ML19250E555
| ML19250E555 | |
| Person / Time | |
|---|---|
| Issue date: | 03/16/1981 |
| From: | Dircks W NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | |
| Shared Package | |
| ML19240A177 | List: |
| References | |
| REF-10CFR9.7, TASK-RIA, TASK-SE SECY-81-168, NUDOCS 8103260437 | |
| Download: ML19250E555 (34) | |
Text
,,,, -
.. L
.(
f SECY-81-168 March 16,1981 CIj' g
RULEMAKING ISSUE /V[(/
( Affirrnation)
/#
' IESin f v.
cc U fd' @ c }
w} b [Il
'. \\,
e
.;U For:
The Commissioners From:
William J. Dircks Executive Director for Operations
Subject:
PROPOSED RULEMAKING TO REDUCE OR ELIMINATE REQUIREMENTS WITH RESPECT TO FINANCIAL QUALIFICATIONS FOR POWER REACTORS
Purpose:
To obtain Commission approval for the publication for public comment of a notice of proposed rulemaking to amend 10 CFR Part 50 that would:
(a) eliminate, in effect, the financial qualifications review for power reactors at the OL stage and reduce the review at the CP stage, and (b) permit the removal of financial qualifications as an issue in ongoing and future OL proceedings.
Discussion:
Since the Commission's Order in Public Service Company of New Hampshire (Seabrook Station, Units 1 and 2) 7 NRC 1 at 20, CLI-78-1 (1978), the staff has addressed the Commission a number of times with respect to altering or eliminating the requirements fcr a financial qualification review fcr production and
Contact:
J. Petersen 492-8599 d
8
!!]
wa s
o s utilization facilities.* The current search for means to expedite the operating license review schedules provides a new urgency for focusing on the financial qualifications review at the operating license stage.
Financial qualifications is addressed by the staff in a safety evaluation report for every CP and OL application and financial qualification contentions have been rais'd in a number of OL proceedings. In addition, the Director of Nuclear Reactor Regulation recently received a petition for issuance of a show-cause order under 5 2.206 of the Commission's regulations seeking to broaden the scope of such financial reviews for power reactors.**
Section 182a of the Act authorizes, but does not mandate, the Conmission to require information as to the financial Qualifications of license applicants.***
The main rationale for the provisions in 10 CFR Part 50 requiring financial qualifications information has been that the statutory provision was intended primarily to provide additional means of assuring that licensed activities would be carried out safely.
In April, 1979, SECY-79-299 addressed the regulatory experience in terms of whether inadequate financing of a licensed activity could have a negative impact on safety. The staff concluded that although technical reviews and inspection efforts are very effective direct methods of discovering deficiencies that could affect safety, the analysis of financial qualifications is an additional method, albeit indirect, of determining an applicant's ability to satisfy safety requirements. However, it was also concluded that the scope of the financial qualifications review could appropriately be reduced for applicants in good financial condition. On the basis of this review, the staff proposed a significant reduction in financial qualifications reviews of power reactor applicants.
- See SECY 79-299, April 27,1979; SECY-80-60, January 30, 1980; SECY-80-217, April 25,1980; SECY-80-227, May 1,1980.
- The er-losed notice of proposed ru'emaking is not expected to prejudice the disposition of this petition.
- See Memorandum dated September 25, 1979, from Howard K. Shapar, ELD, to the Commissioners (Enclosure 2).
, The Staff is now proposing that the Comtission adopt essentially the same recommendations that were made in SECY-79-299.
The proposed rule in that paper would have, in effect, eliminated CP reviews for utilities in good financial condition and OL reviews entirely for all utilities.
Adjudication of the financial issue would also have been reduced at the CP stage and eliminated entirely at the OL stage for all utilities. Under that croposcd rule, an applicant for an OL would be financially qualified if it could demonstrate that its rates for service were determined by state and/or federal regulatory agencies or by the applicant itself.
An applicant for a CP would be financially qualified if it met the rate-setting criteria described above and if its most senior long-term debt was rated "A" or higher by toth of the major securities rating services.
More detailed information would be required of CP applicants that did not satisfy these criteria.
In terms of our present caseload, all OL applicants would meet these criteria, and the one CP applicant that has not as yet had a financial qualifications review (Houston L&P) woulc meet the criteria.
The staff believed then, as it does now, that the proposed changes were and are in substantial accord with the sense of the Commissioners as expressed in the Seabrook case.
The proposed changes are also in general accord with the majority of public cnaments received in response to the staff's Federal Recister request for comments, made after the Seatrook cecision. 43 F.R. 22373 (May 25,1978).
Since submittal of SECY-79-299, the Conmission reviewed, considered but took-no action on the proposed rule a number of times.
Due to the urgency arising out of the lengthening of OL review schedules and the need to identify all areas that could aid in shortening such schedules, I believe that the enclosed proposed rule should be sent to the Federal Register for public comment on an expedited basis.
inis witi allow NRC to focus the OL (and CP) review effort and the adfadicatory process on those issues with more signi ficant impact on public health and safety.
