ML010470183

SECY-01-0049-Attachment 4-Draft Regulatory Guide DG-1106

ML010470183
Person / Time
Issue date:	03/23/2001
From:	Office of Nuclear Regulatory Research
To:
Richter B, NRC/NRR/DRIP/RGEB, 415-1978
References
DG-1106, SECY-01-0049 RG-1.159
Download: ML010470183 (60)

Text

U.S. NUCLEAR REGULATORY COMMISSION February 2001 OFFICE OF NUCLEAR REGULATORY RESEARCH Division 1 Draft DG-1106 DRAFT REGULATORY GUIDE

Contact:

B.J. Richter (301)415-1978 PREPUBLICATION 02/14/01 DRAFT REGULATORY GUIDE DG-1106 (Proposed Revision 1 of Regulatory Guide 1.159)

ASSURING THE AVAILABILITY OF FUNDS FOR DECOMMISSIONING NUCLEAR REACTORS This regulatory guide is being issued in draft form to involve the public in the early stages of the development of a regulatory position in this area. It has not received complete staff review or approval and does not represent an official NRC staff position.

Public comments are being solicited on this draft guide (including any implementation schedule) and its associated regulatory analysis or value/impact statement. Comments should be accompanied by appropriate supporting data. Written comments may be submitted to the Rules and Directives Branch, Office of Administration, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. Comments may be submitted electronically or downloaded through the NRCs interactive web site at <WWW.NRC.GOV> through Rulemaking. Copies of comments received may be examined at the NRC Public Document Room, 11555 Rockville Pike, Rockville, MD. Comments will be most helpful if received by Requests for single copies of draft or active regulatory guides (which may be reproduced) or for placement on an automatic distribution list for single copies of future draft guides in specific divisions should be made to the U.S. Nuclear Regulatory Commission, Washington, DC 20555, Attention: Reproduction and Distribution Services Section, or by fax to (301)415-2289; or by email to DISTRIBUTION@NRC.GOV. Electronic copies of this draft guide are available through NRCs interactive web site (see above), on the NRCs web site <www.nrc.gov> in the Reference Library under Regulatory Guides, and in NRCs Public Electronic Reading Room at the same web site.

TABLE OF CONTENTS Page A. INTRODUCTION B. DISCUSSION

1. Amount of Funds for Decommissioning

2. Methods of Financial Assurance C. REGULATORY POSITION

1. Amount of Funds for Decommissioning 1.1 Funding Requirements for the Decommissioning Report/Initial Amounts To Be Set Aside 1.2 Adjustments to Certification Amounts or Site-Specific Estimates 1.3 Decommissioning Cost Estimates 1.4 Basis for Decommissioning Cost Estimates 1.5 Adjustments to Cost Estimates

2. Methods of Financial Assurance 2.1 Guidance Applicable to All Methods of Financial Assurance 2.2 Prepayment and External Sinking Fund 2.3 Guarantee Methods 2.4 Standby Trust 2.5 Governmental Statement of Intent 2.6 Proposed Decommissioning Plans 2.7 Procedures for Shutdown Reactors D. IMPLEMENTATION References Appendix A--Glossary of Financial Terms Appendix B--Examples of Financial Assurance Instruments B.1 Sample Escrow Agreement B-2 B.1.1 Specimen Certificate of Events B-7 B.1.2 Specimen Certificate of Resolution B-8 B.2 Sample Certificates of Deposit B-9 B.2.1 Sample Negotiable Certificate of Deposit B-9

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B.2.2 Sample Nonnegotiable Certificate of Deposit B-10 B.3 Sample Trust Fund and Standby Trust Agreements B-11 B.3.1 Sample Trust Fund Agreement B-11 B.3.2 Sample Standby Trust Agreement B-17 B.3.3 Sample of Acknowledgment B-20 B.4 Sample Payment Surety Bond B-21 B.5 Sample Irrevocable Standby Letter of Credit B-24 B.6 Sample Documents Recommended to Support Corporate Guarantee B-26 B.6.1 Sample Letter from Chief Financial Officer B-26 B.6.2 Financial Test: Alternative I B-27 B.6.3 Financial Test: Alternative II B-28 B.6.4 Sample of Auditor's Special Report by Certified Public Accountant B-29 B.6.5 Sample Parent Company Guarantee B-31 Value/Impact Statement V/I-1

A. INTRODUCTION The general requirements for applications for license termination and decommissioning nuclear power, research, and test reactors are contained in 10 CFR Part 50, "Domestic Licensing of Production and Utilization Facilities." On June 27, 1988, the Commission published amendments to 10 CFR Part 50 (53 FR 24018) concerning specific criteria for decommissioning nuclear facilities. Subsequent amendments to these requirements have been promulgated, most recently on September 22, 1998 (63 FR 50465).

Amended 10 CFR 50.33(k), 50.75, and 50.82(b) require operating license applicants and existing licensees to submit information on how reasonable assurance will be provided that funds are available to decommission the facility. Amended 10 CFR 50.75 establishes requirements for indicating how this assurance will be provided, namely the amount of funds that must be provided, including updates, and the methods to be used for assuring funds.

This regulatory guide was developed in conjunction with the rule amendments and was originally published for public comment in May 1989 and in initial effective form in August 1990. Its purpose is to provide guidance to applicants and licensees of nuclear power, research, and test reactors concerning methods acceptable to the NRC staff for complying with requirements in the amended rule regarding the amount of funds for decommissioning. It also provides guidance on the content and form of the financial assurance mechanisms indicated in the rule amendments.

As a guidance document, this regulatory guide and its provisions are not designed to be restrictive or to represent binding requirements. The guide presents methods acceptable to the NRC staff for complying with the decommissioning regulations. The NRC staff recognizes that in certain circumstances (e.g., to meet requirements established by Federal or State economic regulatory agencies or to comply with other applicable laws) other approaches may be necessary.

The information collections contained in this draft regulatory guide are covered by the requirements of 10 CFR Part 50, which were approved by the Office of Management and Budget, approval number 3150-0011. If a means used to impose an information collection does not display a currently valid OMB control number, the NRC may not conduct or sponsor, and a person is not required to respond to, the information collection.

B. DISCUSSION Decommissioning means to safely remove a facility or site from service and to reduce residual radioactivity to a level that permits release of the property for unrestricted use and termination of the license, or release of the property under restricted conditions and termination of the license. As used in this context, facility" refers to the contaminated components (or non-contaminated components required to be dismantled to obtain access to contaminated components) of the site, buildings and contents, and equipment associated with all NRC-licensed activities within the scope of 10 CFR 50.75.

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There are three primary methods of decommissioning nuclear reactors.

DECON is the method in which the equipment, structures, and portions of a facility and site containing radioactive contaminants are removed or decontaminated to a level that permits the property to be released for use in accordance with the NRCs definition of decommissioning, shortly after cessation of operations.

SAFSTOR is the method in which the nuclear facility is placed and maintained in a condition that allows the nuclear facility to be safely stored and subsequently decontaminated (deferred decontamination) to levels that permit release for use in accordance with the NRCs definition of decommissioning.

ENTOMB is the method in which radioactive contaminants are encased in a structurally long-lived material, such as concrete. The entombed structure is appropriately maintained, and continued surveillance is carried out until the radioactivity decays to a level permitting release of the property in accordance with the NRCs definition of decommissioning.

So that a lack of funds does not result in delays in or improper conduct of decommissioning that may adversely affect public health and safety, the rule amendments on decommissioning require that applicants and licensees provide reasonable assurance that adequate funds for performing decommissioning will be available at the end of operation. To provide this assurance, the rule requires that two factors be considered, namely, the amount of funds needed for decommissioning and the method used to provide financial assurance.

AMOUNT OF FUNDS FOR DECOMMISSIONING Estimating the correct amount of funds needed for decommissioning is important to prevent funding shortfalls that could adversely affect public health and safety.

Requirements for establishing funding amounts for decommissioning are set out in 10 CFR 50.33(k), 50.75, 50.82(a)(4), 50.82(a)(8), and 50.82(a)(9). These include:

a. An initial certification amount (or, for non-power reactors, a site-specific estimate) established at the operating license stage (for existing licensees, by July 26, 1990) (10 CFR 50.75(b) and 50.75(c)(1)).

b. Adjustments to the certification amount (or site-specific estimate) over the operating life and storage period, if any, of the facility. Specifically, 10 CFR 50.75(b) requires each licensee to annually adjust the initial certification amount by use of the equation in 10 CFR 50.75(c)(2), which provides for escalation factors for labor, energy, and waste burial; in addition, 10 CFR 50.75(f) requires each licensee to submit, about 5 years prior to the projected end of operation, a preliminary decommissioning cost estimate that includes an up-to-date assessment of the major factors that could affect the cost to decommission.

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c. A post-shutdown decommissioning activities report (PSDAR) to be submitted by the licensee to the NRC, and a copy to the affected States.

This must be done prior to or within 2 years following permanent cessation of operations. The PSDAR must include a description of the planned decommissioning activities along with a schedule for their accomplishment, an estimate of expected costs, and a discussion that provides the reasons for concluding that the environmental impacts associated with site-specific decommissioning activities will be bounded by appropriate previously issued environmental impact statements. (10 CFR 50.82(a)(4)).

d. A site-specific decommissioning cost estimate must be submitted to the NRC prior to the licensee using any funds in excess of amounts described in 10 CFR 50.82(a)(8)(ii). Also, such a cost estimate is required to be submitted within 2 years following permanent cessation of operations, if not already submitted. (10 CFR 50.82(a)(8)).

e. A licensee is required by 10 CFR 50.82(a)(9)(ii)(F) to provide [a]n updated site-specific estimate of remaining decommissioning costs . . . as part of a license termination plan (LTP). In addition, 10 CFR 50.82(a)(9)(i) requires that a licensee must submit its LTP at least 2 years before the date of termination of the license.

As indicated in 10 CFR 50.75(b), each power reactor applicant and licensee is to provide certification of financial assurance. The specific information noted in b through e above must also be provided at the appropriate time. The certification amounts in 10 CFR 50.75(c)(1) act as threshold review levels. While not necessarily representing the actual cost of decommissioning for specific reactors, these certification amounts provide assurance that licensees are able to demonstrate adequate financial responsibility in that the bulk of the funds necessary for a safe decommissioning are being considered and planned for early in facility life, thus providing adequate assurance that the facility would not become a risk to public health and safety when it is decommissioned. To estimate increases in the cost of decommissioning over the operating life of the facility, 10 CFR 50.75(c)(2) contains a formula to account for inflation that has occurred in the labor, energy, and waste burial components of decommissioning costs.

As indicated in 10 CFR 50.75(d), each non-power reactor applicant and licensee is to submit a cost estimate for decommissioning its facility. For the purposes of this guidance, non-power reactor applicants and licensees are license applicants for or licensees of test and research reactors whose primary purpose is not to produce electricity. This initial cost estimate is not an exact accounting of the actual cost of decommissioning but is intended to provide and approximation of what decommissioning the reactor will cost at the proposed time of decommissioning. This estimate may be based on information from the literature (e.g., generic studies, licensee models, experience). Pacific Northwest National Laboratory has made a detailed cost estimate of the conceptual decommissioning for research and test reactors (Ref. 1) that can be used as a basis, for regulatory purposes, for developing estimates of the costs of decommissioning.

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Use of the certification approach is a first step in providing reasonable assurance of decommissioning funds. The second step is that, five years prior to the expected end of operations, licensees are required to submit (or for non-power reactors, to update) a preliminary decommissioning cost estimate that includes an up-to-date assessment of the major factors that could affect the cost to decommission and the plans for adjusting levels of funds. In accordance with 10 CFR 50.82(c), for licensees that shut down their reactors prematurely, the collection period for any shortfall of funds will be determined on a case-by-case basis upon application by the licensee, taking into account the specific financial situation of each licensee. As required by 10 CFR 50.75(f), this estimated amount of decommissioning funds is to be based on a then-current assessment of major factors that could affect decommissioning cost and is to include relevant, up-to-date information. The third step is a licensee evaluation of specific decommissioning provisions close to the commencement of decommissioning. (Pursuant to 10 CFR 50.82(a), licensees must also submit a license termination plan at least 2 years before the expected date of termination of the license.) Together, these steps provide reasonable assurance that the NRCs objective will be met--namely, at the time of permanent end of operations, sufficient funds are available to decommission the reactor in a manner that protects public health and safety.

METHODS OF FINANCIAL ASSURANCE NRC rules in 10 CFR 50.75 specify the general requirements for methods that are considered acceptable for providing reasonable assurance of the availability of funds for decommissioning nuclear reactors. These methods and how they are evaluated are discussed in detail in the supplementary information to the NRC rulemaking action that established the requirements (General Requirements for Decommissioning Nuclear Facilities (53 FR 24018, June 27, 1988; 61 FR 39301, July 29, 1996; and 62 FR 39091, July 21, 1997); and the action that recently amended the requirements (Financial Assurance Requirements for Decommissioning Nuclear Power Reactors: Final Rule (63 FR 50465, September 22, 1998)), in an NRC staff report (Ref. 2), and in the Generic Environmental Impact Statement on Decommissioning Nuclear Facilities (Ref. 3). These documents present a rationale for the acceptability of methods for providing financial assurance. The Supplementary Information accompanying the final decommissioning rule indicates that, although some methods for providing funding assurance now may not be available, they are allowed in the event that they become available. This guide addresses the more feasible alternatives in greater detail. Licensees are, of course, free to use any acceptable method as it becomes available.

Section 50.75 indicates that the following methods are acceptable for reactors (a glossary of these terms is provided in Appendix A).

