RC-17-0037, Report of Status of Decommissioning Funding

Report of Status of Decommissioning Funding

ML17087A168
Person / Time
Site:	Summer
Issue date:	03/28/2017
From:	Kochems K, Lippard G South Carolina Electric & Gas Co
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
RC-17-0037
Download: ML17087A168 (13)

Text

George A. Lippard Vice President, Nuclear Operations 803.345.4810 March 28, 2017 RC-17-0037 A SCANA COMPANY Document Control Desk U. S. Nuclear Regulatory Commission Washington, DC 20555

Subject:

VIRGIL C. SUMMER NUCLEAR STATION DOCKET NO. 50-395 OPERATING LICENSE NO. NPF-12 REPORT OF STATUS OF DECOMMISSIONING FUNDING South Carolina Electric and Gas Company (SCE&G) and the South Carolina Public Service Authority (Santee Cooper) have undivided ownership interests of two-thirds and one-third respectively in the V. C. Summer Nuclear Station (VCSNS). As provided in 10 CFR 50.75(f)(1),

SCE&G is required to report to the Nuclear Regulatory Commission (NRC), by March 31, 1999, and every two years thereafter, on the status of its decommissioning funding for its two thirds share of ownership of VCSNS. Santee Cooper discloses the required information relative to its one-third ownership share in a separate submittal.

The following information is submitted pursuant to the requirement of 10 CFR 50.75(f)(1):

The amount of decommissioning The amount of decommissioning funds estimated to be funds estimated to be required required pursuant to 10 CFR 50.75 (b) and (c) for SCE&G's pursuant to 10 CFR 50.75 (b) and two-thirds ownership of VCSNS is $286,884,080 (2016 (C); dollars). Please see Attachment I for the calculation of this amount.

The amount accumulated at the Note: SCE&G does not maintain separate trusts for funds end of the calendar year preceding designated to cover radiological decommissioning costs and the date of the report; funds to cover other decommissioning costs. Of the accumulated funds in the trust, approximately 88.69% are considered to be related to funding costs included in the NRC's definition of decommissioning pursuant to 10 CFR 50.75 (b) and (c), while the remaining 11.31% are considered to be related to other decommissioning costs.

The 88.69% is the ratio of the total radiological decommissioning cost estimate in a 1991 site specific cost study prepared for VCSNS to the total amount that served as the basis for collections through electric rates in an electric rate order issued by the Public Service Commission of South Carolina (SCPSC) in 1993. The calculation is as follows:

V. C. Summer Nuclear Station

• P. 0. Box 88

• Jenkinsville, South Carolina

• 29065

• F (803) 941-9776

• www.sceg.com

Site-specific study (1991) estimate of decommissioning costs pursuant to NRC definition (two-thirds portion) $118,256,667 Customer collection basis (two-thirds portion) 133,333,333 Percent of costs/collections related to items included in NRC definition of decommissioning 88.69%

As such, 88.69% of the decommissioning fund balance, after-tax collections and program costs are presented in The Financial Assurance Model in Attachment II.

The total trust fund balance at December 31, 2016, was

$177,570,059 aftertax. This balance includes cash and the cash surrender values of life insurance policies. Advances of

$54,890,000 from SCE&G to fund premium payments have not been deducted in arriving at this amount.

The portion of the above trust fund balance considered to be related to radiological decommissioning requirements addressed in the NRC's financial assurance formula was

$157,486,885 after tax at December 31, 2016. This balance includes cash and the cash surrender values of life insurance policies. Advances of $48,681,941 from SCE&G to fund premium payments that are considered to be applicable to this portion of the fund have not been deducted in arriving at the balance. These amounts reflect 88.69% of total balances, as described above.

The portion of the trust fund considered to be related to other decommissioning costs was $20,083,174 after tax at December 31, 2016. This balance includes cash and the cash surrender values of life insurance policies. As above, advances of $6,208,059 from SCE&G to fund premium payments that are considered to be applicable to this portion of the fund have not been deducted in arriving at this balance. These amounts reflect 11.31% of total balances, as described above.

