ML040120661

North Anna and Surry Power Stations, Units 1 and 2 - Decommissioning Funding Status Report and Update to Parent Guarantee (TAC Nos. MB8848, MB8849, MB8882, and MB8883)

ML040120661
Person / Time
Site:	Surry, North Anna
Issue date:	01/12/2004
From:	Gratton C, Stephen Monarque NRC/NRR/DLPM/LPD2
To:	Christian D Virginia Electric & Power Co (VEPCO)
Gratton C, NRR/DLPM 415-1055
References
TAC MB8848, TAC MB8849, TAC MB8882, TAC MB8883
Download: ML040120661 (6)

Text

January 12, 2004 Mr. David A. Christian Sr. Vice President and Chief Nuclear Officer Virginia Electric and Power Company Innsbrook Technical Center 5000 Dominion Blvd.

Glen Allen, Virginia 23060-6711

SUBJECT:

NORTH ANNA AND SURRY POWER STATIONS, UNITS 1 AND 2 -

DECOMMISSIONING FUNDING STATUS REPORT AND UPDATE TO PARENT GUARANTEE (TAC NOS. MB8848, MB8849, MB8882, AND MB8883)

Dear Mr. Christian:

Pursuant to Title 10 of the Code of Federal Regulations (10 CFR) Section 50.75(f)(1),

Virginia Electric and Power Company (VEPCO) and Dominion Nuclear Connecticut, Inc. (DNC),

in their letter dated March 31, 2003, as supplemented by letter dated June 25, 2003, submitted the biennial reports on decommissioning funding for North Anna Power Station, Units 1 and 2 (North Anna), Surry Power Station, Units 1 and 2 (Surry), and Millstone Power Station, Units 1, 2, and 3.

As part of the March 31, 2003 submittal, VEPCO proposed to modify its current method of providing decommissioning financial assurance for North Anna and Surry by changing from surety bonds, coupled with the sinking fund method, to a parent company guarantee, coupled with the sinking fund method. In addition, VEPCO requested that if the U. S. Nuclear Regulatory Commission (NRC) staff approves the change to a parent company guarantee, that the NRC staff also provide authorization to release VEPCO and the surety bond holder from the existing surety bonds. This letter and the enclosed safety evaluation address the NRC staffs review of VEPCOs request to revise its current method of providing decommissioning financial assurance for North Anna and Surry. The NRC staffs review of DNCs biennial report on decommissioning funding for Millstone Power Station, Units 1, 2, and 3 is not addressed as part of this letter.

The NRC staff has concluded that VEPCOs decommissioning financial assurance meets the requirements of 10 CFR 50.75(e)(1)(iii)(B) and 10 CFR Part 30, Appendix A. As a result, the NRC staff finds that VEPCOs request to use a parent company guarantee for North Anna and Surry is acceptable.

Subsequently, based upon the NRC staffs approval of this parent company guarantee and pursuant to the requirements of Regulatory Guide 1.159, Assuring the Availability of Funds for Decommissioning Nuclear Reactors, dated August 1990, Appendix B.4, the NRC staff authorizes the termination of this surety bond for North Anna and Surry.

Sincerely,

/RA/

Stephen R. Monarque, Project Manager Christopher Gratton, Sr. Project Manager Project Directorate II, Section 1 Project Directorate II, Section 1 Division of Licensing Project Management Division of Licensing Project Management Office of Nuclear Reactor Regulation Office of Nuclear Reactor Regulation Docket Nos. 50-280, 50-281, 50-338, and 50-339

Enclosure:

As stated cc w/encl: See next page

Subsequently, based upon the NRC staffs approval of this parent company guarantee and pursuant to the requirements of Regulatory Guide 1.159, Assuring the Availability of Funds for Decommissioning Nuclear Reactors, dated August 1990, Appendix B.4, the NRC staff authorizes the termination of this surety bond for North Anna and Surry.

Sincerely,

/RA/

Stephen R. Monarque, Project Manager Christopher Gratton, Sr. Project Manager Project Directorate II, Section 1 Project Directorate II, Section 1 Division of Licensing Project Management Division of Licensing Project Management Office of Nuclear Reactor Regulation Office of Nuclear Reactor Regulation Docket Nos. 50-280, 50-281, 50-338, and 50-339

Enclosure:

As stated cc w/encl: See next page Distribution PUBLIC BThomas EDunnington (paper copy) CGratton EHackett GHill (8) SMonarque MDusaniwskyj OGC ACRS KLandis, RII PDII-1 R/F

• See previous concurrence ADAMS ACCESSION NO. ML040120661 *See previous concurrence OFFICE PM:PDII/S1 PM:PDII/S1 LA:PDII/S2 SC/RPRP OGC SC/PDII-1 NAME SMonarque CGratton BClayton for BThomas* Uttal JNakoski EDunnington DATE 1/6/2004 1/7/2004 1/7/2004 12/23/2003 1/9/2004 1/12/2004 OFFICIAL RECORD COPY G:\PDII-1\Noanna\decomissioning.wpd