ÿ Prepayment - The deposit preceding the start of operation into an account segregated from the licensees assets and outside the licensees administrative control of cash or liquid assets such that the amount of funds would be sufficient to pay decommissioning costs. Prepayment can be in the form of a trust, escrow account, or government-held fund using certificates of deposit, deposits of government securities, or other liquid investments.

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ÿ External Sinking Fund - A fund established and maintained in an account segregated from the licensees assets and outside the licensees administrative control. The fund may be in the form of accounts or investments acceptable to the NRC, similar to those described above for prepayment but which are collected over the remaining operating life of the reactor or, in the case of a permanently shut down power reactor, over a period to be determined by the licensee and subject to NRC approval.

ÿ Guarantee Method - can be in the form of surety bonds, letters of credit, or insurance; for non-electric-utility applicants and licensees, parent company guarantees may be used when a financial test specified in Appendix A to 10 CFR Part 30 is used.

ÿ Statement of Intent by a government agency, if applicable, indicates that funds for decommissioning will be obtained when necessary.

To simplify the preparation, submittal, and review of information on funding methods acceptable for its non-reactor licensees, the NRC has prepared Regulatory Guide 3.66, "Standard Format and Content of Financial Assurance Mechanisms Required for Decommissioning Under 10 CFR Parts 30, 40, 70, and 72" (Ref. 4). This document contains recommended wording for financial assurance instruments. The instruments in Regulatory Guide 3.66 are included in modified form in this regulatory guide in Appendix B and are referenced in Regulatory Position 2. Because of the more extensive economic regulation faced by power reactor licensees as opposed to materials licensees, the sample wording is provided for illustration and is not necessarily recommended for use by any individual licensee.

C. REGULATORY POSITION This section describes methods of implementing the general requirements for financial assurance for decommissioning for reactor licensees and applicants who must comply with 10 CFR Part 50.

Regulatory Position 1 provides guidance to applicants and licensees on establishing the amount of funds necessary for decommissioning as required by the regulations. Regulatory Position 2 provides guidance on methods acceptable to the NRC for assuring funds.

1. AMOUNT OF FUNDS FOR DECOMMISSIONING 1.1 Funding Requirements for the Decommissioning Report/Initial Amounts 1.1.1 Power Reactor Applicants and Licensees For power reactor applicants and licensees, the initial certification amount of funds for decommissioning is based on the equations in 10 CFR 50.75(c)(1) and represents the minimum funding level that applicant and licensees must meet.

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At its discretion, a power reactor licensee may submit a certification based either on the formulas provided in 10 CFR.75(c)(1) and (2) or, when a higher funding level is desired, on a facility-specific cost estimate that is equal to or greater than that calculated in the formula in 10 CFR 50.75(c)(1) or (2). A facility-specific cost estimate may include non-NRC-required costs, but such costs should be identified. If such a combined submittal is used, licensees should ensure that the NRC-required cost estimate for decommissioning costs as defined in 10 CFR 50.2 is equal to or greater than the amount stated in the formulas in 10 CFR 50.75(c)(1) and (2) as the basis for justifying a higher than minimum funding level. For certification amounts below the amount stated in the formulas in 10 CFR 50.75(c)(1) and (2), licensees must submit an exemption request containing details as outlined in Regulatory Position 1.4.

The purpose of the decommissioning report required under 10 CFR 50.33(k) and described in 10 CFR 50.75(b) and (c) is to provide reasonable assurance that licensees have a viable plan to accumulate funds in the certification amount, adjusted for inflation, by the projected time of permanent cessation of operations. Each licensee should submit a statement indicating the certification amount and inflation adjustment appropriate for its reactor or reactors together with a photocopy or conformed copy of the instrument being used to provide assurance of decommissioning funding. If an external sinking fund is being used, the proposed amount of annual (or more frequent) payments should be provided.

1.1.2 Non-Power Reactor Applicants and Licensees For non-power-reactor applicants and licensees, the amount of funds is to be based on a cost estimate for decommissioning the facility and submitted to the NRC in a report required by 10 CFR 50.33(k). The cost estimate for decommissioning need not be an exact accounting of the actual cost of decommissioning, but rather an estimate of the costs for decommissioning the reactor. The PNL studies (Ref. 1) may be used by applicants or licensees for initial cost estimates with suitable adjustments to account for the facility-specific differences as discussed in Regulatory Position 1.4.2. The level of detail necessary to support the cost estimate is discussed in Regulatory Position 1.4.

1.2 Adjustments to Certification Amounts and Licensees For electric utility applicants and licensees, certification amounts described in Regulatory Position 1.1 are to be adjusted annually based on 10 CFR 50.75(b) and (c)(2) and should be available for NRC inspection, as requested. The adjustment factor in 10 CFR 50.75(c)(2) is 0.65L + 0.13E + 0.22B, where L, E, and B are escalation factors for labor, energy, and waste burial costs respectively. Although these adjustments are to be made annually, they need not be submitted to the NRC. Reasonably recent editions of the documents cited below should be used.

The adjustment factor1 for labor, L, can be obtained from Monthly Labor Review, published by the U.S. Department of Labor, Bureau of Labor Statistics (BLS).

Specifically, the appropriate regional data from the table (currently Table 24) entitled Employment Cost Index, Private Nonfarm Workers, by Bargaining Status, Region, and Area Size, subtitled Compensation, should be used. (Reference 5 contains information 1

The derivation of the adjustment factors is explained in greater detail in Sections 3.1-3.5 of Report on Waste Burial Charges, NUREG-1307, Revision 9, September 2000 (Reference 5).

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on obtaining the labor adjustment factors that are available on the World Wide Web.) L should be adjusted from a base value in Table 24 corresponding to the amounts in the decommissioning rule amendments that are in January 1986 dollars. The base values of L from the BLS data corresponding to January 1986 are 130.5, 127.7, 125.0, and 130.1 for the Northeast, South, Midwest, and West regions, respectively. However, the 1999 BLS index values are based on an index value of 100 in June 1989. The June 1989 base values are 144.3, 143.0, 146.3, and 144.7 for the same respective regions. The respective scaling factors are 1.555, 1.441, 1.409, and 1.449. A value of L may be calculated for each region by multiplying the 1989 value by the scaling factor and then dividing by the reference 1981 value. For example, the value of L in the Northeast region is 144.3 x 1.555 ÷ 130.5 = 1.719. This value of L could then be used in the equation in paragraph 50.75(c)(2) of the rule amendments for decommissioning a nuclear power plant located in the Northeast region of the U.S.

The adjustment factor for energy, E, can be obtained from the Producer Price Indexes, published by the U.S. Department of Labor, Bureau of Labor Statistics (BLS).

Specifically, data from the table (currently Table 6) entitled Producer Price Indexes and Percent Changes for Commodity Groupings and Individual Items (PPI) should be used.

The energy term, E, is made up of two components, namely electric power, P, and fuel oil, F. Hence, E should be obtained from the BLS data by using the following equations: for the reference PWR, [0.58P + 0.42F], and for the reference BWR, [0.54P + 0.46F].2 P should be taken from appropriate regional data for industrial power (Commodity code 0543 in Table 6) and F should be taken from data for light fuel oils (Commodity code 0573 in Table 6). These energy adjustment factors can also be obtained from BLS databases made available on the World Wide Web (See Reference 5, Appendix C for further information). As discussed for L in the preceding paragraph, P and F should be adjusted from a base value in the BLS table corresponding to the amounts, as specified in 10 CFR 50.75(c)(1), that are in January 1986 dollars. The base values of P and F from the BLS data corresponding to January 1986 are 114.2 and 82.0 respectively. No regional BLS data for these PPI commodity codes are currently available. All PPI values are based on a value of 100 for the year 1982 (Base 1982 = 100). Thus, the value of P and F for December 1999 are 126.5 ÷ 114.2 = 1.108 and the value of F is 72.9 ÷ 82.0 = 0.889; therefore the value of E in this case for the equation in 10 CFR 50.75(c) for the reference PWR is [0.58 x 1.108+0.42 x 0.889] = 1.016.

The escalation factor for waste burial, B, can be taken directly from data on the appropriate waste burial location in Table 2.1 of NUREG-1307, "Report on Waste Burial Charges" (Ref. 5). The base value of B for January 1986 is 1.0. This corresponds to the value used in the calculation of the waste burial cost for decommissioning in 10 CFR 50.75(c) and reflects the base cost for waste burial at the Washington site. For example, the value of B in January 2000 for the Washington burial site for a PWR is 2.223 ÷ 1.0 =

2.223. Similarly, for South Carolina the values for a PWR in January 2000 (Atlantic Compact) is 17.922 ÷ 1.0. These values for B could then be used in the equation in 10 CFR 50.75(c)(2).

Because this formula does not provide for estimates of future inflation but only of inflation that has already occurred, licensees should recalculate the certification amount each year using the previous year's data as described in 10 CFR 50.75(c)(2). This 2

These equations are derived from Table 6.3 of NUREG/CR-0130, Addendum 4 (Reference 6), and Table 5.3 of NUREG/CR-0672, Addendum 3 (Reference 7), respectively.

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recalculation is for certification purposes only and does not affect estimated future inflation that a licensee may calculate to establish amortization or collection schedules for rate-making purposes.

For non-electric-utility applicants and licensees who have prepared a decommissioning cost estimate, adjustments to the cost estimate should also be prepared annually but need not be submitted to the NRC staff (see Regulatory Position 1.5).

However, updated calculations based on the formulas in 10 CFR 50.75(c) or on site-specific estimates are to be submitted every 2 years as part of the biennial report required in 10 CFR 50.75(f)(1).

1.3 Decommissioning Cost Estimates Five decommissioning cost estimates are required to be developed and submitted for NRC review:

• An initial estimate is required that may be calculated according to 10 CFR 50.75(c) or the estimate may be site-specific and at least equal to the decommissioning cost from 10 CFR 50.75(c).

• Preliminary decommissioning cost estimate at or about 5 years before the projected end of operations in accordance with 10 CFR 50.75(f)(2).

• Estimate of expected costs contained in the Post-Shutdown Decommissioning Activities Report (PSDAR) in accordance with 10 CFR 50.82(a)(4)(i).

• Site-specific decommissioning cost estimate within 2 years following permanent cessation of operations in accordance with 10 CFR 50.82(a)(8)(iii).

• Updated site-specific estimate of remaining decommissioning costs contained in the License Termination Plan (LTP) in accordance with 10 CFR 50.82(a)(9)(ii)(F).

Guidance that is acceptable to the NRC staff is being developed to provide details on content and format for the reporting of these cost estimates. Draft Regulatory Guide DG-1085, Standard Format and Content of Decommissioning Cost Estimates for Nuclear Power Reactors, is expected to be issued shortly.

In general, decommissioning cost estimates are provided by major activity and major decommissioning phase or time period. The cost estimate must account for the entire decommissioning work scope, but not for items that are outside the scope of the decommissioning process, such as the maintenance and storage of spent fuel in the spent fuel pool, the design or construction of spent fuel dry storage facilities, or other activities not directly related to the long-term storage, radiological decontamination and dismantlement (D&D) of the facility, or radiological decontamination of the site. If non-decommissioning cost items are included, these items should be identified separately.

Cost estimates should provide costs for each of the following (or similar) major activities and phases with a level of detail appropriate to the type of cost estimate.

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• Major radioactive component removal Reactor vessel and internals, steam generators, pressurizers, large bore reactor coolant system piping, and other large components that are radioactive to a comparable degree.

• Radiological D&D Removal of remaining radioactive plant systems, including radiological decontamination.

• Management and support (undistributed costs) Labor costs of utility support staff and decommissioning contractor staff, energy costs, regulatory costs, small tools, insurance, etc.

• Waste packaging/shipping Placing waste in packages and shipping to waste vendors or burial site.

• Waste burial or waste vendor Waste burial charges, including waste vendors processing fees.

• Contingency Allowance for unexpected costs.

Cost estimates should also include the assumptions, references, and bases for unit costs used in developing the estimates, as well as a description of how inflation is accounted for in the cost estimate. The cost estimate should be provided in current-year dollars. Escalation of the waste disposition costs are considered separately from the general inflation rate applicabhle to labor, material, and energy costs. Escalation factors are discussed in Regulatory Position 1.2.

1.4 Adjustments to Cost Estimates In order to maintain adequate funds until completion of decommissioning, funding provisions should contain procedures for periodic review and adjustment of the initial estimate and subsequent amounts set aside, during both operation and any storage periods, based on the following.

1.4.1 Inflation The effect of inflation on the estimated cost should be determined. For those licensees subject to the certification requirements of 10 CFR 50.75(b), the certification amount should be adjusted annually using the formula in 10 CFR 50.75(c)(2) (see Regulatory Position 1.2). For licensees using site-specific cost estimates (i.e., research and test reactor licensees, power reactor licensees not covered by 10 CFR 50.75(c), or licensees submitting preliminary or proposed decommissioning plans pursuant to 10 CFR 50.75(f) and 50.82(a)), new cost estimate studies should be conducted periodically to determine whether the estimate reflects cost changes from inflation or other factors. As an alternative to performing new site-specific cost estimates, licensees may use standard measures of price indexing such as the annual Consumer Price Index published by the U.S. Department of Labor, Bureau of Labor Statistics, or the inflation factor derived from the Implicit Price Deflator for the Gross National Product as published in the "Survey of Current Business" by the U.S. Department of Commerce or in "Economic Indicators" by the Council of Economic Advisors. The licensee may also use the factors indicated in Regulatory Position 1.2 for escalating the principal components of the cost estimate.

Estimates of future inflation should bear a reasonable relationship to recent (i.e., within 10 years) economic performance or other relevant economic conditions and factors. The 9

licensee should document the bases for all estimates of past and future inflation.