SCE&G's use of decommissioning funds does not require prior approval from the SCPSC. Moreover, SCE&G is unaware of any SCPSC requirement prohibiting the Company from using any portion of its decommissioning funds for radiological decommissioning costs. SCE&G will continue to assess the adequacy of annual collections and request rate relief as appropriate based upon results of models incorporating site specific cost study estimates.

Document Control Desk LTD 282 RR 1950 RC-17-0037 Page 3 of 4 A schedule of the annual amounts Please see Attachment II.

remaining to be collected; The after-tax annual collection amount is currently

$1,991,388, which was based on a 1991 site specific study.

Annual amounts collected through rates have not changed since 1993. The after-tax collection amounts shown in the Financial Assurance Model in Attachment II represent 88.69% of the $1,991,388, or $1,766,162.

The assumptions used regarding Please see Attachment II.

escalation in decommissioning cost, rates of earnings on decommissioning funds, and rates of other factors used in funding projections; Any contracts upon which the None licensee is relying pursuant to paragraph (e)(1)(v) of this section; Any modifications occurring to a None licensee's current method of providing financial assurance since the last submitted report; Any material changes to trust None agreements.

Site specific cost estimates for The most recent site specific decommissioning cost study license termination, spent fuel for VCSNS was completed in 2016. The cost estimates management and site taken from that study (in 2016 dollars) were $419,425,340 restoration for license termination, $275,344,000 for spent fuel management and $44,407,330 for site restoration. These estimates represent SCE&G's two-thirds ownership share of costs estimated for the DECON decommissioning alternative.

Document Control Desk LTD 282 RR 1950 RC-17-0037 Page 4 of 4 If you have any questions, please call Mr. Bruce Thompson at (803) 931-5042.

Very truly yours, Vice President Nuclear Operations, SCE&G Kevin R. Kochems Director Nuclear Financial Administration, SCE&G SBR/GAL/KRK/ts Attachments c: K. B. Marsh S. A. Byrne J. B. Archie N. S. Cams S. M. Shealy W. M. Cherry J. H. Hamilton C. Haney S. A. Williams NRC Resident Inspector K. M. Sutton RTS (LTD 282, RR 1950)

File (810.34-2)

PRSF (RC-17-0037)

Document Control Desk Attachment I RC-17-0037 Page 1 of 1 ATTACHMENT I CALCULATION OF AMOUNT OF DECOMMISSIONING FUNDS ESTIMATED TO BE REQUIRED PURSUANT TO 10 CFR 50.75 (b) AND (c)

Base Amount for PWR between 1,200 MWt and 3.400 MWt 1986 Base Cost = $(75 + 0.0088p) million

= $(75 + 0.0088 x 2900) million

= $100,520,000 Estimated Cost (Year X) = (1986 $ Base Cost) (A Lx + B Ex + C Bx)

Estimated Cost 2016 = ($100,520,000) ((.65 x 2.499) + (.13 x 1.871) + (.22 x 10.971))

= ($100,520,000) (1.624+ 0.243+ 2.414)

= $430,326,120 SCE&G's two-thirds ownership share of 2016 Estimated Cost = $286,884,080 Where:

p = 2,900 MWt A = .65 (NUREG 1307 Rev. 16)

B = .13 (NUREG 1307 Rev. 16)

C = .22 (NUREG 1307 Rev. 16)

Lx = 2.499 (Computed Below)

Ex = 1.871 (Computed Below)

Px = 1.883 (Computed Below)

Fx = 1.854 (Computed Below)

Bx = 10.971 (NUREG 1307 Rev. 16)

Lx = (1.98) ase 2005 X (126.2)ECI / (100)

B

= 2.499 Px = December 2016 Value / January 1986 Value

= 215.0/114.2

= 1.883 Fx = December 2016 Value / January 1986 Value

= 152.0/82.0

= 1.854 Ex = ((.58Px) + (.42Fx))

= ((.58 x 1.883)+ (.42 x 1.854))

= (1.092 + 0.779)

= 1.871 The values for the labor adjustment factor (south region), the energy adjustment factor, and the waste burial adjustment factor (Atlantic Compact, direct disposal with vendors) were taken from NUREG 1307, Revision 16.

