Text

Decommissioning Funding Status Report, Financial Test and Independent Public Accountants Letter of Attestation
	ML16088A089
Person / Time
Site:	Kewaunee
Issue date:	03/24/2016
From:	Mark D. Sartain; Dominion Energy Kewaunee
To:	; Document Control Desk, Office of Nuclear Reactor Regulation
References
	16-106
	Download: ML16088A089 (12)
	v • d • e

Dominion Energy Kewaunee, Inc.

5000 Dominion Boulevard, Glen Allen, VA 23060 Web Address: www.dom.com March 24, 2016 United States Nuclear Regulatory Commission Attention: Document Control Desk Washington, D. C. 20555-0001 DOMINION ENERGY KEWAUNEE, INC.

KEWAUNEE POWER STATION Serial No.16-106 NL&OSff JS Rev.a Docket No.

50-305 License No. DPR-43 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, 2015 Table II - Decommissioning Funding Status Report for KPS Annual Cash Flow Analysis Starting January 1, 2016 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 2016 dollars is 1.31% and is based upon the average of CPl-U rates for that period. The mnemonics are "FCPIU.US, CPl-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 is held at 0.0% based on assuming a 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 balances 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.

8. Since the previous annual submittal on March 27, 2015 (Serial No.15-098, ADAMS Accession No. ML15093A101) there have been no changes to the Trust agreements established for nuclear decommissioning for KPS.

Serial No.16-106 KPS Decommissioning Funding Status Report Page 2 of 2 Additionally, in a submittal dated January 28, 2015 (Serial No.15-001, ADAMS

\\.ft',

Accession No. ML15034A312), Dominion Resources, Inc. (ORI) 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 11.A.1 or Paragraph 11.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. Craig D. Sly at (804) 273-2784 if you have any questions or require additional information.

Sincerely, Mark D. Sartain Vice President - Nuclear Engineering Dominion Energy Kewaunee, Inc.

Enclosure:

1. Decommissioning Funding Status Report for KPS Summary Information as of December 31, 2015 Attachments:

1. Financial Test for Year Ended December 31, 2015 Paragraph 11.A.2 of Appendix A to 10 CFR Part 30

2. Deloitte & Touche LLP Attesting Letter of Accuracy of the Financial Test Commitments made in this letter: None cc:

U. S. Nuclear Regulatory Commission Region Ill 2443 Warrenville Road, Suite 210 Lisle, IL 60532-4352 Mr. T. Carter NRG 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.16-106 KPS Decommissioning Funding Status Report Decommissioning Funding Status Rep.ort for KPS Summary Information as of December 31, 2015 Kewaunee Power Station Dominion Energy Kewaunee, Inc. (DEK)

Kewaunee Power Station Serial No.16-106 Page 1 of 3 Decommissioning Funding Status Report as of December 31, 2015 Table I Decommissioning Funding Status Report for KPS Summary Information as of December 31, 2015 10 CFR 50.82 (a)(S)(v)-(vii)

(in millions)

Decommission in l Trust Fund Balances 10 CFR Reference ls0.82(a)(8)(v)(A) l50.82(a)(8)(vii)(A)

Fund Balance Type of Trusts Comments 661.347 Qualified fund balance As of:

12131/2015

- Non-aualified fund balance As of:

12131/2015 78.544 Less costs incurred orior vears but not vet billed to Trust Actual Cost in:

As Scent Dollars 582.803 Adjusted decommissioninQ fund balance As of:

12131/2015 Other Financial Assurance Methods Being Relied Upon 10 CFR Reference IS0.82(a)(8)(v)(A)

I None Prior Years Decommissioning Expenditures 111 10 CFR Reference IS0.82(a)(8)(v)(A)

I Total License Term Spent Fuel Mgmt Site Restoration Comments 54.762 $

17.940 36.822 $

2015 Cost in:

2015 Dollars 112.398 $

63.905 48.493 2012-2014 Cost in:

As Scent Dollars 167.160 $

81,844- $-

85.316 $

Total Prior Year in:

As Scent Dollars Prior Year Expenditures - Variance to Estimated Escalated Cost 10 CFR Reference I 50.82(a)(8)(v)(B)

I Total License Term Spent Fuel Mgmt Site Restoration Comments 54.762 $

17.940 36.822 $

Actual Cost in:

2015 Dollars 35.324 $

4.664 $

30.660 $

NRC Auth. $ in 2015 Dollars 19.438 $

13.276 6.162 Variance: License Tennination and Spent Fuel Management overruns due to timing of activities, were underruns in 2014.

