ML030930659

Decommissioning Funding Status Report

ML030930659
Person / Time
Site:	Cook
Issue date:	03/27/2003
From:	Joseph E Pollock Indiana Michigan Power Co
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
AEP:NRC:3075-01
Download: ML030930659 (14)

Text

Indiana Michigan Power Company 500 Circle Drive Buchanan, Ml 49107 1395 INDIANA MICHIGAN POWER March 27, 2003 AEP:NRC:3075-01 10 CFR 50.75(f)(1)

Docket Nos: 50-315 50-316 U. S. Nuclear Regulatory Commission ATTN: Document Control Desk Mail Stop O-P1-17 Washington, DC 20555-0001 Donald C. Cook Nuclear Plant Units 1 and 2 DECOMMISSIONING FUNDING STATUS REPORT In accordance with the requirements of 10 CFR 50.75(f)(1), Indiana Michigan Power Company, the licensee for Donald C. Cook Nuclear Plant (CNP), Units 1 and 2, hereby submits the attached report on the status of decommissioning funding. The recovery of decommissioning funds for the eventual decommissioning of CNP Units 1 and 2 is fully assured through cost of service regulation and the resulting contribution of funds into an external trust.

When projected to the license expiration date for each unit, the Nuclear Decommissioning Trust balance is greater than the escalated Nuclear Regulatory Commission minimum cost of decommissioning, confirming compliance with the financial assurance requirements of 10 CFR 50.75.

This letter contains no new commitments. If you have any questions on the report or decommissioning funding, please contact Mr. Brian A. McIntyre, Manager of Regulatory Affairs, at (269) 697-5806.

Sincerely, J. E. Pollock Site Vice President KAS/rdw Attachment

,lo/ad~Ky J

U. S. Nuclear Regulatory Commission AEP:NRC:3075-01 Page 2 C: H. K. Chernoff, NRC Washington, DC K. D. Curry, Ft. Wayne AEP, w/o attachment J. E. Dyer, NRC Region III J. T. King, MPSC, w/o attachment MDEQ - DW & RPD, w/o attachment NRC Resident Inspector J. F. Stang, Jr., NRC Washington, DC

U. S. Nuclear Regulatory Commission AEP:NRC:3075-0 1 Page 3 bc: A. C. Bakken III, w/o attachment M. J. Finissi, w/o attachment J. B. Giessner D. W. Jenkins, w/o attachment J. S. Kiser - AEP Columbus J. A. Kobyra, w/o attachment D. H. Malin B. A. McIntyre, w/o attachment W. T. MacRae J. E. Newmiller J. E. Pollock, w/o attachment D. J. Poupard M. K. Scarpello, w/o attachment T. K. Woods, w/o attachment

ATTACHMENT TO AEP:NRC:3075-01 Indiana Michigan Power Company Donald C. Cook Nuclear Plant Units 1 and 2 2003 Nuclear Regulatory Commission Financial Assurance Requirements Report for Decommissioning Nuclear Power Reactors This report is being submitted in accordance with 10 CFR 50.75(f)(1). The report is comprised of the following schedules and the general comments set forth herein:

Schedule Title Page A Decommissioning Cost Estimates - Minimum Value Per 2 10 CFR 50.75(c)

B Summary of Decommissioning Trust Fund Balances December 31, 2002 5 C Projected Future Funds to Be Collected For Decommissioning 6 D Cost Escalation Rate for 10 CFR 50.75(c) Decommissioning Costs 8 E After Tax Rate of Return Assumption on Amounts Collected for 9 Decommissioning F Nuclear Decommissioning Trust Fund Agreements Summary of 10 Significant Changes General Comments While the Minimum Value Decommissioning Cost Estimate under 10 CFR 50.75(c) reported on Schedule A is the information the Nuclear Regulatory Commission (NRC) has specified as appropriate for its purposes, the Indiana Michigan Power Company (I&M) believes a broader and more comprehensive definition of and provision for nuclear decommissioning expenses is needed for its purposes.

For the past several years I&M has periodically provided the Indiana and Michigan utility regulatory commissions site specific studies containing a more inclusive definition of nuclear decommissioning requirements. These studies include the 10 CFR 50.75 (b) and (c) costs, 10 CFR 50.54(bb) costs, and "greenfield" costs, versus only the required 10 CFR 50.75 costs.