I recogni:e that there are other elements that need to be addressed, such as dealing with financial arrangements to facilitate recovery from a major accident, possible financial disincentives to safety, and financial requirements for decommissioning.
. Elimination of the routine licensing financial qualifications review, as we are urging in the attsched proposed rule, would allow our small financial qualifications staff to address these issues.
We will provide the Commission an information paper addressing these issues.
Recommendation:
That the Commission:
1.
Approve the enclosed notice of proposed rulemaking (Enclosure 1) for publication in the Fede-al Reaister.
2.
flote:
a.
That the enclosed notice of proposed rulemaking states that the Commission intends to make the final rule, when promulgated, effective inmediately upon publication, pursuant to Section 553(d)(1) of the Administrative Procedure Act, 5 U.S.C. 5 553(d)(1).
b.
That the enclosed notice also states that the Cornission intends to ly the final rule, when effectivt, to ongoing.. censing proceedings now pending and to issues or contentions therein.
c.
That appropriate Congressional committees will be notified of the proposed rule.
d.
That pursuant to 551.5(d)(2) of the Commission's regulations, an environmental impact statement, negative declaration, or environmental impact appraisal need not be_ prepared in connection with the subject proposed amendmtmts.
e.
That the proposed rule contains a statement that the Commission certifies that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities, pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 5605(b).
f.
That the proposed rule contains a statement that pursuant to the Paperwork Reduction Act of 1980, the Commission has made a preliminary detennination that the proposed rule does not impose new reporting or record-keeping requirements but that the proposed rule is nevertheless being submitted to OMB for its determination pursuant to that Act.
. g.
That the Staff w'll directly notify affected licensees and other persons of this proposed rule.
h.
That a Value/ Impact Analysis is attached as.
1.
That the Executive Director for Operations will issue the final rule if no significant adverse comments or questions have been received on the notice of proposed rulemaking and no substantial changes in text are indicated, pursuant to 10 CFR 1.40(d).
/
\\
M y
William
~Dircks Executive Director for Operations
Enclosures:
1.
Notice of Proposed Rulemaking.
2.
Memorandum dated Sept. 25, 1979.
3.
Value/ Impact Analysis Commissioners' comments or consent should be provided directly to the Of fice of the Secretary by c.o.b. Tuesday, March 31, 1981.
Commission Staff Office comments, if any, should be submitted to the Commissioners NLT March 24, 1981, with an information copy to the Office of the Secretary.
If the paper is of such a nature that it requires additional time for analytical review and comment, the Commissioners and the Secretariat should be apprised of when comments may be expected.
This raper is tentativf y scheduled for affirmation at an Open Metir.g during the Week of April
'3, 1981.
Please refer to the appropriate Weekly Commission Schedule, when published, for a specific dite and time.
DISTRIBUTION Commissioners Commission Staff Offices Exec Dir for Operations ACRS ASLBP Secretariat
ENCLOSURE 1
ENCLOSURE 1 NUCLEAR REGULATORY COMMISSION 10 CFR Part 50 FINANCIAL OUALIFICATICNS LICENSING OF PRODUCTION AND UTILIZATION FACILITIES AGENCY:
U. S. Nuclear Regulatory Commission.
ACTION:
Proposed Rule.
SUf1 MARY: The Nuclei r Reculatory Commission is considering arending its regulations to (1) establish criteria that constitute conclusive evidence of an applicant's financial avalifications to pursue activities under a Part 50 construt tion permit or operating license; (2) eliminate the recuire-ment for a financial qualifications finding on applicants that would own an insignificant financial interest in a facility; (3) require applicants for research reactor operating licenses, or rerewals thereof, to demonstrate reasonable assurance of obtaining the funds to permanently shut down the reactor and maintain it in a safe condition; and (4) clarify the information requirements on applicants and staff review practices.
DATES:
Comment period expires Comments received af ter (insert date 60 days af ter publication in the Federal Register) will be considered if it is practical to do so, but assurances of consideration cannot be given except as to conment filed on or before the due date specified herein.
- Ir,sart date 60 days from publication in Federal Peoister.
ADDRESSES:
Interested persons are invited to submit written comments and suggestions on the proposal and/or the supporting valuc/ impact analysis to the Secretary of the Commission, U. S. Nuclear Regulatory Commission, Washington, D. C.
20555, Attention:
Docketing and Service Branch.
Single copies of the value/ impact analysis may be obtained on request from Jim C. Petersen, Office of Nuclear Reactor Regulation, U. S. Nuclear Regulatory Commission, Washington, D. C.
20555 (Phone: 301-492-7000).
Copies of the value/ impact analysis and of comments received by the Conmission may be examined in the Commission's Public Document Coom at 1717 H Street, N. W., Washington, D. C.
