ML19257F403
| ML19257F403 | |
| Person / Time | |
|---|---|
| Issue date: | 01/18/1982 |
| From: | Dircks W NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | |
| Shared Package | |
| ML19257F404 | List: |
| References | |
| REF-10CFR9.7, TASK-RIA, TASK-SE SECY-82-021, SECY-82-21, NUDOCS 8202010397 | |
| Download: ML19257F403 (7) | |
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SECY-82-21 January 18, 1982 t*
RULEMAKING ISSUE 7
[ FECEIVED (Affirmation)
For:
The Commissioners gd M 2 2133& M From:
William J. Dircks EEWJf V
Executive Director for Operations a
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Subject:
FINAL RULE (1) TO ELIMINATE REQUIREMENTS WITH
/
m RESPECT TO FINANCIAL QUALIFICATIONS FOR POWER REACTOR APPLICANTS, AND (2) TO REQUIRE POWER REACTOR LICENSEES TO MAINTAIN PROPERTY DAMAGE INSURANCE Purcose:
To obtain Comission approval for the publication of a final rule to amend 10 CFR Parts 2 and 50 to eliminate the present financial qualifications review and findings for power reactors at the CP and OL stages; also to obtain Commission approval for pbblication of a final rule to amend 10 CFR Part 50 to require power reactor licensees to maintain on-site property damage insurance for decontamination.
Issue:
Whether to approve the final rule (Enclosure 1) for publication in the Federal Register.
Discussion:
A. Backaround On August 18, 1981 the Commission published in the Federal Reaister (46 FR 41786) a notice of proposed rulemaking to amend 10 CFR Part 50 that would (a) eliminate the present financial qualifications review and findings for power reactors at the CP stage entirely, and (b) either eliminate the financial qualifications review and findings for power reactors at the OL stage entirely, or alternatively, retain only the OL financial qualifications review and findings that relate to permanent shutdown and maintenance of the facility (i.e. decommissioning).
Additionally, the notice contained a proposal to amend 10 CFR Part 50 to reauire power reactor licensees to maintain the maximum amount of comercially available on-site property damage insurance. The rationale and specific language of these proposals is contained in the notice and in SECY-81-168A dated June 12, 1981.
Public coments were solicited on the merits of the propcsed rule end, particularly, on which alternative should be adopted by the Commissicn.
Contact:
Robert S. Wood, 05' e20201o397 8201is 492-9885 CF SUBJ CF
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- B. Public Comments Over 160 comments have been received so far.
Nearly 130 were from private citizens and public interest groups and their legal counsel.
These commenters almost unanimously expressed opposition to reducing or eliminating the Commission's financial cualifications review requirements, while at the same time supporting immediate impositicn of requirements for each utility to demonstrate its ability to finance both decommissioning and cleanup after an accident.
By contrast, utilities and their trade and legal representatives strongly favored completely eliminating from the licensing process all financial qualifications considerations including decommissioning.
A majority of, but by no means all, utilities and their representatives also opposed requiring mandatory property damage insurance for decontamination after an accident.
Governmental organizations and individuals excressed a spectrum of views, although most were against eliminating the financial qualifications review.
Some states and municipalities identified potential legal conflicts between certain provisions of the proposed rulemaking and state law.
C.
Staff Resoonse to Comments As Reflected in Final Rule
- 1. Financial Dualifications Reviews With respect to the broad issue of whether financial qualifications reviews should be retained or eliminated, the staff has received no comments that persuade it to depart substantially from the Commission's reasoning in proposing the financial qualifications rule.
A detailed discussion and analysis of the comments received is provided in Enclosure 2.
More narrowly, as indicated in the August 18th Federal Recister notice, the Commission solicited comments, in part, to provide it with a basis for selecting one of the two alternatives proposed in that notice.
Based on the coments received, the staff believes that the Commission's better choice is to eliminate entirely the financial qualifications review at both the CP and OL stages, including consideration of a reactor licensee's ability to finance decommissioning.
This is not meant to discount the imoortance of decommissioning funding to public health and safety, but rather recognizes that any action on deconmissioning is more appropriate when the generic rule is comoleted.