These costs have been commingled in the decommissioning trust funds. For 2003 and 2004, a separate trust fund was established for the disposal of Unit 1 steam generators. This has been presented in reports to the utility regulatory commissions in addition to the site specific decommissioning studies. The commissions have accepted these studies and have authorized recoveries for nuclear decommissioning based on their determinations, considering the reports presented, of appropriate recoveries for nuclear decommissioning using the more comprehensive definition. The most current annual provisions authorized for decommissioning are reported on Schedule C.

Attachment to AEP:NRC:3075-01 Page 2 Schedule A Indiana Michigan Power Company Nuclear Decommissioning Trust Fund Donald C. Cook Nuclear Plant Decommissioning Cost Estimates Minimum Value Per 10 CFR 50.75(c) 10 CFR 50.75(a) requires that each utility assure that there will be adequate funding for the decommissioning of the plant. 10 CFR 50.75(c) established a table of minimum values for the decommissioning funds, in January 1986 dollars, and it also set forth a method to adjust those values. Periodically, the NRC publishes NUREG-1307, "Report on Waste Burial Charges," and in that document, the data and more specific guidance is given regarding the method to be used to adjust the minimum amount to equivalent current amounts. The calculation in this report uses the method outlined in NRC NUREG-1307, Revision 10 to determine the minimum amounts.

Estimated Decommissioning Cost - 10 CFR 50.75(c)

Unit 1 Unit 2 Total

$357,661,3 31 $360,839,468 $7F18,500,799'

• Calculation is shown on pages 3 and 4.

Attachment to AEP:NRC:3075-01 Page 3 Schedule A Decommissioning Cost Estimate Calculation The first part is to determine the 1986 base cost. Donald C. Cook Nuclear Plant's (CNP) two units are rated at 3304 megawatt-thermal (MWt) and 3411 MWtl. The Unit 1 power level of 3304 MWt represents an increase from the 2001 submittal based on a license amendment approved in late 2002. From 10 CFR 50(c)(1)(i), the cost is then based on the MWt output of each unit. For reactor power greater than 3400 MWt the cost is $105 million. For reactor power from 1200 to 3400 MWt the cost is calculated using the following formula, given that P is the power level:

Cost = $(75 + 0.0088P) million.

Thus, for 3304 MWt the cost is:

Cost = $(75 + 0.0088 x 3304) million

= $104.1 million.

Therefore, the total 1986 base decommissioning cost for Cook is $104.1 + $105 million or $209.1 million.

The next portion of the analysis is to adjust the 1986 cost to a 2003 cost.

Using the formula:

Estimated Cost (Year X) = [1986 Dollar Cost] [A L, + B E" + C B.],

where A, B, and C are the fractions of the total 1986 dollar costs that are attributable to labor (0.65), energy (0.13), and burial (0.22), respectively, and sum to 1.0. The factors L, E,,, and B. are defined as:

L = labor cost escalation, January of 1986 to January of Year X, Ex = energy cost escalation, January of 1986 to January of Year X, B, = burial cost escalation, January of 1986 to January of Year X (i.e., burial cost in January of Year X / burial cost in January of 1986).2 The labor escalation factor was obtained by using the U. S. Bureau of Labor Statistics (BLS) data. This data was taken from the World Wide Web following the directions given in NUREG-1307, Rev. 10, Appendix C. Data for the Midwest region was used from the

' Donald C. Cook Nuclear Plant Unit I and Unit 2 Operating Licenses 2

NUREG-1307, Rev. 10

Attachment to AEP:NRC:3075-01 Page 4 Schedule A Employment Cost Index. Data from the first quarter was used, except for 2003 which uses fourth quarter 2002, and is shown in Table 1.

Attachment to AEP:NRC:3075-01 Page 5 Schedule A The energy cost escalation is determined by BLS data by using "Producer Price Indexes." The energy term in the adjustment equation is made up of two components; industrial electric power (P),

and light fuel oil (F). E is determined from the following equation for Pressurized Water Reactors:

E = 0.58P + 0.42F.