FOR FURTHER INFORMATION CONTACT: Jim C. Petersen, Office of Nuclear Reactor Regulation, U. S. Naclear Regulatory Commission, Washington, D. C.
20555 (Phone: 301-492-7000).
SUPPLEMENTARY INFOPJiATION:
In its decision in Public Service Company o_f_
New Hampshire, et al. (Seabrook Station, Units 1 and 2) 7 NRC 1, CLI-78-1 (1978) (hereinaf ter, "the Ccmmission's Seabrook dec'.*er'), the Commission directed iat page 20) the staft "to initiate a rulemaking proceeding in which the factual, legal, i.. policy aspects of the financial qualifications issue may be reexamined." Specificilly, the staff was to examine the re-lationship between the financial qualifications of Part 50 applicants and licansees and their ability to safely construct and operate production and utilization facilities.
Further, the staff was to prepare a proposed rule that would amend existing financial qualifications requirements if the staff's study indicated this to be appropriate.
Dn May 25,1978, the staff notitied the public (43 F.R. 22373) of the Commission's order for a study of the generic financial qualifications issue.
The sta'f requested interested menbers of the public to submit conments on the issue and to propose specific changes to the rules.
Comments were requested to be submitted by July 24, 1978.
In response to the notice, seven sets of comments were received.
Six of the sub-mittals were f rom electric L a sities, the Edison Electric Institute (EEI) or law firms representing electric utilities.
The seventh set of ccaments was from the National Consumer Law Center, Inc. The staff has prepared a detailed analysis of these comments which ray be examined in the Commission's Public Document Room at 1717 H Street, N. W., Washingten, D. C.
The following is a sumary of the comments.
The utilities, the EEI and the law firms reconnended that the regulations be revised to substantially reduce the scope of NRC'r, financial QJalifications review especially as it applies to applicants whose ates for service are either self-determined or are determined by state and/or feceral regulatory agencies.
These correnters generally maintained that a history of successful plant construction and operation coe71ed with the legal requirements placed on economic regulators together constitute " reasonable assurance" that adequate financing can be obtained. This group cf commenters furtner argued that " cutting-corners" in construction or operation is not in the self-interest of the utility.
It is imperative that a plant provide long-term operation reliably and safely in accordance with NRC regulations.
The commenters said that the financial savings that could be achieved through "carner-cutting"
. would be small compared to the sums required to complete the project. The risk of detection by NRC inspectors and possible resulting legal action against the utility serve as additional disincertives to violations of NRC's regulations.
One of the above commenters expressed a preference for complete elimination of the financial qualifications finding as now required by the regulations.
The commenter maintained that a causal relationship between financial qualifications and safety had not been demonstrated.
One of the utility commenters, while endorsing its law firm's comments which are among those summarized above, raised a consideration regarding the sources of funds statemr.nt that the NRC staff routinely requires of construction permit applicants. The sources of funds statement, while not considered a forecast of what will necessarily occur, is a demonstration by the utility applicant of one method by which it might reasonably finaace its overall construction program including the nuclear power plant.
The ccamenter maintained that such projections, if published, (1) could mislead the investing public, possibly leadi.ig to liability for the company; and (2) may constitute a violation of federal securities law. The NRC staff has requested and received the sources of funds statement from a large number of construction permit applicants over the past six years. A very few of these applicants have requested proprietary treatment of their sources of funds statements using a rationale similar to that above. These requests have not been approved. The NRC staff is not aware of any cases
. of liability accruing to applicants because of the publication of such sources of funds staterents.
In the past five years, the NRC staff has twice inouired of the Securities and Exchange Conmission (SEC) staff re-garding the question of possible federal securities law violations.
Both SEC replies indicate that the submission of such sources of funds statements by applicants to the NRC and subsecuent release of the statements to the public do not contravene SEC requirements.
The second and rost recent SEC reply is dated December 14, 1978, which is subseque.1t to the above correnter's submission dated July 21, 1978.
The Naticnal Consurer Law Center, Inc. (NCLC) cenrented that the existing regulation is inadequate in that it does not require the filing of sufficient financial information to demonstrate financial qualifications for a construction permit or an enerating license. NCLC provided a detailed list of the types of financial information that should be required of applicants. Most of the suggested information is currently required by the NRC staff in its financial reviews. While much of these data are not specifically referred to in.the regulations, the NRC staff regularly obtains it from applicants under UFC's authority to require additional pertinent information. NCLC based its sur-gestion for NRC recuiring such inforration on the holding that safe, reliable construction and operation of nuclear facilities is centincent upon the financial qualifications c' the applicant.
It stated that insufficient financing during construction could lead to the use of substandard raterials and to costly delays in construction.
NCLC further suggested that NRC should promulgate a regulation requiring that nuclear facilities be constructed with a reasonable cost of financing and that failing to do so may financially burder, the applicant and the applicant's owners and customers.