1.4.2 Technological and Status Changes For plant-specific decommissioning cost estimates, the effect of technological changes or changes in plant status (e.g., whether the plant has been shut down for an extended period) on the cost estimate should be determined. This could include reasonably determined recent developments in decontamination, waste processing and disposal, or cutting-equipment and other technology, updated information about the facility conditions such as larger levels of contamination than anticipated, updated waste disposal conditions, updated residual radioactivity limits, and experience gained from actually decommissioning similar facilities.

1.4.3 Frequency of Adjustment Adjustment to the certification amount and site-specific cost estimates should be made at least once a year for the effects described in Regulatory Position 1.5.1.

Adjustment to site-specific cost estimates for the effects described in Regulatory Position 1.5.2 should be made according to the amount of change experienced, as appropriate, but at least once every 5 years. Adjustments to funding levels to account for adjustments to the certification amount or site-specific cost estimates are addressed in Regulatory Position 2.2.5.

2. METHODS OF FINANCIAL ASSURANCE Methods that are considered acceptable for reactors for assuring the availability of funds for decommissioning are in 10 CFR 50.75. The following sections provide specific guidance to licensees for complying with the various types of methods specified in 10 CFR 50.75.

2.1 Guidance Applicable to All Methods of Financial Assurance 2.1.1 If more than one licensee owns a facility, the method should provide clear indication of the funding provisions made by each licensee or agent acting for a licensee.

Multiple licensees may, at their discretion, pool decommissioning funds for a jointly-owned facility or facilities as long as the contribution of each licensee and each facility are separately identifiable within the methods being used. Decommissioning funding plans may be submitted either jointly or separately by co-licensees. However, each licensee should ensure the accuracy of its pro rata share of the total NRC-required amount being certified plus periodic adjustments.

2.1.2 The applicant or licensee should indicate that the method used provides, or will provide at the projected cessation of operations, an amount at least equal to the estimated or certified decommissioning cost for the facility. If a licensee uses a combination of different methods for assuring decommissioning funds, the combined total of the methods being used should equal the certification amount, plus adjustments projected to be needed. At its discretion, a licensee may use an assurance method to provide funds for the adjusted certification amount plus non-NRC-required decommissioning costs.

2.1.3 The applicant or licensee should provide evidence that the parties signing the financial instrument (for the applicant or licensee) are authorized to represent the organization in the transaction.

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2.1.4 The applicant or licensee should provide evidence that the financial instrument is either a conformed copy or photocopy of the original instrument.

2.1.5 Each of the methods of financial assurance should be capable of being adjusted to take into account variations in earnings and adjustments in the amount of funds being set aside for decommissioning both during operation and during storage periods, if any (see Regulatory Position 1.5). Adjustments to the annual amount of funds being set aside may be made to coincide with rate cases considered by a licensee's public utility commission (PUC) or by the Federal Energy Regulatory Commission (FERC). Adjustments also may be made to reflect the schedule of ruling amounts established by the Internal Revenue Service under Section 468A of the Internal Revenue Code for a qualified Nuclear Decommissioning Reserve Fund. However, the sum of the adjusted ruling amount in a qualified account plus the target amount in a non-qualified account should at least equal the amount indicated in 10 CFR 50.75(c). In every case, adjustments to the amount of funds set aside should be made at least once every year for licensees that are no longer rate-regulated or do not have access to a non-bypassable charge, and at least once every 5 years for licensees that are rate-regulated (see Regulatory Position 1.5).

2.1.6 The licensee should maintain continuity in the funding method as follows:

2.1.6.1. If the licensee decides to change the funding method during the life of the facility or during the storage period, the licensee should notify the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, of this change at least 30 working days in advance of its effective date. Significant modifications to a funding method should also be submitted to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Materials Safety and Safeguards, as appropriate, at least 30 working days prior to the proposed effective date of the amendment, providing the text of the amendment and a statement of the reason for the proposed amendment.

2.1.6.2. If ownership or operating responsibility of a facility is transferred, the existing financial assurance method is to be maintained until such transfer is approved by the NRC pursuant to 10 CFR 50.80 and the transfer has been effected. (Sale-leaseback agreements do not require new or amended financial assurance mechanisms unless so provided by such agreements.)

2.1.6.3. An acceptable assurance method is to be maintained until the Part 50 license is terminated.

2.2 Prepayment and External Sinking Fund These funding methods should have the following characteristics.

2.2.1. An applicant or licensee using a trust agreement, escrow account, or certificate of deposit to satisfy 10 CFR 50.75(c) may use the sample wording for those methods contained in Appendices B.1, B.2, and B.3 of this guide. These sample forms have been provided for general guidance. Specific provisions may not be applicable to particular licensees and may be modified as a licensee's specific situation warrants. NRC expects that all prepayment or external sinking fund mechanisms will, at a minimum, satisfy the following conditions: (a) The instrument will meet the requirements of State 11

law for that instrument, (b) it will provide for the segregation of decommissioning funds from the licensees other assets, (c) it will ensure that the funds are outside the administrative control of the licensee, (d) it will ensure that special care is taken to safeguard the funds from investment risks, (e) it will ensure that adequate information concerning the funds is provided to NRC, and (f) it will provide safeguards against improper payments from the funds.

The condition stipulated in 10 CFR 50.75(e)(1)(ii) that an external sinking fund be "segregated from licensee assets is intended to ensure that the integrity of decommissioning funds will be maintained, especially with respect to protection from creditors in a bankruptcy situation and to ensure continuity of funding during license transfers. A case-by-case "reasonableness" standard will be applied to licensee compliance with this provision. Key indicia of segregation include separation of the funds from the other assets of the licensee through a transfer to an independent custodian or manager and separate accounting. The phrase "segregation from licensee assets" does not require that the fund be placed in an entity, such as a grantor trust, that is established as a separate tax-paying entity. Licensees should be aware, however, that such a trust will provide greater protection in bankruptcy than the escrow or certificate of deposit.

2.2.2 The following key provisions should be included in the trust instrument (or, when relevant, to the escrow or government fund agreement) to ensure that it is acceptable to NRC:

2.2.2.1. The trust agreement should state the purpose of the trust and the nuclear facility must be identified by license or NRC docket number. An acceptable statement of purpose is the statement required for a trust agreement to qualify as a Nuclear Decommissioning Reserve Fund under Section 468A of the Internal Revenue Code. To qualify under Section 468A, the trust agreement should state that the trust is established for the exclusive purpose of providing funds for the decommissioning of one or more nuclear plants.

2.2.2.2. The trust agreement should specify that the trust fund is established for the benefit of the licensee of the facility and/or the NRC. More than one licensee may be identified. Under Section 468A a single trust agreement may establish two or more Nuclear Decommissioning Funds when a nuclear power plant is owned by two or more licensees. Similarly, a trust agreement may contain both qualified and non-qualified decommissioning funds.

2.2.2.3. The trust agreement should specify the obligations of the trustee with respect to investments, as described below under Regulatory Position 2.2.3.

2.2.2.4. The trust agreement should specify the circumstances under which payments will be made from the trust. It must provide that no disbursements or payments may be made from the trust by the trustee until the trustee has first given the NRC 30 working days written notice, and that no disbursements or payments from the trust may be made if the trustee receives prior written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as appropriate. (Reasonable administrative expenses and taxes on trust fund earnings may be paid from the trust without prior notification to the NRC.) After decommissioning has begun and withdrawals from the decommissioning fund are being made pursuant to 10 CFR 50.82(a)(8)(i), no further notification need be made to the NRC.

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If the trust is a qualified Nuclear Decommissioning Fund under Section 468A, it must provide that the assets in the fund will be used only as authorized by Section 468A and regulations thereunder.

2.2.2.5. The trust agreement must specify that amendments to the trust must be executed in writing, and that the agreement cannot be amended in any material respect without 30 working days prior written notification to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as appropriate. An amendment is material if it revises any key provision of the trust, particularly including the investment provisions, terms relating to the provision of information to NRC, terms relating to payments from the trust, and terms relating to amendments to the trust. Licensees should interpret the phrase amended in any material respect broadly.

2.2.3 The trust agreement should specify that the trustees obligations with respect to investments include (1) day-to-day investment management of the fund, guided by general investment instructions that the trustee may receive from the licensee or a licensees designated investment manager, (2) the obligation of the trustee to select investments and perform trust management under the prudent investor rule, and (3) the obligation of the trustee to avoid specifically prohibited investments, as described below.

2.2.3.1. The requirement that the trust should not be under the administrative control of the licensee will be met if day-to-day investment decisions are made by the trustee or investment manager and not by the licensee. Licensees may exercise general management oversight of trust fund investments to the extent allowed under State trust law. The NRC staff recognizes that licensees have legitimate interests and responsibilities in ensuring appropriate investment strategies for these funds and monitoring the progress of investments. However, licensees should avoid active day-to-day management of these funds. In this regard, if a trustee is unable to act as an investment manager, use of a professional investment manager will be necessary.

2.2.3.2. The trust agreement must prohibit investments in securities or other obligations of the licensee or any other owner or operator of the facility as well as their affiliates, subsidiaries, successors or assignees. An affiliate is any company that controls, is controlled by, or is under common control with the licensee or any other owner or operator of the facility. A subsidiary is any company that is owned or controlled directly or indirectly by the licensee or any other owner or operator of the facility. A successor or assignee is a company that has acquired possessory rights to the licensee, the facility, or any other owner or operator of the facility.

2.2.3.3. The trust agreement must prohibit investments in securities of other power reactor licensees or any entity owning or operating one or more nuclear power plants, except for investments tied to market indices or investments in non-nuclear mutual funds.

2.2.3.4. Investments selected with the approval of or guidance from the State PUC with jurisdiction over the licensee or from FERC would be acceptable to the NRC staff.

2.2.3.5. Licensees that are not subject to PUC or FERC jurisdiction should limit investments to investment-grade securities, such as investment-grade bonds and preferred stocks, which are those rated at least BBB or equivalent by a national rating 13

service. Speculative issues of common stocks (e.g., bulletin board stocks on the NASDAQ exchange, pink sheet stocks, and stocks not traded on major exchanges) and high yield (junk) bonds should be avoided.

2.2.4 The escrow account, certificate of deposit, or trust agreement must comply with applicable state law for such instruments.

2.2.5 The financial assurance instrument, signed by individuals authorized to act for the appropriate parties, should be maintained in the licensee's records and be available for inspection until termination of the Part 50 license. If feasible, records or duplicates should be maintained onsite.

2.2.6 The trustee of a fund should be an entity that has the authority to act as a trustee and whose trust operations are regulated or examined by a State or Federal agency or, if a government fund is being used, the appropriate State or Federal government agency. The word national in the title of a financial institution signals that the institution is federally regulated, as do the initials N.A., or the words National Association, or a national banking association. The examinations department of the appropriate district office of the Office of the Comptroller of the Currency can provide information about whether the institution has trust powers. The word State in the title of a financial institution signals that the institution is State regulated. The examinations department of the applicable State banking authority can provide information about whether the institution has trust powers. Domestic branches of foreign banks may be either Federally regulated or State regulated. Eligibility of an institution can be checked through the Trust Institutions Search database, at http://www2.fdic.gov/structur/trust/index.html .

2.2.7. A trust agreement should include a clause in which the trustee accepts the responsibility of trusteeship.

2.2.8. Annual deposits in an external sinking fund, including projected earnings, should attempt to approximate the total amount remaining to be accumulated, divided by the remaining years of the license, as determined by the initial and updated certification amount specified in 10 CFR 50.75(c)(1) and (2).

Arithmetic precision is not required for fund accumulation rates. If, during the course of collecting funds, a licensee has accumulated significantly greater decommissioning funds than anticipated, it may reduce its remaining contributions commensurately. Likewise, if a licensee is significantly behind in collections, increased contributions should be used to make up the deficit. A reasonable time may be used to make up any deficit, consistent with good-faith efforts to obtain appropriate rate relief.

However, licensees should avoid undue reliance upon contributions weighted in constant dollars toward the end of projected facility operating life. Additionally, the NRC staff considers reliance on an estimated tax deduction for decommissioning expenses at the time such expenses are incurred to be a form of internal reserve and thus not allowed under 10 CFR 50.75(e). If sufficient rate relief by a State PUC or FERC is ultimately not obtained, licensees stockholders will be expected to cover decommissioning costs through reduced return on equity. Projected rates of earnings on an external sinking fund during plant operation should reasonably approximate the historical real rate of earnings (i.e., after inflation) obtained by a given type of investment.

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Licensees and license applicants who use either prepayment or an external sinking fund as a method for providing decommissioning funding assurance are allowed to take a 2 percent real rate of return credit (i.e., nominal rate of return less inflation) for future earnings on the decommissioning trust fund. (See 10 CFR 50.75(e)(1)(i) and (ii).)

During plant operation, this credit should be taken for the remaining years left on the operating license, such that the amount of funds would be sufficient to pay decommissioning costs at the time termination of operation is expected. That is, during plant operation, the 2 percent credit may not be taken for any period, such as extended safe storage, that goes beyond expected termination of operation as specified in the operating license. If license renewal for a plant has been approved by the NRC, the licensee may use the extended license period as the basis for calculating the remaining amount to be collected. As the cost estimate for decommissioning is adjusted annually pursuant to 10 CFR 50.75(b)(2), the adjusted estimate, less amounts already accumulated and taking into account the 2 percent credit, should form the basis of future collections, funds already accumulated, plus projected future trust fund contributions, plus future projected earnings at the allowed 2 percent real rate, should be sufficient to pay decommissioning costs at the time termination of operation is expected. However, pursuant to 10 CFR 50.75(f)(2), when a licensee is within 5 years of the projected end of operations and submits its preliminary decommissioning cost estimate, the licensee may take the 2 percent earnings credit over a storage period, as long as the storage period and its cost implications for total decommissioning cost are specifically addressed in the preliminary decommissioning cost estimate.