The values of P and F are taken from the BLS as described in NUREG-1307. The data from January was used, and is shown in Table 1. Also, shown are the results of the calculations to determine E. The energy data for 2003 is BLS preliminary data.

Table 1 Cost Index Values Year Labor Data (L) Electric Power (P) Light Fuel Oil (F) Energy Data (E) 2003 164.6 139.7 96.7 121.64 2002 161.1 136.3 58.3 103.54 1986 89.4 114.2 82.0 100.68 The next step is to convert the cost index values into the adjustment factors, Lx and Ex. These are determined by dividing the year's cost index value by the cost index value for 1986 (e.g. L2003 = 164.6/89.4). The values for Bx are taken directly from NUREG-1307, Rev. 10 using the data for the South Carolina site using direct disposal with waste vendors for disposition as a non-Atlantic Compact State. 4 The results are shown in Table 2.

The final step is to calculate the Estimated Cost for Year X using the equation given above on page 2 and the Lx, E,, and Bx values. The estimated cost for 2003 is given in Table 2.

Table 2 Escalation Factors and Estimated Cost for 2003 Year Lx E, B, Estimated Decommissioning Cost 2003 1.84116 1.20823 9.46700 $718,500,798.52 2002 1.80201 1.20845 9.46700 -$708,293,865.89 3Ibid.

4 Ibid. Table 2.1

Attachment to AEP:NRC:3075-01 Page 6 Schedule B Indiana Michigan Power Company Nuclear Decommissioning Trust Fund Donald C. Cook Nuclear Plant Summary of Decommissioning Trust Fund Balances December 31, 2002 Total Unit 1 Unit 2 Book Value 580,072,433 297,300,787 282,771,646 Unrealized Appreciation 24,925,826 17,999,105 6,926,721 Market Value 604,998,259 315,299,892 289,698,367 Accrued Interest 962,753 790,038 172,715 Accrued Contributions 3,218,308 1,651,228 1,567,080 Subtotal 609,179,320 317,741,158 291,438,162 Less: Taxes on 4,342,079 6,137,681 1,795,601 Unrealized Appreciation Total 603,041,639 313,399,079 289,642,561

Attachment to AEP:NRC:3075-01 Page 7 Schedule C Indiana Michigan Power Company Nuclear Decommissioning Trust Fund Projected Future Funds To Be Collected For Decommissioning (a)

I Unit 1 I Unit 2 Indiana Michigan FERC Unit I Total Indiana Michigan FERC Decommis-Jurisdiction Jurisdiction Jurisdiction (d) Jurisdiction Jurisdiction Unit 2 Total Jurisdiction sioning Total (b) (c) (b) (c) 2003 15,232,396 3,737,448 602,532 19,572,376 14,491,504 3,631,726 458,262 18,581,492 38,153,868 2004 10,190,729 3,737,448 602,532 14,530,709 9,449,837 3,631,726 458,262 13,539,825 28,070,534 2005 9,732,396 3,737,448 602,532 14,072,376 8,991,504 3,631,726 458,262 13,081,492 27,153,868 2006 9,732,396 3,737,448 602,532 14,072,376 8,991,504 3,631,726 458,262 13,081,492 27,153,868 2007 9,732,396 3,737,448 602,532 14,072,376 8,991,504 3,631,726 458,262 13,081,492 27,153,868 2008 9,732,396 3,737,448 602,532 14,072,376 8,991,504 3,631,726 458,262 13,081,492 27,153,868 2009 9,732,396 3,737,448 602,532 14,072,376 8,991,504 3,631,726 458,262 13,081,492 27,153,868 2010 9,732,396 3,737,448 602,532 14,072,376 8,991,504 3,631,726 458,262 13,081,492 27,153,868 2011 9,732,396 3,737,448 602,532 14,072,376 8,991,504 3,631,726 458,262 13,081,492 27,153,868 2012 9,732,396 3,737,448 602,532 14,072,376 8,991,504 3,631,726 458,262 13,081,492 27,153,868 2013 9,732,396 3,737,448 602,532 14,072,376 8,991,504 3,631,726 458,262 13,081,492 27,153,868

