ML15093A101

Decommissioning Funding Status Report, Financial Test and Independent Public Accountants Letter of Attestation

ML15093A101
Person / Time
Site:	Kewaunee
Issue date:	03/27/2015
From:	Heacock D Dominion Energy Kewaunee
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
15-098
Download: ML15093A101 (12)

Text

Dominion Energy Kewaunee, Inc.

5000 Dominion Boulevard, Glen Allen, VA 23060 Web Address: www.dom.com March 27, 2015 United States Nuclear Regulatory Commission Serial No.15-098 Attention: Document Control Desk NL&OS/TJS Rev.0 Washington, D. C. 20555-0001 Docket No.

50-305 License No.

DPR-43 DOMINION ENERGY KEWAUNEE, INC.

KEWAUNEE POWER STATION DECOMMISSIONING FUNDING STATUS REPORT, FINANCIAL TEST AND INDEPENDENT PUBLIC ACCOUNTANTS' LETTER OF ATTESTATION Pursuant to 10 CFR 50.75(f)(1) and 10 CFR 50.82(a)(8)(v)-(vii), Dominion Energy Kewaunee, Inc. (DEK) is providing this report on the status of decommissioning funding for Kewaunee Power Station (KPS). provides the following information for KPS:

Table I -

Decommissioning Funding Status Report for KPS Summary Information as of December 31, 2014 Table II -

Decommissioning Funding Status Report for KPS Annual Cash Flow Analysis Starting January 1, 2015 through the End of Decommissioning The following information is provided in support and as part of this filing:

1. The escalation of decommissioning costs from the Cost Study's 2012 dollars to 2015 dollars is 1.44% and is based upon the average of CPI-U rates for that period. The mnemonics are "FCPIU.US, CPI-U Not Seasonally Adjusted (NSA)

All Urban Consumers, All Items US City Average (Index, 1982-84=100, SA)."

2. The escalation of decommissioning costs, shown in Table II "Annual Cash Flow Analysis" with a starting date of January 1, 2015 is held at 0.0% based on assuming 2.0% Real Rate of Return.

3. The growth rate on Trust Funds is held at the allowed 2.0% Real Rate of Return over the escalation rate.

4. No rate regulatory authority citation for KPS is referenced because KPS is a merchant unit.

5. There are no contracts upon which DEK is relying under paragraph 10 CFR 50.75(e)(1)(v) and there were no modifications to the current method of providing financial assurance since the last submitted report.

6. There are no annual funding amounts for KPS.

7. Trust Fund amounts shown in this report are market value and after-tax on realized gains and losses. The Trust Fund balances have not been adjusted for unrealized gain or loss positions not currently taxable.

jO001

Serial No.15-098 KPS Decommissioning Funding Status Report Page 2 of 2

8. Since the previous annual submittal on March 31, 2014 (Serial No.14-117, ADAMS Accession No. ML14098A259) the only changes to trust agreements established for nuclear decommissioning for KPS were those reported in a letter dated February 18, 2015 (Serial No.15-089) implementing the exemptions issued by the NRC on May 21, 2014 and correcting an error in the non-qualified trust agreement.

Additionally, in a submittal dated January 28, 2015 (Serial No.15-001, ADAMS Accession No. ML15034A312), Dominion Resources, Inc. (DRI) committed to provide ongoing information pertaining to its continuing ability to provide additional financial assurance by submitting by March 31 of each year in connection with DEK's annual financial assurance status report, (1) information demonstrating the results of the financial test in either Paragraph II.A.1 or Paragraph II.A.2 of Appendix A to 10 CFR Part 30 for the immediately preceding calendar year; and (2) a letter from its independent certified public accountant attesting to the data and accuracy of the financial test1. This information is included in Attachments 1 and 2, respectively.

Please contact Mr. David A. Sommers at (804) 273-2823 if you have any questions or require additional information.

Sincerely, David A. Heacock President and Chief Nuclear Officer Dominion Energy Kewaunee, Inc.

Attachments Commitments made in this letter: None cc:

U. S. Nuclear Regulatory Commission Region III 2443 Warrenville Road, Suite 210 Lisle, IL 60532-4352 Mr. T. Carter NRC Senior Project Manager (KPS)

U. S. Nuclear Regulatory Commission, Mail Stop T-8 F5 Two White Flint North 11545 Rockville Pike Rockville, MD 20852-2738 1DEK is aware that the American Institute of Certified Public Accountants (AICPA) has informed the NRC that certified public accountants are precluded from issuing any form of report or assurance on matters related to solvency. (See ADAMS Accession No. ML13094A316.)

