteratedby- ,

the Commission in the course of its rulemaking. -  :

"The Commission believes that its existing financial qualifications review has done little to' identify substantial health and safety.

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. .. . . - . ~

. i concerns at nuclear power plants." (Proposed Rulemaking on -

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Financial Qualifications Review, 46 Fed. Reg. 41786' (Augsst 18,  !

1981)). *

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"[T}he Comission does not find any reason to consider, in a , l vacuum, the general ability of utilities to finance the- _

j j

construction of new generation facilities. Only wh n joined with '

j the issue of adequate protection of the public health and safety.

does this issue become pertinent . . .-(Tlhe Comission in its 4 Seabrook decision indicated its support for the substance of the.

i proposed rule elimination of the financial qualifications review. -

j because of the lack of any demonstrable link between public health-  !

and safety concerns and a utility's ability to naake' the requisite i f i

j financial showing. (Final Rule on Financial Qualifications Review, -.

4 47 Fed. Reg.13751 (March 31,1982)). . '(Emphasis ~ added). ,

l

{The Commission's) concern is that reasonable costs of safely .

maintaining and operating nuclear plants.will be allowed to be i recovered through rates. This concern does not extend..to any level

~

l of profit or rate of return beyond those' operating. expenses.. The  ;

Comission's concern is with safe operation, not profits. (Final ~

Rule on Financial. Qualifications Review, 49 Fed. Reg. 35747, 35749 j .l

' (September 12,1984)). (Emphasis added).  !

~

The Commission believes that the record of this rulemaking ,

l demonstrates generically that the rate process; assures.that funds

l needed for safe operation will be made available to regulated

Since obtaining such assurance was-the sole 1 electric utilitieh objective of the financial qualification rule, the Commission-concludes that, other than in exceptional cases, no case-by-case l Mtigation of the financial qualification of such applicants is warranted. (Id. at 35750).

I j

ThisCommissionpositionisconsistentwiththelegislativehistoryoftheAtomic j Committee i j

Energy Act and the judicial decisions interpreting the Act.- .The; Join' l i Report on the Atomic Energy Act describes facility licensing as being " subject to regulation by the Commissionjn the interest of the common defense and security.if f and in order to protect the health and safety.of the public,Vand required the:

l  !

Commission "to issue licenses to all qualified applicants without'other discretion l

on its part." (S. Rep. No. 1699, 83rd Cong., 2d--Sess.:(1954) .and H.R. Rep. No.

a 2181, 83rd Cong., 2d Sess. (1954),at 20, I Leg. Histh;7$8,Il016!) Representa Holified and Price, in a separate statement-in the Jo15E ComalNee Report!,- =l i

criticized the then-proposed bill because the licensing standards were ' barren of J

any recognition of the public Unterest in securing elect'r'ic ' energy from this new i resource at the lowest possible rates.' (Id,. at 121. I Leg. Hist. 860,1117.) '

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1 Similar views were expressed in the Senate during debates.on the Atomic Energy Act f prior to passage, but the bill was enacted without those views being reflected in '

-l it. Thus, the legislative history is clear that licensing standards are tied to matters of public health and safety and the common defense and security. ]

I j

The Energy Reorganization Act of 1974, in creating the Nuclear Regulatory i Commission, does not, by its terms, amend any of the. substantive public health and' safety or comlnen defense and security standards set forth in the Atomic Energy ]

Act or set forth any new standards. The House Committee Report accompanying the. l Act specifically stated that "the' Commission will continue to carry out those f IRegulatory] functions under pertinent provisions of the' Atomic Energy Act of.. j 1954, as amended" . . . (H.R. Rep. No.93-707, 93rd Cong.,1st Sess. (1973 Tat .

22, I 1.eg. Hist. Energy Reorganization Act of 1974 at 413.) - A~ major purpose, of ,

the Energy Reorganization Act of 1974 was to separate the functions of promoting 1

and regulating nuclear power. -Thus, the concern of economic risk to the utility or the public in the event of a loss of plant appears, by implication, not to be-  !

4 intended with regard to NRC regulation.

i Further, the National Environmental Policy Act of 1969, as amended,'does not lead ]

to a contrary conclusion. Except in the most unusual circumstances, the. proposed .

imposition of a backfit. is not a major. federal action significantly affecting the .f quality of the human environment. -Accordingly, no NEPA statement is required or l appropriate in connection with backfitting. . This being the case, there is no -

basis for a claim that NEPA requires the Commission to consider averted onsite costs in connection with the imposition of a backfit. Even in those unusual and rare instances where arguably a NEPA statement would be required in connection with a backfit, NEPA does not require the averted onsite costs to be considered.