SAFETY EVALUATION BY THE OFFICE OF NUCLEAR REACTOR REGULATION USE OF PARENT COMPANY GUARANTEE NORTH ANNA AND SURRY POWER STATIONS, UNITS 1 AND 2 VIRGINIA ELECTRIC AND POWER COMPANY DOCKET NOS. 50-280, 50-281, 50-338, AND 50-339

1.0 INTRODUCTION

Pursuant to Title 10 of the Code of Federal Regulations (CFR) Section 50.75(f)(1), Virginia Electric and Power Company (VEPCO) and Dominion Nuclear Connecticut, Inc. (DNC), in their letter dated March 31, 2003, as supplemented by letter dated June 25, 2003, submitted the biennial reports on decommissioning funding for North Anna Power Station, Units 1 and 2 (North Anna), Surry Power Station, Units 1 and 2 (Surry), and Millstone Power Station, Units 1, 2, and 3 (Millstone). As part of the March 31, 2003 submittal, VEPCO proposed to modify its current method of providing decommissioning financial assurance for North Anna and Surry by changing from surety bonds, coupled with the sinking fund method, to a parent company guarantee, coupled with the sinking fund method. In addition, VEPCO requested that if the U. S. Nuclear Regulatory Commission (NRC) staff approves the change to a parent company guarantee, that the NRC staff also provide authorization to release VEPCO and the surety bond holder from the existing surety bonds. This safety evaluation addresses the NRC staffs review of VEPCOs request to revise its current method of providing decommissioning financial assurance for North Anna and Surry. The NRC staffs review of DNCs biennial report on decommissioning funding for Millstone is not addressed as part of this safety evaluation.

2.0 REGULATORY EVALUATION

According to 10 CFR Section 50.75(e)(1)(iii)(B), a parent company guarantee of funds for decommissioning costs that are based upon a financial test may be used if the guarantee and test are as contained in 10 CFR Part 30, Appendix A.

Pursuant to 10 CFR Part 30, Appendix A, Criteria Relating to Use of Financial Tests and Parent Company Guarantees for Providing Reasonable Assurance of Funds for Decommissioning, a parent company must meet the criteria of either paragraph A.1 or A.2 in 10 CFR Part 30, Appendix A, in order to pass the financial test.

In addition, Appendix B.4 of Regulatory Guide (RG) 1.159, Assuring the Availability of Funds for Decommissioning Nuclear Reactors, dated August 1990, contains the following requirements regarding the termination of surety bonds:

Enclosure

The Principle may terminate this bond by sending written notice to the NRC 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 NRC.

Furthermore, 10 CFR 50.75(e)(vi) states Any other mechanism, or combination of mechanisms, that provides, as determined by the NRC upon its evaluation of the specific circumstances of each licensee submittal, assurance of decommissioning funding equivalent to that provided by the mechanisms specified in paragraphs 10 CFR 50.75(e)(1)(i) through (v) of this section.

3.0 EVALUATION Dominion Resources Incorporated (DRI) is the parent company of VEPCO and DNC. VEPCO is the 100-percent owner and operator of Surry. VEPCO is also the 88.4-percent owner and operator of North Anna; however, VEPCO is contractually obligated to its co-owners to be responsible for 89.2 percent of decommissioning funding at North Anna. DNC is the 81-percent owner and operator of Millstone Unit 2, and 93.47-percent owner and operator of Millstone Unit 3.

This safety evaluation for a parent company guarantee was conducted to the extent that DRI has ownership interest and decommissioning responsibility for North Anna, Surry, and Millstone as a whole. The NRC staff conducted its review using one parent company guarantee valued at $74 million for North Anna, Surry, and Millstone in the aggregate, in order to determine whether there was reasonable assurance that DRIs sinking fund method would not result in a shortfall of decommissioning trust funds for these plants, as of December 31, 2002.

By letter dated March 31, 2003, as supplemented by letter dated June 25, 2003, VEPCO and DNC submitted the biennial reports on decommissioning funding for North Anna, Surry, and Millstone. As part of the letter dated June 25, 2003, VEPCO and DNC submitted an independent audit statement from Deloitte & Touche and a Financial Test contained in 10 CFR Part 30, Appendix A. These documents provided financial information on DRI in order to demonstrate DRIs financial qualifications, in accordance with 10 CFR Part 30, Appendix A, A.2. The NRC staffs review of the financial information provided by DRI follows.

Appendix A to 10 CFR Part 30(A)(2)(i) requires that a parent company providing a parent company guarantee must have a minimum bond issuance rating of BBB from Standard and Poors or a minimum bond issuance rating of Baa from Moodys. By letter dated June 25, 2003, DRI stated that it has a bond rating of BBB+ and Baa1 from Standard and Poors and Moodys, respectively. The NRC staff finds this acceptable.

