IA-92-218, Forwards Updated Status Rept on Actions Re Diagnostic Evaluation Performed at Facility
| ML20127B628 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 12/31/1990 |
| From: | Martin J NRC OFFICE OF INSPECTION & ENFORCEMENT (IE REGION V) |
| To: | Taylor J NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| Shared Package | |
| ML20126L802 | List: |
| References | |
| FOIA-92-218 NUDOCS 9101090026 | |
| Download: ML20127B628 (3) | |
Text
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, / % UNITLD STATLS NUCLEAR REGULATORY COMMISSICN 3 j ,'y), 'ql 1
HtoiON V g , . ino uania ( AN(. suni tio t,, +w. . . /; W ALNUT CR(( K, C ALH OHNI A SOM DEC 3 : 1990 MEMORANDUM FOR: James M. Taylor Executive Director for Operations FROM: John B. Martin Regional Ad:ninistrator
SUBJECT:
STATUS OF STAFF ACTIONS RELATED TO THE DIAGNOSTIC EVALVATION AT PALO VERDE In my memorandum to you dated September 14, 1990, I stated that I would provide an updated status report regarding the actions related to the Diagnostic Evaluation perforned at Palo Verde. The present status of these actions is summarized below.
Action items 1 and 3: " Review and evaluate the adequacy of the licensee's response to the DTT~ report. Conduct detailed discussions of the licensee's Business Plan."
Status - Management meetings were held in the Region V office on October 3 and November 5. 1990 during which all categories of the Business Plan were di cussed. We focused upon the motor operated valve and.
maintenance improvement programs in some detail. The Business Plan identifies specific objectives to meet improvement goals and assigns specific responsibilities and due dates. My assessment is that the Business Plan is a workable method for focusing organizational resources and monitoring progress toward established goals. We will continue to monitor the licensee's effectiveness in its implementation.
Action items 2 and 4: " Evaluate and issue any enforcement action. Review the implementation of the licensee's corrective actions to the DET findings and enforcement actions."
status - As I reported earlier, the licensee has contested four of the eleven violations cited. We will continue discussions with the licensee on these citations, and will continue our review of the licensee's contentions relative to the DET findings. We expect our response to be issued in January 1991.
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We have reviewed and closed two of the remaining seven violations. In addition to completing our review of the enforcement related corrective actions, we have programed a review of the licensee's rnotor operated valve and check valve programs into tne FY91 Master Inspection Plan using Safety Assessment /Ouality verification modules, Finally, these areas have received additional emphasis during the routine inspection program, 4 Regional Adninis m or a
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POLICY ISSUE I
May 15, 1991 SECY-91-137 i
For: The Comissioners from: James M. Taylor Executive Director for Operations Subjects
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f!NAL POLICY STATEMENT ON ECONOMIC PERFORMANCE INCENT!vE REGULATION
-Purpose: To submit for approval the final policy statement on economic performance incentive (EPI) regulation that sets forth the views of the Comission concerning EPIs.
Backgrounds in response to the Comission's request of May 8,1990, the staff presented for the Comission's approval a proposed policy statement on economic performance incentive programs (SECY-90 288, dated August 15,1990). On October 4, 1990, the Commission approved publication of the proposed Policy Statement, it was published in the Federal Register on 0ctober 26,1990 with a 60 day coment period.
Discussion: The NRC received 37 condents: -14 from. State public utility comissions,12 rom f utility _ licensees or law firms representing utility licensees, and 11 from_public interest---
groups, trade associations, non-affiliated individuals, or government bodies other than public utility commissions.