Remaining Decommissioning Estimated Cost 10 CFR Reference IS0.82(a)(8)(v)(B)

I 50.82(a)(8)(vii)(B)

Total License Term Spent Fuel Mamt Site Restoration Comments 703.827 $

451.604 $

215.559 $

36.664 Estimate in:

2016 Dollars Decommissioning Criteria Upon Which the Estimate is Based 10 CFR Reference lso.a2(a)(8)(v)(B)

I SAFSTOR Any Modification To Method of Providing Financial Assurance 10 CFR Reference IS0.82(a)(8)(v)(C)

I None Any Material Changes To Trust Agreement Since Previous Report 10 CFR Reference IS0.82(a)(8)(v)(D)

I None Need For Additional Financial Assurance 10 CFR Reference IS0.82(a)(8)(vi)

I 50.82(a )(8)(vi i)(C)

None See Annual Cash Flow Analvsis in Table II Inputs to Remaining Cost and Funding Analysis I

I 2016 Start vear of analvsis 1.31%

Escalate study dollars from 2012$ to Start Year of Analvsis usino CPI averaoe (2012 to Start Year of Analvsis) 0.00%

Escalation rate 2016

& beyond 2.00%

Fund orowth rate 2016

& bevond (Reflects NRC allowed 2% Real Rate of Return)

Annual expenditures Proiected annual exoenditures - see Annual Cash Flow Analvsis in Table II (1) A reconciliation of decommissioning costs to Trust Fund im.oices indicated expenditures for spent fuel as reported in the prelious Decommissioning Funding Status Report (Serial No.15-098 dated March 27, 2015 ADAMS Accession No. ML15093A101), were O\\erstated by $48.2 million. Therefore, the 2012-2014 Decommissioning Expenditures section has been relised in this report to correct the o\\erstatement. There was no disbursement of the O\\erstated costs from the Decommissioning Trust Fund and reported Trust Fund balances in prelious reports were correct.

Serial No.16-106 Page 2 of 3 Kewaunee Power Station Decommissioning Funding Status Report as of December 31, 2015 Table II Decommissioning Funding Status Report for KPS Annual Cash Flow Analysis Starting January 1, 2016 through End of Decommissioning 10 CFR 50.82 (a)(S)(v)-(vii)

(in millions)

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Beginning Earnings Remaining Remaining Remaining Remaining of on License Termination Spent Fuel Mgmt Site Restoration SAFSTOR Year Trust Funds Expenditures Expenditures Expenditures Expenditures Year Balance (Reflects 2% RRoRl (Reflects 0% Esc)

(Reflects 0% Esc) fReflects 0% Escl fReflects 0% Escl 2016 582.803 11.293 6.376 29.910 36.285 $

2017 557.811 10.924 15.708 7.515 23.224 2018 545.511 10.835 1.806 5.693 7.499 2019 548.848 10.902 1.806 5.693 7.499 2020 552.251 10.970 1.806 5.693 7.499 $

