ML18153C311

Decommisioning Financial Assurance Certification Rept for Surry Power Station & North Anna Power Station.

ML18153C311
Person / Time
Site:	Surry, North Anna
Issue date:	07/26/1990
From:	Stewart W Virginia Power (Virginia Electric & Power Co)
To:
Shared Package
ML18151A967	List: ML18151A966 ML18153C310 ML18153C311 ML20056A034
References
NUDOCS 9008030086
Download: ML18153C311 (18)

Text

ENCLOSURE A Decommissioning Financial Assurance Certification Report for Surry Power Station

• and North Anna Power Station

• DECOMMISSIONING FINANCIAL ASSURANCE CERTIFICATION REPORT Virginia Electric and Power Company (the Company) hereby submits this

• Decommissioning Financial Assurance Certification Report in compliance with 10 CFR 50.33(k) and 50. 75(b ).

1. The Company owns the following undivided interests in these nuclear power facilities:

Surry Power Station Units 1 and 2 100.0%

North Anna Power Station Units 1 and 2 88.4%1

2. The Company is responsible for the following percentages of the decommissioning costs for these nuclear power facilities:

Surry Power Station Units 1 and 2 100.0%

North Anna Power Station Units 1 and 2 89.6%2

3. The Company hereby certifies that financial assurance for decommissioning the above facilities is provided in the amount of $476.20 million. The calculation of this amount is set forth in Enclosure B and complies with the formula specified in

• 10 CFR 50.75(c). The Company acknowledges the following interests with respect to the total financial assurance amount:

Surry Power Station Units 1 and 2 North Anna Power Station Units 1 and 2 100.0%

89.6%

$246.36 million

$229.84 million Total $476.20 million

4. The method by which the Company will provide financial assurance for decommissioning the facilities will be by the use of established external sinking fund accounts in which deposits will be made at least annually in accordance with 10 CFR 50.75(e).

5. Attached as Enclosure C to this Decommissioning Financial Assurance Certification Report are copies of the Company's Qualified Nuclear Decommissioning Trust and Non-Qualified Nuclear Decommissioning Trust agreements. These documents are the financial instruments which evidence the Company's described method of providing financial assurance. The Company is maintaining two external trust accounts to segregate those funds that qualify for tax deductibility as required by Section 468A of the Internal Revenue Code of 1954, as amended, and those funds that do not qualify for such deductibility.

1 Old Dominion Electric Cooperative owns 11.6% of North Anna Power Station Units 1 and 2 .

2 Old Dominion Electric Cooperative is responsible for 10.4% of the decommissioning costs for North Anna Power Station.

• 6. The Company is accumulating funds for decommissioning. As of December 31, 1989, Virginia Electric and Power Company has collected 13.75% of the required decommissioning funds assuming an after tax earnings rate of 6.75% on these funds until station retirement. These collections have been deposited in the external trust accounts and are managed by external investment managers.

Earnings are reinvested into investments held by the trusts.

7. Attached as Enclosure D to this Decommissioning Financial Assurance Certification Report are schedules for implementing the Company's method of providing financial assurance for decommissioning North Anna and Surry Power Stations.

I hereby certify that the information provided above is true and correct to the best of my knowledge.

Virginia Electric and Power Company By:

W. L. Stewart Senior Vice President - Nuclear

COMMONWEALTH OF VIRGINIA )

)

COUN1Y OF HENRICO )

The foregoing document was acknowledged before me, in and for the County and Commonwealth aforesaid, today by W. L. Stewart who is Senior Vice President - Nuclear, of Virginia Electric and Power Company. He is duly authorized to execute and file the foregoing document in behalf of that Company, and the statements in the document are true to the best of his knowledge and belief.

Acknowledged before me this 2~ day of =-H-=~=-"-,t--' 19 qo.

