ML19092A267

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Decommissioning Funding Status Report, Financial Test and Independent Public Accountants' Letter of Attestation
ML19092A267
Person / Time
Site: Kewaunee Dominion icon.png
Issue date: 03/28/2019
From: Gerald Bichof
Dominion Energy Kewaunee
To:
Document Control Desk, Office of Nuclear Reactor Regulation
References
19-047
Download: ML19092A267 (12)


Text

Dominion Energy Kewaunee, Inc.

~ Dominion 5000 Dominion Boulevard, Glen Allen, VA 23060 DominionEnergy.com March 28, 2019 p- Energy United States Nuclear Regulatory Commission Serial No.19-047 Attention: Document Control Desk NRA/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).

Enclosure 1 provides the following information for KPS:

Table I - Decommissioning Funding Status Report for KPS Summary Information as of December 31, 2018 Table II - Decommissioning Funding Status Report for KPS Annual Cash Flow Analysis Starting January 1, 2019 through End of Decommissioning The following information is provided in support and as part of this filirig:

1. The escalation of decommissioning costs from the Cost Study's 2018 dollars to 2019 dollars is 1.94% and is based upon the average of CPI-U rates, Bureau of Labor Statistics, FCPIU.US CPI: Consumer Price Index for All Urban Consumers, (Index 1982-84=100, SA) for that period. *
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 bal,ances 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 23, 2018 (Serial No.18-089, ADAMS Accession No. ML 18092AD82) there have been no changes to the Trust agreements established for nuclear decommissioning of KPS.

Serial No.19-047 KPS Decommissioning Funding Status Report Page 2 of 2 Additionally, in a submittal dated January 28, 2015 (Serial No.15-001, ADAMS Accession No. ML15034A312), Dominion Resources, Inc. (now known as Dominion Energy, Inc.) 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 DE K'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 1

accuracy of the financial test . 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.

Sbly, G. T. Bischof Senior Vice President - Nuclear Operations & Fleet Performance Dominion Energy Kewaunee, Inc.

Enclosure:

1. Kewaunee Power Station Decommissioning Funding Status Report as of December 31, 2018 Attachments:
1. Financial Test for Year Ended December 31, 2018, 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. H. 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 1

DEK 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.19-047 KPS Decommissioning Funding Status Report Enclosure 1 Decommissioning Funding Status Report for KPS Summary Information as of December 31, 2018 Kewaunee Power Station Dominion Energy Kewaunee, Inc. (DEK)

Serial No. 19-04 7 Enclosure 1 Page 1 of 3 Kewaunee Power Station Decommissioning Funding Status Report as of December 31, 2018 Table I Decommissioning Funding Status Report for KPS Summary Information as of December 31, 2018 10 CFR 50.82 (a)(8)(v)-(vii)

(in millions)

Decommission in J Trust Fund Balances 10 CFR Reference Is0.82{a)(8)(v)(A) Iso.S2{a)(8){vii)(A)

Fund Balance Type of Trusts Comments

$ 724.508 Qualified fund balance As of: 12/31/2018

$ - Non-qualified fund balance As of: 12/31/2018

$ 150.097 Less costs incurred prior vears but not vet billed to Trust Actual Cost in: As Soent Dollars

$ 574.411 Adjusted decommissioning fund balance As of: 12/31/2018 Other Financial Assurance Methods Being Relied Upon 10 CFR Reference I50.82(a)(8){v){A) I None Prior Years Decommissioning Expenditures 10 CFR Reference I50.82(a){8l(vl(A) I Total License Term Soent Fuel Mamt Site Restoration Comments

$ 23.511 $ 7.346 $ 16.165 $ - 2018 Cost in: 2018 Dollars

$ 251.840 $ 102.704 $ 149.136 $ - 2012-2017 Cost in: As Soent Dollars

$ 275.351 $ 110.050 $ 165.301 $ - Total Prior Year in: As Soent Dollars Prior Year Expenditures - Variance to Estimated Escalated Cost 10 CFR Reference I50.82(a l(Sl(v){B) I Total License Term Spent Fuel Mgmt Site Restoration Comments

$ 23.511 $ 7.346 $ 16.165 $ - Actual Cost in: 2018 Dollars

$ 7.948 $ 1.914 $ 6.034 $ - NRG Auth. $ in: 2018 Dollars

$ 15.563 $ 5.432 $ 10.131 $ -

Variance: License Termination and Spent Fuel Management due to delay in spent fuel pool off-load campaign and higher dormancy costs.