NOTE: TO BE MADE PUBLICLY AVAILABLE WHEN THE FINAL SRM IS MADE AVAILABLE Contact -
tra P. Dinitz, NRR 492-1289' l
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-Overall the coments were supportive _of the objectives of the; policy statement.- Several comenters provided extensive =
discussion on their experience with1EPIfprograms. :Most of the-comenters believed that the NRC should: provide' advice but.not 4 endorse any-specific EPI program.; They indicated that the~NRC:
should monitor the effectiveness-of EPIEprograms but should not:. -
interfere in the proceedings of State ~public utility'. _.
commissions. Almost all of-the comenters also. indicated.that the NRC, the utilities,Jand the State utility commissions?
should continue to comunicate with one' another. _Many of the utility comenters stated that the NRC s_ ould h discourage..the -
use of-EP] programs or various; aspects:of-them.
Most of the State utility comissions that comented indicated ,
that rational incentive programs do not adversely affect the
-operation of nuclear power plants and thus do not adversely.
' affect public -health and safety. Many of the States that -
comented indicated that they do not use any of:the criteria of concern to NRC, such as sharp thresholds, short term-performance measures, or sal.P scores.
Af ter carefully considering the coments, the staff made minor.
revisions to the Policy Statement. The recomended final Policy Statement is included as Enclosure 1.. Upon approval
- of the' final Policy Statement, the: staff will initiate its implementation. .This will consist'of (1)-sending a generic letter to power plant licensees requesting'that they report -
whenever State public utility commissions or the FERC are developing or substantially revising EP! programs: and (2)
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sending a letter from the Executive Director of Operations to ,
FERC and the State public utility commissions-seeking =their cooperatio1 in advising the NRC of-initiatives;to: impose or ;
change an EPl program that applies to.an NRC licen.see.- The' .,
text of-this letter was: included:as Enclosure 2 to: ;
SECY-90-288.- It was modified and approved by the Comission along with the approval,of. the Federal' Register Notice and is'
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included as Enclosure 2 to this paper.
Recomendation: It is recomended that the Comission approve'the enclosed.
Policy Statement to be published in.the-Federal Register to-be effective _upon publication.
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-3 Coordination: -This policy statement has-been reviewed by the Office of the General Counsel which has no legal objection to it.
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J mes M. T ' or xecutive irector for Operations
Enclosures:
- 1. Possible Safety impacts of Economic Performance Incentives: Final Policy Statement :-
- 2. Letter to be Sent to the Federal Energy Regulatory Commission and to State Utility Regulatory Commissions Commissioners' comments or consent should be provided directly to the Office of the Secretary by COB Thursday, May 30, 1991.
Commission Staff Office comments, if any, should be submitted to the Commissioners NLT Wednesday, May 22, 1991, with an infor-mation copy to the Office of the Secretary. If the paper is of such a nature that it requires additional review and comment, the Commissioners and the Secretariat should be apprised of when comments may be expected.
This paper is tentatively scheduled for affirmation at an-Open Meeting during the Week of June 3, 1991. Please refer to the for a appropriate Weekly Commission Schedule, when published, specific date and time.
DISTRIBUTION:
Commissioners OGC OIG LSS GPA REGIONAL OFFICES EDO ACRS ASLBP ASLAP SECY
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Enclosure 1
[7590-01)
NUCLEAR REGULATORY COMMISSION Possible Saf ety impacts of Economic Performance incentives: Final Policy Statement AGENCY: Nuclear Regulatory Commission.
ACTION: Final policy statement.
SUMMARY
- This statement presents the final policy of the Nuclear Regulatory Commission (NRC) with respect to the possible safety impacts of economic performance incentive (EPI) programs established by State commissions regulating electric utilities. The policy statement (1) contains a discussion of the possible effect of the policies nd actions of State regulatory bodies, emphasizing that these actions can have either a positive or negative effect on public health and safety; (2) reflects the Commission's concern that certain forms of economic performance incentive (EP1) regulation may adversely
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affect the operation of nuclear plants and the public. health and: safety; (3) specifically ident6fies those methods that are of particular concern (e.g.
the use of sharp thresholds, the measurement of performance over very short time intervals, the lack of " null zones," and inappropriate reliance on systematic assessment of licensee performance (SALP) scores or other_
performance indicators; (4) indicates that the NRC will continue to monitor the application of EPIs and performance criteria to nuclear power plant operations; and (5) urges licensees and State regulatory commissions to inform the NRC of EPl programs that are being considered for application to NRC licensees.