My Commission Expires: ~

• 31, , 19 q<1l

_lfiCe!~ y ~}/_u_£L__

• Notarf~ublic I*- (.SEAL):

ENCLOSURE 8 Calculation of the Decommissioning Financial Assurance Amount for Surry Power Station

• and North Anna Power Station

Page 1 of 3 ENCLOSURE B

• Calculation of the Minimum Amount Necessary to Assure Availability of Funds for Decommissioning North Anna and Surry Power Stations The NRC rule, published on June 27, 1988, provides guidance and contains a formula, based upon reactor type and the thermal megawatt rating of the nuclear unit, for determining the "minimum amount" required to demonstrate reasonable assurance of fund availability for decommissioning. This guidance recognized three major constituents of decommissioning costs, i.e., labor, energy, and burial. The rule also

• contains a means of adjusting, i.e., escalating, the amount from. the .1986 value generated by the megawatt-based formula to current economic levels.

Using the NRC formula, the following minimum financial assurance amounts were determined necessary for removal of radioactivity from the facilities. All costs are in millions of dollars.

Minimum Amount Required (as per NRC rule) - 1986 Dollars*

Surry Power Station Unit 1 2441 MWt $96.48 Surry Power Station Unit 2 2441 MWt $96.48

• North Anna Power Station Unit 1 North Anna Power Station Unit 2 2893 MWt 2893 MWt As discussed in Exhibit A, North Anna Power Station is partially owned by Old

$100.46

$100.46 Dominion Electric Cooperative. Therefore, the Company acknowledges responsibility for the following interests with respect to the total decommissioning financial assurance amounts. All costs are in millions of dollars.

NRC Minimum Amount - 1986 Dollars - Company Responsibility Portion*

Surry Power Station Unit 1 100% $96.48 Surry Power Station Unit 2 100% $96.48 North Anna Power Station Unit 1 89.6% $90.01 North Anna Power Station Unit 2 89.6% $90.01 Total $372.98 As evidenced by the NRC report NUREG-1307, "Report on Waste Burial Charges," this minimum financial assurance amount is based on burial costs associated with the Hanford, Washington burial site. Both Surry and North Anna are currently using the

• The formulae and calculations used are presented in Attachment 2 to this enclosure.

Page 2 of 3 ENCLOSURE 8 regional burial site in Barnwell, South Carolina. Therefore, it is appropriate to adjust this amount for the relative difference in burial costs.

The following financial assurance amounts were determined by adjusting the amount described above from January 1986 dollars with burial in Washington to January 1986 dollars with burial in South Carolina. This adjustment was made using the NRC cost escalation formula and the values for burial cost escalation as a function of burial site found in NUREG-1307. The values for burial cost escalation taken from NUREG-1307 are used only as a relative escalation factor for the differences in cost between Washington and South Carolina. All costs are in millions of dollars.

NRC Minimum Amount - 1986 Dollars - Adjusted to South Carolina Burial*

Surry Power Station Unit 1 $103.34 Surry Power Station Unit 2 $103.34 North Anna Power Station Unit 1 $96.41 North Anna Power Station Unit 2 $96.41 Total $399.50

• As described previously, the NRC rule contains a means of escalating the "minimum amount" from the 1986 value generated by the megawatt-based formula to current economic levels. The references provided as sources of economic indices are somewhat non-specific. In efforts to apply the escalation formula to the NRC minimum amount, a decommissioning consultant firm employed by Virginia Electric and Power Company discussed several potentially pertinent economic indices with the NRC staff.

As a result of these discussions, the appropriate economic indices for escalation of each financial component of the decommissioning cost amount were determined. The labor indices were extracted from the U.S. Department of Labor, Bureau of Labor Statistics' publication "Monthly Labor Review," the Employment Cost Index, Compensation, Worker by Region. The energy indices were obtained from the Bureau of Labor Statistics' publication "Producer Price Indexes," Commodity Group Code 0543 for industrial power by region and Commodity Group Code 0573 for light fuel oils. These two energy indices were combined, for a PWR unit, using the formula:

Combined Energy Indices= 0.58 (P) + 0.42 (F),

where (P) is the industrial power index and (F) is the index for light fuel oils. For burial cost escalation for a specific nuclear station, it was determined best based upon a regional site and not an average of the nation's three commercial operating burial facilities. Consequently, the escalation of the burial components for the North Anna and Surry Power Stations was based on the increase in base disposal charges at

• The formulae and calculations used are presented in Attachment 2 to this enclosure.