NEPA's focus in this connection would be.on the need for power from the facility, and averted onsite costs would be implicit in consideration of the need for power and the anticipated benefit of generation of electricity from the facility. Such a consideration is not the same as weighing averted onsite costs in.ma' king the-t backfit determination. l

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This restrictive view of Counission Hegulatory authority n'ofonly ..t is.~ u.

a: reflection of the legislative history of the Atomic Energy Act but also is; evident in ~

positions which the Commission has taken with~ regard to its authority over such

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matters as consideration of thermal pollution (State of New Hampshire v. Atomic Energy Commision, 406 F.2d 170 (1st Cir.1969)) and psychological health (Metropolitan Edison Co. v. People Against Nuclear Energy,103 S. Ct

(" PANE")). .

In State of New Hampshire, the court adopted the Commission's position that history of the 1954 legislation reveals that the Congress, in thinking of the ..

public's health and safety, had in mind only the special hazards of radioactivity."' Furthermore, the court emphasized that' the. Joint Committee, its 1965 Report (S. Rep. No. 390, 89th Cong.,1st Sess. (1965) at 4), recognize that the "AEC's regulatory control was limited to considerations involving the common defense and security and protection of the health and safety of the with respect to the special hazards associated with the operation of nuclear  :

facilities." 406 F.2d'at 175.

The limited role of the Commission in non-health and safety matters again was advocated by the Commission in the PANE case, the Commission stating that "

Atomic Energy Act itself does not discuss psychological hEdith, and the statute, its legislative history, and applicable case law all suggast strongly that the Congress intended the Co,mmission to exercise its regulatory Hetropolitan authority to only against the physica'l risks associated with radioactivity."

Edison Co., NRC Docket No. 50-289 (March 30,1982) (Emphasis added).

Thus, it appears inappropriate under the law for the Commission to consider t economic risks to a utility which are inherent in any consideration of averted onsite costs.*

l

• This does not imply, however, that consideration of costs 'by the Cosaission connection with the proposed imposition of new safety require .

Backfit Rule is improper.

the Commission's Statement of Consideration in adopting the new' Backfit R FR 38097, 38101-02 (September 20,1985), since such' consideration is directly 7, . ,

related to the Commission's health and safety mission.

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5. THE DOLLAR / PERSON-REM VALUE TO BE USED IN NRC REGULATORY ANALYSES i

NRC is proposmg to incorporate the interim value of $1000/ person-rem into ,

regulatory assessment guidelines, and to defer evaluating this value in the context of l

! preparing these guidelines because a separate review and analysis of the $1000/ person- l rem is ongoing within the agency. Because the review and analysis is a separate initiative within the agency, the staff also deferred Commissioner Remick's concem, expressed in a 3 Staff Requirements Memorandum (SRM), dated February 21,1992, that appropriate consideration would be given to the impact that revising the current value would have on current and past regulatory decisions. The nuclear power industry is aware of one i

9 approach being used by Brookhaven National Laboratory under contract to NRC to evaluate the interim value. Our understanding of that approach causes the industry to be I concerned regarding whether the staff will appropriately consider the basis and logic that - 'l went into the original value and will properly consider the implications on past and future regulatory decisions of revisions to that value.

Revising the value and failing to recognize the limitations to its' usefulness could  ;

have far ranging impacts on many important policies within the agency. Because of this, l i

we are taking this opportunity to provide comments on review and analysis of the interim I value in addition to observations on the use of this and related values and impacts contained in the draft revision to NUREG/BR-0058. His is appropriate since this value is likely to be most useful in the context of comparative evaluations of alternative l

regulatory approaches, not as an indicator of absolute value. (History has shown that N individual facilities, as well as the industry as a whole, have accomplished substantial

,h reductions in doses to workers and the public far below regulatory dose limits using qualitative factors and business considerations which minimize the need to resort to usage 4

of simplistic dollar / person-rem values for ALARA decisions.) -We plan to provide

' additional comments when NRC's proposed value is developed and published for comment.

The draft regulatory assessment guidance lists anticipated uses of this " conversion j or coefficient reflecting the monetary worth of a unit of radiation exposure." Rese uses j' include for assessing "all offsite consequences...of severe power reactor accidents," and "as a reference point or baseline" for assessing " occupational exposure, non-power reactor accidents, and ALARA determinations associated with cleanup of contaminated sites."

This value is to be used in these applications "as the dollar conversion factor for all offsite consequences (health-related impacts and dollar values for offsite cleanup, contamination, and property damage values)." Care should be taken that factors considered for revising the value are limited to those specifically pertinent to the value's direct use, i.e., offsite t m_ _. .

Draft 10/15/93 Page 12

Il L l consequences. This is necessary to be consistent with the bases and approach in the draft !