Remaining Decommissioning Estimated Cost 10 CFR Reference I 50.82(a){8l(v)(B) I 50.82(al(8){vii)(B)

Total License Term Spent Fuel Mgmt Site Restoration Comments

$ 903.992 $ 550.383 $ 314.671 $ 38.938 Estimate in: 2019 Dollars Decommissioning Criteria Upon Which the Estimate is Based 1 O CFR Refe re nee I50.82(a){8){v){B) I SAFSTOR Any Modification To Method of Providing Financial Assurance 10 CFR Reference I50.82(a){8)(v){C) I None Any Material Changes To Trust Agreement Since Previous Report 10 CFR Reference I50.82(a){8){v){D) I None Need For Additional Financial Assurance 10 CFR Reference I50.82(a ){S){vi) I50.82(a){8){vii){C)

None See Annual Cash Flow Analysis in Table II Inputs to Remaining Cost and Funding Analysis I I 2019 Start year of analysis 1.94% Escalate studv dollars from 2018$ to Start Year of Analysis using CPI average (2018 to 2019) 0.00% Escalation rate 2019 & beyond 2.00% Fund growth rate 2019 & beyond (Reflects NRC allowed 2% Real Rate of Return)

Annual expenditures Projected annual expenditures - see Annual Cash Flow Analysis in Table II

Serial No.19-047 Enclosure 1 Page 2 of 3 Kewaunee Power Station Decommissioning Funding Status Report as of December 31, 2018 Table II Decommissioning Funding Status Report for KPS Annual Cash Flow Analysis Starting January 1, 2019 through End of Decommissioning 10 CFR 50.82 (a)(8)(v)-(vii)

(in millions)