Document Control Desk Attachment II RC-17-0037 Page 1 of 3 ATTACHMENT II EXPLANATION OF FINANCIAL ASSURANCE MECHANISM AND AMOUNTS REMAINING TO BE COLLECTED Financial Assurance Mechanism SCE&G and Santee Cooper are joint owners of undivided interests in VCSNS. Under the joint ownership arrangement, SCE&G is the operator of VCSNS and shares the ownership, operating costs and energy output of the plant with Santee Cooper in the proportions of two-thirds and one-third, respectively. Under the plan used by SCE&G to fund its share of the costs of decommissioning VCSNS, funds collected through rates are invested in life insurance policies on key company personnel who, in return for participating in the plan, may receive a two-year salary continuation benefit from SCE&G. SCE&G has established a decommissioning trust fund (trust fund) with U.S. Bank, N.A. as Trustee. SCE&G and the trust fund are beneficiaries of the life insurance policies. Lynch & Associates is the servicing agent for the life insurance policies.

Through the purchase of life insurance contracts, SCE&G and the trust fund are able to take advantage of income tax provisions that allow SCE&G to accrue earnings on the life insurance contracts on a tax deferred basis. In a letter dated July 13, 1989, the NRC indicated that the program satisfies the investment criteria of its financial assurance regulations. Further, this funding methodology has been approved by the SCPSC.

Gains and losses related to policy cash surrender values are tax-deferred. Upon the death of the insured, the policy proceeds are remitted tax-free. With regard to general account policies, the trust fund receives the cash surrender value (CSV) and SCE&G receives the death benefit component (minus any CSV paid; plus any interest due from the date of death) in order to recover its term premium and salary continuation payments, if applicable. With regard to separate account policies, SCE&G is currently reinvesting death benefits back into those policies.

Designated amounts collected through electric rates, insurance proceeds, and interest on proceeds, less after-tax expenses of the program, are transferred by SCE&G to the trust fund.

As noted earlier in this report, SCE&G does not maintain separate trusts for radiological and non-radiological segments of the decommissioning process. However, based upon rate treatment received in our 1993 electric rate order, 88.69% of after-tax collections (and also 88.69% of the trust fund balances) are considered to relate to items included in the NRC's definition of radiological decommissioning.

In SCE&G's June 1993 electric rate case, the SCPSC approved gross annual collections for decommissioning in the amount of $3,224,920, based upon cost estimates contained in a 1991 site-specific study. In subsequent rate orders, including a rate order issued in December 2012, the PSC has not changed this amount. SCE&G reassesses the adequacy of annual collections on a periodic basis as site-specific decommissioning cost studies are completed. As noted earlier,

$2,860,181 (88.69% of $3,224,920) or $1,766,162 after-tax, is considered to relate to items included in the NRC's definition of radiological decommissioning.

The Financial Assurance Model on the following page incorporates the 2017 beginning trust fund balance (gross of advances) and projections of annual amounts (after tax) collected through electric rates, program costs (aftertax), investment earnings, and payments of amounts of decommissioning funds estimated to be required pursuant to 10 CFR 50.75 (b) and (c). Relevant assumptions used in the Financial Assurance Model are discussed on page 3 of 3.