NUREG revision. ,

ne value used to quantify offsite consequences must be derived based only on '

those effects; the necessary accounting for factors associated with other applications, e.g., 1 occupational exposure, should not be inclu'ded in that value. As the draft NUREG revision states, that value "will serve as a reference point or baseline...for occupational ,

i exposure. " It also indicates that for these considerations, "there may be a range of ,

applicable values based on willingness-to-pay analyses, occupational exposure surveys, j

...and other case-specific data." The necessary evaluation of factors associated with occupational exposure, other than health effects, should be performed in a separate step as '

recognized in the draft document; it should not be included in the value for offsite '

consequences.

i The methodology reported in an articlel by a consultant at Brookhaven National' Laboratory (BNL) who contracts to NRC provides an example of where this important l

distinction is not respected. It seems to support a common value for dose-avoided of -

S10,000/ person-rem for both offsite and occupational exposure consequences by using ,

dollars / person-rem values that some utilities have at times employed for business '

decisions based on the costs (training and employment related) ofusing skilled workers in tasks involving radiation dose. This value is not directly related to offsite consequences, e.g., prevention of health-related impacts, and its use in this context is inappropriate an insupportable. In fact, such misapplication of business-based decisions to the value of 1 .

ofTsite consequences could be viewed as ratcheting, i.e., ultimately al! licensees would be j

required to use a value simply because there is evidence it might have been applied by some utilities in some circumstances, even though for purposes other than consideration ofprotection of health and safety.

1 J

ne broad spectrum of potential applications for "the dollar conversion factor for j

all offsite consequences" value underlines the need to take a global approach that is not i limited to reactor applications in establishing a sound, defensible basis for such a value and to recognize and address the limitations of this value's use. The approach taken in the above referenced article appears to be overly influenced by the reactor perspective, rather than being more widely applicable.

It is our understanding, based upon previous discussions with NR. C stafE that the .

initial value of $1000 per person-rem was selected to envelope by a wide margin typical values of dollars per life saved being applied in communities and by gov,ernment agencies at that time, e.g., for evaluating the cost effectiveness oflifesaving measures in the health I " Valuation of Dose Avoided at U.S. Nuclear Power Plants," John W. Baum, #melear PlantJournal, March-April 1991.

Draft 10/15/93 Page 13

profession, actions which would improve highway safety, etc. The wide margin was ,

deemed desirable to avoid a necessity to revisit the issue and regulatory decisions in which it may have played a part. The value was not selected as a direct surrogate for risk avoidance valuation. The high degree of conservatism also was intended to negate the need to infer a high degree of accuracy to the value or a precise scientific basis for the value. We believe that the approach taken by the staffin developing the initial value was appropriate.

The stafT should svoid basing the analysis of the initial value on the BNL contractor approaches discussed above. Also, in the referenced article the author took the current value of $1000/pe'/ son-rem and applied an inflation factor (factor of 2.5) and a correction for more recent risk estimates (factor of 4) to arrive at $10,000/ person-rem.

Such adjustment implies a degree of accuracy and precision in the initial value that is not there. The factor of conservatism incorporated in the original value should be recognized and whether sufficient need exists for reassessments for inflationary adjustments at this time should be considered. Ifit is determined that there is a need to update the value,-

then the staff should refer to current estimates of typical dollars per life saved being employed by communities and agencies responsible for public safety, e.g., lifesaving measures in the health profession and values underlying highway safety improvements.

Likewise, it would appear to be unnecessary to expedite adoption of the latest BEIR V -

values for this application, as the referenced article would, because the BEIR V values have typically not been adopted in other NRC regulatory documents, e.g., dose limits, etc.

In addition, we understand that the BEIR V values are currently under review and could change before the agency adopts them as a part of other basic regulatory limits and decision making.

Retaining the original approach for establishing the value, i.e., money rpent by l

communities and govemment agencies for lifesaving measures in other areas, v 'll also provide internal consistency for comparisons in regulatory analyses where , on reduction must be balanced against the cost of non-radiological health de m NRC's regulatory assessments of optimum dose limits for site cl nups and v6es for ALARA assessments for site cleanups provide an example of the need to balance radiological and non-radiological health effects to decide between attemative approaches. In these cases transportation and industrial risks will accrue when moving large volumes of contaminated soil to reduce potential dose to future users of the site. In this instance intemal inconsistencies and the potential for illogical results would be built into the  !

analysis if much higher monetary values were used for averted radiological consequences l compared with the monetary values used for similar non-radiological consequences. l In summary, the industry endorses the general approach of the draft revision to use the value of $1000/ person-rem on an interim basis for all offsi.te consequences and as a i

Draft 10/15/93 )

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baseline when offsite consequences are not involved, such as for occupational c.\posure or non-power reactor accidents. The values to be used in considering the latter circumstances should be developed based on relevant and case-specific data. In addition, the industry believes the staffs planned revisiting of the interim offsite consequences value should begin with a serious consideration ofwhether sufficient need exists to change the interim value, keeping in mind the significance that will be attached, corre or incorrectly, to any changes made and accounting for the implications of change on past and future regulatory decisions. In considering and implementing changes, the approac originally used to develop the value should be evaluated. If changes to the value made, care should be taken to avoid certain inappropriate approaches discussed above I '~ Whether or not the staff decides to revise the interim value after completing their review and analysis, the staff should use this opponunity to document the basis of the value

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including the degree of conservatism, and inherent limitations to the use of such a v l This will significantly benefit those involved with regulatory analyses.