2.3 Guarantee Methods Guarantee methods include surety bonds, letters of credit, lines of credit, and insurance. Acceptable guarantee methods should have the following characteristics.

2.3.1 An applicant or licensee using a surety bond, letter of credit, or parent guarantee may use the sample wording for these methods contained in Appendices B.4, B.5, and B.6, respectively. These sample forms have been provided for illustrative purposes. Specific provisions may not be applicable to particular licensees and may be modified as a licensees specific situation warrants. However, each licensee should be sure that the instrument being used conforms to applicable State law.

2.3.2 The following documents should be maintained in the licensees records and be available for inspection by the NRC:

ÿ For surety bonds: An originally signed duplicate or conformed copy of the surety bond signed by individuals authorized to act for the licensee and the surety company.

ÿ For letters of credit, an originally signed duplicate or conformed copy of the letter of credit signed by individuals authorized to act for the licensee and the financial institution.

ÿ For insurance, individuals authorized to act for the licensee and the insurer or a conformed copy of such.

ÿ A standby trust fund to receive funds if the surety, letter of credit, or insurance is drawn upon.

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2.3.3 The following should be considered for financial institutions used as guarantors:

ÿ For surety bonds: The surety company must be listed by the U.S.

Department of the Treasury in the most recent edition of Circular 570 and have a coverage limit sufficient to cover the cost estimates for which assurance is sought. Circular 570 is published annually about July 1 and is updated in the Federal Register.

ÿ For letters of credit: The issuing institution must be an entity that has the authority to issue a letter of credit and whose letter of credit operations are regulated and examined by a Federal or State agency.

ÿ For insurance: The insurance company must be licensed by State regulatory authorities to transact business as an insurer in one or more States.

2.3.4 If lines of credit are used, the applicant or licensee should obtain from the lender a written commitment to provide funds for all decommissioning expenditures required by the rule.

2.4 Standby Trust 2.4.1 Under the decommissioning regulations, a licensee or applicant using a surety bond, letter of credit, line of credit, or insurance must establish a "standby" trust fund to receive funds from the other financial instruments, if necessary. Under this arrangement, if a licensee defaults on decommissioning requirements, the issuer or provider of the instrument (or beneficiary, if appropriate) will draw on the funds held in the instruments listed and deposit them directly into the standby trust for use as required for decommissioning. In addition to the instruments listed, applicants or licensees using parent company guarantees, certificates of deposit, or government securities should establish a standby trust.

2.4.2 An applicant or licensee establishing a standby trust is directed to the sample wording for the instrument contained in Appendix B.3.2.

2.4.3 Appropriate documentation regarding the standby trust should be maintained in the licensees records as indicated in Regulatory Position 2.2.2.

2.5 Governmental Statement of Intent A government licensee or license applicant as designated in 10 CFR 50.75(e) can submit a statement of intent that contains a cost estimate for decommissioning and indicates that funds for decommissioning will be obtained when necessary. Federal licensees of power reactors are the only government licensees allowed to use a statement of intent. As defined in 10 CFR 50.2, a federal licensee means any NRC licensee, the obligations of which are guaranteed by and supported by the full faith and credit of the United States Government. Non-power reactor licensees using a statement of intent may be Federal, State, or local government entities. The statement of intent should contain the following:

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ÿ Identification of the facility or facilities for which it provides the financial assurance and the corresponding decommissioning costs.

ÿ An indication that funds for decommissioning will be requested and obtained sufficiently in advance of decommissioning to prevent delay of required activities.

ÿ Evidence of the authority of the official of the government entity to sign the statement of intent.

A signed copy of the statement of intent that funds will be obtained when necessary should be maintained in the licensees records and be available for inspection.

2.6 Biennial Reports 2.6.1 As provided in 10 CFR 50.75(f)(1), each power reactor licensee is required to report to the NRC on a calendar year basis, beginning on March 31, 1999, and every 2 years thereafter, on the status of its decommissioning funding for each reactor or share of a reactor that it owns. The information in this report must include, at a minimum, the amount of decommissioning funds estimated to be required, pursuant to 10 CFR 50.75(b) and (c), or a site-specific estimate, if greater than the amount in 10 CFR 50.75(c), as appropriate; the amount accumulated to the end of the calendar year preceding the date of the report; a schedule of the annual amounts remaining to be collected; the assumptions used regarding rates of escalation in decommissioning costs, rates of earnings on decommissioning funds, and rates of other factors used in funding projections; any contracts upon which the licensee is relying pursuant to 10 CFR 50.75(e)(1)(ii)(C); and any modifications to a licensees current method of providing financial assurance occurring since the last submitted report, including material modifications to decommissioning trust agreements. Any licensee whose plant is within 5 years of the projected end of operation, or when conditions have changed such that it will close within 5 years or has already closed, is required to submit the report annually.

Licensees of plants involved in mergers or acquisitions are also required to submit this report annually until the NRC has approved the merger or acquisition pursuant to 10 CFR 50.80. For such licensees, this report may be submitted as part of the licensees license transfer application, provided that it contains the information described above.

2.6.2 As long as the information described above is included in the report, no specific reporting format is required. As part of the report, licensees do not need to submit a complete listing of all investments, although they should indicate broad categories of investments as a percent of the total trust portfolio (e.g., equities equal 20 percent of the total value of the trust, Federal Government bonds and notes equal 50 percent of the total value of the trust). Additionally, each licensee should indicate the assurance mechanism being used as a source of revenues for the external sinking fund (e.g., traditional cost-of-service ratemaking, a non-bypassable charge, long-term contracts that the NRC has found to be acceptable pursuant to 10 CFR 50.75(e)(1)(v)).3 If the assumed real earnings rate on an external sinking fund exceeds 2 percent, each licensee should indicate the specific rate ruling or decision by its rate regulator that 3

To the extent that power reactor licensees have received rate regulator approval to use market-based rates for a significant portion of their nuclear-related revenues (i.e., greater than 20 percent), the NRC will not consider them to be subject to traditional cost-of-service rate regulation for that portion of their rates.

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documents the earnings rate being used, as provided in 10 CFR 50.75(e)(1)(I) or (ii). If a licensee is using an assurance mechanism other than an external sinking fund, it should include adjustments to the assurance mechanisms (e.g., a surety bond or letter of credit) as part of the report to account for any escalation since the previous report.

2.7 License Termination Plans In 10 CFR 50.82(a)(9), submittal of a license termination plan is required at the time a licensee applies for termination of a license. The plan is to include provisions for funding. The following should be included:

ÿ A site characterization;

ÿ Identification of remaining dismantlement activities;

ÿ Plans for site remediation;

ÿ Detailed plans for the final radiation survey;

ÿ A description of the end use of the site, if restricted;

ÿ An updated site-specific estimate of remaining decommissioning costs; and

ÿ A supplement to the environmental report, pursuant to 10 CFR 51.53, describing any new information or significant environmental change associated with the licensees proposed termination activities.

2.8 Procedures for Prematurely or Previously Shutdown Reactors The funding requirements of 10 CFR 50.75 and 50.82 apply to all reactors, including those that were shut down prior to the effective date of the final rule (July 27, 1988), because these reactors possess a Part 50 license, albeit modified. As indicated in the Supplementary Information to the final rule, details concerning financial assurance, primarily the time period for accumulating funds not set aside during operation, would be decided on a case-by-case basis. In a final rule published July 9, 1992 (57 FR 30383),

this case-by-case approach was extended to licensees of all power reactors that shut down prematurely. Each licensee should provide:

2.8.1 Information on how reasonable assurance will be provided that funds will be available to decommission the facility.

2.8.2 Information on the amount of funds for decommissioning as required by 10 CFR 50.75(f). That is, a cost estimate that includes provisions for adjusting the estimate should be submitted based on Regulatory Position 1.

2.8.3 Information on the method of financial assurance to be used as required by 10 CFR 50.75(e). That is, funds needed to complete decommissioning are to be placed in an account segregated from licensee assets and outside the licensee's administrative control, or a surety method or fund statement of intent should be maintained based on Regulatory Position 2.

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D. IMPLEMENTATION The purpose of this section is to provide information to applicants and licensees regarding the NRC staff's plans for using this regulatory guide.

This proposed revision has been released to provide information to applicants regarding the NRC staffs plans for using this regulatory guide. Except in those cases in which an applicant or licensee proposes an acceptable alternative method for complying with the specified portions of the NRC's regulations, the method to be described in the active guide reflecting public comments will be used to evaluate compliance with the requirements of 10 CFR 50.33(k), 50.75, and 50.82 applicable to the following nuclear reactors:

(1) All plants having an operating license in effect on July 27, 1990, or later.

(2) All plants for which an application for an operating license is submitted or under NRC review after the July 27, 1988, effective date of the final decommissioning rule (53 FR 24018, June 27, 1988).

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REFERENCES

1. G.J. Konzek, "Technology, Safety, and Costs of Decommissioning Reference Nuclear Research and Test Reactors" (prepared by Pacific Northwest Laboratory for the U.S. Nuclear Regulatory Commission), NUREG/CR-1756, March 1982, and Addendum 1, July 1983.1

2. Robert S. Wood, "Assuring the Availability of Funds for Decommissioning Nuclear Facilities," U.S. Nuclear Regulatory Commission, Draft Report, NUREG-0584, Rev. 3, March 1983.2

3. U.S. Nuclear Regulatory Commission, "Final Generic Environmental Impact Statement on Decommissioning of Nuclear Facilities," NUREG-0586, August 1988.1

4. U.S. Nuclear Regulatory Commission, "Standard Format and Content of Financial Assurance Mechanisms Required for Decommissioning Under 10 CFR Parts 30, 40, 70, and 72," Regulatory Guide 3.66, June 1990.2

5. U.S. Nuclear Regulatory Commission, "Report on Waste Burial Charges,"

NUREG-1307, Revision 9, September 2000.1

6. R. I. Smith, G. J. Konzek, and W. E. Kennedy, Jr., "Technology, Safety, and Costs of Decommissioning a Reference Pressurized Water Reactor Power Station" (prepared by Pacific Northwest Laboratory for the U.S. Nuclear Regulatory Commission), NUREG/CR-0130, June 1978; and Addendum 1, July 1979, Addendum 2, July 1983; Addendum 3, September 1984; and Addendum 4, July 1988.1

7. H. D. Oak et al., "Technology, Safety, and Costs of Decommissioning a Reference Boiling Water Reactor Power Station" (prepared by Pacific Northwest Laboratory for the U.S. Nuclear Regulatory Commission), NUREG/CR-0672, June 1980; Addendum 1, July 1983; Addendum 2, September 1984; and Addendum 3, July 1988.1 1

Copies are available at current rates from the U.S. Government Printing Office, P.O. Box 37082, Washington, DC 20402-9328 (telephone (202)512-1800); or from the National Technical Information Service by writing NTIS at 5285 Port Royal Road, Springfield, VA 22161; <http://www.ntis.gov/ordernow>; telephone (703)487-4650; . Copies are available for inspection or copying for a fee from the NRC Public Document Room at 11555 Rockville Pike, Rockville, MD; the PDRs mailing address is USNRC PDR, Washington, DC 20555; telephone (301)415-4737 or (800)397-4209; fax (301)415-3548; email is PDR@NRC.GOV.

2 Single copies of regulatory guides, both active and draft, and draft NUREG documents may be obtained free of charge by writing the Reproduction and Distribution Services Section, OCIO, USNRC, Washington, DC 20555-0001, or by fax to (301)415-2289, or by email to <DISTRIBUTION@NRC.GOV>. Active guides may also be purchased from the National Technical Information Service on a standing order basis. Details on this service may be obtained by writing NTIS, 5285 Port Royal Road, Springfield, VA 22161; telephone (703)487-4650; online

<http://www.ntis.gov/ordernow>. Copies of active and draft guides are available for inspection or copying for a fee from the NRC Public Document Room at 2120 L Street NW., Washington, DC; the PDRs mailing address is Mail Stop LL-6, Washington, DC 20555; telephone (202)634-3273 or (800)397-4209; fax (202)634-3343; email

<PDR@NRC.GOV>.

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APPENDIX A GLOSSARY OF FINANCIAL TERMS Certificate of Deposit (CD) - A bank's or other financial institution's written acknowledgment of the receipt and deposit of a sum of money by the licensee or applicant and its promise of repayment. When using a CD to demonstrate financial assurance for decommissioning, the licensee deposits with a bank or other financial institution funds sufficient to cover the certification amount or site-specific cost of decommissioning the licensed facility and receives a CD.

Escrow Account - An account containing funds deposited by the licensee or applicant and held by a bank or other financial institution. An escrow account differs from similar accounts in that the licensee or applicant provides funds that are held by the escrow until the happening of a contingency or the performance of a condition such as commencement of decommissioning, and then the funds are released to the grantor or the grantors designee or, if appropriate, placed in the standby trust.

External Sinking Fund - A fund established and maintained by periodically setting funds aside in an account segregated from licensee assets and outside the licensee's administrative control. The total external sinking fund should be sufficient to pay decommissioning costs at the expected time of termination of operation. An external sinking fund may be in the form of a trust, escrow account, government fund, certificate of deposit, or deposits of government or corporate securities.

Financial Test - An accounting ratio requirement, net worth requirement, bond rating requirement, or similar requirement or combination of requirements that measures the financial strength of a firm providing financial assurance. The financial test is used by a firm that provides a guarantee to a licensee to show its own financial strength and its ability to support the guarantee. This mechanism is unavailable to electric utility (power reactor) licensees. (See Appendix A to10 CFR Part 30.)