Because that rule is scheduled to be published within the year and since all licensees will be
3 required to meet any financial requirements imposed as a result of that rulemaking, there should be little practical negative effect in temporarily eliminating consideration of decomissioning funding from pre-licensing reviews.
In contrast, if decorraissioning financing issues were continued to be allowed in current licensing proceedings, not only would the intent of this rule be countered (i.e., one could expect little, if any, reduction in the contentions before licensing boards on financial qualifications issues) but there would also be an increased chance that findings in such cases might contradict evolving Commission policy on deccmissioning finance.
Also, the staff has accepted two specific comments on the financial qualifications rule.
First, " electric utility" has been defined to eliminate any doubt that it is meant to include generating subsidiaries of utility companies, public power associations such as WPPSS, or single -
asset organizations such as the Yankee Corporations.
Second, necescary conforming changes have been made to the Commission's rules of practice in 10 CFR Part 2.
2.
Mandatory Procerty Insurance As indicated above, coments were divided on the issue of requiring on-site property damage insurance to cover decontamination expenses resulting from an accident.
Pri. rate citi: ens and puolic interest groups strongly favored the Comission's requiring that i utility prove its ability to pay for cleanup after an accident.
The staff assumes this to mean support for mandatory property insurance, insofar as it covers accident cleanup costs.
Utilities and their representatives generally either (1) opposed mandatory coverage outright because of recent self-initiated moves by the utility industry to obtain insurance or, (2) favored substantial modification of the rule to clarify several of its provisions.
Although many commenters correctly pointed out that such insurance is rapidly evolving and although the staff itself has studies close to completion by insurance experts *, we believe there is justification to adopt now
- Two studies Deing perfomed are:
(1) A contractor is evaluating the feasibility and possible structure of a utility self-insurance pool for both decontamination and decommissioning insurance.
This study has been completed and will be available to the public 'cly in the year; (2) A consultant who is a professor of insurance is evaluating the various property insurance schemes recently proposed by various private sources.
This study will be completed in the next few months.
When completed, these studies will form the basis of a mid-1982 Staff recommendation as to whether and how to modify the final rule presented here, if approved by the Comission.
_4 an interim requirement for property insurance to cover possible decontamination expenses arising from a reactor accident. First, not adopting the rule might send the wrong signal to the utility and insurance industries and to Congress that the Comission no longer believes that decontamination insurance is a significant health and safety issue.
Such a perception might not only dampen progress toward recent private and Congressional efforts to provide increased levels of coverage for all reactor licenses,but might also adversely affect efforts directed toward TMI-2 cleanup.
Second, even though the staff has not completed its evaluation of the various insurance schemes being studied, there appears to be no valid reason to suspect that the final rule would be detrimental to licensees or the public. As discussed below, by broadening the language of the regulation to allow the licensee greater leeway in selecting an insurer, little adverse effect will come from requiring on-site property damage insurance now on an interim basis. By contrast, there is some benefit to public health and safety by requiring that all commercial reactor licensees obtain this insurance sooner rather than later. Although the net benefit is probably small, the net cost is apparently even smaller because almost all licensees maintain on-site property insurance now and most can be t:xpected to increase their coverage as limits rise.
Further, the public benefit from greater assurance that property insurance is required and is pur:hased may be significant.
Even within the utility industry, many concenters did not object in princ'iple to a requirement for property insurance but rather to the ambiguity of certain provisions. These ambiguities have been handled as follows:
1.
Language referring to the " maximum available amount" of pmperty insurance has been eliminated and replaced by references to a combination of coverage offered by either the insurance pools or Nuclear Mutual Limited (NML) plus the excess coverage planned to be offered either by the pools, NML, Nuclear Electric Insurance Limited (NEIL), or the Edison Electric Institute (EEI).
The intent of this change is to require the maximum amount of insurance available through the traditional nuclear insurance markets without forcing utilities to switch fmm one carrier to another as soon as policy limits offered by one exceed the others. Also, utilities would not be required, at this time, to carry insurance from all carriers concurrently.
5 2.
Language has been added to indicate that insurance need only be bought at recsorable costs and under reasonable terms and condit: ens. The intent of this change is to preclude forcing utilities to buy insurance from any carrier no matter what the cost or terms.
3.