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6. INFORMATION REQUESTS UNDER 10 CFR 50.54(f) l 10 CFR 50.54(f) allows the NRC to seek information from a licensee to determine whether or not its license should be modified, suspended, or revoked. In seeking this information, the NRC must, in most cases, justify its request by <letermining that the i potential safety significance of the issue being addressed outw':ighs the burden imposed i upon the licensee by providing the information.

The nuclear industry acknowledges the NRC's need for licensee information if the NRC is to meet its obligation to protect public health and safety. However,information R requests can and have placed considerable burden on the resources oflicensees.

Requested information is not always immediately available and can require the expenditure of time and manpower in retrieval or research. In some cases, the request may necessitate the development ofnew information that calls for the diversion of licensee personnel from other tasks or the procurement of outside contractor services.

The cost estimate associated with a 50.54(f) request is often presented as a mean of a wide range of values for all licensees. Even assuming that the estimate is accurate,  !

this approach gives a macroscopic estimate of the impact industry-wide, and does not fully account for the impact on individual licensees. A licensee may find itself at the high l

l end of the postulated cost range, far above the mean value. In this instance, the burden of complying with the information request may not bejustified by the value of the information that the licensee provides. The NRC should exercise discretion appropriately l to review the claims for relief by licensees so burdened.

i

! Since the NRC has a regulatory obligation to consider the likely burden of -  ;

i proposed information requests, it is vital that it be able to estimate the costs to licensees accurately. The particulars of such cost estimates (value/ impact ratios, averted on-site l

costs, cost per man-rem averted, etc.) are dealt with elsewhere and are not repeated here.

The industry's concern is that the NRC adopt methods that consistently yield credible cost l

! estimates for the information it seeks. In the past, licensees have often found that the actual cost of satisfying an information request may far exceed the NRC estimate.

l NUMARC encourages the NRC to seek licensee input on potential information l requests that the NRC is considering issuing under {50.54(f). As the parties most . l affected by such requests, licensees are in the best position to determine their likely impacts. He intimate knowledge that licensees possess of their intemal costs would make them an invaluable resource to the NRC during the development ofinformation requests. His cooperation would give the NRC and the industry the reassurance that information requests are based upon firm empirical data rather than imprecise generic I

Draft 10/15/93 l Page 16 l

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approximations and that the burdens imposed by the requests are indeed commensura

! with the potential safety significance of the issue.

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7. THE PROPOSED BENEFIT-COST METHODOLOGY I 1

i introduction The following comments bear on the proposed benefit-cost d'etermination methodology  ;

that is set forth in NUREG/BR-0058, " Regulatory Analysis Guidelines of the U.S. l Nuclear Regulatory Commission". The comments are subdivided into four main topics. 1

'J

- The NRC Plan To Exclude Costs That Represent Transfer Payments The Classifications of Benefits and Costs c

The Benefit / Cost Ratio: Whose Benefits and Whose Costs l 3

- The Choice of Discount Rate The nuclear power industry i.giesed that the NRC has responded favorably to i several ofits earlier concems. For example the NRC now takes the position that future health and safety benefits should be subject to present worth considerations the'same as costs. With this approach, future health and safety effects are valued equally in regulatory analyses regardless of when they occur.

ne nuclear industry sees progress in that the NRC now publicly recognizes that '

the offsetting of costs with benefits yields intemally inconsistent results. Using this erroneous technique, an analyst can bring about any benefit / cost ratio he desires by claiming that some part of the benefit can be considered as an offset to part of the cost.

De NRC has sought to use this device to enhance the benefit / cost ratio by com,idering. ,

AOSC as a negative cost (in the denominator of the benefit / cost ratio) rather than a benefit in the numerator.

In the currently proposed guidelines, it is recommend'e'd that all benefit-cost results first be displayed on a net value basis (all benefits and costs be arithmetically summed). '

~

It specifies that when calculating a net valuc sum, AOSC be considedd as a positive benefit. Industry agrees that from an economics methodology hint'of view a net value sum is an intemally consistent, acceptable te'chnique, regardlesi of whether AOSC is '

included or not.

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While the above would appear to be a sound step forward,it unfortunateli out the NRC staff proposal has gone one step forward and one backj Guideline ;;oes on to require the NRC analyst to also calculate a be.

with AOSC expressed not as'a positive saving, as when getting a net val!

i l negative cost in the denominator. Moreover the NRC has identifie savings to governmental bodies that it now wants to consider ,

in the denominator.  !

j In reality, a decision maker needs not only al netNRC value, has - but som cost comparison. The benefit cost ratio serves that purpose. i h Unfortul again openly arJ knowingly proposed putting utility savings as nega ,

denominator, ,vhich it acknowledges is internallyi inconsistent, f rath  ;

the numerator, which yieMs internally consistent economics. It is an-NRC predisposition to calculate large benefit / cost ratios re l project and the validity of the calculation. An expanded discussf included later in these comments. i There exists in the draft guidelines one new provision with very signific .