Insurance - Insurance in this case would be similar to surety bonding as discussed below in that it would guarantee that decommissioning costs will be paid to a trustee should the licensee default.

Letter of Credit - A binding agreement by which the issuing party, such as a bank or other financial institution, agrees on behalf of the applicant or licensee (the account party) to pay a governmental or government-approved authority (the beneficiary) in the event of any default by the licensee in the performance of decommissioning.

Line of Credit - An arrangement of the licensee with a lender (a bank or other financial institution) in which the lender agrees to provide funds required for decommissioning of the licensee's facility. The maximum amount of credit stated in the contract between the applicant or licensee and the lender must be at least sufficient to equal the certified or estimated cost of decommissioning.

Parent Company Guarantee - A promise by one party (the guarantor) to pay specified debts or perform specified obligations of another party (the principal) in the event that the principal fails to satisfy the debts or obligations. Specifically, to satisfy the 21

decommissioning regulations, an applicant's or licensee's parent corporation guarantees providing specified dollar amounts to fund performance of decommissioning in the event of the licensee's default. A parent company guarantee can only be used if the parent company passes a financial test. (See Appendix A to 10 CFR Part 30.)

Prepayment - The deposit prior to the start of operation (or, for existing facilities, by a specified time provided in the regulations) into an account, segregated from licensee assets and outside the licensee's administrative control, of cash or liquid assets such that the amount of funds should be sufficient to pay decommissioning costs. Types of accounts can be similar to those described above for an external sinking fund.

Standby Trust Fund - A trust fund (see below) set up to receive funds from a surety, letter of credit, insurance, or guarantee when payment is made from them to ensure that the funds remain available for decommissioning.

Surety Bond - A guarantee that decommissioning costs will be paid should the licensee default. The surety bond is a contract that the licensee or applicant (the principal) enters into with a qualified surety company (the surety) to assure the Commission or State regulatory agency that the licensee will fulfill its decommissioning obligations. In the event of the licensee's default, the surety guarantees that decommissioning costs will be paid.

Trust Fund - A three-party agreement whereby the licensee or applicant, called the grantor or trustor, transfers assets to a trustee, such as a bank, other financial institution, or governmental authority, to hold on behalf of the beneficiary (e.g., the Commission or a State agency). The assets may be at least equal to the cost of decommissioning (prepayment) or may build up over time such that the amount of funds should be sufficient to pay decommissioning costs (external sinking fund).

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APPENDIX B EXAMPLES OF FINANCIAL ASSURANCE INSTRUMENTS The following formats for financial assurance instruments provide samples of language and provisions for compliance with financial assurance requirements for decommissioning. Although the sample language is not required by decommissioning regulations, except for certain provisions in the parent guarantee, applicants and licensees will find that its use will simplify the submittal process. Licensees may add, delete, or modify sample provisions as their circumstances warrant. However, licensees should ensure that the financial assurance instruments being used are valid under applicable State law and comply with NRC's decommissioning regulations in 10 CFR 50.33, 50.75, and 50.82.

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APPENDIX B-1 SAMPLE ESCROW AGREEMENT ESCROW NUMBER ___________

Paragraph 1. Establishment of Escrow Account It is agreed between the parties that [insert name of licensee], licensee, has elected to establish an escrow account with [insert name, address, and position of escrow agent] to provide financial assurance for decommissioning of the facility(ies) in the amounts shown below:

[For each facility for which financial assurance is provided by the escrow agreement, list facility name, address, and license and/or docket number, corresponding estimated or certified decommissioning costs, and indicate amount of financial assurance provided by the escrow account.]

Paragraph 2. Description of Property in Escrow Account It is hereby acknowledged by the parties that [list the assets that have been delivered to the escrow agent and indicate the value of each item] has (have) been delivered to escrow and will remain in the escrow account created by this agreement until one of the two conditions stated in Paragraph 3 of this agreement has been satisfied.

[Insert name of licensee] warrants to and agrees with [insert name of escrow agent] that, unless otherwise expressly set forth in this Agreement: there is no security interest in the property in the escrow account or any part thereof; no financing statement under the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the escrow account or any part thereof; and the escrow agent shall have no responsibility at any time to ascertain whether or not any security interest exists or to file any financing statement under the Uniform Commercial Code with respect to the escrow account or any part thereof.

Paragraph 3. Conditions of Escrow Agreement The property described in Paragraph 2, above, will remain in the escrow account created by this agreement until one of the two following conditions has been satisfied: (1) the decommissioning activities required by 10 CFR Part 50 have been authorized pursuant to paragraph 4 or completed, the license has been terminated, the facility site is available for use for public or private purpose, pursuant to NRC regulations, or the escrow account has been terminated by notice, in writing, from [insert name of licensee] or (2) the escrow agent, [insert name of the escrow agent] has been notified by the [insert NRC or name of the State regulatory agency] in writing, that the licensee, [name of licensee] has defaulted on the agreed obligation to carry out the decommissioning for the above listed facility(ies).

Paragraph 4. Disbursement of Property in Escrow Account The [insert name of escrow agent] shall make payments from the escrow account upon the presentation of a certificate duly executed by the Secretary or appropriate Officer of the [insert name of licensee] attesting to the occurrence of the events, and in the form set 24

Appendix B-1 forth in the attached Specimen Certificate, and upon presentation of a certification attesting to the following conditions:

(1) that decommissioning is proceeding pursuant to an NRC-noticed or -

approved plan, and (2) that the funds withdrawn will be expended for activities undertaken pursuant to that plan.

Or upon [insert name of escrow agent] receiving written notification of licensee default from the [insert NRC or State regulatory agency], [insert name of escrow agent] shall make payments from the escrow account as the [insert NRC or name of State regulatory agency] shall direct, in writing, to provide for the payment of the costs of the required decommissioning activities covered by this agreement. The escrow agent shall reimburse the licensee or other persons as specified by the [insert NRC or State regulatory agency] from the escrow account for expenses for required activities in such amounts as the [insert NRC or name of the State regulatory agency] shall direct in writing. In addition, the escrow agent shall refund to [insert name of licensee] such amounts as the [insert NRC or the name of the State regulatory agency] specifies, in writing. Upon refund, such funds shall no longer constitute part of the escrow account as described in paragraph 2, above.

Paragraph 5. Irrevocability It is also agreed between the parties that this escrow is revocable upon delivery to [insert name of escrow agent], the escrow agent, only on the occurrence of one of the conditions described in Paragraph 3 above or by transfer of the funds held in escrow to another financial assurance mechanism permitted under 10 CFR 50.75(e).

Paragraph 6. Powers of the Escrow Agent The only powers and duties of the escrow agent shall be to hold the escrow property and to invest and dispose of it in accordance with the terms of this agreement.

Escrow Account Management The escrow agent shall invest and reinvest the principal and income of the escrow account and keep the escrow account invested as a single fund, without distinction between principal and income, in accordance with general investment policies and guidelines which the (insert name of licensee] may communicate in writing to the escrow agent from time to time, subject, however, to the provisions of the escrow account; the escrow agent shall discharge its duties with respect to the escrow account solely in the interest of (insert name of licensee's] decommissioning obligation and with the care, skill, prudence, and diligence, under the circumstances then prevailing, that persons of prudence, acting in like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims; except that:

(a) Securities or other obligations of the licensee, or any other owner or operator of the licensed facility(ies), or any of their affiliates as defined in the Investment 25

Appendix B-1 (b) Company Act of 1940, as amended (15 U.S.C. 80A.2(a)), shall not be acquired or held, unless they are securities or other obligations of the Federal government; (c) The escrow agent is authorized to hold cash, awaiting investment or distribution uninvested, for ___ days and without liability for the payment of interest thereon.

Express Power of the Escrow Agent Without in any way limiting the powers and discretion conferred upon the escrow agent by other provisions of this agreement or by law, the escrow agent is expressly authorized and empowered:

(a) To register any securities held in the escrow account in its own name and to hold any security in bearer form or in book entry, or to deposit or arrange for the deposit of any securities issued by the U.S. Government, or any agency or instrumentality thereof, with a Federal Reserve bank, but the books and records of the escrow agent shall at all times show that all such securities are part of the escrow account; (b) To deposit any cash in the escrow account in interest-bearing accounts or savings certificates; (c) To pay taxes, from the account, of any kind that may be assessed or levied against the escrow account and all brokerage commissions incurred by the escrow account.

Paragraph 7. Annual Valuation After delivery has been made into this escrow account, the escrow agent shall [monthly, quarterly, annually] furnish to the licensee a statement confirming the value of the escrow account. Any securities in the account shall be valued at market value within a reasonable time before issuance of such statement. The failure of the licensee to object in writing to the escrow agent within 90 days after the statement has been furnished to the licensee shall constitute a conclusively binding assent by the licensee, barring the licensee from asserting any claim or liability against the escrow agent with respect to the matters disclosed in the statement.

Paragraph 8. Successor Escrow Agent Upon 90 days prior notice to the licensee, [insert name of licensee], the escrow agent may resign; upon 90 days notice to the escrow agent, the licensee, [insert name of licensee], may replace the escrow agent provided that such resignation or replacement is not effective until the escrow agent has appointed a successor escrow agent and this successor accepts the appointment or another financial assurance instrument has been secured pursuant to paragraph 5. The successor escrow agent shall have the same powers and duties as those conferred upon the escrow agent under this agreement.

Upon the successors acceptance of the appointment, the escrow agent shall assign 1 transfer, and pay over to the successor the funds and properties then constituting the escrow account. If for any reason the licensee cannot or does not act in the event of the 26

Appendix B-1 resignation of the escrow agent, the escrow agent may apply to a court of competent jurisdiction for the appointment of a successor, or for instructions. The successor escrow agent shall specify the date on which it assumes administration of the escrow account in a writing sent to the licensee and the current escrow agent by certified mail 10 days before the change becomes effective. Any expense incurred by the escrow agent as a result of any of the acts contemplated by this paragraph shall be paid as provided in Paragraph 10 of this agreement.

Paragraph 9. Instructions to the Escrow Agent All orders, requests, and instructions from the licensee to the escrow agent shall be in writing, signed by such persons as are signatories to this agreement, or such other designees as the licensee may designate in writing. All orders, requests, and instructions from the [insert the NRC or the name of the State regulatory agency] shall be in writing, signed by the designees of the [insert NRC or the name of the State regulatory agency].

The escrow agent shall be fully protected in acting in accordance with such orders, requests, and instructions. The escrow agent shall have the right to assume, in the absence of written notice to the contrary, that no event constituting a change or a termination of the authority of any person to act on behalf of the licensee or [insert the NRC or the name of the State regulatory agency] under this agreement has occurred.

The escrow agent shall have no duty to act in the absence of such orders, requests, and instructions from the licensee and/or [insert the NRC or the name of the State regulatory agency], except as provided in this agreement.

Paragraph 10. Compensation and Expenses of the Escrow Agent The fee of the escrow agent for its services in establishing the escrow account shall be

$_____, payable at the time of the execution of this agreement, to be borne by [insert the name of the licensee], licensee.

Expenses of the escrow agent for the administration of the escrow account, the compensation of the escrow agent for services subsequent to the establishing of the escrow account to the extent not paid directly by the licensee, and all other proper charges and disbursements shall be paid from the escrow account.

Paragraph 11. Amendment To This Agreement This agreement may be amended by an instrument in writing executed by the licensee and the escrow agent.

Paragraph 12. Termination This agreement can be terminated by written notice of termination to the escrow agent signed by [insert the name of licensee], licensee, and by the [insert NRC or the name of the State regulatory agency] alone, if the licensee has ceased to exist.

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Appendix B-1 Paragraph 13. Interpretation This escrow agreement constitutes the entire agreement between [insert the name of licensee] and [insert the name of the escrow agent]. The escrow agent shall not be bound by any other agreement or contract entered into by [insert name of licensee] and the only document that may be referenced in case of ambiguity in this escrow agreement is the licensing agreement between [insert name of licensee] and the United States Nuclear Regulatory Commission, or its successor.

Paragraph 14. Acceptance of Appointment by Escrow Agent

[Insert name, address, and position of escrow agent] does hereby acknowledge its appointment by [insert name of licensee], the licensee to serve as escrow agent for the escrow account created under this agreement and agrees to carry out its obligations and duties as stated in this escrow agreement.

Paragraph 15. Severability If any part of this agreement is invalid, it shall not affect the remaining provisions, which remain valid and enforceable.

Paragraph 16. Effectiveness This agreement shall not become effective (and the escrow agent shall have no responsibility hereunder except to return the escrow property to the [insert name of licensee]) until the escrow agent shall have received the following and shall have advised

[insert name of licensee] in writing that the same are in form and substance satisfactory to the escrow agent:

Certified resolution of its Board of Directors authorizing the making and performance of this Agreement; Certificate as to the names and specimen signatures of its officers or representative authorized to sign this Agreement and notices, instructions and other communications hereunder.

[Signatures and positions of the designees of the licensee and the escrow agent.]

[Insert name of escrow agent] [Insert name of licensee]

By ____________________________ By _________________________

Name _________________________ Name _______________________

Title ___________________________ Title ________________________

Date.

Witness by Notary Public.

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APPENDIX B-1.1 SPECIMEN CERTIFICATE OF EVENTS

[Insert name and address of escrow agent]

Attention: Escrow Division Gentlemen:

In accordance with the terms of the Agreement with you dated ________, I,

____________ , [Authorized Officer] of [insert name of licensee], hereby certify that the following events have occurred:

1. [Insert name of licensee] is required to commence the decommissioning of its facilities located at [insert location of facility] (hereinafter called the decommissioning).