EFFECTIVE DATE: This policy statement becomes effective (upon publication in-the Federal Register).
FOR FURTHER INFORMATION CONTACT: Anthony T. Gody, Sr., Chief, Policy Development and Technical Support Branch, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC, 20555, Telephone: (301) 492-1254.
SUPPLEMENTARY INFORMATION:
In exercising their jurisdiction over the economics of the generation of electricity, a number of State regulatory commissions and the Federal: Energy Regulatory Commission (FERC) have established economic performance incentive
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- 3 (EPI) programs for electric power plants. Although_some programs have existed unchanged for a number of years, others have been substantially modified or
- are newly established. They can significantly help to improve the economic performance of electric power plants. They can also affect the safety of nuclear power plants. The NRC monitcrs and evaluates these incentive programs i to determine the effect that they may have on the safe operation of nuclear _
power reactors.
After reviewing the information on EPl programs established by State regulatory commissions that regulate the economic returns of utilities operating nuclear power plants, the Commission decided that it should set forth its views in a Commission Policy Statement on the manner in which such programs could af fect safety.
SUMMARY
OF COMMENTS On October 26, 1990, tha NRC published the draf t policy statement, "Possible Safety impacts of Economic Performance incentives," in the-Federal Register (55 FR 43231). The NRC received 37 comments: 14=from State public utility commissions, 12 from utility licensees or law firms representing utility licensees, and 11 from public interest groups, trade associations, non-affiliated individuals, or governmental bodies other. than public utility.
commissions.
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4 Most of the commenters believed that the NRC should provide advice but not endorse any specific EPl program. They indicated that the NRC should monitor the effectiveness of EPl programs but should not interfere in the proceedings of State public utility commissions. Almost all of the commenters also indicated that the NRC, the utilities, and the State utility commissions should continue to communicate with one another. Many of the utilities or their representatives that commented stated that the NRC should discourage the use of EPIs in the absence of evidence that they promote safety. Further, a number of uti'lity concenters indicated that the SALP scores and other performance ir,dicators should not be used for assessing penalties, in addition, certain commenters stated that regulators should not use the results of root-cause and self-assessment analysis to determine if costs should be disallowed. These commenters also believed that the NRC should evaluate the manner in which specific EPl programs either benefit or hinder safety but should not endorse specific types of programs. Finally, some commenters suggested that _
the Policy Statement should be more specific by stating, for example, the difference between a long-term performance measure and a short-term performance measure.
Most of the State public utility commissions that commented indicated that rational incentive programs do not adversely affect the operation of nuclear power plants and thus do not adversely affect public health and safety. Many of the States that commented indicated that they do not use any of the criteria of concern to the NRC, such as sharp thresholds, short term performance measures, or SALP scores. The State utility commission for New York stated that it does not penalize or reward utilities for operating at or
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5 close to the industry's average capacity f actors. However, it imposes penalties and rewards on a sliding scale for deviations from the target factors. The State utility commission for North Carolina stated that it establishes targets based on long-term averages of nuclear capacity f actors for testing the efficiency of nuclear plant generation. It does not automatically impose penalties for not meeting these targets if a utility can _
show that its nuclear operations were prudent. The State public utility commissions generally indicated that States cannot legally be precluded nor should be precluded from adopting performance standards that encourage utilities to both economically and safely operate nuclear power plants.
The public advocacy group, Massachusetts Public Interest Research Group (MASSPIRG) provided a substantial amount of comments. It was a major participant in the settlement agreement that resulted in the Massachusetts performance incentive plan for the Boston Edison Company relating to the _
Pilgrim Nuclear Plant, MASSPIRG generally supported the objectives of the draft Policy Statement and desired to work with NRC in identifying superior alternative indicators for use in EPl plans.