2021 555.722 11.039 1.806 5.693 7.499 $

2022 559.262 11.110 1.806 5.693 7.499 $

2023 562.873 11.182 1.806 5.693 7.499 $

2024 566.557 11.256 1.806 5.693 7.499 $

2025 570.314 11.331 1.806 5.693 7.499 $

2026 574.146 11.408 1.806 5.693 7.499 $

2027 578.055 11.486 1.806 5.693 7.499 $

2028 582.042 11.566 1.806 5.693 7.499 $

2029 586.109 11.647 1.806 5.693 7.499 2030 590.257 11.730 1.806 5.693 7.499 2031 594.489 11.815 1.806 5.693 7.499 2032 598.804 11.901 1.806 5.693 7.499 2033 603.207 11.981 2.652 5.693 8.345 2034 606.842 12.062 1.806 5.693 7.499 2035 611.405 12.153 1.806 5.693 7.499 2036 616.059 12.246 1.806 5.693 7.499 2037 620.807 12.341 1.806 5.693 7.499 2038 625.649 12.438 1.806 5.693 7.499 2039 630.588 12.537 1.806 5.693 7.499 2040 635.625 12.638 1.806 5.693 7.499 2041 640.764 12.740 1.806 5.693 7.499 2042 646.005 12.845 1.806 5.693 7.499 2043 651.351 12.952 1.806 5.693 7.499 2044 656.805 13.061 1.806 5.693 7.499 2045 662.367 13.172 1.806 5.693 7.499 $

2046 668.040 13.286 1.806 5.693 7.499 $

2047 673.827 13.400 1.806 5.827 7.633 $

2048 679.594 13.523 1.818 5.028 6.846 2049 686.271 13.707 1.823 1.823 $

2050 698.155 13.945 1.823 1.823 $

2051 710.276 14.187 1.823 1.823 $

2052 722.640 14.435 1.823 1.823 $

2053 735.252 14.687 1.823 1.823 $

2054 748.115 14.944 1.823 1.823 $

2055 761.236 15.206 1.823 1.823 $

2056 774,619 15.474 1.823 1.823 $

2057 788.270 15.747 1.823 1.823 $

2058 802.194 16.026 1.823 1.823 $

2059 816.397 16.310 1.823 1.823 $

2060 830.883 16.599 1.823 1.823 $

2061 845.659 16.895 1.823 1.823 $

2062 860.731 17.196 1.823 1.823 $

2063 876.104 17.504 1.823 1.823 $

2064 891.785 17.817 1.823 1.823 $

2065 907.779 18.137 1.823 1.823 $

2066 924.093 18.464 1.823 1.823 $

2067 940.733 18.681 13.376 13.376 $

2068 946.038 18.680 24.069 24.069 $

2069 940.649 18.346 46.681 46.681 2070 912.314 17.180 106.675 106.675 $

2071 822.819 15.483 97.347 97.347 $

2072 740.955 14.186 51.594 11.755 63.349 $

2073 691.792 13.564 0.115 2.183 24.909 27.206 $

Remaining$ in 2016 Dollars 451.604 215.559 36.664 703.827 Est. Fund Balance (end of Decommissioning) (in Future$ escalated at 0.0% & 2.0% Real Rate of Return Fund Growth Rate)

Est. Fund Balance (end of Decommissioning) discount to 2016 Dollars Discount Rate = 2.00%

Column 7 End Of Year Balance 557.811 545.511 548.848 552.251 555.722 559.262 562.873 566.557 570.314 574.146 578.055 582.042 586.109 590.257 594.489 598.804 603.207 606.842 611.405 616.059 620.807 625.649 630.588 635.625 640.764 646.005 651.351 656.805 662.367 668.040 673.827 679.594 686.271 698.155 710.276 722.640 735.252 748.115 761.236 774.619 788.270 802.194 816.397 830.883 845.659 860.731 876.104 891.785 907.779 924.093 940.733 946.038 940.649 912.314 822.819 740.955 691.792 678.149 678.149 219.339

Serial No.16-106 Page 3 of 3 Table II Definitions:

Column 1:

Column 2:

Column 3:

Column 4:.

Column 5:

Column 6:

Column 7:

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.

Earnings on Trust Funds:

Reflects earnings on funds remaining in the Trust. A 2.0% RRoR Fund growth rate is used for 2016 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.

Remaining License Termination Expenditures:

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

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 provides information related to funding for managing irradiated fuel as required by 10 CFR 50.82(a)(8)(vii).

Remaining Site Restoration Expenditures:

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

Remaining SAFSTOR Expenditures:

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

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: (Any minor differences in totals are due to rounding.)