Serial No.15-098 KPS Decommissioning Funding Status Report Enclosure I Decommissioning Funding Status Report for KPS Summary Information as of December 31, 2014 Kewaunee Power Station Dominion Energy Kewaunee, Inc. (DEK)

Serial No.15-098 Page 1 of 3 Kewaunee Power Station Decommissioning Funding Status Report as of December 31, 2014 Table I Decommissioning Funding Status Report for KPS Summary Information as of December31,2014 10 CFR 50.82 (a)(8)(v)-(vii)

(in millions)

Decommissionini Trust Fund Balances 10 CFR Reference 150.82(a)(8)(v(A) 8 A

50.82(a)(8)8vI)iA)

Fund Balance Type of Trusts Conments 688.233 Qualified fund balance As of:

12/31/2014

- Non-qualified fund balance As of:

12/31/2014 52.438 Less costs incurred prior years but not yet billed to Trust Actual Cost in:

As Spent Dollars 635.795 Adjusted decommissioning fund balance As of:

12/31/2014 Other Financial Assurance Methods Being Relied Upon 110 CFR Reference 150.82(a)(8)(v)(A)

None Prior Years Decommissioning Expenditures (1) 10 CFR Reference 150.82(a)(8)(v)(A)I Total License Term Spent Fuel Mgnt Site Restoration Comments 71.729 $

40.683 31.046 2014 Cost in:

2014 Dollars 88.860 $

23.221 65.639 2012-2013 Cost in:

As Spent Dollars 160.589 $

63.905 -$

96.685 - $

Total Prior Year in:

As Spent Dollars Prior Year Expenditures - Variance to Estimated Escalated Cost 10 CFR Reference 150.82(a)(8)(v)(B)

I Total License Term Spent Fuel Mqmnt Site Restoration Comments 71.729 40.683 31.046 Actual Cost in:

2014 Dollars 109.6641 $

75.304 34.360

§ NRC Auth. $ in 2014 Dollars (37.935$*$

(34.621) $

(3.314) $

Variance: License Termination and Spent Fuel Management underruns due to timing of activities.

Remaining Decommissioning Estimated Cost 10 CFR Reference 150.82(a)(8)(v)(B) 150.82(a)(8)(vil)(B)

Total License Term Spent Fuel Mgnt Site Restoration Comminents 732.904 452.189 244.384 36.331 Estimate in:

2015 Dollars Decommissionin Criteria Upon Which the Estimate is Based 10 CFR Reference 150.82(a)(8)(v)(B)

I SAFSTOR Any Modification To Method of Providing Financial Assurance 110 CFR Reference 150.82(a)(8)(v)(C)

I None I

Any Material Changes To Trust Agreement Since Previous Report 10 CFR Reference 150.82(a)(8)(v)(D)

I Yes ISee letter dated February 18, 2015 Serial No.15-089) implementing NRC Exemption and correction of error.

Need For Additional Financial Assurance 10 CFR Reference 150.82(a)(8)(vl) 150.82(a)(8)(vil)(C)

None See Annual Cash Flow Analyis in Table II Inputs to Remainin Cost and Funding Analysis 2015 Start year of analysis 1.44%

Escalate study dollars ftom 2012$ to Start Year of Analysis using CPI average (2012 to Start Year of Analysis) 0.00%

Escalation rate 2015

& beyond 2.00%

Fund growth rate 2015

& beyond (Reflects NRC allowed 2% Real Rate of Retum)

Annual expenditures Projected annual expenditures - see Annual Cash Flow Analysis in Table II (1) A reconciliation of 2013 decommissioning costs indicated that expenditures shown as of December 31, 2013. In the prewious Decommissioning Funding Status Report (Senal No.14-117 dated March 31, 2014), were overstated by $5.416 million. Therefore, the Prior Years Decommissioning Expenditures section is revised in this report to correct the previous oerstatement. There was no disbursement of the owerstated costs from the Decommissioning Trust Fund.