Column 3 Column 1 Column 2 Remaining Column 4 Column 5 Column 6 Column 7 Beginning Earnings License Remaining Remaining Remaining End of on Termination Spent Fuel Mgmt Site Restoration SAFSTOR of Year Trust Funds Expenditures Expe ndltures Expenditures Expenditures Year Year Balance (Reflects 2% RRoR) (Reflects 0% Esc) (Reflects 0% Esc) (Reflects 0% Esc) (Reflects 0% Esc) Balance 2019 $ 574.411 $ 11.363 $ 3.161 $ 9.370 $ - $ 12.531 $ 573.243 2020 $ 573.243 $ 11.337 $ 3.425 *$ 9.370 $ - $ 12.795 $ 571.785 2021 $ 571.785 $ 11.310 $ 3.246 $ 9.370 $ - $ 12.616 $ 570.478 2022 $ 570.478 $ 11.285 $ 3.096 $ 9.370 $ - $ 12.466 $ 569.297 2023 $ 569.297 $ 11.257 $ 3.485 $ 9.455 $ - $ 12.940- $ 567.614 2024 $ 567.614 $ 11.227 $ 3.152 $ 9.370 $ - $ 12.522 $ 566.319 2025 $ 566.319 $ 11.202 $ 2.895 $ 9.498 $ - $ 12.393 $ 565.128 2026 $ 565.128 $ 11.180 $ 2.867 $ 9.379 $ - $ 12.246 $ 564.062 2027 $ 564.062 $ 11.173 $ 2.144 $ 8.680 $ - $ 10.824 $ 564.411 2028 $ 564.411 $ 11.172 $ 2.523 $ 9.086 $ - $ 11.610 $ 563.974 2029 $ 563.974 $ 11.172 $ 2.132 $ 8.632 $ - $ 10.765 $ 564.381 2030 $ 564.381 $ 11.180 $ 2.156 $ 8.632 $ - $ 10.788 $ 564.772 2031 $ 564.772 $ 11.188 $ 2.144 $ 8.632 $ - $ 10.777 $ 565.183 2032 $ 565.183 $ 11.195 $ 2.190 $ 8.638 $ - $ 10.828 $ 565.550 2033 $ 565.550 $ 11.176 $ 3.301 $ 10.186 $ - $ 13.487 $ 563.239 2034 $ 563.239 $ 11.156 $ 2.209 $ 8.632 $ - $ 10.841 $ 563.555 2035 $ 563.555 $ 11.163 $ 2.132 $ 8.632 $ - $ 10.765 $ 563.953 2036 $ 563.953 $ 11.167 $ 2.144 $ 9.043 $ - $ 11.187 $ 563.934 2037 $ 563.934 $ 11.170 $ 2.143 $ 8.683 $ - $ 10.826 $ 564.278 2038 $ 564.278 $ 11.175 $ 2.288 $ 8.767 $ - $ 11.056 $ 564.398 2039 $ 564.398 $ 11.182 $ 1.965 $ 8.632 $ - $ 10.598 $ 564.982 2040 $ 564.982 $ 11.193 $ 2.045 $ 8.644 $ - $ 10.690 $ 565.485 2041 $ 565.485 $ 11.201 $ 1.977 $ 8.925 $ - $ 10.902 $ 565.784 2042 $ 565.784 $ 11.210 $ 1.974 $ 8.632 $ - $ 10.606 $ 566.387 2043 $ 566.387 $ 11.218 $ 2.260 $ 8.717 $ - $ 10.977 $ 566.628 2044 $ 566.628 $ 11.227 $ 1.965 $ 8.632 $ - $ 10.598 $ 567.257 2045 $ 567.257 $ 11.235 $ 2.123 $ 8.921 $ - $ 11.044 $ 567.447 2046 $ 567.447 $ 11.240 $ 1.977 $ 8.925 $ - $ 10.902 $ 567.785 2047 $ 567.785 $ 11.249 $ 1.977 $ 8.688 $ - $ 10.665 $ 568.369 2048 $ 568.369 $ 11.244 $ 2.473 $ 9.893 $ - $ 12.366 $ 567.247 2049 $ 567.247 $ 11.238 $ 2.041 $ 8.632 $ - $ 10.674 $ 567.811 2050 $ 567.811 $ 11.250 $ 1.965 $ 8.632 $ - $ 10.598 $ 568.464 2051 $ 568.464 $ 11.260 $ 1.977 $ 8.925 $ - $ 10.902 $ 568.822 2052 $ 568.822 $ 11.222 $ 1.997 $ 13.490 $ - $ 15.487 $ 564.557 2053 $ 564.557 $ 11.252 $ 3.928 $ - $ - $ 3.928 $ 571.880 2054 $ 571.880 $ 11.403 $ 3.509 $ - $ - $ 3.509 $ 579.773 2055 $ 579.773 $ 11.561 $ 3.439 $ - $ - $ 3.439 $ 587.895 2056 $ 587.895 $ 11.723 $ 3.451 $ - $ - $ 3.451 $ 596.168 2057 $ 596.168 $ 11.889 $ 3.451 $ - $ - $ 3.451 $ 604.606 2058 $ 604.606 $ 12.055 $ 3.695 $ - $ - $ 3.695 $ 612.966 2059 $ 612.966 $ 12.225 $ 3.439 $ - $ - $ 3.439 $ 621.752 2060 $ 621.752 $ 12.400 $ 3.543 $ - $ - $ 3.543 $ 630.609 2061 $ 630.609 $ 12.578 $ 3.451 $ - $ - $ 3.451 $ 639.736 2062 $ 639.736 $ 12.760 $ 3.439 $ - $ - $ 3.439 $ 649.057 2063 $ 649.057 $ 12.944 $ 3.704 $ - $ - $ 3.704 $ 658.298 2064 $ 658.298 $ 13.131 $ 3.481 $ - $ - $ 3.481 $ 667.948 2065 $ 667.948 $ 13.325 $ 3.439 $ - $ - $ 3.439 $ 677.834 2066 $ 677.834 $ 13.508 $ 4.824 $ - $ - $ 4.824 $ 686.518 2067 $ 686.518 $ 13.627 $ 10.318 $ - $ - $ 10.318 $ 689.827 2068 $ 689.827 $ 13.357 $ 43.920 $ - $ - $. 43.920 $ 659.265 2069 $ 659.265 $ 12.229 $ 95.628 $ - $ - $ 95.628 $ 575.866 2070 $ 575.866 $ 10.388 $ 112.434 $ 0.528 $ - $ 112.962 $ 473.292 2071 $ 473.292 $ 8.451 $ 94.004 $ 1.183 $ 6.323 $ 101.511 $ 380.232 2072 $ 380.232 $ 6.762 $ 58.625 $ 3.165 $ 22.483 $ 84.273 $ 302.720

,U/.j Remaining $ in

$ 302.720 2019 Dollars b.921 $

3.111 550.383 0.U/t) 314.671 $

$ 10.131 38.938 $

$ 13.318 903.992

i, Est. Fund Balance (end of Decommissioning) (in Future$ escalated at 0.0% & 2.0% Real Rate of Return Fund Growth Rate) $ 295.324 Est. Fund Balance (end of Decommissioning) discount to 2019 Dollars Discount Rate = 2.00% $ 101.365