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, 2015, 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 1 O 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)

By letter dated January 28, 2015 (ADAMS Accession No. ML15034A312) DEK submitted a Commitment for Parent Company Guarantee (PCG) and Notice of Request to Discontinue Existing Parent Support Agreement (PSA) from Dominion Resources, Inc. (ORI). *The PCG provides additional assurance to address any potential shortfalls in decommissioning funding assurance for KPS, up to

$60 million. The NRC staff has completed review of the KPS submittal. By letter dated December 14, 2015 (ADAMS Accession No. ML15344A503), the NRC notified DEK that it has no objection to the cancellation of the $60 million PSA, issued by ORI, for KPS.

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 (ADAMS Accession No. ML13337A287), the NRC granted DEK an exemption allowing the Trust to be used for spent fuel management costs.

Serial No.16-106 KPS Decommissioning Funding Status Report Financial Test for Year Ended December 31, 2015 Paragraph 11.A.2 of Appendix A to 10 CFR Part 30 Kewaunee Power Station Dominion Energy Kewaunee, Inc. (DEK)

Dominion Resources Services, Inc.

P.O. Box 26666, Richmond, VA 23261 Dominion March 15, 2016 [UPATE TO 2015]

FINANCIAL TEST Paragraph 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 $500,000,000 in 2 year unsecured senior notes on February 19, 2016. This issuance was rated BBB by Standard and Poor's and Baa2 by Moody's at the time of settlement and maintains these ratings today.

C. DRl'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 Less:

Goodwill Intangible Assets (ii) Tangible Net Worth ORI Total Assets

$ 58,797 Less: Foreign Assets Total US Assets

$ 58.797 FINANCIAL TESTS

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

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

$13,602

$13.602 3,294 570

$ 9,738 YES

~

NO D

D

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?

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 D

D D

D I hereby certify that the content of this Financial Test: Paragraph 11.A.2 of Appendix A to 10 CFR Part 30 is true and correct to the best of my knowledge.

Serial No.16-106 Decommissioning Funding Status Report Deloitte & Touche LLP Attesting Letter of Accuracy of the Financial Test Kewaunee Power Station Dominion Energy Kewaunee, Inc. (DEK)

Deloitteo INDEPENDENT ACCOUNTANTS' REPORT ON APPL YING AGREED-UPON PROCEDURES To the Board of Directors and Shareholders of Dominion Resources, Inc.

Richmond, Virginia Deloitte & Touche LLP West Tower 901 East Byrd Street Suite 820 Richmond, VA 23219 USA Tel: +1804697 1500 Fax: + 1 804 697 1825 www.deloitte.com We have performed the procedures enumerated below, which were agreed to 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 ("U.S. NRC") in evaluating the Company's compliance with the financial test to demonstrate financial assurance for the year ended December 31, 2015, as specified in Appendix A to Part 30 of the United States Code of Federal Regulations (the "Financial Test"), included as Attachment 1 to the financial assurance letter dated March 15, 2016 from James Chapman, Senior Vice President Mergers & Acquisitions and Treasurer of Dominion Resources, Inc. to the U.S. NRC (the "Financial Assurance Letter"). Dominion's management is responsible for the Financial Test and compliance with the 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 those 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 audited consolidated financial statements as of December 31, 2015, on which we have issued our report dated February 26, 2016, 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 "Foreign Assets" in Attachment 1 to the Company's Financial Assurance Letter to the corresponding amounts in a schedule or report prepared by the Company as of December 31, 2015, 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.

Member of Deloitte Touche Tohmatsu Umited

With respect to procedures outlined in Paragraph 11.B of Appendix A of the U.S. NRC's 10 CFR Part 30, professional standards preclude us from providing any form of report or assurance on matters relating to solvency. Accordingly, we did not perform any such procedures and no such form of report or assurance is provided.

We were not engaged to, and did not, conduct an examination, the objective of which would be the expression of an opinion on compliance of the Financial Assurance Letter. 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. NRC, and is not intended to be and should not be used by anyone other than these specified parties.

D~

i T~ LL.f March 24, 2016 Dominion Energy Kewaunee, Inc.