The NRC staff's study of the generic financial qualifications issue included the following elements:
consideration of the public comments solicited on the matter; review and enalysis of the Commission's Seabrock decision which included the Commission's own review of the issue as well as its Order for this study; review and analysis uf other NRC and Atomic Energy Commission licensing cases which have involved financial qualifications; and analynis of regulatory e.xperience during the two decades of power reactor ' construction and operatirm. The staff also considered the relevant regulatory initiatives that have been adopted subsequent to the enactment of the Atomic Energy Act of 1954 that contained the financial qualifications requirement. These initia-tives include the establishment of comprehensive quality assurance require-ments on licensees, the establishment of civil penalties as enforcement vehicles, the. promulgation of 10 CFR Part 21, " Reporting of Defects and Non-compliance," and the initiation of the program for NRC resident inspectors at reactor si tes.
Each of these measures provides additional assurcnces regarding proper construction and operation and, thereby, serves to reduce the safety dependence on financial qualifications.
The Commission has concluded, however, that although technical reviews and inspection efforts are very effective direct methods of discovering deficiencies that could affect safety, the analysis of financial qualifications is an additional method, a'beit indirect, of determining an applicant's ability to satisfy safety requirements.
. The Commission has also tentatively corcluded that the scope of the financial qualifications review can appropriately be reduced for applicants in good financial condition and for those applicants that have insignificant o.nersnip interests in facilities.
In particular, the Commission contemplates reducing the financial qualification requir2J.ents on electric utility applicants for nuclear power plant operating licenses by requiring them to submit only information that demonstrates that their rates for service are regulated or self-determined.
Construction permit applicants of the same class need submit information showing that their rates for service are regulated or self-determined and that their bond rating by the two major rating services (Moody's and Standard
& Poor's) is at least an "A".
These respective requirements are implenented by the establishment of criteria that constitute conclusive evidence of an applicant's financial quali fications.
If an applicant for a CP or OL meets the applicable " conclusive evidence" criteria, the applicant shall be deemed financially qualified. Only when an applicant for a CP or OL cannot satisfy the applicable criteria does the Commission reserve the right to request more information for a financial qualifications review. The Commission has not changed, by this proposed rule, its rignt to request financial information in the unusual case where a licensee cannot continue to conduct the activities authorized by its license, bLt this does not affect the scope of the pre-licensing financial qualifications review and the use of the " conclusive evidence" criteria as set forth in this proposed rule.
The Commission will also retain its current scope of review for those applicants not enjoying regulated status and not having authority to set their own rates.
The value of the proposed rule will be that the level of effort by applicants, licensees, the staff and NRC adjudicatory boards will appropriately reflect
8_
the indirect relationship between financial qualifications and safety. The proposed rule aims at eliminating virtually all staff review in cases where the applicant is clearly qualified to finance activities under the proposed permit or license.
Under the existing rule, applicants in good financial condition and clearly financially qualified have been subject to extensive reviews and time-consuming litigation.
The proposed rule will sharply lessen the chance of that happening.
On the other hand, a construction permit applicant or licensee that is experiencing significant financial difficulties or that is in a marginal financial condition will be subject to a more detailed review if that applicant cannot demonstrate its ability to meet the applicable conclusive evidence criteria.
It is noted that the Commission is now considering development of more explicit overall policy for nuclear facility decommissioning (including finan ial assurance related to the cost of decommissioning) and amending its regulations in 10 CFR Parts 30, 40, 50 and 70 to include more specific guidance on decommissioning criteria for production and utilization facility licensees and byproduct, source and special nuclear material licensecs.
Since the generic decommissioning study has not yet been completed, the rule change proposed herein does not reflect results of that study.
In summary, the Commission has tentatively concluded that adoption of the proposed rule will resuit in a substantial reduction in the impact, or burden, accompanying the requirement for a demonstration of financial qualifications with no reduction in the value, to safety, that the requirement provides.
If the proposed rule is adopted, it is the Commission's present intention to make it effective immediately upon publication since the rule is expected to significantly relieve the obligation with respect to information required of certain applicants for construction
. permits and operatir; licenses and also to reduce the amount of unnecessary tice-consuming staff review and adjudicatory proceedings.
5 U.S.C. 5553(d)(1).
In that regard, the Commission notes that the final rule, when effective, will apply to ongoing licensing proceecings now pending and to issues er co the rei n.
The Commission's Value/ Impact Analysis of the proposec rule is availao for public inspection as noted above.
Regulatory Flexibility Certificaticn In accordance with the Regulatory Flexibility Act of 1980, 5 U.S.C. S 505(b) the Commission hereby certifies that this rule will not, if promulgatec, have a significant economic impact en a substantial number of small entities.
The proposed rule reduces certain minor reporting reqeirerents for the owners and operators of nuclear po.er plants licensed pursuant to Section 103 and 104b of the Atomic Energy Act of 1954, as amendec, 42 U.S.C. 55 2133, 21345.