Document Control Desk Attachment II RC-17-0037 Page 2 of 3 Financial Assurance Model Schedule of Annual External Trust, Collection Program Beginning Amounts, Net Costs, Decommissioning Investment External Trust, Year Balance of Tax After Tax Payments Earnings Ending Balance 2016 157,486,885 2017 157,486,885 1,766,162 197,971 3,181,102 162,236,178 2018 162,236,178 1,766,162 156,896 3,276,909 167,122,353 2019 167,122,353 1,766,162 156,896 3,374,632 172,106,251 2020 172,106,251 1,766,162 166,481 3,474,119 177,180,051 2021 177,180,051 1,766,162 226,269 3,574,399 182,294,343 2022 182,294,343 1,766,162 156,896 3,678,072 187,581,681 2023 187,581,681 1,766,162 156,896 3,783,819 192,974,766 2024 192,974,766 1,766,162 156,896 3,891,681 198,475,713 2025 198,475,713 1,766,162 201,623 4,000,805 204,041,057 2026 204,041,057 1,766,162 181,541 4,112,514 209,738,192 2027 209,738,192 1,766,162 156,896 4,226,949 215,574,407 2028 215,574,407 1,766,162 156,896 4,343,673 221,527,346 2029 221,527,346 1,766,162 156,896 4,462,732 227,599,344 2030 227,599,344 1,766,162 211,208 4,583,086 233,737,384 2031 233,737,384 1,766,162 181,541 4,706,440 240,028,445 2032 240,028,445 1,766,162 156,896 4,832,754 246,470,465 2033 246,470,465 1,766,162 156,896 4,961,595 253,041,326 2034 253,041,326 1,766,162 201,623 5,092,117 259,697,982 2035 259,697,982 1,766,162 156,896 5,226,145 266,533,393 2036 266,533,393 1,766,162 181,541 5,362,360 273,480,374 2037 273,480,374 1,766,162 156,896 5,501,793 280,591,433 2038 280,591,433 1,766,162 156,896 5,644,014 287,844,713 2039 287,844,713 1,766,162 201,623 5,788,185 295,197,437 2040 295,197,437 1,766,162 156,896 5,936,134 302,742,837 2041 302,742,837 1,766,162 156,896 6,087,042 310,439,145 2042 310,439,145 1,766,162 156,896 13,661,147 5,967,745 304,355,009 2043 304,355,009 156,896 40,983,440 5,264,293 268,478,966 2044 268,478,966 156,896 40,983,440 4,546,773 231,885,403 2045 231,885,403 156,896 40,983,440 3,814,901 194,559,968 2046 194,559,968 156,896 40,983,440 3,068,393 156,488,025 2047 156,488,025 156,896 40,983,440 2,306,954 117,654,643 2048 117,654,643 156,896 40,983,440 1,530,286 78,044,593 2049 78,044,593 156,896 27,322,293 1,011,308 51,576,712 Total 157,486,885 45,920,212 5,560,029 286,884,080 140,613,724 51,576,712

Document Control Desk Attachment II RC-17-0037 Page 3 of 3 Relevant assumptions used in the model to project decommissioning funds through 2049 are as follows:

• Estimated program costs (after tax) that are paid by SCE&G or the trust include salary continuation payments to beneficiaries of the insured and administrative costs. These costs are shown in the model at 88.69% of total estimated program costs.

• Repayment of advances of $54,890,000 from SCE&G to fund premium payments have not been reflected in the model. Advances of $48,681,941, or 88.69%, are considered to be applicable to the fund balance shown in the model.

• The assumed real rate of return on invested funds is 2% based on the provisions of 10 CFR 50.75(e)(1)(ii) which allows "up to a 2 percent annual real rate of return" for licensees that provide decommissioning cost estimates according to the NRC formulas under 10 CFR 50.75(c).

• This 2% earnings credit is taken through the presumed dismantlement period, as allowed for licensees that use the NRC formula under 10 CFR 50.75(c) to derive decommissioning cost estimates.

• Amounts totaling $286,884,080 in 2016 dollars estimated to be required pursuant to 10 CFR 50.75 (b) and (c) based upon the DECON method are expended evenly over the dismantlement period 2042-2049.

It should be noted that the above does not consider the effects of presumed income tax deductibility of decommissioning payments in the years in which such payments are made.

Additionally, the above Financial Assurance Model incorporates the NRC formula-based cost estimates and the DECON (immediate decommissioning) methodology. In contrast, SCE&G currently intends to utilize a deferred decommissioning (SAFSTOR) methodology. Under the SAFSTOR methodology, the site will be placed and maintained for an extended period in a condition that allows for subsequent decontamination to levels that permit release for unrestricted use in 2104.