2. Ninety days after the plans and procedures for the commencement and conduct of the decommissioning have been either noticed in the Federal Register by the United States Nuclear Regulatory Commission, or its successor (copy of notice attached), or in the case of a license termination plan, approved by the NRC, or its successor (copy of approval attached).

3. The Board of Directors of [insert name of licensee] has adopted the attached resolution authorizing the commencing of the decommissioning.

[Authorized Officer] of [insert name of licensee]

Date 29

APPENDIX B-1.2 SPECIMEN CERTIFICATE OF RESOLUTION I, ____________ , do hereby certify that I am [Authorized Officer] of [insert name of licensee], a [insert state of incorporation] corporation, and that the resolution listed below was duly adopted at a meeting of this Corporation's Board of Directors on

___________ , 20 __.

IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of this Corporation this _____ day of _____________, 20 __.

[Authorized Officer] of

[insert name of licensee]

RESOLVED, that this Board of Directors hereby authorizes the President or such other employee of the Company as he may designate [insert name, as appropriate, to enter into an escrow agreement," or "to commence decommissioning activities at (name of facility)] with the [insert name of escrow agent] in accordance with the terms and conditions described to this Board of Directors at this meeting and with such other terms and conditions as the President shall have approved with and upon the advice of Counsel.

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APPENDIX B-2 SAMPLE CERTIFICATES OF DEPOSIT APPENDIX B-2.1 SAMPLE NEGOTIABLE CERTIFICATE OF DEPOSIT PAYABLE AT THE EXPIRATION OF A SPECIFIED TIME CERTIFICATE OF DEPOSIT (Financial Institution)

Place ________________________________________ No.

(Date)

[Insert name of licensee or applicant] has deposited not subject to check _________

Dollars ($ ) payable to the order of the holder in current funds not less than 30 days days after date, upon surrender of this certificate properly endorsed, with interest at the rate of ____ percent per annum from date to maturity only. The rate of interest payable hereunder is subject to change by the bank to such extent as may be necessary to comply with requirements of the Federal Reserve Board made from time to time pursuant to the Federal Reserve Act.

These funds are deposited for the purpose of providing financial assurance for the cost of decommissioning activities as required under Title 10 of the Code of Federal Regulations, Part 50. Accordingly, this certificate will be renewed automatically unless written notice of (1) the default of the [insert name of licensee or applicant] on these obligations; (2) the termination of the facility license; or (3) the substitution of another financial assurance mechanism is received from [the name of licensee or applicant]

Cashier or Officer Note:

The negotiable Certificate of Deposit should be in the possession of the trustee of the concurrently created standby trust or the escrow agent of an escrow account.

The certificate should be for a limited time period, such as 1 to 5 years, so that the face value can be adjusted.

31

APPENDIX B-2.2 SAMPLE NONNEGOTIABLE CERTIFICATE OF DEPOSIT PAYABLE ON A CERTAIN DATE CERTIFICATE OF DEPOSIT (Financial Institution)

Certificate of Deposit _________________________, 20__

[Insert name of licensee or applicant] has deposited in the financial institution the sum of

_______________ Dollars ($ ________) payable to [State regulatory agency (if the agency can hold special funds under applicable state law), trustee of standby trust, or escrow agent] _________________ months after date, with interest thereon at the rate of

_____ percent per annum from date, upon presentation of this certificate properly endorsed. These funds are deposited for the purpose of providing financial assurance for the cost of decommissioning activities as required under Title 10 of the Code of Federal Regulations Part 50. Accordingly, this certificate will be renewed automatically unless written notice of (1) the default of the [insert name of licensee or applicant] on these obligations; (2) the termination of the facility license; or (3) the substitution of another financial assurance mechanism is received from [the name of the licensee or applicant].

Cashier or Officer Note: The certificate should be for a limited time period, such as 1 to 5 years, so that the face value can be adjusted.

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APPENDIX B-3 SAMPLE TRUST FUND AND STANDBY TRUST AGREEMENTS APPENDIX B-3.1 SAMPLE TRUST FUND AGREEMENT TRUST AGREEMENT, the Agreement is entered into as of [date] by and between [name of NRC licensee], a [name of State] [insert "corporation," "partnership," "association," or "proprietorship"], herein referred to as the "Grantor," and [name and address of an appropriate State or Federal government agency or an entity that has the authority to act as trustee and whose trust operations are regulated or examined by a State or Federal agency], the "Trustee."

WHEREAS, the U.S. Nuclear Regulatory Commission (NRC), an agency of the U.S.

Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, has promulgated regulations in Title 10, Chapter I of the Code of Federal Regulations, Part 50. These regulations, applicable to the Grantor, require that a holder of, or an applicant for a license issued pursuant to 10 CFR Part 50 provide assurance that funds will be available when needed for required decommissioning activities.

WHEREAS, the Grantor has elected to use a trust fund to provide [insert "all" or "part"] of such financial assurance for the facilities identified herein and also provide such additional decommissioning funds not required by the NRC as the Grantor may elect; WHEREAS, the Grantor, acting through its duly authorized officers, has selected the Trustee to be the trustee under this Agreement, and the Trustee is willing to act as

trustee, NOW, THEREFORE, the Grantor and the Trustee agree as follows:

Section 1. Definitions. As used in this Agreement:

(a) The term "Grantor" means the NRC licensee who enters into this Agreement and any successors or assigns of the Grantor.

(b) The term "Trustee" means the trustee who enters into this Agreement and any successor Trustee.

Section 2. Costs of Decommissioning. This Agreement pertains to the costs of decommissioning the facility identified in License Number [insert license number] issued pursuant to 10 CFR Part 50.

Section 3. Establishment of Fund. The Grantor and Trustee hereby establish a Trust Fund (the Fund) for the benefit of [insert the Grantor or other appropriate beneficiary such as a State agency or the NRC]. The Grantor and the Trustee intend that no third party shall have access to the Fund except as provided herein. [Modification of this provision to cover sale-leaseback agreements should be made contingent upon continued dedication of the trust to provide funds for decommissioning.]

33

Appendix B-3.1 Section 4. Payments Constituting the Fund. Payments made to the Trustee for the Fund shall consist of cash, securities, or other liquid assets acceptable to the Trustee. The Fund is established initially as consisting of property acceptable to the Trustee. Such property and any other property subsequently transferred to the Trustee are referred to as the "Fund," together with all earnings and profits thereon, less any payments or distributions made by the Trustee pursuant to this Agreement. The Fund shall be held by the Trustee, IN TRUST, as hereinafter provided.

Section 5. Payment for Required Activities Specified in the Plan. The Trustee shall make payments from the Fund to the Grantor or to a decommissioning contractor of the Grantor as the Grantor may designate upon presentation to the Trustee of the following:

a. A certificate duly executed by the [Authorized Officer] of the Grantor attesting to the occurrence of the events, and in the form set forth in the attached Specimen Certificate (see certificate following standby trust), and

b. A certificate attesting to the following conditions; (1) that decommissioning is proceeding pursuant to an NRC-noticed plan, and (2) that the funds withdrawn will be expended for activities undertaken pursuant to that Plan.

In the event of the Grantor's default or inability to direct decommissioning activities, the Trustee shall: (1) make payments from the Fund as the NRC or State agency shall direct, in writing, to provide for the payment of the costs of required activities covered by this Agreement; (2) make disbursements to the Grantor or other persons as specified by the NRC, or State agency, from the Fund for expenditures for required activities in such amounts as the NRC, or State agency, shall direct in writing; and (3) refund to the Grantor such amounts remaining after the license has been terminated or as the NRC or State Agency specifies in writing. Upon refund, such funds shall no longer constitute part of the Fund as defined herein.

Section 6. Trust Management. The Trustee shall invest and reinvest the principal and income of the Fund and keep the Fund invested as a single fund, without distinction between principal and income, in accordance with general investment policies and guidelines which the Grantor may communicate in writing to the Trustee from time to time, subject, however, to the provisions of this section. In investing, reinvesting, exchanging, selling, and managing the Fund, the Trustee shall discharge its duties with respect to the Fund in the best interest of the beneficiary and with the care, skill, prudence, and diligence under the circumstances then prevailing which persons of prudence, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims; except that:

(a) Securities or other obligations of the Grantor, or any other owner or operator of the facilities, or any of their affiliates as defined in the Investment Company Act of 34

Appendix B-3.1 1940, as amended (15 U S.C. 80A-2(a)), shall not be acquired or held, unless they are securities or other obligations of the Federal or a State government; and (b) For a reasonable time, not to exceed ___ days, the Trustee is authorized to hold uninvested cash, awaiting investment or distribution, without liability for the payment of interest thereon.

(c) Investing the funds in securities or other obligations of the licensee or any other owner or operator of the power reactor or their affiliates, subsidiaries, successors or assignees, or in securities of any other entity owning one or more nuclear power plants, except for investments tied to market indices or non-nuclear sector mutual funds is prohibited.

Section 7. Commingling and Investment. The Trustee is expressly authorized in its discretion:

(a) To transfer from time to time any or all of the assets of the fund to any common, commingled, or collective trust fund created by the Trustee in which the Fund is eligible to participate, subject to all of the provisions thereof, to be commingled with the assets of other trusts participating therein; and (b) To purchase shares in any investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80A-1 et seq.), including one that may be created, managed, underwritten, or to which investment advice is rendered, or the shares of which are sold by the Trustee. The Trustee may vote such shares in its discretion.

Section 8. Express Powers of Trustee. Without in any way limiting the powers and discretion conferred upon the Trustee by the other provisions of this Agreement or by law, the Trustee is expressly authorized and empowered:

(a) To sell, exchange, convey, transfer, or otherwise dispose of any property held by it, by public or private sale, as necessary, for prudent management of the Fund; (b) To make, execute, acknowledge, and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; (c) To register any securities held in the Fund in its own name, or in the name of a nominee, and to hold any security in bearer form or in book entry, or to combine certificates representing such securities with certificates of the same issue held by the Trustee in other fiduciary capacities, to reinvest interest and dividends payments and funds from matured and redeemed instruments, to file proper forms concerning securities held in the Fund in a timely fashion with appropriate government agencies, or to deposit or arrange for the deposit of such securities in a qualified 35

Appendix B-3.1 central depository even though, when so deposited, such securities may be merged and held in bulk in the name of the nominee or such depository with other securities deposited therein by another person, or to deposit or arrange for the deposit of any securities issued by the U.S. Government, or any agency or instrumentality thereof, with a Federal Reserve bank, but the books and records of the Trustee shall at all times show that all such securities are part of the Fund; (a) To deposit any cash in the Fund in interest-bearing accounts maintained or savings certificates issued by the Trustee, in its separate corporate capacity, or in any other banking institution affiliated with the Trustee; and (b) To compromise or otherwise adjust all claims in favor of or against the Fund.

Section 9. Taxes and Expenses. All taxes of any kind that may be assessed or levied against or in respect of the Fund and all brokerage commissions incurred by the Fund may be paid from the Fund. All other expenses incurred by the Trustee in connection with the administration of this Trust, including fees for legal services rendered to the Trustee, the compensation of the Trustee to the extent not paid directly by the Grantor, and all other proper charges and disbursements of the Trustee may be paid from the Fund.

Section 10. Annual Valuation. After payment has been made into this Trust Fund, the Trustee shall [monthly, quarterly, annually] furnish to the Grantor a statement confirming the value of the Trust. Any securities in the Fund shall be valued at market value within a reasonable time of such statement. The failure of the Grantor to object in writing to the Trustee within __ days after the statement has been furnished to the Grantor shall constitute a conclusively binding assent by the Grantor, barring the grantor from asserting any claim or liability against the Trustee with respect to the matters disclosed in the statement.

Section 11. Advice of Counsel. The Trustee may from time to time consult with counsel, who may be counsel to the grantor, with respect to any question arising as to the construction of this Agreement or any action to be taken hereunder. The Trustee shall be fully protected, to the extent permitted by law, in acting on the advice of counsel.

Section 12. Trustee Compensation. The Trustee shall be entitled to reasonable compensation for its services as agreed upon in writing from time to time with the Grantor.

Section 13. Successor Trustee. Upon __ days notice to the Grantor, the Trustee may resign; upon __ days notice to the Trustee, the Grantor may replace the Trustee; but such resignation or replacement shall not be effective until the Grantor has either appointed a successor Trustee and this successor accepts the appointment or implements another financial assurance mechanism specified in Title 10, Chapter I, Code of Federal Regulations, Section 50.75(e). The successor Trustee shall have the same powers and duties as those conferred upon the Trustee hereunder. Upon the successor Trustee's acceptance of the appointment, the Trustee shall assign, transfer, and pay over to the 36

Appendix B-3.1 successor Trustee the funds and properties then constituting the Fund. If for any reason the Grantor cannot or does not act in the event of the resignation of the Trustee, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee or for instructions. The successor Trustee shall specify the date on which it assumes administration of the trust in a writing sent to the Grantor and the present Trustee by certified mail __ days before such change becomes effective. Any expenses incurred by the Trustee as a result of any of the acts contemplated by this section shall be paid as provided in Section 9.

Section 14. Instructions to the Trustee. All orders, requests, and instructions by the Grantor to the Trustee shall be in writing, signed by such persons as are signatories to this agreement or such other designees as the Grantor may designate in writing. The Trustee shall be fully protected in acting without inquiry in accordance with the Grantor's orders, requests, and instructions. If the NRC or State agency issues orders, requests, or instructions to the Trustee in the event of Grantor default, these shall be in writing, signed by the NRC, State agency, or their designees, and the Trustee shall act and shall be fully protected in acting, in accordance with such orders requests, and instructions.

The Trustee shall have the right to assume, in the absence of written notice to the contrary, that no event constituting a change or a termination of the authority of any person to act on behalf of the Grantor, the NRC, or State agency, hereunder has occurred. The Trustee shall have no duty to act in the absence of such orders, requests, and instructions from the Grantor and/or the NRC, or State agency, except as provided for herein.