Accordingly, there is no significant economic impact, nor are such owners and operators of nuclear power plants within the definition of a small business found in Section 3 of tne Small Business Act,15 U.S.C. 5 632, or within the Small Business Size Standards set fertn in 13 CFR Part 121.
Paperwcrk Reduction Act Statement Pursuant to the provisions of the Paperwork Reduction Act of 1980 (Pub. L.96-511), the NRC has made a preliminary cetermination that this proposed rule does not impose new reporting or record-keeping requirements.
This proposed rule has nevertheless been subuitted to the Office of Management and Budget for its consideration of any potential or new reporting or record-keeping requirements, pursuant to Pub. L.96-511.
Pursuant to the Atomic Energy Act of 1954, as amended, the Energy Reorganizaticn Act of 1974, as amended, and Section 553 of Title 5 of tne United States Coce, notice is hereby given that adoption of the following amencments to 10 CFR Part 50 are contemplated.
10 CFR 50.33(f),10 CFR 50.54, and Appendix C to 10 CFR Part 50 are revised to read as follows.
1.
Paragraph (f) in 10 CFR 50.33(f) is revised to read as follows:
50.33 Contents of applications; general information.
Each application shall state:
(f)
Information sufficient to demonstrate to the Commission the financial qualifications of the applicant to carry out, in accordance with tne regulations in this chapter, the activities for which the permit or license is sought.
As provided in this paragrapn and in Appendix C to this Part (Sections II. A.4 for construction permits and 11.5.3 for operating licenses), applicants for licenses to construct and operate production or utilization facilities of the types descrioed in S50.21(b) or $50.22 may submit information satisfying certain financial criteria, and thus demonstrate conclusive evidence of financial qualifications.
Such applicants are not required to submit the cost and other financial information in subparagraphs (1) and (2),
oelow.
Appendix C to this Part (Section V.) also specifies certain circumstances in which an applicant has or would have an " insignificant financial interest," and would normally not be required to submit the financial information addresseu in subparagr>ph 'l) and (2) below, and in Appendix C.
(1)
If the application is for a construction permit, sucn information shall demonstrate that the applicant possesses or nas reasonable assurance of cbtaining the funds necessary to cover esticatec construction costs and related fuel cycle costs. Tre applicant shall submit estimates of the total censtruction cost of the facility and related fuel cycle costs and shall indicate tr,e source of funds to cover such costs.
(2)
If the application is for an operating license, such infor:.ation snall demonstrate tnat the applicant possesses or has reasonable assurance of obtaining the funds necessary to cover estimated operating costs for the period of the license, plus the estirated costs of permanently shutting the f acility down and maintaining it in a safe condition.
The applicant shall submit estimates of total annual operating costs for each of the first five years of operation of the facility and estimates of the costs to permanently shut down the f acility and main'.ain it in a safe condition.
The applicant shall s' iso indicate the sources of funds to cover such costs. An applicaticn to renew or extend the term of an operating license shall include the sa e financial information as required in an application for an initial license.
Subject to the same limitations set fortn above on the necessity to submit financial qualification information, each application for a construction permit or an operating license submitted by a newly formed entity organized for the primary purpose of constructing or operating a facility shall include information showing the legal and financial relationships it has or proposes to have with its stockholders or owners, and their financial ability to meet any contractual obligation to such entity which they have incurred or propose to incur, and any other information deemed necessary by the uc nission to enable it to determine the applicant's financial qualifications.
Appendix C to this Part states in greater detail the financial data ard other related information to be submitted by applicants for licenses to construct and operate production or utilization facilities of the types described in 550.21(b) or $50.22, er a testing facility.
Appendix C also specifies certain financial criteria that, when sati'.':ied by such an applica7t, demonstrate conclusive evidente of financial qualifications. An applicant that satisfies such specified criteria shall be deemed to be financially qualified tnder the Commission's regulations to pursue the activities for which the permit or license is sought.
An applicant that does not satisfy the specified criteria will provide additional information at the Commission's request to demonstrate its financial qualifications.
Further irquiry and adjudication of an applicant's or a licensee's financial qualifications shall be foreclosed af ter the Commission has determined that conclusive evidence of financial qualifications has been demonstrated, except that such further inouiry and adjudication shall not be foreclosed in the case of an applicant or a licensee, previously found financially qualified under the criteria that demonstrate conclusive evidence, that no longer satisfies either one or both of the specified criteria.
Enclosuit 1
. 2.
A new paragraph (v) is added to 10 CFR 50.54 to read as fo11cws:
50.54 Conditions of licenses.
(v)
If the licensee has previously been found financ',c!!j oaalified by application of the criteria for conclusive evidence of financial qualification as set forth in Appendix C to Fa"t 50, it sna11 promptly report to the Comnission when it no icnger satisfies either one or both of such criteria.
3.