As noted earlier, SCE&G will continue to assess the adequacy of annual collections and request rate relief as appropriate, based upon results of models incorporating site specific study cost estimates and a SAFSTOR method of decommissioning.

Lastly, similar to that filed and accepted in connection with our 2014 report of status, we have enclosed current certificates of insurance evidencing our coverage for premature decontamination and decommissioning liabilities.

Document Control Desk Attachment III RC-17-0037 Page 1 of 5 ATTACHMENT ill NEIL CERTIFICATE OF INSURANCE POLICY NO. X16-052 Decontamination Liability, Decommissioning Liability, and Excess Property Insurance POLICY NO. P16-082 Primary Property and Decontamination Liability Insurance

CERTIFICATE OF INSURANCE ISSUED TO: United States NRC ADDRESS: Washington, DC 20555 Attn: William Dean Director of Nuclear Reactor Regulation THIS IS TO CERTIFY that insurance has been effected with NUCLEAR ELECTRIC INSURANCE LIMITED, 1201 N. Market Street, Suite 1100, Wilmington, Delaware 19801, under Policy No. XI6-052 as follows:

MEMBER INSURED: SOUTH CAROLINA ELECTRIC AND GAS COMPANY ADDRESS: P.O. Box 764 Columbia, SC 29218 PROPERTY INSURED: Summer Nuclear Station COVERAGE: Decontamination Liability, Decommissioning Liability, and Excess Property Insurance AMOUNT OF A. Except as provided in Item 6.B, the Insurer's maximum Limit INSURANCE: of Liability resulting from any one Accident will not exceed $0.

B. The Insurer's maximum Limit of Liability resulting from any one Accident that involves coverage under paragraph 1.1(a), subsection 1.2 or Section II will not exceed $1,250,000,000; provided, however, that not more than $0 of such Limit of Liability may be used for losses that are covered under Policy provisions other than paragraph 1.1(a), subsection 1.2 or Section II.

INSUREDS: South Carolina Electric & Gas Company and South Carolina Public Service Authority.

POLICY TERM: 12:01 a.m. on April 1, 2016 to 12:01 a.m. on April 1, 2017 Standard time in Hamilton, Bermuda.

X16-052.doc

LOSS PAYEE CLAUSE:

A. Expenses covered under the Nuclear Liability Coverage (subsection I.A.1(a)) shall be adjusted with the Member Insured and payable to:

South Carolina Electric & Gas Company The Member Insured may, by written notice to the Insurer, designate other payees.

B. The expenses covered under the Debris Removal and Decontamination Coverage (subsection 1.1(b)), the losses covered under the Property Damage Coverage (subsection 1.1(c)), and the losses covered under the Functional Total Loss Coverage (subsection 1.2) shall be adjusted with the Member Insured and payable to:

South Carolina Electric & Gas Company The Member Insured may, by written notice to the Insurer, designate other payees.

C. Expenses covered under the Decommissioning Liability Coverage (subsection II.1) shall be adjusted with the Member Insured and payable to:

South Carolina Electric & Gas Nuclear Decommissioning Trust and South Carolina Public Service Authority Nuclear Decommissioning Internal Fund.

The Member Insured may, by written notice to the Insurer, designate other payees.

This Certificate is not transferable and may be canceled by NUCLEAR ELECTRIC INSURANCE COMPANY by giving 60 days written notice to the party to whom this Certificate is issued prior to cancellation of the insurance described herein, unless specifically provided for otherwise under the Terms, Conditions and Exceptions of the Policy.

THIS CERTIFICATE is for information only; it is not a contract of insurance but attests that a policy as numbered herein, and as it stands at the date of this Certificate, has been issued by the Company. Said policy is subject to change by endorsement and cancellation in accordance with its terms.

EFFECTIVE DATE OF THIS CERTIFICATE: April 1, 2016 CERTIFICATE EXPIRES: April 1, 2017, unless canceled sooner.