Language has been added to clarify that on-site property damage insurance is meant to cover reasonable decontamination expenses resulting from an accident, pursuant to the Commission's responsibility to protect public health and safety.
4.
Provisions in the proposed rule requiring insurance coverage to begin as soon as fuel arrived at the site have been removed. With fuel merely stored at a reactor, the chance of an accident requiring extensive decontamination is extremely remote. As with liability insurance under the Price-Anderson Act, significant property insurance would be required only when thc facility is licensed to operate.
5.
Language has been added to clarify the time limit that licensees have to obtain insurance both initially and after subsequent increases. Since many regulated utilities could not get approval from their public utility commissions within 90 days, the utility would cnly be required to take reasonable steps to secure insurance.
6.
Several Texas utilities commented that the Texas constitution (and, apparently, the Louisiana and Idaho constitutions) prohibits certain municipal utilities from purchasing insurance either offered by mutual insurance companies or involving retroactive assessments. The rule has been revised to address these concerns.
7.
The term " commercially available" insurance has been eliminated because some construed it to exclude insurers such as NML and NEIL.
A detailed analysis of the comments is provided in Enclosure 2.
_6 Recommendation:
That the Conmission:
1.
Approve the final rule for publication in the Federal Recister (Enclosure 1) both to eliminate financial qualifications requirements and to require on-site property damage insurar.ce for decontamination after an accident for electric utility applicants for power reactors.
2.
Certify that this rule does not have a significant economic impact upon a substantial number of small enti ties.
This rule applies only to the companies that own nuclear power plants.
These companies are not considered small entities under th2 Regulatory Flexibility Act.
This certification is reqcired by the Act (5 U.S.C. 605(b)).
3.
Note:
a.
That the final rule, when promulgated, will be effective inmediately upor publication, pursuant to Section 553(d)(1) of the Administrative Procedure Act, 5 U.S.C. 553(d)(1), except that this inmediate effectiveness provision would not be applicable to that portion of the final rule pertaining to requiring on-site property insurance.
The effective date for the on-site property insurance recuirement will be ninety days after the date of publication.
b.
With respect to property insurance coverage, the rule herein may be superseded by subsequent rulemaking during 1982 as a result of studies currently being conducted by the staff.
c.
That the final rule, when effective, will be applied to ongoing licensing proceedings now pending and to issues or contentions therein.
d.
That appropriate Congressional committees will be notified of the final rule.
e.
That, pursuant to E51.5(d)(3) of the Commission's regulations, an environmental impact statement, negative declaration, or environmental impact appraisal need not be prepared in connection with the subject amendments since they are non-substantive and insignificant from the standpoint of environmental imoact.
f.
That the Chief Counsel for Advocacy of the Small Business Administration will be informed of the certification and the reasons for it as required by the Regulatory Flexibility Act.
g.
That the final rule contains a reporting requirement that is subject to review by tne Office of Management and Budget.
Upon Commission affirmation, formal request for OMB review and clearance will be initiated.
OMB review may take 60-90 days from the date of publication in the Federal Reaister.
Therefore, the effective date for tne reporting requirement in paragraph (w)(5) of 950.54 will be 90 days after publict Lion in the Federal Reaister.
If approval is denied bv OMS, the Commission will be notified.
h.
Copies of the final rule will be distributed to affected applicants, licensees, and other interested persons by the Office of Administration.
- i. This final rule requires r.o new NRC resources or reprograming of resources.
Scheduling:
While no specific circumstances require Cormission action by a particular date, the Commission should be aware that financial qualifications is an issue in several current licensing proceedings and thus affects the scheduling of issuance of NRC licenses.
u William J. Dircks Executive Director for Operations
Enclosures:
1.
Final Rule 2.
Synopsis and Analysis of Comments Commissioners' comments or consent should be provided directly to the Offica of the Secretary by c.o.b. Wednesday, February /3, 1932.
Commission Staff Office comments, if any, should be submitted to the Commissioners NLT January 27, 1982, with an information copy to the Office of the Secretary.
If the paper is of such a nature that it recuires additional time for analytical review and comment, the Commissioners and the Secretariat should be apprised of when conments may be expected.