Section 15. Amendment of Agreement. This Agreement may be amended by an instrument in writing executed by the Grantor, the Trustee and, if applicable, the NRC or State agency, or by the Trustee and the NRC or State agency if the Grantor ceases to exist.

Section 16. Termination. This trust agreement shall continue until terminated at the written agreement of the Grantor, the Trustee and, if applicable, the NRC or State agency, or by the Trustee and the NRC or State agency if the grantor ceases to exist.

Upon termination of the trust, all remaining trust property, less final trust administration expenses, shall be delivered to the Grantor or its successor, or transferred to another financial assurance mechanism specified in 10 CFR 50.75(e), as appropriate.

Section 17. Immunity and Indemnification. The Trustee shall not incur personal liability of any nature in connection with any act or omission, made in good faith, in the administration of this trust, or in carrying out any directions by the Grantor, the NRC, or State agency, issued in accordance with this Agreement. The Trustee shall be indemnified and saved harmless by the Grantor or from the trust fund, or both, from and against any personal liability to which the Trustee may be subjected by reason of any act or conduct in its official capacity, including all expenses reasonably incurred in its defense in the event the Grantor fails to provide such defense.

Section 18. Choice of Law. This Agreement shall be administered, construed, and enforced according to the laws of the State of [insert name of State].

37

Appendix B-3.1 Section 19. Interpretation and Severability. As used in this Agreement, words in the singular include the plural and words in the plural include the singular. The descriptive headings for each section of this Agreement shall not affect the interpretation or the legal efficacy of this Agreement. If any part of this agreement is invalid, it shall not affect the remaining provisions which will remain valid and enforceable.

IN WITNESS WHEREOF the parties have caused this Agreement to be executed by the respective officers duly authorized and the incorporate seals to be hereunto affixed and attested as of the date first written above.

ATTEST: [Insert name of licensee (Grantor)]

[Signature of representative of Grantor]

[Title]

[Title]

[Seal]

[Insert name of Trustee]

[Signature of representative of Trustee]

[Title]

ATTEST:

[Title]

[Seal]

38

APPENDIX B-3.2 SAMPLE STANDBY TRUST AGREEMENT TRUST AGREEMENT, the Agreement entered into as of [date] by and between [name of NRC licensee], a [name of State] [insert "corporation," "partnership," association," or proprietorship"], herein referred to as the "Grantor," and [name and address of an appropriate State or Federal government agency or an entity that has the authority to act as trustee and whose trust operations are regulated or examined by a State or Federal agency], the "Trustee."

WHEREAS, the U.S. Nuclear Regulatory Commission (NRC), an agency of the U.S.

Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, has promulgated regulations in Title 10, Chapter I of the Code of Federal Regulations, Part 50. These regulations, applicable to the Grantor, require that a holder of, or an applicant for, a Part 50 license provide assurance that funds will be available when needed for required decommissioning activities.

WHEREAS, the Grantor has elected to use a [insert "letter of credit," "line of credit,"

"surety bond," "insurance policy," "parent guarantee," "certificate of deposit," or "deposit of government securities"] to provide [insert "all" or "part"] of such financial assurance for the facilities identified herein; and WHEREAS, when payment is made under a [insert "letter of credit," "line of credit,"

"surety bond," "insurance policy, "certificate(s) of deposit," "deposit of government securities," or "parent guarantee"], this standby trust shall be used for the receipt of such payment; and WHEREAS, the Grantor, acting through its duly authorized officers, has selected the Trustee to be the trustee under this Agreement, and the Trustee is willing to act as

trustee, NOW, THEREFORE, the Grantor and the Trustee agree as follows:

[The remainder of the recommended wording for the Standby Trust Agreement is as indicated in B.3.1 for the Trust Fund Agreement except that the words Standby Trust Fund" should be substituted in Section 3 and Section 10 in place of the words "Trust Fund."]

39

APPENDIX B-3.2.1 SPECIMEN CERTIFICATE OF EVENTS

[Insert name and address of trustee]

Attention: Trust Division Gentlemen:

In accordance with the terms of the Agreement with you dated _________, I,

______________ , [Authorized Officer] of [insert name of licensee], hereby certify that the following events have occurred:

1. [Insert name of licensee] is required to commence the decommissioning of its facility located at [insert location of facility] (hereinafter called the decommissioning).

2. The plans and procedures for the commencement and conduct of the decommissioning have been noticed and approved by the United States Nuclear Regulatory Commission, or its successor, on ________________

(copy of approval attached).

3. The Board of Directors of [insert name of licensee] has adopted the attached resolution authorizing the commencement of the decommissioning.

[Authorized Officer] of [insert name of licensee]

Date 40

APPENDIX B.3.2.2 SAMPLE CERTIFICATE OF RESOLUTION I, _____________ do hereby certify that I am [Authorized Officer] of [insert name of licensee], a [insert state of incorporation) corporation, and that the resolution listed below was duly adopted at a meeting of this Corporation's Board of Directors on

____________ , 20 __.

IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of this Corporation this ____ day of _____________, 20 __.

[Authorized Officer]

RESOLVED, that this Board of Directors hereby authorizes the President, or such other employee of the Company as he may designate, to commence decommissioning activities at [insert name of facility) in accordance with the terms and conditions described to this Board of Directors at this meeting and with such other terms and conditions as the President shall approve with and upon the advice of Counsel.

41

APPENDIX B.3.3 SAMPLE OF ACKNOWLEDGMENT ACKNOWLEDGMENT

[The following is an example of the acknowledgment that should accompany the trust agreement for a standby trust fund or trust fund.]

STATE OF ___________

To Wit _________

CITY OF __________

On this ______ day of _________, before me, a notary public in and for the city and State aforesaid, personally appeared ___________, and she/he did depose and say that she/he is the [title], of [financial institution], Trustee, which executed the above instrument, that she/he knows the seal of said association; that the seal affixed to such instrument is such corporate seal; that it was so affixed by order of the association; and that she/he signed her/his name thereto by like order.

[Signature of notary public]

My Commission Expires:

[Date]

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APPENDIX B-4 SAMPLE PAYMENT SURETY BOND PAYMENT SURETY BOND Date bond executed: _________________________

Effective date: _______________________

Principal: [legal name and business address of licensee or applicant]

Type of organization: [insert "proprietorship," "joint venture," "partnership" or "corporation"]

State of incorporation: ___________________ (if applicable)

NRC license number, name and address of facility, and amount(s) for decommissioning activity guaranteed by this bond: _____________________

Surety(ies) [name(s) and business address(es)]

Type of organization: [insert "proprietorship," "joint venture," "partnership" or "corporation"]

State of incorporation: __________________ (if applicable)

Surety's qualification in jurisdiction where licensed facility(ies) is (are located)

Surety's bond number: _________________

Total penal sum of bond: $________________

Know all persons by these presents, That we, the Principal and Surety(ies) hereto, are firmly bound to the [insert U.S. Nuclear Regulatory Commission (hereinafter called NRC) or the name of the State agency] in the above penal sum for the payment of which we bind ourselves, our heirs, executors, administrators, successors, and assigns jointly and severally; provided that, where the Sureties are corporations acting as co-sureties, we, the Sureties, bind ourselves in such sum "jointly and severally" only for the purpose of allowing a joint action or actions against any or all of us, and for all other purposes each Surety binds itself, jointly and severally with the Principal, for the payment of such sum only as is set forth opposite the name of such Surety; but if no limit of liability is indicated, the limit of liability shall be the full amount of the penal sum.

WHEREAS, the U.S. Nuclear Regulatory Commission, an agency of the U.S.

Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, has promulgated regulations in Title 10, Chapter I of the Code of Federal Regulations, Part 50, applicable to the Principal, which require that a license holder or an applicant for a license provide financial assurance that funds will be available when needed for facility decommissioning; 43

Appendix B-4 NOW, THEREFORE, the conditions of the obligation are such that if the Principal shall faithfully, before the beginning of decommissioning of each facility identified above, fund the standby trust fund in the amount(s) identified above for the facility; Or, if the Principal shall fund the standby trust fund in such amount(s) after an order to begin facility decommissioning is issued by [insert "the NRC or the name of the State agency] or a U.S. district court or other court of competent jurisdiction; Or, if the Principal shall provide alternative financial assurance and obtain the written approval of the [insert "NRC" or the name of the State agency] of such assurance, within 30 days after the date a notice of cancellation from the Surety(ies) is received by both the Principal and the [insert "NRC" or the name of the State agency], then this obligation shall be null and void; otherwise it is to remain in full force and effect.

The Surety(ies) shall become liable on this bond obligation only when the Principal has failed to fulfill the conditions described above. Upon notification by the [insert "NRC" or the name of the State agency] that the Principal has failed to perform as guaranteed by this bond, the Surety(ies) shall place funds in the amount guaranteed for the facility(ies) into the standby trust fund.

The liability of the Surety(ies) shall not be discharged by any payment or succession of payments hereunder, unless and until such payment or payments shall amount in the aggregate to the penal sum of the bond, but in no event shall the obligation of the Surety(ies) hereunder exceed the amount of said penal sum.

The Surety(ies) may cancel the bond by sending notice of cancellation by certified mail to the Principal and to the [insert "NRC" or the name of the State agency] provided, however, that cancellation shall not occur during the 90 days beginning on the date of receipt of the notice of cancellation by both the Principal and the [insert "NRC" or the name of the State agency], as evidenced by the return receipts.

The Principal may terminate this bond by sending written notice to the [insert "NRC" or name of State agency] and to Surety(ies) 90 days prior to the proposed date of termination, provided, however, that no such notice shall become effective until the Surety(ies) receive(s) written authorization for termination of the bond from the [insert "NRC" or the name of the State agency].

The Principal and Surety(ies) hereby agree to adjust the penal sum of the bond yearly so that it guarantees a new amount, provided that the penal sum does not increase by more than 20 percent in any one year.

In Witness Whereof, the Principal and Surety(ies) have executed this financial guarantee bond and have affixed their seals on the date set forth above.

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Appendix B-4 The persons whose signatures appear below hereby certify that they are authorized to execute this surety bond on behalf of the Principal and Surety(ies).

Principal

[Signature(s)]

[Name(s)]

[Title(s)]

[Corporate seal]

Corporate Surety(ies)

[Name and address]

State of incorporation: _________________

Liability limit: $_________________

[Signature(s)]

[Name(s) and title(s)]

[Corporate seal]

[For every co-surety, provide signature(s), corporate seal, and other information in the same manner as for Surety(ies) above.]

Bond premium: $_______________

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APPENDIX B-5 SAMPLE IRREVOCABLE STANDBY LETTER OF CREDIT STANDBY LETTER OF CREDIT NO. [INSERT NO.]

This Credit Expires [insert date]

Issued To: [Insert U.S. Nuclear Regulatory Commission; Washington, DC 20555, or name and address of appropriate State agency.]

Dear Sir or Madam:

We hereby establish our Standby Letter of Credit No. _________________ in your favor, at the request and for the account of [applicant's name and address] up to the aggregate amount of [in words], U. S. dollars $___________ available upon presentation of:

(1) your sight draft, bearing reference to this Letter of Credit No.__________ and (2) your signed statement reading as follows: "I certify that the amount of the draft is payable pursuant to regulations issued under authority of __________________.

This letter of credit is issued in accordance with regulations issued under the authority of the U.S. Nuclear Regulatory Commission (NRC), an agency of the U.S. Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974. The NRC has promulgated regulations in Title 10, Chapter I of the Code of Federal Regulations, Part 50, which require that a holder of, or an applicant for, a license issued under 10 CFR Part 50 provide assurance that funds will be available when needed for decommissioning.

This letter of credit is effective as of [date] and shall expire on [date at least 1 year later],

but such expiration date shall be automatically extended for a period of [at least 1 year]

on [date] and on each successive expiration date, unless, at least 90 days before the current expiration date, we notify both you and [licensees name], as shown on the signed return receipts. If [licensee's name] is unable to secure alternative financial assurance to replace this letter of credit within 30 days of notification of cancellation, the NRC may draw upon the full value of this letter of credit prior to cancellation. We shall give immediate notice to the applicant and the [insert "NRC" or name of State agency] of any notice received or action filed alleging (1) the insolvency or bankruptcy of the financial institution or (2) any violations of regulatory requirements that could result in suspension or revocation of the bank's charter or license to do business. We also shall give immediate notice if we, for any reason, become unable to fulfill our obligation under the letter of credit.

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Appendix B-5 Whenever this letter of credit is drawn on, under, and in compliance with the terms of this letter of credit, we shall duly honor such draft upon its presentation to us within 30 days, and we shall deposit the amount of the draft directly into the standby trust fund of

[licensee's name] in accordance with your instructions.

Each draft must bear on its face the clause: "Drawn under Letter of Credit No. ______ ,

dated ___________ , and the total of this draft and all other drafts previously drawn under this letter of credit does not exceed [fill in amount]."

[Signature(s) and title(s) of official(s) of issuing institution]

[Date]

This credit is subject to [insert "the most recent edition of the Uniform Customs and Practice for Documentary Credits, published by the International Chamber of Commerce," or "the Uniform Commercial Code].

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APPENDIX B-6 SAMPLE DOCUMENTS RECOMMENDED TO SUPPORT CORPORATE GUARANTEE APPENDIX B-6.1 SAMPLE LETTER FROM CHIEF FINANCIAL OFFICER OF CORPORATE PARENT, INCLUDING COST ESTIMATES AND DATA FROM AUDITED FINANCIAL STATEMENTS

[Address to U. S. Nuclear Regulatory Commission or State regulatory agency]

I am the chief financial officer of [name and address of firm], a [insert "proprietorship,"

"joint venture, "partnership," or "corporation"]. This letter is in support of this firm's use of the financial test to demonstrate financial assurance, as specified in 10 CFR Part 50.