Serial No.15-098 Page 2 of 3 Kewaunee Power Station Decommissioning Funding Status Report as of December 31, 2014 Table If Decommissioning Funding Status Report for KPS Annual Cash Flow Analysis Starting January 1, 2015 through End of Decommissioning 10 CFR 50.82 (a)(8)(v)-(vll)

Column 3 Column 1 Column 2 Remaining Column 4 Column 6 Column 6 Column?7 Beginning Earnings Ucense Remaining Remaining Remaining End of on Termination Spent Fuel Mgmt Site Restoration SAFSTOR of Year Trust Funds Expendituresa Expenditures Expenditures Expenditures Year Year Balance (eflects 2% RRoR)

(Reflects O*AEsc)

(Reflects0% Esc)

(Rteflects0% Esc)

(Reflects OAEsc)

Balance 205 635.795 12.361 4.682 30.780 35.462 612.694 2016 612.694 11.894 6.318 29.638 35.956 588.632 2017 588.632 11.543 15.566 7.447 23.013 577.162 2018 577.162 11.469 1.790 5.641 7.431 581.200 2019 581.200 11.550 1.790 $

5.641 7.431 585.318 2020 585.318 11.632 1.790 $

5.641 7.431 589.520 2021 589.520 11.716 1.790 $

5.641 7.431 593.805 2022 593.805 11.802 1.790 5.641 7.431 598.175 2023 598.175 11.889 1.790 5.641 7.431 602.634 2024 602.634 11.978 1.790 5.641 7.431 607.181 2025 607.181 12.069 1.790_

5.641 7.431 611.820 2026 611.820 12.162 1.790 5.641 7.431 616.551 2027 616.551 12.257 1.790 5.641 7.431 621.376 2028 621.376 12.353 1.790 5.641 7.431 626.299 2029 626.299 12.452 1.790_ $

5.641 7.431 631.319 2030 631.319 12.552 1.790 5.641 7.431 636.440 2031 636.440 12.655 1.790 5.641 7.431 641.664 2032 641.664 12.759 1.790 5.641 7.431 646.992 2033 646.992 12.857 2.628 5.641 8.269 651.580 2034 651.580 12.957 1.79-0 5.641 7.431 657.106 2035 657.106 13.068 1.790 5.641 7.431 662.743 2036 662.743 13.181 1.790 5.641 7.431 668.493 2037 668.493 13.296 1.790 5.641 7.431 674.357 2038 674.357 13.413 1.790 5.641 7.431 680.339 2039 680.339 13.532 1.790 5.641 7.431 686.441 2040 686.441 13.655 1.790 5.641 7.431 692.664 2041 692.664 13.779 1.790 5.641 7.431 699.012 2042 699.012 13.906 1.790 5.641 7.431 705.487 2043 705.487 14.035_ $

1.790 5.641 7.431 712.092 2044 712.092 14.168 1.790 5.641 7.431 718.828 2045 718.828 14.302 1.790 5.641 7.431 725.700 2046 725.700 14.440 1.790 5.641 7.431 732.708 2047 732.708 14.579 1.790 5.774 7.564 $

739.723 2048 739.723 14.727 1.802 4.982 6.784 $

747.666 2049 747.666 14.935 1.807 1.807 760.794 2050 760.794_ $

15.198 1.807 1.807 $

774.185 2051 774.185 15.466 1.807 1.807 787.844 2052 787.844 15.739 1.807 1.807 801.776 2053 801.776 16.017 1.807 1.807 -$

815.987 2054 815.987 16.302 1.807 1.807 $

830.482 2055 830.482 16.592 1.807 1.807 $

845.267 2056 845.267 16.887 1.807 1.807 $

860.347 2057 860.347 17.189 1.807 1.807 $

875.729 2058 875.729 17.497 1.807 1.807 891.419 2059 891.419 17.810 1.807 1.807 907.423 2060 907.423 18.130 1.807 1.807 923.746__

2061 923.746 18.457 1.807 1.807 $

940.397 2062 940.397 18.790 1.807 1.807 $

957.380]

2063 957.380 19.130 1.807 1.807 974.703 2064 974.703 19.476 1.807 1.807 $

992.372~

2065 992.372 19.829 1.807 1.807 1,10394 2066 1,010.394 20.190 1.807 1.807 1,28778 2087 1,028.778 20.443 13.255 13.255 1,35966 2068 1,035966. $

20.481 23.851 23.851 1,32.96 2069 1,3.9 20.189 46.257, 46.257 1,06528 2070 1,006.528 19.073 105.7071 $

105.707 919.894 2071 919.8941 $

17.433 96.464 96.464 840.864 2072 840.864 1$

16.190 51.126 11.648 62.774 794.279 2073 794.2791 $

15.616 0.114 2.163 24.683 26.959 782.936 Remaining $ In 2015 Dollars 452.189 244.384 36.331 732.904 Eat. Fund Balance (end of Decomnirssioning) (in Future $ escalated at 0.0% & 2.0% Real Rate of Return Fund Growth Rate) 782.936 Est. Fund Balance (end of Decommnissioning) disc to 2016 Dollars IDiscount Rate = 2.00%

248.26

Serial No.15-098 Page 3 of 3 Kewaunee Power Station Decommissioning Funding Status Report as of December 31, 2014 Table II Definitions:

Column 1:

Beginning of Year Balance:

Reflects the beginning-of-year Trust Fund balance at a 0.0% cost escalation rate and a 2.0% Real Rate of Return (RRoR) on fund growth.