This paper is tentatively scheduled for affirmation at an open meeting during the week of February 8, 1982.
Please refer to the appropriate weekly Cc= mission Schedule, when published, for a specific date and time.
DISTRIBUTICN:
Commissioners ELD Comission Staff Offices ACRS EDO ASLSP ASLAP
ENCLOSURE 1
End11sure 1 NUCLEAR REGULATORY COMMISSION 4
10 Cr4 Parts 2 and 50 Elimination of Review ci. Financial Qualifications of Electric Utilities in Licensing Hearings For Nuclear Power Plants Adr"CY:
Nuclear Regulatory Commission.
ACTION:
Fin.nl Rule.
SUt1 MARY:
The Nuclear Regulatory Commis inn is amending its regulations to eliminate entirely recuirenants 'for financial qualifications review and findings for c-lectric utilities that a'e applying for construction permits or operating licenses for production or utilization facilities.
The Commission is also amending its regulations to require power reactor licensees to cbtain en-site property damage insurance, or an equivalent amount of protection (e.g., letter of credit, bond, or self insurance),
from the time that the Commission first issues an operating license for the nuclear reactor.
EFFECTI/E DATE:
For amendments eliminating iinancial qualifications review (52.104, sections VI and VIII of Appendix A to Part 2,550.33(f),
and 550.40), [ insert date of publication]; for amendments establishing cn-s.ite property damage insurence requirement (5!50.5a(w) and 50.57),
[ insert the date which is 90 days from date of publication in the 82020104o5 gg"s,1,~
In accordance with the Paperwork Reduction Act of 1980, (44 U.S.C. 3507), the reporting provision that is included in paragraph (w)(5) of $50.54 has been submit *.ed for approval to the Office of Management and Buoget (OMB).
It is not effective until OMB approval has been obtained.
FOR FURTHER INFORMATION CONTACT:
Robert 5. Wood, Office of State Programs, U.S. Nuclear Regulatory Commission, Washington, D.C.
20555 (telephone 305492-9885).
S'JPPLEMENTARY INFORMATION:
I. Backaround On August 18, 1981, the Commission published a notice of proposed ru emaking in the FEDE4.AL REGISTER (46 FR 41786) concerning requirements
~
for financial qualifications review and findings for electric utilities that are applying for permits or licenses for proc'uction or utilization fa cili ti ?s. As proposed, the rule would have:
(i) eliminated entirely financial qualifications review requirements far construction permit applicants; and (2)(i) also eliminated entirely these requirements for operating license applicants; or (ii) retained these requirements for operating license applicants to the extent they require submission of information concerning the costs of permanently shutting down the facility and maintaining it in a safe condition (i.e., decommissioning costs).
Concurrently, the Commission proposed amending its regulations to require, on an interim basis, power reactor licensees to " maintain the maximum amount of commercially available on-site property damage insurance, or an equivalent amount of protection (e.g., lettar of credit, bond, or self insurance), from the time that the Commission first permits ownership, possession, and storage of special nuclear material at the site of the nuclear reactor."
In the FEDERAL REGISTER notice, the Commission based its proposal for this rulemaking, in part, upon the statutory basis in the Atomic Energy Act of 1954, as amended ("AEA") for the financial qualifications regulations and its discussion in public Service Comoany of New Hampshire, et. al.
(Seabrook Station, Units 1 and 2), CLI-78-1, 7 NRC 1 (1978) ("Seabrook").
In that decision and the proposed rulemaking, the Commission affirmed its belief that the existing financial qualifications review has done little to identify substantial health and safety concerns at nuclear power plants. However, because the Comission believed that there are matters important to safety which may be affected by financial considerations, it requested coments regarding the type of NRC financial review that would focus effectively on considerations tnat might adversely affect safety.
_4 II.
hblic Comments on the Proposed Rule Over 160 comments were received on the proposed rulemaking and have been categorized as follows:
Private citizens - 98 corr.ents received Public interest groups - 30 coments received Insurance groups - 2 coments received Legal counsel - 8 comments received Governmental organizations and individuals - 10 comments received Utilities and utility groups - 16 coments received Architect-engineers and contractors - 2 coments received All private citizen comments and all but two public interest group comments oppose reducing or eliminating the Cormission's financial qualification review requirements. However, they generally support imposing immediate decommissioning financing requirements and also requiring licensees to demonstrate their ability to clean up after an accident.