Serial No.19-047 Enclosure 1 Page 3 of 3 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 2019 through 2073 which reflects the allowed 2.0% RRoR over a 0.0% cost escalation rate. The annual 2.0% RRoR earning~ are calculated on the beginning balance less 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 provides funding information for managing irradiated fuel as 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: (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 and further updated based on a Decommissioning Cost Estimate dated November 22, 2018.
2) The Trust Fund Balance reflects market value on December 31, 2018, net of taxes on realized gafns 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 by a 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 to establish a Parent Company Guarantee (PCG) and a Notice of Request to Discontinue an Existing Parent Support Agreement (PSA) from Dominion Resources, Inc. (ORI). The PCG provides additional financial assurance to address any potential shortfalls in decommissioning funding assurance for KPS, up to $60 million. By letter dated December 14, 2015 (ADAMS Accession No. ML15344A503), the NRC notified DEK that it had 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.
7) 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. 19-04 7 KPS Decommissioning Funding Status Report Attachment 1 Financial Test for Year Ended December 31, 2018 Paragraph 11.A.2 of Appendix A to 10 CFR Part 30 Kewaunee Power Station Dominion Energy Kewaunee, Inc. (DEK)

James R. Chapman

~ Dominion Executive Vice President, Chief Financial Officer and Treasurer 120 Tredegar Street, Richmond, VA 23219 p- Energy Dominion Energy .com March 20, 2019 FINANCIAL TEST FOR YEAR ENDED DECEMBER 31, 2018 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 Energy Inc. issued $400,000,000 of 30 year unsecured senior notes and $200,000,000 of 10 year unsecured senior notes on March 13, 2019. The issuances were rated BBB by Standard and Poor's and Baa2 by Moody's at the time of settlement and maintain these ratings today.

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

Total Equity $22,048 Less: Net Book Value of the Nuclear Facility and Site (KPS)

Goodwill of the Nuclear Facility and Site (KPS)

(i) Total Net Worth $22,048 Less: Goodwill 6,410 Intangible Assets 670 (ii) Tangible Net Worth $14,968 DEi Total Assets $ 77,914 Less: Foreign Assets Total US Assets $ 77,914 FINANCIAL TESTS NO

1. Is line C (ii) at least $21 Million? D
2. Is line C (i) at least 6 times the guarantee amount of $60 million? D
3. a. Are at least 90 percent of the firm's assets located in the U.S.? D or,
b. Is line C (i) at least 6 times the guarantee amount of $60 million? D

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

b. Are bond ratings Baa (including+/- adjustments) or above as issued by Moody's 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. 19-04 7 Decommissioning Funding Status Report Attachment 2 Deloitte & Touche LLP Attesting Letter of Accuracy of the Financial Test Kewaunee Power Station Dominion Energy Kewaunee, Inc. (DEK)

Deloitte.

Deloitte & Touche LLP Suite 820 901 East Byrd Street Richmond, VA23219 USA Tel: +1 804 6971500 Fax: +1 804 6971825 www.deloitte.com INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES To the Board of Directors of Dominion Energy, Inc.

Richmond, Virginia We have performed the procedures included in Appendix A, Part 30 of Title 10, which are required by the U.S. Nuclear Regulatory Commission and agreed to by Dominion Energy, Inc. ("Dominion Energy"), as parent company of Dominion Energy Kewaunee, Inc., licensed operator of the Kewaunee Power Station, solely to assist the specified parties in evaluating the Dominion Energy's compliance with the financial test as of December 31, 2018, included in the accompanying letter dated March 20, 2019 from James Chapman, Executive Vice President, Chief Financial Officer and Treasurer of Dominion Energy, Inc. fanagement is responsible for compliance with those requirements. 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 Dominion Energy's Financial Assurance Letter to the most recently issued reports of S&P and Moody's covering Dominion Energy, noting no differences.
2. We compared amounts identified as "Total Equity", "Goodwill", "Intangible Assets",

and "DEi Total Assets" in Attachment 1 to Dominion Energy's Financial Assurance Letter to the corresponding amounts in Dominion Energy's audited consolidated financial statements as of December 31, 2018, on which we have issued our report dated February 28, 2019, 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 Dominion Energy's Financial Assurance Letter to the corresponding amounts in a schedule prepared by Dominion Energy. We agreed the total shown in the schedule to the corresponding amount in Dominion Energy's audited consolidated financial statements as of December 31, 2018, on which we have issued our report dated February 28, 2019, 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 Dominion Energy's Financial Assurance Letter without exception.

Member of Deloitte Touche Tohmatsu Limited

With respect to procedures outlined in Paragraph II.B of Appendix A, Part 30 of Title 10 of the United States Code of Federal Regulations, professional standards preclude us from providing any form ofreport or assurance on matters relating to solvency. Accordingly, no such form of report or assurance is provided.

This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on compliance of the Financial Test.

Accordingly, we do not express such an opinion or conclusion. 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 Dominion Energy and Dominion Energy Kewaunee, 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.

1)~ ~ 1 ~ LL'P March 28, 2019