MASSPIRG indicated that the Massachusetts plan was of necessity developed in confidence because it was a part of a larger settlement with the Boston Edison Company. MASSPIRG stated that it understood the concerns that the NRC had previously expressed relating to the use of SALP scores and performance indicators. However, in developing the plan for the Boston Edison Company,
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6 -l MASSPIRG used expert consultants and searched for indicators that could correlate with long-run economic performance, correspond with recurrent Pilgrim problems, encourage the timely maintenance of equipment, and provide early indications of problems that would lead to long-run economic and safety performance. MASSPIRG also looked for indicators that were easy to evaluate and use in an incentive system and would cover a broad range of plant activities and systems.
The Pacific Gas and Electric Company (PG&E) provided many comments on the manner in which the comprehensive performance-based ratemaking settlement approved in 1988 by the California Public Utilities Commission (CPUC) for the Diablo Canyon Nuclear Power Plant provides long-term incentives to improve the reliability of the Diablo Canyon plant. The settlement, which will be in effect for 28 years, provides a' number of incentives to PG&E to improve the reliability and safety of plant operations. PG&E assumes risks associated with equipment failures, prolonged outages, and new regulatory requirements for the entire 28 year period of the settlement. This program provides PGLE with an economic incentive to ensure that the plant operates well over many years. The Diablo Canyon settlement does not rely on short-term performance measurements with sharp _ thresholds and does not use SALP scores--features that the NRC has identified that may adversely affect the public health and safety.
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NRC RESPONSE TO COMMENTS Many of the comments related to the role of the NRC in EP! programs. The NRC certainly agrees that economic regulatory agencies should be the groups to develop and approve EPIs. However, the NRC reviews matters that raise safety concerns at licensed facilities. The NRC deals with safety issues regardless of the source of the concern.
The commenters provided a number of suggestions for changing the Policy Statement, particularly to more clearly specify certain issues. The NRC believes this should not be done. A wita variety of acceptable EPl programs could be devised. Because rate regulatory agencies and licensees are more-familiar with economic regulatory options than is the NRC, they_are more capable of devising plans to meet these regulatory objectives. It.is the position of the NRC that the Policy Statement provides sufficient guidance on safety issues for the parties to use in developing or improving EP! programs.
Some licensees commented that the NRC-should' allow licensees to voluntarily report to it on EPI programs. These licensees also indicated that the NRC should not require licensees to evaluate or analyze information. However, the NRC believes that some EPl programs clearly could be of major safety concern, and that the NRC must obtain sufficient information to properly-conduct its regulatory responsibility.
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Certain cormenters also stated that confidential negotiations may be necessary under certain circumstances to develop EPl programs-because other. regulatory. 1 matters are also involved. While the NRC concedes that :uch-negotiations may-be necessary, it is unlikely that the program developed must be withheld from the NRC until after final adoption. The NRC is issuing the Policy Statement to improve communications with agencies having economic regulatory responsibilities of nuclear power plants.
After carefully considering all the comments on the draft Policy Statement, the NRC has decided to issue the final Policy. Statement with little change from the draft Policy Statement.
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Statement of Policy Potential-Impacts The NRC recognizes that the existing programs vary considerably-from State to State and that the plans are not easily classified, especially as.to the-effect that they may have on the safe operation of plants. However, certain
_ general characteristics of programs can be evaluated and found-to have:an-effect on safety that is either desirable (or at least neutral) or undesirable.
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9-A desirable plan provides incentives to make reasonable improvements in operation and maintenance'that result in long-term improvement in the An reliability of the reactor, the main generator, and their support systems.
undesirable plan provides incentives to operate a facility that could have safety problems or to start up before it is fully ready, merely to meet an operational goal.