Appendix C to 10 CFR Part 50 is revised to read as follows:
Appendix C - A GUIDE FOR THE FINANCIAL DATA AND RELATED INFORMATION REQUIRED TO DEMONSTRATE FINANCIAL QUALIFICATIONS FOR FACILITY CONSTRUCTION PERMITS AND OPERATING LICENSES Table of Contents I.
General Information.
II.
Applicants Which Are Established Er tities.
A.
Applications for construction permits.
1.
(a) Conclusive evidence of financial qualifications.
(b)
Reporting adverse changes to the Ccamission.
2.
Alternative demonstration of financial qualifications.
(a)
Estimate of construction ecsts.
(b) Sources of construction funds.
(c) Applicant's financial statements.
B.
Applications for operating licenses.
1.
(a)
Cenclusive evidence of financial qualifications.
(b) i orting adverse changes to the Commission.
2.
Alternative demonstration of financial qualifications.
(a)
Estiuste of operatir.g costs and sources of funds.
(b) Applicant's financial statements.
C.
Applications by joint applicants.
III. Applicants Which Are Newly Formed Entities.
A.
Applications for construction permits.
1.
Estimate of construction costs.
2.
Sources of construction funds.
3.
Applicant's financial statements.
B.
Applications for operating licenses.
1.
Estimates of operatino revenues and expenses.
2.
Applicant's financial staterents.
IV.
Transfers of Ownership Interests.
V.
Insignificant Financial Interests.
VI.
Annual Financial Statements - Reporting Requirements.
VII. Additional Inferratic.
I.
GENERAL INFORMATION This appendix is intended to apprise applicants for licenses to construct and operate production or utilization facilities of the types described in Section 50.21(b) or Section 50.22, or a testing facility, of the financial data and other related information that will demonstrate the financial qualifications of the applicant to carry out the activities for which the permit or license is sought.
The provisions of this appendix are in accordance with the requirements of Section 50.33(f) of this Part.
The appendix sets forth certain financial criteria that, when satisfied by an applicant, demonstrate conclusive evidence of financi4', quali fi cation s.
An applicant that satisfies the specified criteria shall be deemed to be financially qualified under the Commiss on't regulations to pursue the i
activities for which the permit or license is sought. An applicant that does not satisfy the specificd criteria will provide additional information at the Commission's request to demonstrate its financial qualifications.
Further inquiry and adjudication of an applicant's or a licensee's financial qualifications is foreclosed after the Commission'has determined that conclusive evidence of financial qualifications has been demonstrated.
An exception to this foreclosure is the case of an applicant or a licensee, previnusly found financially qualified by application of the criteria for conclusive evidence of financial qualifications, that no longer satisfies either one or both of the specified criteria.
Item V of this appendix specifies certain circumstances in which an applicant that has or will have an "1nsignificant financial interest" in a facility is not normally required to submit the financial information addressed in Section 50.33(f) of this Part and in this appendix to the Commission.
Since separate findings of financial qualifications will be made by the Commission at the construction permit stage of the licensing process and at the operating license stage, the nature of the ;nformation to be included in the application at each of these stages is discussed separately.
It is important to observe also that both Section 50.33(f) and this appendix distinguish between applicants which are established entities and those which are newly formed entities organized crimarily for the purpose of engaging in the activity for which the permit or license is sought.
Those in the former category will normally have a history of operating experience and be able to submit data reflecting the financial results of past operations. With respect to the applicant which is newly formed company established primarily for the purpose of carrying out the licensed activity, with little or no prior operating history, somewhat more detailed data and supporting documentation will generally be necessary.
For this reason, the appendix describes separately the scope of information to be included in applications by each of these two classes of applicants.
The data specified in this appendix will generally be sufficient for the Commission to determine an applicarit's financial qualifications for a con-strtction permit or an operating license. However, the Commission reserves the right to require additional financial information if deemed necessary to enable the Commission to determine the applicant's financial qualifications for the permit or license or in response to significant adverse economic developments which may affect the licensee's ability to continue the activities authorized by its license.
. Applicants, permit holders and licensees are encouraged to consult with the Commission with respect to any questions they may have relating to the requirements of the Commission's regulations or the information set forth in this appendix.
II.
APPLICANTS WHICH ARE ESTABLISHED ENTITIES A.
Applications for construction permits.
1.(a)
Conclusive evidence of financial cualifications.
An applicant that satisfies the following two criteria shall be deemed to be financially qualified under the Conmission's regulations governing the issuance of construction permits.
Each applicant shall state in its application information sufficient to demonstrate how it does nor does not sati s fy each of the following two criteria (1)
The applicant's rates for service are determined by state and/or federal regulatory agencies or by the applicant it-self.
For this purpose, the applicant's rates shall be con-sidered to be self-determined if its rates are established either directly for itself or by a controlling governmental unit (e.g., by the city council for its municipal utility);
and (2)
The applicant's most senior long-term debt is rated "A" or higher by both of the major securities rating services (Moody's Investors Service, Inc., and Standard and Poor's Corporation).