By contrast, utilities, utility groups, and utility contractors support completely eliminating the Commission's financial qualifications requirements, including decommissioning.
Further, utilities and their representatives generally oppose requiring mandatory property damage insurance.
Comments from legal counsel generally reflected the interests and views of their utility, insurance, or public interest clients.
Governmental organizations and individuals reflected a spectrum of views, although most were against eliminating the financial qualifications review.
Some states and municipalities identified potential legal conflicts between certain provisions of the proposed rulemaking and state law.
A summary of the comments is presented below. Those who are interested may obtain copies of specific comments from the Public Document Room or the NRC Secretary under designation PR-50 (46 FR 41785), by writing to:
Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, D.C.
20555.
A. Reducino or eliminatino the Commission's financial cualifications review.
Those arguing against reducing or eliminating the Commission's financial qualifications review make four major points.
First, they discount NRC's presumption that public utilities can meet the financial demands of constructing and operating nuclear plants.
Citing Seabrook, WPPSS, TMI, South Texas and other examples, commenters maintain that utilities often have experienced and will continue to experience difficulty in raising funds to cover capital, operating, and maintenance costs (particularly in periods of huh interest rates and overcapacity), whether or not such costs can be recovered in the rate base through Construction Work in Progress (CWIP) or otherwise recovered in rates. Second, these comenters maintain that the inability to recover all costs provides an incentive for utilities to skimp on important safety components and quality assurance standards.
Some commenters cite the discussion of financial disincentives in the Rogovin Deport (Three Mile Island:
A Recort to the Commission and the Public, Mitchell Rogovin, Director, January 1980) to support their views. Another commenter suggests that utilities will be tempted to lower wages which would lead to higher turnover and, thus, to employment of inadequately trained personnel.
Third, comenters maintain that NRC inspection efforts and capabilities are inadequate to provide sufficient assurance of safety.
Even if violations are found, some comenters argue that NRC enforcement efforts are inadequate.
Fourth, the comenters assert that the financial qualifications review function is statutorily required by 42 U.S.C. 12232(a),(c) and (d).
Further, many of those arguing against eliminating the financial qualifications review recommend that the Commission should at least retain that portion of the review pertaining to decommissioning.
They state that the on-going decommissioning rulemaking is no substitute for an immediate general requirement to demonstrate financial capability to deconmission a nuclear production on utilization f acility safely and expeditiously.
Many expressed the view that the generic decommissioning study would not be completed in a reasonable time.
By contrast, those favoring the Comission's proposed reduction or elimination of the financial c;ualifications review function generally support the Commission's reasoning that such a review has done little to identify substcative health and safety problems at nuclear power clants and that the Comission's inspection arid enforcement activities provide more effective protection of public health and safety. Most utilities and their associates support complete elimination of the financial qualifications review, including provisions pertaining to decommissioning.
These commenters maintain that, if any regulations relating to the financing of decommissioning are adopted, they should await completion of the Commission's generic rulemaking on decommissioning.
The Commission has received no comments to persuade it to change significantly its reasoning on the proposed financial qualifications rule.
As indicated above, many of those opposing the proposed rule change have concluded that experience with Seabrook, WPPSS and other plants demonstrates the close connection between financial qualifications and public health and safety.
The Commission disagrees.
As to the first point raised by commenters opposing elimination of the financial qualifications review, the Conmission does not find any reason to consider, in a vacuum, the general ability of utilities to finance the construction of new generation facilities. Only when joined with the issue of adequate protection of the public health and
'aty does this issue become pertinent.
As to this, the commenters' ond point, the Commission in its Seabrook decision indicated its support for the substance of the proposed rule --
elimination of the financial qualifications review because of the lack of any demonstrable link between public health and safety concerns and a utility's ability to make 'Ae requisite #inancial showing.
.g.
The actual firancial situation analyzed in that case has not changed.
There is no ovidence that the safety of the public has been adversely affected by Public Service Company of New Hampshire's (PSCNH) difficulties in obtaining financing.