]

j implications. The NRC proposes that in its benefit-cost di analyse nuclear plant backfits, it will estimate costs from society's perspect its analyses costs that constitute transfer payments. Backgroun  :

ramifications of this methodology are discussed in the next sectio private sector has never used this approa. ~

but all have failed. Sooner or later, as a matter of survival, they hav -!

business decisions on product costs, and the prices the market isj U.S., only the most global of government decisions have been-cost analyses. In general the Federal Government has ldollar.been ml analyses, because the cost of the project in t. he analysis vastly unl cost. Hence, projects can be undertaken that will forever lose, mon l history, the NRC emphasizes throughout the draft Guidell ^

societal benefit-cost approach, and to not include transfer payment c Mk] l determining the relative worth of nuclear power . . wnplant e.nhancem ,

i would appear the NRC has embarked on a path inconsistent w  !

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The next section provides background on what the NRC has proposed and its i ramifications to industry and society.

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1 The NRC Plan To Exclude Costs That Represent Transfer Payments q

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In its proposed Regulatory Analysis Guidelines, the NRC stipulates that transfer payments not be included as costs when making benefit-cost analyses that bear on nuclear f

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j power plant safety enhancements. The implications of this move on the NRC's part are j sweeping and enormous. He paragraphs that follow briefly discuss what is involved

.j when transfer payments are excluded from benefit-cost analyses and the meaning of such j analyses. This will be sufficient at this time because the field of knowledge, literature, l i

4

and expertise in this area are extensive and far exceed what it is appropriate to present

! here. y I

j The goal of a societal benefit-cost analysis is to examine some proposed project or j l

activity from a nationwide, society-wide perspective. One in essence stands outside the

, l country and looks in at net national benefits and costs. He concept of transfer payments and their treatment is at the heart of societal benefit-cost analyses. From a societal - j perspective, the only net costs in a society's activities are consumed resources such as l I manhours and nature.provided raw materials. Cost's such as taxes, return'on equity (stock l

dividends); retum on debt (bond interest, etc.), Social Security, Medicare payments,.

~l Workman's Compensation, etc. are transfer payments from an overall societal

]  !

perspective. The effect of transfer payments is to move financial resources from one l .;

j group in the nation's society to another group. However, with such transfers there is no' , I i change in the nation's net worth. A transfer payment does not represent manhours -

consumed, natural resources used or products and value created. j A societal benefit-cost analysis that excludes the transfer payment portion of costs can provide a nationwide, society-wide perspective in judging the worth of some change .

, or product. But it is irrelevant for other purposes. De following exainple explains why- .;

this is so. Consider that a safety enhancement is proposed that, including transfer _  !

payments, would add 5 cents per kilowatt hour to the cost 6f electricity and would appear %

to make the enhancement unjustifiable. But the analyst finds that'4 of the 5 ' cents are .

-i transfer payments (taxes, cost of capital, Workmans Compensation, Social Security,

' Medicare, insurance), etc. that the utility, the suppliers and the workers (from their ,

wages) will pay. He thus reasons that the societal cost is only I cent per kilowatt hour i Draft 10/15/93 q Page 20 i

_, _a  ;- .

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j (the approximated basic cost of manhours and natural resources) and  !

project isjustified. 1 In this example the cost of electricity to customers will increase 5 cents  ;

societal analysis purposes the cost is only I cent. 'Ihe 4 cents h per kilowat transfer payments are collected from the affected electric rate payers, and:

members of society throughout the nation (and world). id It is used to build{

theater tickets and for a full spectrum of private and public purposes nation ,

little of which is related to electricity. To the societal analyst d it matte ,

money is collected from one element of society,in this h case electricity l

transferred to the nation at large. From the national perspective it is all a wa t In the real world, the consequences of transfer payments are not nel as in societal benefit-cost analysis. In the above example, the rate inj unjustifiable from an electricity cost perspective. It would ) not bell or the company would be competitively forced from business even thl benefit-cost analysis would justify the enhancement. No private busi ifit would ignore the transfer payment portion ofits costs in making b:

Industry suggests that the NRC seriously reconsider its intention ol

\ societal benefit-cost analyses and of excluding transfer payment coi must be included in all analyses and decisions. Customers and stat -i electricity on its price and reliability, not by an abstract concept that attel determine the net benefit of an enhancement to the whole of society. l The Cimifications of Benefits and Costs - -!

