ML11195A008
| ML11195A008 | |
| Person / Time | |
|---|---|
| Site: | Oconee, Mcguire, Catawba, McGuire  |
| Issue date: | 07/11/2011 |
| From: | Waldrep B Duke Energy Carolinas |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| TAC ME5465, TAC ME5466, TAC ME5499, TAC ME5500, TAC ME5508, TAC ME5509, TAC ME5510 | |
| Download: ML11195A008 (5) | |
Text
Benjamin C. Waldrep Duke 10 CFR 50.75 Vice President tEEnergy.
Nuclear Corporate Duke Energy Corporation 526 South Church Street Charlotte, NC 28202 Mailing Address:
EC07H/P. 0. Box 1006 Charlotte, NC 28201-1006 July 11, 2011 7043828162 704 382 6056 fax Benjamin. Waldrep@duke-energy. corn U. S. Nuclear Regulatory Commission Attn: Document Control Desk Washington, DC 20555-0001
Subject:
Duke Energy Carolinas, LLC (Duke Energy)
Oconee Nuclear Station, Units 1, 2, and 3, Docket Nos. 50-269, 50-270, 50-287 McGuire Nuclear Station, Units 1 and 2, Docket Nos. 50-369, 50-370 Catawba Nuclear Station, Units 1 and 2, Docket Nos. 50-413, 50-414 Response to Request for Additional Information - 2011 Decommissioning Funding Status Reports
Reference:
Letter from John Stang (NRC) to Benjamin C. Waldrep (Duke Energy), Request for Additional Information dated June 24, 2011 Related to 2011 Decommissioning Funding Status Reports ML11158A163 (TAC Nos. ME5465, ME5466, ME5499, ME5500, ME5508, ME5509, ME5510)
This letter provides the Duke Energy response to the Nuclear Regulatory Commission's request for additional information (RAI) included in the referenced letter.
The response to the NRC information request is addressed in the Attachment.
No new commitments are found in the correspondence.
If you have any questions or need any additional information, please contact L. B. Jones at 704-382-4753 or Luellen.Jonescduke-enerpy.com.
Sincerely, Benjamin C. Waldrep Attachment www.duke-energy.com
U. S. Nuclear Regulatory Commission July 11, 2011 Page 2 xc:
V. M. McCree, Region II Administrator U.S. Nuclear Regulatory Commission Marquis One Tower 245 Peachtree Center Avenue NE, Suite 1200 Atlanta, Georgia 30303-1257 J. F. Stang, Jr., Senior Project Manager (ONS)
U.S. Nuclear Regulatory Commission 11555 Rockville Pike Mail Stop 0-8 G9A Rockville, MD 20852-2738 J. H. Thompson, Project Manager (CNS & MNS)
U. S. Nuclear Regulatory Commission 11555 Rockville Pike Mail Stop 0-8 G9A Rockville, MD 20852-2738 A. T. Sabisch NRC Senior Resident Inspector Oconee Nuclear Station NRC Senior Resident Inspector McGuire Nuclear Station G. A. Hutto, Ill NRC Senior Resident Inspector Catawba Nuclear Station S. E. Jenkins, Manager Radioactive & Infectious Waste Management SC Dept. of Health and Env. Control 2600 Bull St.
Columbia, SC 29201 W. L. Cox, Ill, Section Chief Div. of Environmental Health, RP Section NC Dept. of Env. & Natural Resources 1645 Mail Service Center Raleigh, NC 27699
Attachment July 11, 2011 Page 1 of 3 Duke Energy Response to Request for Additional Information RAI on March 30, 2011, Decommissioning Financial Assurance Report RAI #1:
Citations for real rate of return:
Provide the citation (e.g., an Order by the rate-regulatory authority) by the regulatory entity that allows for the assumptions used regarding rates of escalation in decommissioning costs, rate of earnings on decommissioning funds and rates of other factors assumed in the DFS reports for Catawba 1 and 2, McGuire 1 and 2, and Oconee 1, 2, and 3.
On March 30, Duke Energy reported the following:
Duke Energy:
4 percent rate of escalation, 6 percent rates of earnings on qualified decommissioning funds, and 5.5 percent rate of earnings on non-qualified decommissioning funds.
North Carolina Electric Membership Corporation:
2.82 percent rate of escalation, and 4.34 percent rate of return on decommissioning funds.
North Carolina Municipal Power Agency No. 1:
4 percent rate of escalation, and 5.5 percent rate of return on decommissioning funds.
Piedmont Municipal Power Agency:
4 percent rate of escalation, and 5.5 percent rate of return on decommissioning funds.
As stated in 10 CFR 50.75(f)(1):
The information in this [DFS] report must include [...] 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...
Response to RAI #1:
Duke Energy Duke Energy's electric rates are approved by the North Carolina Utilities Commission, the Public Service Commission of South Carolina, and the Federal Energy Regulatory Commission.