Column 2:

Earnings on Trust Funds:

Reflects earnings on funds remaining in the trust. A 2.0% RRoR Fund growth rate is used for 2015 through 2073 which reflects the allowed 2.0% RRoR over a 0.0% cost escalation rate. The annual 2.0% RRoR earnings are calculated on the beginning balance plus 50% of the projected annual expenditure for each year.

Column 3:

Remaining License Termination Expenditures:

Reflects the annual License Termination Plan cost portion at a 0.0% escalation rate from the Site Specific Estimate.

Column 4:

Remaining Spent Fuel Management Expenditures:

Reflects the annual Irradiated Fuel Management Plan cost portion at a 0.0% escalation rate from the Site Specific Estimate. This column is intended to provide the report on the status of funding for managing irradiated fuel required by 10 CFR 50.82(a)(8)(vii).

Column 5:

Remaining Site Restoration Expenditures:

Reflects the annual Site Restoration Plan cost portion at a 0.0% escalation rate from the Site Specific Estimate.

Column 6:

Remaining SAFSTOR Expenditures:

Reflects the annual SAFSTOR Decommissioning Plan cost at a 0.0% escalation rate from the Site Specific Estimate.

Column 7:

End of Year Balance:

Reflects the end of year Trust Fund balance after all projected earnings are added and all projected expenditures are deducted for the year specified at a 0.0% escalation rate and a 2.0% RRoR on fund growth.

Tables I and II General Notes:

1) The cost estimates contained in Tables I and II are obtained from revised site-specific cost and schedule tables that were provided in an update to the KPS Post-Shutdown Decommissioning Activities Report (Serial No.14-116, ADAMS Accession No. ML14118A382) dated April 25, 2014.

2) The Trust Fund Balance reflects market value on December 31, 2014, net of taxes on realized gains and losses.

3)

The 2.0% RRoR is based on the rate allowed by 10 CFR 50.75(e)(1)(i) and 10 CFR 50.82(a)(8)(vi) and not on any order of rate setting authority.

4) The funding method for providing financial assurance for decommissioning KPS remains prepayment. This cash flow analysis demonstrates that the amounts accumulated in the Trust are sufficient; with credited earnings at a 2.0% RRoR, to cover the estimated cost of radiological decommissioning, spent fuel management and site restoration.

5)

DEK has in place a parent Support Agreement in the amount of $60 million that upon NRC approval is expected to be cancelled in the near future. By letter dated January 28, 2015 (Serial No.15-001), DEK provided a new commitment letter from its parent and requested NRC concurrence with the cancellation of the previous Support Agreement.

6) The cash flow analysis in Table II shows that the funds accumulated in the Trust are sufficient, with credited earnings at a 2.0% real rate of return, to cover the estimated cost of radiological decommissioning, spent fuel management and site restoration. On May 21, 2014, the NRC granted DEK an exemption allowing the Trust to be used for spent fuel management costs.

Serial No.15-098 KPS Decommissioning Funding Status Report Financial Test for Year Ended December 31, 2014 Paragraph II.A.2 of Appendix A to 10 CFR Part 30 Kewaunee Power Station Dominion Energy Kewaunee, Inc. (DEK)

G. Scott Hetzer Senior Vice President and Treasurer Dominion Resources, Inc.

120 Tredegar Street, Richmond, VA 23219 Mailing Address: P.O. Box 26532 Richmond, VA 23261 Dominion March, 19, 2015 FINANCIAL TEST Paraqraph II. A.2 of Appendix A to 10 CFR Part 30 A. Maximum Guarantee Amount for Facility License No. DPR-43: $60 million B. Dominion Resources, Inc. issued a total of $1,650,000,000 in unsecured senior notes, split among three tranches, on November 17, 2014 as follows: $700M 5 year; $500M 10 year; $450M 30 year. Each of these issues were rated BBB+ by Standard and Poor's and Baa2 by Moody's at the time of issuance and maintain those ratings today.