It is true that to raise capital, PSCNH has sold part of its ownership in the Seabrook plant, but such action does not have any demonstrable link to any safety problems.
Similarly, citing WPPSS' experience is not convincing, because WPPSS' response (and that of most other utilities encountering financial difficulties) has been to postpone or cancel their plants, actions clearly not inimical to public health and safety under the Atomic Energy Act.
As to the third point raised in opposition to the pioposed rule, in the absence of facts to the contrary, the Commission cannot accept unsuppo,ted statements that, as a general matter, its inspection and enforcement efforts are inadequate. The examples that commenters cite (e.g., South Texas) appear to substantiate, rather than undercut, the Comission's view that any violations of safety regulations are being found and corrected and that, in any event, such violations cannot be shown to arise from a licensee's alleged lack of financial qualifications.
-g-With respect to the final assertion that the financial qualifications review function is statutorily mandated, Section 182a of the AEA, 42 U.S.C. 52232(a), clearly indicates that such function is within the Commission's discretionary authority, but is not mandated.
As noted in the proposed rule, this interpretation of Section 182a has been approved by the United States Court of Appeals for the First Circuit in New Encland Coalition on Nuclear Pollution v. NRC, 582 F.2d 87, 93 (1978), affirming the NRC's Seabrook decision.
On balance, after careful consideration of the coments submitted and of the factors discussed in the notice of proposed rulemaking, the Cormission has elected to promulgate the first of the two alternatives outlined in the proposed rule, i.e., eliminate the financial qualifications review of electric utilities entirely t.t the CP and OL stages,
.cluding elimination of any consideration of decornissioning funding. This is not meant to discount the importanci of decommissioning funding to public health and safety, but rather recognizes that any action on decommissioning is more appropriate in the context of the generic rulemaking now being conducted.
Until that time, the Commission has concluded that it is premature to include any final decision on decomissioning in this final rule on financial qualifications.
Because the generic decommissioning rule is scheduled to be aublished in 19S2 and since all licensees will be required to meet any financial requirements imposed as a result of that rulemaking, there should be little practical effect in temporarily eliminating consideration of decommissioning funding from licensing activities. Moreover, if decommissioning financing issues were continued to be allowed in current licensing proceedings, two undesirable effects may result.
First, there would be an increased chance that findings in such cases might contradict evolving Commission policy in this area.
Second, one positive gain from the final rule would be countered, in that there could be expected to be little, if any, reduction in the contentions before the licensing boards on financial qualifications issues, thereby not significantly reducing the time and effort devoted to those issues.
B.
Mandatory procerty insurance for decontamination.
Comments are similarly divided on the issue of requiring on-site property insurance to cover decontamination expenses resulting from an accider,t. Those who support keeping the financial qualifications review generally suoport requiring a utility to demonstrate proof of its ability to clean up after an accident. The Commission interprets these comments as sucom ting mandatory property insurance, insofar as it covers accident cleanup costs. The other commenters favoring elimination of the financial qualifications rule generally either (1) oppose mandatory coverage outright because of recent self-initiated moves by the utility industry to obtain insurance or, (2) favor substantial modification of the rule to clarify several of its provisions.
The first group of commenters do not generally state their reasons for favoring mandatory insurance except for an undefined and non-quantifiable general benefit in protecting public health and safety.
Some indicated that the amount of insurance currently available is not sufficient to cove: accidents such as TMI-2.
However, because of recently announced increases in the amount of coverage available and the continuing evolution in the it.surance markets, this concern may not be as great as might otherwise be the case.
As indicated above, the second group of comrenters -- primarily utilities and their representatives -- object more to the wording of certain provisions of the proposed on-site property damage insurance rule than to the require-ment itself.
Several commenters recognize that the practical effect of requiring mandatory insurance has been reduced, particularly since the TMI-2 accident, because most utilities will buy whatever amount of coverage is offered, within reasonable limits, as a matter of good business judgment.
Other commenters indicate that the Commission's estimates of annual premiums required for a typical reactor may have been understated.
Estimated premiums for coverage currently available (i.e., $375 or $450 million) are $3 million per year for a typical two-unit site.
In light of these coments and for the reasons stated in the proposed rule, the Commission has decided to retain the recuirement in the final rule that electric utilities must have on-site property damage insurance, but several modifications have been made pursuant to the comments received.