In the North Carolina Utilities Commission Order dated December 7, 2009 in Docket No. E-7, Sub 909, the Commission granted a retail general rate increase that allows annual cost recovery of nuclear decommissioning expenses based on 2008 nuclear decommissioning cost and funding studies that use assumptions regarding rates for escalation in decommissioning costs and earnings on decommissioning funds. In the Public Service Commission of South Carolina Order Number 2010-79 dated January 27, 2010 in Docket No. 2009-226-E, the Commission granted a retail general rate increase that allows annual cost recovery of nuclear decommissioning expenses also based on 2008 nuclear decommissioning cost and funding studies. The Federal Energy Regulatory Commission also allows Duke Energy to collect in its
Attachment July 11, 2011 Page 2 of 3 wholesale rates an annual amount for nuclear decommissioning costs based on the 2008 nuclear decommissioning cost and funding studies. Wholesale rates are determined under a formula rate that includes an annual amount for nuclear decommissioning costs also based on these 2008 studies.
Duke Energy's 2008 nuclear decommissioning cost and funding studies assumed a 4.0% cost escalation rate and a 5.5% to 6% earnings rate. Using these cost and return rates results in an annual real rate of return of 1.5% to 2%, which is at or within the 2.0% annual real rate of return permitted in 10CFR50.75(e)(1)(ii).
North Carolina Electric Membership Corporation:
Because North Carolina Electric Membership Corporation (NCEMC) is an electric membership corporation, it is exempt from state rate regulation and therefore does not have a citation from a rate regulatory body regarding cost escalation and rate of earnings assumptions. Rate of escalation in decommissioning costs is based on the ten-year average increase of the Consumer Price Index - For All Urban Consumers (CPI-U) at the time of the latest Catawba site-specific decommissioning cost study. The estimated rates of earnings are based on NCEMC's risk-free rate for a debt instrument with a term approximating the remaining years until decommissioning, in accordance with Accounting Standards Codification 410 - Asset Retirement and Environmental Obligations.
NCEMC's assumption of a 2.82% cost escalation rate and a 4.34% earnings rate results in an annual real rate of return of 1.52%, which is within the 2.0% annual real rate of return permitted in 10CFR50.75(e)(1)(ii).
North Carolina Municipal Power Agency No. 1:
Because North Carolina Municipal Power Agency No. 1 (NCMPA1) is a public power utility, it is exempt from state rate regulation and therefore does not have a citation from a rate regulatory body regarding cost escalation and rate of earnings assumptions. Rate of escalation in decommissioning costs is based on a review of various inflation forecasts as well as the annualized rate of change in the Catawba site-specific decommissioning cost studies. The estimated rates of earnings in Treasuries and other government-backed securities in which NCMPA1 invests take into account a number of factors including the current yield on the portfolio, current market conditions, as well as forecasted yields based upon interest rate forecasts including the Bloomberg Survey of Economists median forecast.
NCMPA1's assumption of a 4.0% cost escalation rate and a 5.5% earnings rate results in an annual real rate of return of 1.5%, which is within the 2.0% annual real rate of return permitted in 1 OCFR50.75(e)(1)(ii).
Piedmont Municipal Power Agency:
Because Piedmont Municipal Power Agency (PMPA) is a public power utility, it is exempt from state rate regulation and therefore does not have a citation from a rate regulatory body regarding cost escalation and rate of earnings assumptions. Rate of escalation in decommissioning costs is based on a poll of other nuclear utilities as well as the annualized rate of change in the Catawba site-specific decommissioning cost studies. The estimated rates of earnings are based on expert opinion from PMPA's investment management firm regarding long-term earnings.
Attachment July 11, 2011 Page 3 of 3 PMPA's assumption of a 4.0% cost escalation rate and a 5.5% earnings rate results in an annual real rate of return of 1.5%, which is within the 2.0% annual real rate of return permitted in 1 OCFR50.75(e)(1 )(ii).
RAI #2:
Shutdown date inconsistency:
Clarify the inconsistency in the Catawba 1 and 2 shutdown dates used for collections between Duke Energy and the other licensees and any potential impact on the future collections. The clarification should include the basis for Duke Energy's statement that "Annual amounts are based on the likelihood that units will be shut down five years prior to the license expiration date."
Also, explain why Duke Energy's co-licensees for Catawba 1 and 2 do not base their financial assurance amounts on the likelihood that the units will shut down five years prior to license termination (i.e. 2038). North Carolina Electric Membership Corporation and Piedmont Municipal Power Agency provided their schedule of annual amounts to be collected based upon the actual license termination date (i.e. 2043) for Catawba 1 and 2. North Carolina Municipal Power Agency No.1 provided its schedule of annual amounts to be collected for Catawba 1 and 2 based on the last year of their current Participant Project Power Sales Agreement with Duke Energy (i.e. 2032).
As stated in 10 CFR 50.75(f)(1):
The information in this [DFS] report must include [...] a schedule of the annual amounts remaining to be collected...
Response to RAI #2 Duke Energy, with the approval of the North Carolina Utilities Commission and the Public Service Commission of South Carolina, is funding through its annual revenue collections its nuclear decommissioning costs for each unit at a level that projects being fully funded up to five years prior to the license expiration date of that unit. This funding approach is based on the conservative premise that potential economic issues may justify closure prior to the license expiration date. If Duke assumed collections through license expiration, the potential impact would be lower annual future contributions.
Duke Energy's conservative funding approach does not impose the same funding approach on the co-owners of Catawba Nuclear Station. North Carolina Electric Membership Corporation and Piedmont Municipal Power Agency base their contributions on collections being made through license expiration. North Carolina Municipal Power Agency No. 1 bases its contributions on collections through the end of its current Participant Project Power Sales Agreement.