Appendix A to 10 CFR Part 30(A)(2)(ii) requires that the parent company must have a tangible net worth at least six times the amount sought in the parent company guarantee. In addition, Appendix A to 10 CFR Part 30(A)(2)(iii) requires that the parent company must have a tangible net worth of at least $10 million. By letter dated June 25, 2003, DRI stated it has a tangible net worth of $2,856 million, which exceeds the $10 million net worth requirement and is almost 26 times the value of the parent company guarantee. The NRC staff finds that DRI has met the requirements of Appendix A to 10 CFR Parts 30(A)(2)(ii) and 30(A)(2)(iii).

Appendix A to 10 CFR Part 30(A)(2)(iv) requires that the parent company must have 90 percent or more of its assets located in the United States. By letter dated June 25, 2003, DRI stated that $37,178 million of its $37,909 million assets are located in the United States. The NRC staff finds this acceptable.

Appendix A to 10 CFR Part 30(B) requires that the parent companys independent certified public accountant must have compared the data used by the parent company in the financial test, which is derived from the independently audited, year-end financial statement for the latest fiscal year, with the amounts provided in these financial statements. As part of the submittal dated June 25, 2003, DRI provided an independent audit statement indicating that such comparisons were made from Deloitte & Touche. The NRC staff finds this acceptable.

Finally, by letter dated June 25, 2003, DRI submitted a copy of the Limited Guaranty between DRI and its subsidiaries VEPCO and DNC. The NRC staff finds that the Limited Guaranty meets the provisions stated in Appendix A of 10 CFR Part 30, Section III, Parent Company Guarantee.

Based on its review of these biennial reports on decommissioning funding, the NRC staff finds that the parent company guarantee sought by DRI for its subsidiary VEPCO satisfies the requirements of 10 CFR Part 30, Appendix A and 10 CFR 50.75(e)(1)(ii)(B) for North Anna and Surry. The NRC staff recognizes that DRI (and its subsidiary VEPCO) is requesting this parent company guarantee for the purpose of providing additional decommissioning trust fund assurance for Surry and North Anna, coupled with the sinking fund decommissioning trusts for each of these units. Additionally, VEPCO requested NRC staff approval for the termination of its surety bond. Based upon the its approval of the parent company guarantee as a replacement of the surety bonds, the NRC staff authorizes the termination of the surety bonds in accordance with RG 1.159, Appendix B.4 for North Anna and Surry.

4.0 CONCLUSION

The NRC staff concludes that the financial information provided by DRI and VEPCO satisfies the requirements of 10 CFR Part 30, Appendix A and 10 CFR 50.75(e)(1)(ii)(B); therefore, the NRC staff approves VEPCOs request to use a parent company guarantee in order to provide decommissioning trust fund assurance for Surry and North Anna, as well as the sinking fund decommissioning trusts. The NRC staff also finds that because VEPCO is placing a parent company guarantee, the surety bond can be terminated.

Principal Contributor: M. Dusaniwskyj Date: January 12, 2004

Mr. David A. Christian Virginia Electric and Power Company cc:

Ms. Lillian M. Cuoco, Esq. Office of the Attorney General Senior Counsel Commonwealth of Virginia Dominion Resources Services, Inc. 900 East Main Street Building 475, 5th Floor Richmond, Virginia 23219 Rope Ferry Road Rt. 156 Mr. Chris L. Funderburk, Director Waterford, Connecticut 06385 Nuclear Licensing & Operations Support Mr. Richard H. Blount, II Innsbrook Technical Center Site Vice President Dominion Resources Services, Inc.

Surry Power Station 5000 Dominion Blvd.

Virginia Electric and Power Company Glen Allen, Virginia 23060-6711 5570 Hog Island Road Surry, Virginia 23883-0315 Mr. Jack M. Davis Site Vice President Senior Resident Inspector North Anna Power Station Surry Power Station Virginia Electric and Power Company U. S. Nuclear Regulatory Commission P. O. Box 402 5850 Hog Island Road Mineral, Virginia 23117-0402 Surry, Virginia 23883 Mr. C. Lee Lintecum Chairman County Administrator Board of Supervisors of Surry County Louisa County Surry County Courthouse P.O. Box 160 Surry, Virginia 23683 Louisa, Virginia 23093 Dr. W. T. Lough Old Dominion Electric Cooperative Virginia State Corporation 4201 Dominion Blvd.

Commission Glen Allen, Virginia 23060 Division of Energy Regulation P. O. Box 1197 Senior Resident Inspector Richmond, Virginia 23218 North Anna Power Station U.S. Nuclear Regulatory Commission Robert B. Strobe, M.D., M.P.H. 1024 Haley Drive State Health Commissioner Mineral, Virginia 23117 Office of the Commissioner Virginia Department of Health P.O. Box 2448 Richmond, Virginia 23218 Mr. William R. Matthews Vice President - Nuclear Operations Virginia Electric and Power Company Innsbrook Technical Center 5000 Dominion Boulevard Glen Allen, Virginia 23060-6711