C. DRI's tangible net worth (millions of dollars):

Total Equity Less:

Net Book Value of the Nuclear Facility and Site (KPS)

Goodwill of the Nuclear Facility and Site (KPS)

(i) Total Net Worth

$11,957 Less:

Goodwill Intangible Assets

$11,957 3,044 570

$ 8.343 (ii) Tangible Net Worth DRI Total Assets Less: Foreign Assets Total US Assets

$ 54,327

$ 54.327 FINANCIAL TESTS YES NO

1. Is line C (ii) at least $21 Million?

2. Is line C (i) at least 6 times the guarantee amount of $60 million?

3. a. Are at least 90 percent of the firm's assets located in the U.S.?

or,

b. Is line C (i) at least 6 times the guarantee amount of $60 million?

N Eli

4. a. Are bond ratings BBB (including +/- adjustments) or above as issued by Standard and Poor's or,

b. Are bond ratings Baa (including +/- adjustments) or above as issued by Moody's 9 El z

F-I hereby certify that the content of this Financial Test: Paragraph II.A.2 of Appendix A to 10 CFR Part 30 is true and correct to the best of my knowledge.

Senior Vice President &,4easurer, Dominion Resources Ir(.

Serial No.15-098 KPS Decommissioning Funding Status Report Deloitte & Touche LLP Attesting Letter of Accuracy of the Financial Test Kewaunee Power Station Dominion Energy Kewaunee, Inc. (DEK)

D elo itte.

Deloitte & Touche LLP Suite 820 901 East Byrd Street Richmond, VA 23219 USA Tel: +1 804 697 1500 Fax: +1 804 697 1825 www.deloitte.com INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES To the Board of Directors and Shareholders of Dominion Resources, Inc.

Richmond, Virginia We have performed the procedures enumerated below regarding the data used by Dominion Resources, Inc. ("Dominion" or the "Company"), as parent company of Dominion Energy Kewaunee, Inc., licensed operator of the Kewaunee Power Station, solely to assist the U.S.

Nuclear Regulatory Commission in evaluating the Company's compliance with the financial test to demonstrate financial assurance for the year ended December 31, 2014, as specified in Appendix A to Part 30 of the U.S. Nuclear Regulatory Commission's Code of Federal Regulations (the "financial test"), included as Attachment 1 to the financial assurance letter dated March 19, 2015 from Scott Hetzer, Senior Vice President Tax and Treasury of Dominion Resources, Inc. to the U.S. Nuclear Regulatory Commission (the "Financial Assurance Letter"). Dominion's management is responsible for the financial test and compliance with associated requirements. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.

The procedures that we performed and related findings are as follows:

1. We compared the bond rating in Attachment 1 to the Company's Financial Assurance Letter to third-party sources, noting no differences.

2. We compared amounts identified as "Total Equity", "Goodwill", "Intangible Assets", and "DRI Total Assets" in Attachment 1 to the Company's Financial Assurance Letter to the Company's consolidated financial statements as of December 31, 2014, on which we have issued our report dated February 27, 2015, noting no differences.

3. We compared amounts identified as "Net Book Value of the Nuclear Facility and Site (KPS)", "Goodwill of the Nuclear Facility and Site (KPS), and Member of Deloitte Touche Tohmatsu Limited

"Foreign Assets" in Attachment 1 of the Company's Financial Assurance Letter to corresponding amounts in a schedule or report prepared by the Company as of December 31, 2014, noting no differences.

4. We recomputed the mathematical accuracy of the amounts identified as "Total Net Worth", "Tangible Net Worth", and "Total US Assets" in Attachment 1 to the Company's Financial Assurance Letter, noting no differences.

With respect to procedures outlined in Paragraph II.B of Appendix A of 10 CFR Part 30 of the U.S. Nuclear Regulatory Commission's 10 CFR Part 30, professional standards preclude us from providing any form of report or assurance on matters relating to solvency. Accordingly, no such form of report or assurance is provided.

We were not engaged to, and did not, perform an examination, the objective of which would be the expression of an opinion on the accompanying Financial Assurance Letter dated March 19, 2015. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

This report is intended solely for the information and use of the board of directors and management of the Company and Dominion Energy, Inc., and the U.S. Nuclear Regulatory Commission, and is not intended to be and should not be used by anyone other than these specified parties.

March 27, 2015