. An applicant whose long-term debt is guaranteed by the United States, or an agency thereof, shall be deemed to have sJtisifed this criterion.
Such an applicant shall submit copies of a loan commitment notice for debt that will finance constructic.; of the facili ty.
(b)
Reporting adverse changes to
- e Commission.
If at any time after submitting its construction permit application and before an operating license is issued, an applicant fthat had previously been found financially qualified by satisfying the criteria that dem;nstrate conclusive evidence) no longer satisfies one or both of the above criteria, it shall promptly report the circumstances and reasons therefore to the Commission.
2.
Alternative Demonstration of Financial Qualifications.
An appliccit that does not satisfy either one or both of the above conclusive evidence criteria shall provide the following information:
(a)
Estimate of construction costs.
For electric utilities, each applicant's estimate of the total cost of each unit of the pro-posed facility should be broken down as follows and be accompanied by a statement describing the bases from which the estimate is derived:
(1) Total nuclear production plant costs.........
5
. (2) Transmission, distribution and gener al plant costs,....
(3) Nuclear fuel inventory cost for first core 5
Total Estimated Cost.
5 If the fuel is to be acquired by lease or other arrangement than purchase, the application should so state. The items to be in-cluded in these categories should be the sare as those defined in the applicable electric plant and nuclear fuel inventory accounts stated in the Uniform System of Accounts of the Federal Energy Regul:ter;' Commission or an explanation given as to any departures there f rom.
Since the composition of construction cost estimates for produc-tion and utilization facilities other than nuclear power reactors will vary eccording to the type of facility, no particular for-mat is suggested for submitting such estimates. The estimate should, however, be itemized by categories of cost in sufficient detail to permit an evaluation of its reasonableness.
(b)
Sources of construction funds.
The application shall include a brief statement of the applicant's general financial pla- 'or fi-nancing the cost of the facility, identifying the sour.e or sources upon which the applicant will rely for the necessary construction funds, e.g., internal sources such as retained earnings and
. depreciation accruals and external sources such as issuance of debt and equity securities.
The application shall indicate the relative degree to which each source of funds is expected to contribute to the total required funds.
The projected overall capital structure of the applicant during construction of the facility shall also be indicated.
A publicly-owned applicant shall submit excerpts from statutes, crdinances or other legal authority that allow it to issue bonds or other forns of indebtedness and to tu'e other actions necessary to finance the facility.
(c) Applicant's financial statements.
The application shall also include the applicant's latest published annual financial report, together with its most recent interim finar<cial statements.
If cuch a report is not published, the balance sheet and operating statoment covering the latest complete accounting year together with all pertinent notes tht eto and certification by a public accountant shall be furnished.
B.
Applications for operating licenses -
1.(a) Conclusive evidence of financial cualifications.
An applicant that satisfies the following criterion shall be deemed to be financially qualified under the Commissicn's regulations governing the issuance of operating licenses.
Each applicant shall state in its application information sufficient to demonstrace how it does ce does not satisfy the following criterion:
. The applicant's rates for service are ' determined by state and/or federal regulatory agencies or by the applicant it-sel f.
For this purpose, the applicant's rates shr.Il be con-sidered to be self-determined if its rates are established either directly for itself or by a controlling governmental unit (e.g., by the city council for its municipal utility).
(b)
Reporting adverse changes to the Commission.
If at any time after submitting its application or while the facility is lien Jed, an applicant or licensee (that had pre-viously be en found financially qualified by satisfyino the iteric that demonstrates conclusive evidence) r.o longer satisfies the above criterion, it shall promptly report the circumstances ard reasons therefore to the Coramission.
2.
Alternative demonstration of financial qualifications.
An applicant that does not satisfy the above criterion of conclu-sive evidence shall provide the following information:
(a)
Estimate of operating costs and sources of funds. Curing the review of an application for an operating license, the applicant will provide, at the Commission's request, current estimates of the total annual cost to operate the facility for each of the first five years of operation and estimates of the ccsts to permanently shut down the facility and maintain it in a safe condition.
The applicant wil' also describe the sources of funds io cover operating costs and shutdown and maintenance costs.
. (b)
Applicant's financial statements.
The application shall include the applicant's latest published annual financial report, to-gether with its most recent interim financial statements.
If such a report is not published, the balance sheet and operating statement covering the latest complete accounting year together with all pertinent notes thereto and certification by a public accountant shall be furnished.
C.
Applications by joint applicants.
Joint applicants are a grou9 of established entities that have agreed to apply for and to pursue activities under a construction permit or operating license. Each joint applicant is individually subject to all of the above reqJirements for established entities.
In addition to provid!ng the Commission with the information require j for established entities, joint applicants shall submit copies of their joint ownership and operation agreemert (or similar agreement or contract) that outlines the financial responsibilities of the parties.
Joint applicants are differentiated from a newly formed entity in that the latter does not have a significant operating history that can be analyzed from the financial qualifications standpoint. The requirements for newly formed entities are covered in III, below.