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In the proposed guidelines that the NRC has f issued broad- for w+

the desire to evaluate proposed NRC ordered nuclear safety enhancemen 3 societal perspective. Thus it is proposed s for example that transfe f included as costs. And as later discussed, the Guidelines m c using a discount rate similar to what thev government w has used ini nu nn - ,

-l Industry believes the NRC's intent to regulate the nuclear powe

, l societal perspective is misguided and would have unfortunate long l r

Considering the NRC's stated intentions, it is important to exami ,

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l classify the various benefits and costs. The proposed guidance document stipulates that I

the following major items be treated as benefits (and be entered in the numerator of benefit / cost ratios):

- The protection of public health and safety (including plant workers)

. The protection of off-site property

. Protection against plant worker radiation exposure and other risks  ;

l The NRC states that the above entries may have plus or minus values i

The proposed guidance dacument stipulates that the following major items' be i

treated as costs (and entered into the denominator of benefit / cost ratios):.

- Direct costs or savings to licensees

- Costs or savings to the NRC, State and local governments

. Nonradiation risk related costs and savings to the general public

. Averted on-site costs 1

As indicated in the previous section, the NRC states that costs should exclude all transfer payments.

l The goal here is to attempt to discem the criteria that the NRC has used to f differentiate benefits from costs. Starting with benefits, the NRC states that the protection of the public health and safety (including plant workers), the protection of off-site property, and protection against occupational radiation exposure are all benefits by definition. Further, it states these benefits can be plus or minus. Thus, if an NRC ordered enhancement increased worker exposure it would be a negative benc6t. .m  :

\

From the above it would at first appear that simply stated, benefits' include the l

! protection of the public, both personal and property, and the plant workers. But such is l not the case. The list of costs in the Guidelines includes an item that is described as, Draft 10/15/93 Page 22 l

l t . _ _ _

"nonradiation risk-related costs and savings to the general public". f ff i A call was the NRC to ask how this is different from the listed benefit of,"the protection o o l

property". The answer was that the avoidance of postulated radiation off-site property would be considered a positive benefit while the avoid ,

nonradiation related damage to off-site property would be considered a ne l

is not clear whether the NRC intends that the same reasoning also hold any event the reason why the NRC censiders radiation related da nonradiation related damage to be a negative cost is not evident; there underlying rationale other than it gives a larger benefit / cost ratio.

Turning to costs, it at one time appeared that the NRC defined costs i

d effects on utilities, other than the workers, and all other effects were to be treat benefits. The current draft guidance document makes it clear that the something yet different than this. In addition to classifying direct costs a utilities, including AOSC, as costs, it now also classifies costsl and sav state and local govemments, and nonradiation risk-related costs and sav public as plus or minus costs. Again, no rationale is evident. W NRC has proposed to define that benefits will include both utility and as well as costs (as negatives). Likewise it has defined that costs will and nonutility costs as well as benefits (as negatives). The definitions the created make the meaning of the results unintelligible, but provide the o obfuscation to achieve any answer and conclusion.

There should be no arbitrary classifications, i.e., no benefits that are tre negative costs, and no costs that are treated as negative benefi would be internally consistent and easy to understand. They would be bene costs.

The Benefit / Cost Ratio: Whose Benefits and Whose Costs While the Guidelines now call for a net value l determinatio they also require the NRC analyst to calculate a benefit / cost ratio. The n determination is in effect a simple subtraction of all the costs from all b determination can be useful, appropriate and internally consistent. .

,c i Draft 10/15/93 Page 23

l Industry also agrees that a determination of the benefit / cost ratio is both j

appropriate and in fact is needed. To achieve perspective, the decision-maker must weigh '

the benefit of an enhancement against its cost. For example, in judging a certain project i

whose net value benefit (benefit minus cost) is $100 thousand, the decision-maker will want to know if this is for a project whose cost is $100 thousand or $100 million. It 1

might lead to a different decision.

Unfortunately, the NRC has again indicated it intends to determine the benefit / cost l ratio in a way that it acknowledges is internally inconsistent. This is to offset (subtract) l some benefits against the costs that are entered into the denominator of the benefit / cost l ratio. In this way the analyst can get as large a benefit / cost ratio as he desires. If there are $100 of true benefits for $50 of tme costs, the benefit / cost ratio is 100/50 = 2. If one ,

claims that $20 of the costs are offset by $20 of the benefits, the ratio becomes 80/30 =

2.67. If one claims that $40 of the cost are offset by 540 of the benefits, the ratio becomes 60/10 = 6, etc. The NRC's proposed method of calculating benefit / cost ratios is an invalid device for generating large (but completely erroneous) benefit / cost ratios. The paragraphs that follow explore the makeup of the internally inconsistent benefit / cost ratio that the NRC proposes to use and attempts to determine whether the ratio has any understandable meaning.