Signed by:

NUCLEAR ELECTRIC INSURANCE LIMITED fyon, <Hevi6 Jon Levis Underwriter II X16-052.doc

CERTIFICATE OF INSURANCE ISSUED TO: United States NRC ADDRESS: Washington, DC 20555 Attention: William Dean Director of Nuclear Reactor Regulation THIS IS TO CERTIFY that insurance has been effected with NUCLEAR ELECTRIC INSURANCE LIMITED, 1201 N Market Street, Suite 1100, Wilmington, Delaware 19801, under Policy No. P16-082 as follows:

MEMBER INSURED: SOUTH CAROLINA ELECTRIC AND GAS COMPANY ADDRESS: P.O. Box 764 Columbia, South Carolina 29218 PROPERTY INSURED: Summer Nuclear Station COVERAGE: Primary Property and Decontamination Liability Insurance AMOUNT OF A. Except as provided in Item 6.B, the Insurer's maximum Limit of INSURANCE: Liability resulting from any one Accident will not exceed $1.500.000.000.

B. The Insurer's maximum Limit of Liability resulting from any one Accident that involves coverage under paragraph I.A.2, subsection I.F or Section I.G will not exceed $1.500.000.000: provided, however, that not more than

$1.500.000.000 of such Limit of Liability may be used for losses that are covered under Policy provisions other than paragraph I.A.2, subsection I.F or Section I.G.

INSUREDS: South Carolina Electric and Gas Company and South Carolina Public Service Authority POLICY TERM: 12:01 a.m. on April 1, 2016 to 12:01 a.m. on April 1, 2017, Standard time in Hamilton, Bermuda LOSS PAYEE CLAUSE:

A. Expenses covered under Section I.A.2 (Nuclear Liability Coverage) shall be adjusted with the Member Insured and payable to:

South Carolina Electric and Gas Company P16-082.doc

B. All other covered Losses, except for expenses covered under Section I.G. shall be adjusted with the Member Insured and payable to:

Loss, if any under this policy, except losses to Nuclear Fuel and except as to materials and supplies and except as otherwise provided shall be adjusted with South Carolina Electric & Gas Company except as to any particular loss less than the greater of Ten Million Dollars

($10,000,000) and three per centum (3%) of the sum of (x) the principal amount of Securities Outstanding on the date of such particular loss and (y) the principal amount of the Class A Bonds Outstanding on the date of such particular loss, other than Class A Bonds delivered to and held by the Trustee hereunder, to be made payable to The Bank of New York Mellon Trust Company, N.A., successor to Nations Bank of Georgia, National Association, as trustee as the interest of the Trustee may appear.

Payments, if any, under this policy with respect to loss or damage to the Nuclear Fuel covered under the Amended and Restated Nuclear Fuel Agreement dated October 25, 2012, between South Carolina Fuel Company, Inc. and Wells Fargo Bank. National Association, as Collateral Agent, shall be made to such Collateral Agent as its interest may appear.

C. Expenses covered under Section I.G. (Decommissioning Liability Coverage) shall be adjusted with the Member Insured and payable to:

South Carolina Electric & Gas Nuclear Decommissioning Trust and South Carolina Public Service Authority Nuclear Decommissioning Internal Fund.

The Member Insured may, by written notice to the Insurer, designate other payees under Items 10 A, B or C.

This Certificate is not transferable and may be canceled by NUCLEAR ELECTRIC INSURANCE LIMITED by giving 60 days written notice to the party to whom this Certificate is issued prior to cancellation of the insurance described herein, unless specifically provided for otherwise under the Terms, Conditions and Exceptions of the Policy.

THIS CERTIFICATE is for information only; it is not a contract of insurance but attests that a policy as numbered herein, and as it stands at the date of this Certificate, has been issued by the Company. Said policy is subject to change by endorsement and cancellation in accordance with its terms.

EFFECTIVE DATE OF THIS CERTIFICATE: April 1, 2016 CERTIFICATE EXPIRES: April 1, 2017, unless canceled sooner.

Signed by:

NUCLEAR ELECTRIC INSURANCE LIMITED

$on otevii Jon Levis Underwriter II P16-082.doc