Page 3 of 3 ENCLOSURE B Chem-Nuclear Systems' Low-Level Radioactive Waste Management Facility located in Barnwell, South Carolina. Specifically, in January 1986, the base disposal charge was $27.62/cubic foot. In January 1990, that same charge is now $38.71. A ratio of the two charges produces an "escalator" of 1.40 for the four year period. This factor was used as "8" in the escalation formula.

Using the NRC escalation formula and the identified economic indices the following costs were determined for removal of radioactivity (the NRC's definition of decommissioning) in 1990 dollars. All costs are in millions of dollars.

NRC Minimum Amount - Escalated to 1990 Dollars*

Surry Station Unit 1 $123.18 Surry Station Uni_t 2 $123.18 North Anna Station Unit 1 $114.92 North Anna Station Unit 2 $114.92 Total $476.20 A tabulation summary of these calculations is provided as Attachment 1 to this enclosure .

• The economic indicators, formulae, and calculations used are presented in Attachment 3 to this enclosure.

ENCLOSURE B Page 1 of 1 Attachment 1

• '"*NRC Minimum. Financial Assurance .Amount Calculation Summary Tabulation

• NRC Minimum Amount- NRC Minimum Company NRG Minimum Adjusted to . Amount -

Responsible Amount S.C. Burial Escalated to Percentage (1986 dollars) (1986 dollars) 1990 dollars Station (See Note 1) (See Note 2) (See Note 3) (See Note 4)

Surry Unit 1 100% $96.48 $103.34 $123.18 Surry Unit 2 100% $96.48 $103.34 $123.18 Station Total 100% $192.96 $206.68 $246.36

• North Anna Unit 1 North Anna Unit 2 Station Total 89.6%

89.6%

89.6%

$90.01

$90.01

$180.02

$96.41

$96.41

$192.82

$114.92

$114.92

$229.84 Company Total - $372.98 $399.50 $476.20

• All costs are in millions of dollars.

Note (1) Company's undivided interest in Surry Power Station is 100% and in North Anna Power Station is 88.4%. However, the Company is responsible for 89.6% of the decommissioning costs for North Anna Power Station. Old Dominion Electric Cooperative responsible for 10.4% of the decommissioning costs for North Anna Power Station.

Note (2) Company's percentage of the NRG Minimum Cost Amount as calculated per the NRG rule.

Old Dominion Electric Cooperative is responsible for 10.4% of the decommissioning costs for North Anna Power Station.

Note (3) NRG Minimum Cost Amount, adjusted for SC Burial site, calculated as per NRC rule.

Note (4) The minimum cost amount in 1986 dollars is escalated by the formula:

Escalated Cost Amount= [NRG Minimum Amount] [(0.65)(L) + (0.13)(E) + (0.22)(8)].

ENCLOSURE 8 Page 1 of 2

• Attachment 2 Determination of the NRC Minimum Financial Assurance Amount For Each Surry Unit (PWR)

The NRC Minimum Cost Amount'

• is calculated in January 1986 dollars:

Minimum Cost Amount'=$ (75 + 0.0088 P) millions of dollars where: P = the thermal power rating of the reactor (MWt)

P = 2441 MWt Minimum Cost Amount'=$ [75 + 0.0088 (2441 )] millions of dollars Minimum Cost Amount'= $96.48 millions of dollars The NRC Minimum Cost Amount' is then adjusted to compensate for the relative difference between burial costs at Hanford, Washington and Barnwell, South Carolina (Reference NUREG-1307). This adjustment is made by escalating the "minimum cost amount" from January 1986 dollars in Washington to January 1986 dollars in South Carolina using the NRC cost escalation formula:

1 Minimum Cost Amount = [Minimum Cost Amount [0.65 (L) + 0.13 (E) + 0.22 (B)]

where: L = Labor Cost Escalation (Dec. 85 / Dec. 85) = 1 E = Energy Cost Escalation (Jan. 86 I Jan. 86) = 1 B = Burial Cost Escalation (Jan. 86, SC I Jan. 86, WA) =1.323 Minimum Cost Amount = [$96.48] [0.65 + 0.13 + (0.22)(1.323)]

Minimum Cost Amount= $103.34 millions of dollars

• The prime symbol ( ') designates the NRC Minimum Amount calculated with burial costs at Hanford, Washington.

ENCLOSURE B Page 2 of 2 Attachment 2 Determination of the NRC Minimum Financial Assurance Amount For Each North Anna Unit (PWR):

The NRC Minimum Cost Amount"

• is calculated in January 1986 dollars:

Minimum Cost Amount"=$ (75 + 0.0088 P) millions of dollars where: P = the thermal power rating of the reactor (MWt)

P = 2893 MWt Minimum Cost Amount"= $ [75 + 0.0088 (2893)] millions of dollars Minimum Cost Amount"= $100.46 millions of dollars This NRC Minimum Cost Amount" is then adjusted to reflect the Company's 89.6%

ownership of North Anna Power Station:

Minimum Cost Amount' # =$[Minimum Cost Amount"* (89.6%)] millions of dollars Minimum Cost Amount'=$ (100.46)(0.896) millions of dollars Minimum Cost Amount'= $90.01 millions of dollars The NRC Minimum Cost Amount' is then adjusted to compensate for the relative difference between burial costs at Hanford, Washington and Barnwell, South Carolina (Reference NUREG-1307). This adjustment is made by escalating the "minimum cost amount" from January 1986 dollars in Washington to January 1986 dollars in South Carolina using the NRC cost escalation formula:

Minimum Cost Amount = [Minimum Cost Amount1 [0.65 (L) + 0.13 (E) + 0.22 (B)]

where: L = Labor Cost Escalation (Dec. 85 / Dec. 85) = 1 E = Energy Cost Escalation (Jan. 86 I Jan. 86) = 1 B = Burial Cost Escalation (Jan. 86, SC/ Jan. 86, WA) =1.323 Minimum Cost Amount = [$90.01] [0.65 + 0.13 + (0.22)(1.323)]

Minimum Cost Amount= $96.41 millions of dollars

• The double prime symbol(") designates the NRC Minimum Amount calculated with burial costs at Hanford, Washington .

1. The prime symbol (') designates the Company's portion of the NRC Minimum Amount calculated with burial costs at Hanford, Washington.

ENCLOSURE 8 Page 1 of 1 Attachment 3 Escalation of the NRC Minimum Financial Assurance Amount The NRC Minimum Cost Amount is then escalated to January 1990 dollars using the NRC cost escalation formula:

Escalated Cost Amount = [Minimum Cost Amount] [0.65 (L) + 0.13 (E) + 0.22 (B)]

where: L = Labor Cost Escalation (Dec. 89 I Jan. 86) * = ~ 1~:~ = 1.15 E = Energy Cost Escalation (Jan. 90 I Jan. 86) # =

(0 *58) ( P; Jan. 90) (O ) (F; Jan. 90)

P; Jan. 86 + *42 F; Jan. 86 =

(0.58 ) ( 119.3) ( ) (85.3) 113.6 + 0.42 82.0 = 1.05 B = Burial Base Rate Escalation (Jan. 90, SC/ Jan. 86, SC) ** = 1.40 For Each Surry Unit Escalated Cost Amount = [$103.34] [(0.65)(1.15) + (0.13)(1.05) + (0.22)(1.40)]

Escalated Cost Amount = $123.18 millions of dollars For Each North Anna Unit Escalated Cost Amount = [$96.41] [(0.65)(1.15) + (0.13)(1.05) + (0.22)(1.40)]

Escalated Cost Amount = $114.92 millions of dollars A summary of the escalation factors used for Labor is provided as Appendix 1 .