[Complete the following paragraph regarding facility(ies) and associated cost estimates.

For each facility, include its license number, name, address, and current cost estimates for the specified activities.]

This firm guarantees, through the parent company guarantee submitted to demonstrate compliance under 10 CFR Part 50, the decommissioning of the following facility(ies) owned or operated by subsidiary(ies) of this firm. The current cost estimates or certified amounts for decommissioning, and the amounts being guaranteed, are shown for each facility:

Name of Location of Current Amount Being Facility Facility Cost Estimates Guaranteed This firm [insert "is required" or "is not required"] to file a Form 10K with the U.S.

Securities and Exchange Commission for the latest fiscal year.

This fiscal year of this firm ends on [month, day]. The figures for the following items marked with an asterisk are derived from this firm's independently audited, year-end financial statements and footnotes for the latest completed fiscal year, ended [date].

[Insert completed Alternative I or Alternative II.]

I hereby certify that the content of this letter is true and correct to the best of my knowledge.

[Signature]

[Name]

[Title]

[Date]

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APPENDIX B-6.2 FINANCIAL TEST: ALTERNATIVE I

1. Decommissioning cost estimates or guaranteed amount for facility

[insert license number] (total of all cost estimates shown in paragraph above) $

• 2. Total liabilities (if any portion of the cost estimates for decommissioning is included in total liabilities on your firms financial statements, you may deduct the amount of that portion from this line and add that amount to lines 3 and 4) $

• 3. Tangible net worth** $

• 4. Net worth $

• 5. Current assets $

• 6. Current liabilities $

• 7. Net working capital (line 5 minus line 6) $

• 8. The sum of net income plus depreciation, depletion, and amortization $

• 9. Total assets in United States (required only if less than 90 percent of firms assets are located in the United States) $

Yes No

10. Is line 3 at least $10 million?

11. Is line 3 at least 6 times line 1?

12. Is line 7 at least 6 times line 1?

13. Are at least 90 percent of firmss assets located in the United States? If not, complete line 14.

14. Is line 9 at least 6 times line 1?

Guarantor must meet two of the following three ratios:

15. Is line 2 divided by line 4 less than 2.0?

16. Is line 8 divided by line 2 greater than 0.1?

17. Is line 5 divided by line 6 greater than 1.5?

• Denotes figures derived from financial statements.

• • Tangible net worth is defined as net worth minus goodwill, patents, trademarks, and copyrights.

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APPENDIX B-6.3 FINANCIAL TEST: ALTERNATIVE II

1. Decommissioning cost estimates or guaranteed amount for facility

[insert license number] (total cost of all cost estimates should be stated in paragraphs above) $

2. Current bond rating of most recent unsecured issuance of this firm Rating Name of rating service

3. Date of issuance of bond

4. Date of maturity of bond

• 5. Tangible net worth** (if any portion of estimates for decommissioning is included in total liabilities on your firms financial statements, you may add the amount of that portion to this line) $

• 6. Total assets in United States (required only if less than 90 percent of firms assets are located in the United States)

Yes No

7. Is line 5 at least $10 million?

8. Is line 5 at least 6 times line 1?

9. Are at least 90 percent of firms assets located in the United States? If not, complete line 10.

10. Is line 6 at least 6 times line 1?

11. Is the rating specified on line 2 BBB or better (if issued by Standard & Poors) or Baa or better (if issued by Moodys)?

• Denotes figures derived from financial statements.

• • Tangible net worth is defined as net worth minus goodwill, patents, trademarks, and copyrights.

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APPENDIX B-6.4 SAMPLE OF AUDITOR'S SPECIAL REPORT BY CERTIFIED PUBLIC ACCOUNTANT CONFIRMATION OF CHIEF FINANCIAL OFFICER'S LETTER We have examined the financial statements of [company name] for the year ended [date],

and have issued our report thereon dated [date]. Our examination was made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary.

The [company name] has prepared documents to demonstrate its financial responsibility under the NRC's financial assurance regulations, 10 CFR Part 50. This letter is furnished to assist the licensee [insert NRC license number and name] in complying with these regulations and should not be used for other purposes.

The attached schedule reconciles the specified information furnished in the chief financial officer's (CFO's) letter in response to the regulations with the company's financial statements. In connection therewith, we have

1. Confirmed that the amounts in the column "Per Financial Statements" agree with amounts contained in the company's financial statements for the year ended

[date];

2. Confirmed that the amount in the column "Per CEO's Letter" agrees with the letter prepared in response to the NRC's request;

3. Confirmed that the amount in the column "Reconciling Items" agrees with analyses prepared by the company setting forth the indicated items; and

4. Recomputed the totals and percentages.

Because the procedures in 1-4 above do not constitute a full examination made in accordance with generally accepted auditing standards, we do not express an opinion on the manner in which the amounts were derived in the items referred to above. In connection with the procedures referred to above, no matters came to our attention that cause us to believe that the chief financial officer's letter and supporting information should be adjusted.

Signature Date 51

APPENDIX B-6.4.1 SAMPLE SCHEDULE RECONCILING AMOUNTS CONTAINED IN CFO's LETTER WITH AMOUNTS IN FINANCIAL STATEMENTS This illustrates the form of schedule that is contemplated. Details and reconciling items will differ in specific situations.

XYZ COMPANY YEAR ENDED DECEMBER 31, 20XX Per Recon- Per Line Number in Financial ciling CFOs CFOs Letter Statements Items Letter Total current liabilities X Long-term debt X Deferred income taxes X XX Accrued decommissioning costs included in current liabilities X Total liabilities (less accrued decommissioning costs) X Net worth XX Less: Cost in excess of value of tangible assets acquired X X

Accrued decommissioning costs included in current liabilities X Tangible net worth (plus decommissioning costs) XX (Balance of schedule is not illustrated.)

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APPENDIX B-6.5 SAMPLE PARENT COMPANY GUARANTEE PARENT COMPANY GUARANTEE Guarantee made this [date] by [name of guaranteeing entity] a [insert "proprietorship,"

"joint venture, partnership, or "corporation"] organized under the laws of the State of

[insert name of State], herein referred to as "guarantor," to the U S. Nuclear Regulatory Commission (NRC), or State agency found acceptable to the NRC, [insert name of State agency], obligee, on behalf of our subsidiary [licensee] of [business address].

Recitals

1. The guarantor has full authority and capacity to enter into this guarantee [if guarantor is a corporation, add the following phrase "under its bylaws, articles of incorporation, and the laws of the State of [insert guarantor's state of incorporation], its State of incorporation"]. [If the guarantor has a Board of Directors, insert the following: "Guarantor has approval from its Board of Directors to enter into this guarantee."]

2. This guarantee is being issued to comply with regulations issued by the NRC, an agency of the U.S. Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974. NRC has promulgated regulations in Title 10, Chapter I of the Code of Federal Regulations, Part 50, which require that a holder of, or an applicant for, a license issued pursuant to 10 CFR Part 50 provide assurance that funds will be available when needed for required decommissioning activities.

3. The guarantee is issued to provide financial assurance for decommissioning activities for [identify licensed facility(ies)] as required by 10 CFR Part 50. The decommissioning costs and guarantee amount for which are as follows: [insert amount of decommissioning cost guaranteed for each identified facility].

4. The guarantor meets or exceeds the following financial test criteria [insert statement indicating which financial test is being used] and agrees to comply with all notification requirements as specified in 10 CFR Part 50.

The guarantor shall meet one of the following two financial tests:

(a) (i) A current rating of its most recent bond issuance of AAA, AA, A, or BBB as issued by Standard and Poor's, or Aaa, Aa, A, or Baa as rated by Moody's; and (ii) Tangible net worth is at least $10 million and at least six times the current decommissioning cost estimate or guarantee amount (or prescribed amount if a certification is used); and 53

Appendix B-6.5 (iii) Assets located in the United States amounting to at least 90 percent of its total assets or at least six times the current decommissioning cost or guarantee amount (or prescribed amount if certification is used). or (b)(i) Net working capital and tangible net worth each at least six times the current decommissioning cost estimates or guarantee amounts (or prescribed amount if certification is used); and (ii) Assets located in the United States amounting to at least 90 percent of its total assets or at least six times the amount of the current decommissioning cost estimates or guarantee amounts (or prescribed amount if certification is used); and (iii) Meets two of the following three ratios: a ratio of total liabilities to net worth less than 2.0; a ratio of the sum of net income plus depreciation, depletion, and amortization to total liabilities that is greater than 0.1; and a ratio of current assets to current liabilities that is greater than 1.5; and (iv) Tangible net worth of at least $10 million.

4. The guarantor has majority control of the voting stock for the following licensee(s) covered by this guarantee. (List for each licensee: name, address, the facility(ies) owned or operated by each licensee, and the corresponding license number(s).]

5. Decommissioning activities as used below refers to the activities required by 10 CFR Part 50 for decommissioning of facility(ies) identified above.

6. For value received from [licensees] (if the guarantor is a corporation, add "and pursuant to the authority conferred upon the guarantor by ("the unanimous resolution of its directors" or "the majority vote of its shareholders"), a certified copy of which is attached"), the guarantor guarantees to the [insert "NRC" or the name of the State agency] that if the licensee fails to perform the required decommissioning activities, as required by License No. [insert license number], the guarantor shall (a) carry out the required activities, or (b) set up a trust fund in favor of the above identified beneficiary in the amount of these current cost estimates or guarantee amount for these activities. [If a State is the named beneficiary, the guarantee documentation should include written verification from the State agreeing to use the trust funds to carry out the required decommissioning activities for the named facility(ies).]

7. The guarantor agrees to submit revised financial statements, financial test data, and a special auditor's report and reconciling schedule annually within 90 days of the close of the parent guarantor's fiscal year.

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Appendix B-6.5

8. The guarantor agrees that if, at the end of any fiscal year before termination of this guarantee, it fails to meet the financial test criteria, the licensee shall send within 90 days of the end of the fiscal year, by certified mail, notice to the [insert "NRC" or the name of the State agency] that the licensee intends to provide alternative financial assurance as specified in 10 CFR Part 50. Within 120 days after the end of the fiscal year, the guarantor shall establish such financial assurance if the

[licensee] has not done so.

9. The guarantor also agrees to notify the beneficiary promptly if the ownership of the licensee or the parent firm is transferred and to maintain this guarantee until the new parent firm or the licensee provides alternative financial assurance acceptable to the beneficiary.

10. The guarantor agrees that within 30 days after being notified by the [insert "NRC" or the name of the State agency] of a determination that it no longer meets the financial test criteria or that it is disallowed from continuing as a guarantor for the facility under License No. [insert license number], it shall establish an alternative financial assurance as specified in 10 CFR Part 50 as applicable, in the name of

[licensee] unless [licensee] has done so.

11. The guarantor as well as its successors and assigns agree to remain bound jointly and severally under this guarantee notwithstanding any or all of the following:

amendment or modification of license or NRC-approved decommissioning funding plan for that facility, the extension or reduction of the time of performance of required activities, or any other modification or alteration of an obligation of the licensee pursuant to 10 CFR Part 50.

12. The guarantor agrees that all bound parties shall be jointly and severally liable for all litigation costs incurred by the beneficiary [insert name] in any successful effort to enforce the agreement against the guarantor.

13. The guarantor agrees to remain bound under this guarantee for as long as

[licensee] must comply with the applicable financial assurance requirements of 10 CFR Part 50, for the previously listed facility(ies), except that the guarantor may cancel this guarantee by sending notice by certified mail to the [insert "NRC" or the name of the State agency] and to [licensee], such cancellation to become effective no earlier than 120 days after receipt of such notice by both the [insert NRC" or the name of the State agency] and [licensee] as evidenced by the return receipts.

14. The guarantor agrees that if [licensee] fails to provide alternative financial assurance as specified in 10 CFR Part 50, as applicable, and obtain written approval of such assurance from the [insert "NRC," or the name of the State agency] within 90 days after a notice of cancellation by the guarantor is received by the [insert "NRC" or the name of the State agency] from the guarantor, the guarantor shall provide such alternative financial assurance in the name of

[licensee] or make full payment under the guarantee.

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Appendix B-6.5

15. The guarantor expressly waives notice of acceptance of this guarantee by the

[insert "NRC or the name of the State agency] or by [licensee]. The guarantor also expressly waives notice of amendments or modification of the decommissioning requirements and of amendments or modifications of the license.

16. If the guarantor files financial reports with the U.S. Securities and Exchange Commission, then it shall promptly submit them to the [insert NRC, or the name of the State agency] during each year in which this guarantee is in effect.

I hereby certify that this guarantee is true and correct to the best of my knowledge.

Effective date: ________________________

[Name of guarantor]

[Authorized signature for guarantor]

[Name of person signing]

[Title of person signing]

Signature of witness or notary: ______________________

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VALUE/IMPACT STATEMENT A draft value/impact statement was published with the previous draft of this guide, DG-1106, when the draft guide was published for public comment in May 1989. No changes were necessary when the guide was published in its final form in August 1990, so a separate value/impact statement for the final guide had not been prepared.

However, a draft regulatory impact analysis has been published for public comment on the corresponding proposed rule on Decommissioning Trust Provisions, which includes the impacts of this revised guide as well. The analysis examines the costs and benefits of the alternatives considered by the Commission. The draft analysis is available for inspection in the NRC Public Document Room, 11555 Rockville Pike, Rockville, MD.

Single copies of the analysis may be obtained from Brian J. Richter, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone (301) 415-1978, e-mail bjr@nrc.gov.

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