• 2014 8,105,142 3,034,547 477,819 11,617,508 8,991,504 3,631,726 458,262 13,081,492 24,699,000 2015 8,991,504 3,631,726 458,262 13,081,492 13,081,492 2016 8,991,504 3,631,726 458,262 13,081,492 13,081,492

• 2017 8,991,504 3,631,726 458,262 13,081,492 13,081,492 Total 121,119,831 44,146,475 7,105,671 172,371,977 140,830,893 54,475,890 6,873,930 202,180,713 374,552,690

Attachment to AEP:NRC:3075-01 Page 8 Schedule C Notes:

(a) Based on regulatory commission orders in effect on December 31, 2002. Assumes each unit operates over its current licensed life and that authorized collections are not changed.

(b) Includes additional annual amounts of up to $5,500,000 per unit in 2003 and $458,000 in 2004 deposited under flexible funding arrangement.

(c) Amount dependent on kWh sales. Base amount is $3,086,600 per year for Unit I and $2,946,000 for Unit 2.

(d) Projected funds for 2003 and 2004 include Unit I steam generator disposal as authorized by Indiana and Michigan utility regulatory commissions.

• The Operating License for Unit I expires in October 2014. The Operating License for Unit 2 expires in December 2017.

Attachment to AEP:NRC:3075-01 Page 9 Schedule D Indiana Michigan Power Company Nuclear Decommissioning Trust Fund Donald C. Cook Nuclear Plant Cost Escalation Rate for 10 CFR 50.75(c)

Decommissioning Costs Jurisdictional Jurisdiction Allocation (a) Projected Escalation Weighted Escalation Indiana (b) 73.1291% 6.50% 4.75%

Michigan (c) 14.5031% 6.50% 0.94%

FERC (d) 12.3678% 6.00% 0.74%

Total 6.43%

Notes:

(a) Reported to Indiana Utility Regulatory Commission in most recent decommissioning study.

(b) Indiana Utility Regulatory Commission Order in Case No. 39314.

(c) Michigan Public commission Order in Case No. U-10347.

(d) Federal Energy Regulatory Commission Order in Case ER90-269-000.

Attachment to AEP:NRC:3075-01 Page 10 Schedule E Indiana Michigan Power Company Nuclear Decommissioning Trust Fund Donald C. Cook Nuclear Plant After Tax Rate of Return Assumption on Amounts Collected for Decommissioning Jurisdictional Jurisdiction Allocation (a) Projected Earnings Weighted Earnings Indiana (b) 73.1291% 7.00% 5.12%

Michigan (c) 14.5031% 7.00% 1.02%

FERC (d) 12.3678% 7.27% 0.90%

Total 7.04%

Notes:

(a) Reported to Indiana Utility Regulatory Commission in most recent decommissioning study.

(b) Indiana Utility Regulatory Commission Order in Case No. 39314.

(c) Michigan Public commission Order in Case No. U-10347.

(d) Federal Energy Regulatory Commission Order in Case ER90-269-000.

Attachment to AEP:NRC:3075-01 Page 11 Schedule F Indiana Michigan Power Company Nuclear Decommissioning Trust Fund Donald C. Cook Nuclear Plant Nuclear Decommissioning Trust Fund Agreements Summary of Significant Changes A nuclear decommissioning trust fund agreement for the units at the Donald C. Cook Nuclear Plant (CNP) exists with the following trustee:

Mellon Bank Pittsburgh, Pennsylvania.

Since the report dated March 27, 2001, filed with the NRC on Funding for CNP, Units 1 and 2, the following substantive changes have been made in the trust agreements or affect the trust arrangements:

On July 2, 2001, the decommissioning trust funds for CNP were transferred to Mellon Bank of Pittsburgh, PA. With the transfer, separate accounting records continue to be maintained for each unit and each regulatory jurisdiction for both the qualified and non-qualified trusts. The transfer was made to increase administrative efficiencies and take advantage of economies of scale. Effective with the transfer, decommissioning trust agreements with the following trustees were terminated:

National City Bank of Indiana Fort Wayne, Indiana Wells Fargo Bank Indiana Fort Wayne, Indiana First Source Bank South Bend, Indiana The Bank of New York New York, New York