The following summarizes the makeup of the internally inconsistent benefit / cost ratio that the NRC proposes to use in judging whether to crder utilities to make backfit enhancements and other applications.

radiation related protection of public health and safety (persons), plus radiation protection of plant workers, plus radiation protection of off-site property, plus ioccupational radiation exposure -

B/C Ratio -

direct costs or savings to licensees (including non-radiation items), plus costs or savings to the NRC, State, and local governments, plus nonradiation related costs and savings to the general public, plus averted on-site costs The question is, how can one characterize the numerator (benefit) of the NRC's proposed benefit / cost ratio. Likewise, how can one characterize the denominator (cost).

Draft 10/15/93 Page 24

i The common element of the numerator (defined benefit) appears to be that all i

entries relate to either the postulated radiation related exoosure of persons or related exnosure of off-site property. In addition to the public, the persons include -

workers whose exposure can be plus (due to an accident) or minus (due to the  :

enhancement). Because the numerator includes both persons and property, a yet mol basic characterization is not obvious. The key appears to be radiation exposure.

s A common element of the denominator (defined cost) appears to be that f

the entries are person related. The entries include direct costs or savings to costs or savings to the NRC and state and local governments, avoided nonraI related damage to off-site property, (but not radiation related damage), d be an'd radiation and nonradiation caused damage to utility property. The denomina  ;

a net value of nonradiation, nonperson related benefits and costs for the c l

utility, NRC, and state and local governments, except that with AOSC it in radiation effects on utility property. '

! With the NRC's proposed entries for the numerator and denominator, it was not l

possible to determine the meaning of the NRC's proposed benefit / c principle equation appears to be:

Net radiation related on-site and off-site person exposure plus net radiatio ,

related off-site property exposure B/C Ratio -  ;

Net of all nonradiation, nonperson costs and savings minus radiation re \

on-site property exposure Beside being intemally inconsistent, it is not apparent that this proposed be l l

cost ratio has any clearly understandable meaning. With a b'odgepodge of ter '

numerator and denominator, it is not even possible to clearly answer the questio whose benefit and whose cost.-

One thing is certain. This is an intemally inconsistent, unitelligible benefit /

ratio. Such a ratio should have only positive benefits in the numerator and posit l

in the denominator. The results would have a clear meaning and be intemally lc They would be comparison of the benefits of the,. oenhancement to its costs r .

. . i Draft 10/15/93 Page 25 l

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, l The industry firmly believes that averted onsite costs should not be considered in

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regulatory benefit-cost analyses. Our rationale is discussed at length in a separate - ]

enclosure to these comments. However, if the Commission ultimately decides that . l averted onsite costs should be included, we strongly believe that the methodology should j

be technically correct and intemally consistent. Detefore, we find it particularly - ~

I troubling that the NRC continues to argue for including the savings of AOSC as an off-set against costs in the denominator of a benefit / cost ratio display. The NRC scknowledges -

j this economic technique is internally inconsistent and knows it should be treated as a positive benefit in the numerator to be intemally consistent and provide any worthwhile meaning. No mitigating factor will improve an approach that is fundamentally flawed.

The NRC makes several statements in defense'of entering AOSC as an offset against costs in the denominator cf the benefit cost ratio. For example it states, "In the '

staffs view, the use of the ratio and the extent to which intemally inconsistent results might mislead the decision maker is significantly mitigated by the fact that all alternatives and all regulatory actions are being assessed on the same basis." In this statement the NRC acknowledges that its proposed ratio gives invalid, economically inconsistent-results. However it claims the amount the decision-maker is misled is mitigated by the fact that all alternatives and all regulatory actions are assessed on the same basis. As has been shown, the latter is not true. The costs and savings have been segregated and used in a fashion that yields the largest possible benefit / cost ratio. The NRC has not encumiered itself with accepted, sound economic principles, nor held back because the ratio results are intemally inconsistent, invalid and meaningless.

Perhaps the most surprising set of NRC statements are found in Enclosure 3 to -

SECY-93-167. He first states, 'In May,1987 Commissioner Bernthal requested the views of the Office of the General Counsel on whether excluding averted onsite costs in backfit analyses is legally defensible. The response fmm William Parler, General Counsel concluded that.....

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j "under no defensible view of cost-benefit analysis can the agency exclude' outright -

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any consideration of averted on-site costs. Howeve'r,'given the agency's mission to protect the health, safety, and property of the public, averted on-site' costs should be considered...not as benefits but rather as reductions in thelosts associa the proposed backfits.'"

Draft 10/15/93 Page 26

It appears unlikely that the NRC General Counsel realized that the economic calculational methodology he was advocating was intemally inconsistent and wou invalid results.