1. A summary of the escalation factors used for Energy is provided as Appendix 2.

• • A discussion of the escalation factors used for Burial is in Enclosure B.

ENCLOSURE B Page 1 of 1 APPENDIX 1 Escalation for Labor Costs The escalation factor for labor costs can be derived from data in the Bureau of Labor Statistics' (BLS') "Monthly Labor Review." The BLS provides this labor data for four geographic regions of theUnited States (Northeast, South, Midwest, and West). The four nuclear power facilities owned by the Company are located in the Southern Region. The 1986 and the recent 1989 BLS labor cost data are specified by region below.

Labor ("L") Escalation Factor

• for December, 1989 Region** Jan. '86 Dec. '89 "L" Northeast 130.5 160.0 1.23 South 127.7 147.3 1.15 Midwest 125.0 143.6 1.15

• west 130.1 147.5 1.13 Values used in this chart were obtained from "Monthly Labor Review," published by the U.S. Department of Labor, Bureau of Labor Statistics.

Regional breakdown by cities and states as set forth in the "Monthly Labor Review."

Northeast Massachusetts, New York, Connecticut, New Jersey, Pennsylvania, Maine, New Hampshire and Rhode Island.

South Georgia, Maryland, Texas, Florida, Alabama, Mississippi, Kentucky, Indiana (Louisville area), Tennessee, Arkansas, Louisiana, Virginia, South Carolina, North Carolina, Delaware (Wilmington area, including part of New Jersey) and the District of Columbia.

Midwest Illinois, Ohio, Kentucky (Cincinnati area), Indiana, Iowa, Michigan, Missouri, Kansas, Wisconsin, Minnesota and Nebraska.

West California, Montana, Colorado, Oregon, Utah, Washington, Idaho and Arizona .

ENCLOSURE B Page 1 of 1

• APPENDIX 2 Escalation Factor for Energy Costs The equation for calculating the energy escalation factor for a PWR is as follows:

E = [0.58P + 0.42F]

The escalation factor for energy costs can be derived from data in the Bureau of Labor Statistics' (BLS) table entitled "Producer Price Indexes and Percent Changes for Commodity Groupings and Individual Items." The NRC's draft Regulatory Guide explains that E consists of two sub-components: electric power

("P") and fuel oil ("F"). When utilizing the BLS data, the values for "P" must be taken from the approporiate regional BLS data for "Industrial Power" (Commodity Code 0543 in Table 6) and the value of "F" must be taken from the BLS data for "light fuel oils" (Commodity Code 0573 in Table 6). The January, 1986 and the January, 1990 BLS energy cost data are specified by region below:

Power ("P").Escalation Factor ..

for January, 1990 Region .... Jan. '86 Jan. '90 "P" New England 105.8 106.1 1.00 Mid-Atlantic 111.9 117.3 1.05 East North Central 115.3 115.6 1.00 West North Central 115.6 132.3 1.14 South Atlantic 119 .3 113 .6 0.95 East South Central 117.4 122.5 1.04 West South Central 111.4 109.9 0.99 Mountain 119.3 107.2 0.89 Pacific 112.2 119.0 1.06 Fuel Oil ("F") Escalation Factor ..

for January, 1990 Region .... Jan. '86 Jan. '90 "F" All 82.0 85.3 1.04 Combined Energy ("E") Escalation Factor ..

for January, 1990 "E" (PWR) = 0.58 (P) + 0.42 (F) = 0.58 (0.95) + 0.42 (1.04) = 0.99

• The regions by states are as follows:

New England - Maine, Vermont, New Hampshire, Massachusetts, Connecticut and Rhode Island.

Mid-Atlantic New York, New Jersey and Pennsylvania.

South Atlantic Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida, Delaware, Maryland and the District of Columbia.