A desirable EPl program rewards a utility for having sound operations and maintenance programs and for correcting recurrent or predictable failures or.
other problems that could lead to an operational transient, an unplanned plant outage, or a derating. 'Such an incentive is desirable because a well run
-l plant and the prompt correction of problems _ enhance safety. Unanticipated
, transients and shutdowns challenge operators and safety systems and, although with a low probability, could initiate a more serious event, Economic performance-incentives can encourage a utility's operational organization to improve its performance; which can help to improve both safety and economic performance. However, current safety and economic requirements also provide utilities with incentives to operata safe plants.
The current influence of. incentive plans on reactor safety _is believed' to _be small.- However, the' Commission's concern with incentive plansfis that, in the interest of real or perceived short-term economic benefit, the utility might hurry work,.take short cuts, or delay a shutdown for maintenance in order to
10 meet a deadline, a cost limitation, or other incentive plan f actor.
Therefore, an incentive program could directly or indirectly encourage the utility to maximize measured performance in the short term at-the expense of plant safety (public health and safety). By keeping a reactor on line when it should be taken down for preventive or corrective maintenance and by using shortcuts or compressed work schedules to minimize down time, the licensee could decrease the margin of safety.
Adverse Effects on Plant Operation and Public Health and Safety Some specific features of incentive plans now used by some States could adversely affect public health and safety. These features are (1) sharp thresholds between rewards and penalties (or between penalties and null zones, or rewards and null zones) and (2) performance measurements that have short time intervals. The NRC believes that.these features should not be allowed to prompt licensees to operate a plant when it should be shut down for safety reasons.
A sharp threshold is a situation in which a ticensee narrowly misses a target capacity factor and must bear a large part or all of the resulting replacement power costs. By creating a sharp threshold in its incentive program, a State could prompt a licensee to continue to operate a plant to achieve a target
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capacity factor in order to avoid the large replacement power cost or to earn a substantial reward. This_ type of incentive could divert attention from safe plant operation. To minimize these effects, States should consider ir.corporating a reasonably broad null zone of acceptable performance in which no rewards or penalties are imposed.
. 11 Performance measurements for short-term intervals would encourage the licensee to focus on a short term target or performance goals such as a higher capacity factor or availability factor. This target could become the primary focus, diverting attention from long-term goals of reliability and operational safety. In contrast, performance measurements for long-term intervals would prompt the utility to follow sound maintenance and operational practices to _
improve operating performance. For example, an incentive program could include a three or four year period with a rolling average capacity f actor evaluation period and could account for other factors such as refueling outages, inclement weather and other periodic events. Short-term measurements tend to make safety and economic goals conflict with each other, while long-term measurements tend to make the two goals complementary.
Specific Features That Cause NRC Concern Sharp thresholds and short-term performance measures can adversely affect safety and present several major concerns. First, the NRC's SALP ratings assist the NRC and licensees in identifying trends and areas of performance that should receive a more detailed assessment, in assessing the safety of the 2 performance at individual f acilities, and in communicating to the licensee.
Therefore, these ratings address selected areas of licensee activity, but do not ,
necessarily cover all significant performance areas. Further, the scores and
a 12 ratings are not based on absolute quantitative considerations, and therefore ,
The NRC expects produce numerical scores that are of limited significance.
licensees to focus on the f acts in the SALP report, the issues identified, and the apparent root causes of problems. By determining financial rewards or punishments for the licensee based on SALP, the State may cause the licensee to focus on improving the numerical scores instead of addressing the underlying issues, where the focus should be. If the issues identified in SALP reports are obscured by concerns over the financial consequences incurred as a result of those ratings, the process may not achieve the desired objective and may instead prompt a licensee to take corrective actions that produce rapid results rather than taking those that yield the highest increase in safety in the h j term.
Undue emphasis on performance indicators in an incentive program could prompt a licensee to improve-the scores by taking inappropriate actions rather than by identifying and correcting underlying safety conditions.1 I for further information on existing economic-incentive programs and the possible effect of such programs on nuclear safety, see NUREG/CR-4911, Incentive Regulation of Nuclear Power Plants by State Regulators,1991.