In light of this, the second statement is incomprehensible. It states, "In the NR proposed Regulatory Analysis Guidelines, the staffviews AOSC as an integ value-impact analysis and, in deference to OGC's legalinterpretations, supports a cost offset when value impact results are presented as a ratio." The essence of this statement is that, in deference to the NRC's General Counsel's legal interpretation, t NRC will calculate benefit / cost ratios in an acknowledged, internally inconsiste way. He legal counsel's office should not be the authority on economic analyse especially ifit advocates overruling sound, accepted economic principles analyses. And in deference, must the NRC follow these rulings, no matter wh NRC's position on this matter should be seriously reconsidered.

The Choice of Discount Rate De NRC's proposed regulatory analysis guidelines recommend the use of a constant dollar 7% discount rate for present valuing costs and benefits. The followin ,

direct quote from the guideline document. " Based on OMB guidance, all values impris should be expressed on a present-worth basis using the recommended rate specified in the latest version of OMB Circular A-94. This circular was most recently updated on November 10,1992, (Ref.13) and specifies the use of a 7 perce real (i.e., adjusted to climinate the effect of expected inflation) discount rate. OM percent rate approximates the marginal pre-tax real rate ofreturn on an average investment in the private sector in recent years."

Industry concurs that OMB's recommended 7% constant dollar value for the discount rate is in close agreement with the cost of capital for most utilities. Utilities normally do their analyses with the effects ofinflation included, hence the curren equivalent discount rate they use is close to 10%. However, this represents n difference. When economic analyses are made using a valid, internally consistent, economic methodology, the results are identical regardless of whether one makes the analysis in constant dollars or current dollars. ,3 Draft 10/15/93 Page 27

1 l j 1  !

Industry understands the basis for the OMB recommended discount rate and l

concurs it is a realistic, appropriate rate to use. However, the NRC further recommends that the analysis also be made using a 3% constant dollar discount rate. To quote, "An - f alternative analysis using a 3 percent real discount rate should also be prepared for '

sensitivity analysis purposes. The base case, using for example OMB's currently recommended 7 percent rate, reflects recent economic conditions, yet NRC actions

- typically involve a 30- to 60-year time horizon. . Given that uncertainties expand as one attempts to project further into the future, it is considered prudent to examine the result o assuming a lower rate as part of a sensitivity analysis.' nere are also theoretical .

arguments in the economics literature that support the use oflower rates (Ref.14).' A 3 -

percent rate is proposed for the alternative case because it approximates the long-tenn risk-free real rate of retum on investment based on historical data. If the altema does no't alter the bottom-line result, simply indicating this conclusion is sufficient. If l

there is a different conclusion or if the value/ impact determination is significantly aftered, this result should be discussed and placed in perspective for the decision maker."

In years past, many large government projects such as waterways, were justified by economic analyses that used very low discount rates (such as 3%). Arguments were advanced that these were societal projects and that 3% was representative of a ' societal discount rate. The present value of a benefit that occurs 30 years in the future is three times larger when using a 3% discount rate than when using a 7% discount rate. Hence, has long been recognized that the choice of discount rate can be the dominant variable when making a benefit-cost analysis.' For these reasons, the proponents ofprojects have long argued for low discount rates.

In recent years, the federal government has sought to discourage the use of extremely low (so called societal discount rates) when evaluating proposed projects.

it because projects can appear to be cost effective that will never pay for themselves or..

justify the effort put into them.

De guideline document offers several reasons for requiring an analysis that uses a 3% discount rate. It argues that "Given that uncertainties expand as one attempts to j

'i project further into the future, it is considered prudent to examine the result of ass lower rate as part of a sensitivity analysis." Industry concurs that the ihrther in the futu a benefit will occur, the more uncertain is its value. Changes may occur that increase or diminish its value. But of course this is cause for a higher, not lower discount rate.

4 Draft 10/15/93 i Page 28 .

i i 9 O Lenders rightly demand more interest on projects whose fruition is far in the future and uncertain, rather than near term and certain.

l

, i The proposed guidance document also states, "A 3 percent rate is proposed for the altemative case because it approximates the long-term risk-free real rate of return on

)

investment based on historical data." The significance of this statement is not obvious.

Does the NRC believe the enhancements it requires will be paid for solely with risk free debt money? Will there not be equity funds, and a provision for Federal Taxes in the l l

overhead rate? Who does the NRC beliese will supply debt funds to nuclear power at a risk-free rate absent an equity base? In short, the reality or relevance of this statement is 4

(

not apparent. I i

Relative to using a 3% discount rate vs the OMB specified 7% discount rate, the Guidance document concludes, "If there is a different conclusion or if the value/ impact l l

determination is significantly altered, this result should be discussed and placed in perspective for the decision maker." The statement is fatuous. For a plant enhancement, the major costs are typically near term and the benefits spread far into the future. A 3% j discount rate, as opposed to the OMB specified 7% discount rate will for practical l 1

purposes always give a much larger benefit / cost ratio.

l

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Historically, when exceptionally low discount rates have been used for which there I appears to be little economic justification, it has been to generate large benefit / cost ral l

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