East North Central Ohio, Indiana, Illinois, Michigan and Wisconsin.

West South Central - Arkansas, Louisiana, Oklahoma and Texas.

East South Central Kentucky, Tennessee, Alabama and Mississippi.

West North Central Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska and Kansas.

Mountain Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah and Nevada.

Pacific Washington, Oregon, California, Alaska and Hawaii.

• • Rounded to the nearest hundredth.

ENCLOSURE C Virginia Electric and Power Company Qualified Nuclear Decommissioning Trust Trust Agreement and Virginia Electric and Power Company Non-Qualified Nuclear Decommissioning Trust Trust Agreement

• (Copies of the Company's Financial Instruments for Providing Assurance of Availability of Funds for Decommissioning North Anna and Surry Power Stations)

VIRGINIA ELECTRIC AND POWER COMPANY NUCLEAR DECOMMISSIONING TRUST TRUST AGREEMENT AMENDMENT THIS TRUST AGREEMENT AMENDMENT made the 23rd day of December, 1987, between VIRGINIA ELECTRIC AND POWER COMPANY, a Vir-ginia corporation, the Granter, and CRESTAR BANK (formerly United Virginia Bank), a Virginia banking corporation with trust powers, the Trustee, provides:

WHEREAS the Granter and the Trustee made a Trust Agree-ment dated December 31, 1985, to establish the VIRGINIA ELECTRIC AND POWER COMPANY NUCLEAR DECOMMISSIONING TRUST (the "Trust"),

WHEREAS section 5.01 of the Trust Agreement reserved to the Granter the right to amend the Trust Agreement subject to cer-tain restrictions, and WHEREAS the Granter now wishes to make amendments to the Trust Agreement that do not contravene the restrictions imposed by section 5.01; NOW, THEREFORE, the Granter and the Trustee agreed to amend the Trust as follows:

1. Name. The first sentence of section 1.01 of the Trust Agreement is ***amended to read: "The name of the Trust is the VIR-GINIA ELECTRIC AND POWER COMPANY QUALIFIED NUCLEAR DECOMMISSIONING TRUST."

2. Trust committee. Section 1.03 of the Trust Agreement is

• redesignated as section 1.04, and a new section 1.03 is added to read:

wl.03. Trust committee.

"The Grantor may establish a Nuclear Decommissioning Trust Commit-tee composed of any three or more persons appointed by the Grant-or's Board of Directors on whatever terms the Board desires. The Committee has the authority to exercise all of the Grantor's powers under the Agreement, and the Trustee will treat the directions and other actions of the Committee as the directions or actions of the Grantor. The Granter must certify to the Trustee all appointments to or removals from the Committee, and the Trustee must recognize written instructions signed by any two committee members as a di-rective from the Committee.~

3. Directing the Trustee. Section 3.04(c) of the Trust Agreement is amended to read: "If exercised, the Grantor's right to direct investment and reinvestment includes the right to select investment managers, brokers, salesmen, or agents to handle invest-ments or execute investment orders. The Granter may give an in-vestment manager any of the Grantor's powers, pursuant to this sec-tion 3.04 or otherwise, by so certifying in writing to the Trustee.

The Trustee is not responsible for the selection, terms of appoint-ment, compensation, or conduct of any investment manager, broker, salesman, or agent selected by the Granter, but the Trustee remains responsible for its own actions in its dealings with such persons in accordance with the provisions of section 2.03 of this Agree-ment.w

4. Other provisions. All provisions of the Trust Agreement not expressly amended by this Trust Agreement Amendment continue in full force and effect

• IN WITNESS of this Trust Agreement Amendment, the Grantor

.and the Trustee have signed below on this 23rd day of December, 1987.

ATTEST: VIRGINIA ELECTRIC AND POWER COMPANY Assistant By: _ ____.~--~---:+--',4.J-f~+-~--------

Ll.nwooaR~~..Jt.oer tson Secretary Vice President, Treasurer and Corporate Secretary ATTEST: CRESTAR BANK