III. APPLiuANTS WH.'CH ARE NEWLY FORMED ENTITIES A.
Applications for construction permits.
1.
Ectimate of construct 1on costs.
The information that is no -
mally required of applicants which are newly formed entitie:
. does not differ in scope from that required of established entities. Accordingly, applicants shall submit constructicn cost estimates as described above for established entities.
2.
Sources of construction funds.
The application shall specif-ically identify the source or sources upor. which the applicant will rely for the funds necessary to pay the cost of constructing the ft.cility, and the amount to be obtained from each.
With respect to each source, the application shall describe in detail the applicant's legal and financial relationships
~
with its stockholders, corporate affiliates, or others (such as finencial instituticns) upon which tne applicant is relying for financial assistance.
If the sources of funds relied upon include parent companies or other corporate affiliates, informatier, to support the financial capability of each such company or af filiate to meet its commitments to the applicant shall be set forth in the application. This information shall be of the same kind and scope as would be required if the parent compar,iss or affiliates were in fact the arplicant.
The estab fished entities comprising the nen;y formea entity shall submit copies of their joint ownership and operation agreement (or similar agreement or contract) that outlines the financial responsibilities of the parties.
3.
Applicant's financial statements.
As noted earlier in this appendix, ar applicant which is a newly formed entity will normally not be in a position to
. submit the usual types of balance sheets and income statements reflecting the results of prior opera + ions.
The applicant shall, however, include in its application a statement of its assets, liabilities and capital structure as of the date of the application.
B.
Applications for operating licenses.
1.
Estimates of operating revenues and expenses.
Curi ng
..le review of an application for an operating license, the applicant will provide, at the Commission's request, current estimates of the facility's annual operating revenues and operatino expenses for each of the first five years of operation. The requested information should list operating revenues and expenses in sufficient detail to permit an assessment of the reasonableness of the estimates. The expected source of operating revenues shall be indicated.
In addition, the requested information shall include an estimate of costs and indicate the source of funds to penmanently shut down the facility and maintain it in a safe condition.
2.
Applicant's financial statements.
In its application for a license to operate the facility, the applicant shall include a statement of its assets, liabilities and capital structure as of the date of the application.
Encicsure 1 IV.
TRANSFERS OF OWNERSHIP INTERESTS A transfer of ownership interest in a licensed facility requires prior Commission approval by amendment to the permit or license.
10 CFR 50.10. The financial information required by the Comission for its review of a prvposed ownership transfer is the same type of information required for an initial permit or license.
Accordingly, a proposed new owner or an owner seeking an increased ownership share in a licensed facility is subject to the requirements of this appendix and $50.33(f),
including the exemption for insignificant financial interests in paragraph V, below.
V.
INSIGNIFICANT FINANCIAL INTERESTS An ownership interest of less than five percent in a facility by any one applicant is considered insignificant from the financial qualifi-cations standpoint.
(With respect to a nuclear power plant, " facility" means each nuclear unit.)
Accordingly, the Commission generally does not review and no finding is necessary on the financial qualifications of an
~
applicant for less than a five percent ownership interest in a facility.
Likewise, the applicant for such an interest is normally not required to submit the financial information specified in $50.33(f) of this Part and in this gpendix.
(Such an applicant is required to file its annual financial report with the Commission in accordance with paragraph VI, below, and $50.71(b).)
However, the Comission may elect to review such an interest if it appears that extenuating circumstances may be present.
For example, such an in;erest would be subject to the financial qualifications
, review if the interest appears to represent a significant level of control over the corstruction or operation of the facility.
Likewise, an application for a license amendment involving less than a five percent increase in ownership interest by any one applicant is not subject to a financial qualifications review.
However, such an applicant is subject to a financial qualifications review if its proposed total ownership in the facility is greater than five percent and the applicant has not previously been subject to the financial qualifications review with respect te that facility.
These provisions for insignificant financial interests do not affect other provisions in this Chapter for licensing of an ownership interest or for prior approval by the Commission of transfers of ownership interests.
VI.
ANNUAL FINANCIAL STATEMENTS - REPORTING RECUIREMENT Each licensee and each holder of a construction permit for a production or utilization facility of a type described in 550.21(b) or $50.22, or a testing facility is required by 550.71(b) to file its annual financial report with the Commission at tha time of issuance thereof.
This requirement does not apply to licensees or holders of construction permits for medical and research reactors.
VII. ADDITIONAL INFORMATI.ON The Commission may, from time to time, request the applicant or licensee, whether an established entity or newly formed entity, to submit additional er more detailed information respecting its financial arrangements and status of funds if such information is deemed necessary to enable the Cornission to determine the applicant's financial qualifications for the permit or license or a licensee's financial qualifications to continue the conduct of the activities authorized by the license and to permanently shut down the f acility and maintain it in a safe condi ti on.
ENCLOSURE 2