Copies of NUREG/CR-4911 may be purchased from the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 37082, Washington, DC 20013-7082.
Copies are also available from the National Technical .Information Service,-
5285 Port Royal Road, Springfield, VA 22161.- A copy is also available for public inspection or copying at the NRC Public Document Room, 2120 L Street, NW, Washington, DC.
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t Continued NRC Monitoring Program ,
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The NRC will periodically survey FERC and State regulatory commissions that regulate the utility rates of power reactors to identify any new programs or substantial changes in existing programs and to ascertain how the programs __
have been implemented, and to determine if large penalties have been imposed.
We will update the survey annually, We will periodically assess the frequency
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- of the surveys to determine the need to adjust the schedule, Licensees and Utility Commissions Urged To Inf orm NRC of Program Initiatives The NRC needs to be apprised of EPl programs that are being pl u ned by State A number of commenters regulatory commissions and that can affect safety, supported certain f eatures of an EPI program. The Commission has reviewed these features and believes State public utility commissions (PUCs) may want to consider these features in est;blishing programs that prompt licensees to both economically and safely operate nuclear power plants. These features include (1) capacity f actor targets based upon industry's average performance to account for problems throughout the industry, (2) equal opportunities for
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rewards and penalties, (3) the " banking" of superior performance to offset lower performance, and (4) using performance measures of the entire system instead of those for a specific unit. Frequently, the States develop these programs in coordination with regulated utilities. Therefore, the NRC will .
request hat licensees report whenever these commissions develop or substantially revise EPIs. The NRC also will ask FERC and the State utility regulatory commissions to discuss with the NRC initiatives to impose or change an EPl program that applies to an NRC licensee. The NRC will take these actions in order to gain information on the principal features of the program so that the NRC can assess the ex ent to which the program will affect plant
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safety. Further, he tRC will request licensees to report the rewards and A free exchange of penalties assessed through these programs as they occur.
information between the NRC and the-agencies with economic jurisdiction over nuclear utilities will help the NRC and those agencies to work together to achieve the goals of the safe and economic operation of nuclear power plants.
Dated at Rockville, Maryland, this day of. , 1991.
For the Nuclear Regulatory Commission.
Samuel J. ChiIk ,
Secretary of the Commission.
Enclosure-2 TEXT OF LETTER TO BE SENT TO THE FEDERAL ENERGY REGULATORY COMMISSION AND TO.
STATE UTillTY REGULATORY COMMISSIONS REQUESTING COMMENTS ON.THE PROPOSED POLICY STATEMENT ON ECONOMIC PERFORMANCE INCENTIVES (Heading) _
A number of State regulatory commissions and the Federal Energy Regulatory ,
Commission (FERC) have established economic performance incentive programs relating to commercial nuclear reactors. Some programs have existed for a number of years, whereas others have been substantially modified or are newly established. The U.S. Nuclear Regulatory Commission (NRC) has monitored these programs through periodic surveys of State commissions and licensees to determine whether they create incentives for reactor licensees to change operating or maintenance practices in such a way that safety is diminished.
in reviewing the programs in effect in 1990, _the Commission has determined that a few economic performance incentive: programs have the potential to direct licensees' attention away from the responsibility of 'e operation and toward attempting to meet an operational goal to avoid a-pene :y or receive a.
reward. As a result, the Commission directed the NRC staff to-develop a proposed Policy Statement that describes desirable and undesirable features of these. programs with respect'to licensee's responsibilities for public-health.
and safety. Enclosed for your consideration is a copy of the proposed Policy Statement.
Enclosure 2 2
Your cooperation in providing comments to the NRC on this matter will be greatly appreciated. The NRC has indicated in the past that properly devised.
economic performance incentive programs can encourage both economical and safe operation.
Sincerely, James M. Taylor Executive Director for Operations