The following changes have been incorporated into the text of the final rule on property insurance:
1.
The definition of " maximum available amount" has been clarified.
This term could have been interpreted to mean that utilities would be required to switch their insurance coverage to the carrier offering the greatest amount at any particular time.
Another interpretation could be that utilities would be required to obtain coverage from the two major insurers or any othe" insurer that decides to enter this market.
Finally, the ' maximum available" could have included any increment no matter how highly priced or how restrictive the terms and conditions.
The Commission's intent is neither to disrupt the insurance markets by forcing utilities to switch their insurance carriers unnecessarily nor to require utilities to obtain insurance under unreasonable terms and conditions.
The rule '1at been changed to clarify the Commission's intent, specifically in % E0.5Uw).
2.
Some commenters maintained that the proposed rule snould apply only to insurance covering decontamination of a facility suffering an accident and not to "all risk" property damage insurance. Because decontamination insurance is the Commission's only concern from the point of view of protecting public health an? safaty, coverage to replace the existing facility on an "all risk" basis is beyond the scope of the Commission's authority. By the same reas ing, the Commission disagrees with the position taken by some conmenters that it is unfair to many owners of smaller power reactors to require insurance greatly exceeding the cost of replacing the facility. A TMI-2 type accident could well require coverage approaching $1 billion, no matter what the original value or size of the facility.
Until completion of studies evaluating the cost of cleaning up accidents of varying severity, it is prudent to require for all power reactors a reasonable amount of insurance for decor.tamination expense.
3.
Several persons commented that reactor licensees should not be required to maintain on-site property damage insurance until the operating license has been received. With fuel merely ste.ed at a reactor, the chance of an accident requiring extensive decontamination is extremely remote.
The Commission agrees and has changea the rule accordingly, so that such insurance need be in force only when the utility is licensed to operate the reactor.
4.
Several Texas utilities commented that the Texas constitution (and, apparently, the Louisiana and Idaho constitutions) prohibits certain municipal utilities from purchasing insurance aither offered by mutual insurance companies or involving retroactive assessments.
The Commission has revised the rule to address these concerns.
5.
One commenter discussed the need to clarify the amount of time required of the licensee to obtain not only initial insurance but also subsequent increases offered.
Another suggested that many regulated utilities may have difficulty in obtaining approval to purchase insurance within 90 days. The Commission has revised the rule to reflect its view that 90 days is a reasonable time in which to take reasonable steps to obtain both initial and any additional on-site property damage insurance.
6.
The phrase " commercially available" insurance could have been construed to exclude insurers such as NML and NEIL.
The Commission recognizes this possible but erroneous interpretation and has changed the wording of the rule accordingly.
III. Other Considerations A.
Recuirement Fnr Additional In.
m=+'
As indicated in the proposed rule, the Conmission does not intend s waive er relinquish its residual authority to require such additional information in individual cases as may be necessary for the Commission to determine whether an application should be granted or denied or whether a li;ense sho '
a modified or revoked.
See, for example, the fourth sentence of Section 182a of the AEA.
Similarly, no change in the present powers of the Commission with regard to the financial qualifications review of non-utility applicants for Part 50 licenses will be made.
In addition, an exception to or waiver from the rule would be pessible to require the submission 1:
financial information from a particular electric utility applical t i' special circumstances are shown pursuant to 10 CFR 2.758 in an indivicual licensing hearing.
B.
Practical Impacts.
Also as indicated above and in the proposed rule, the Commission continues to expect that the final rule will, in normal circumstances, reduce the time and effort which applicants, licensees, the NRC staff and NRC adjudicatory boards devote to reviewing the applicant's or licensee's financial qualifications.
The rule will eliminate staff review in cases where the applicant is an electric utility, presumed to be able to finance activities to be authorized under the permit or license.
C. License Amendments.
The elimination by this rule of the financial qualifications re,iew for electric utility applicants also applies to any electric utilities that become co-owners via amendments to existing permits or licenses.
From time to time, original owners of production or utilization facilities make arrangements to transfer to other electric utilities a portion of the ownership in the facility. Normally, an amendment request is then filed, which seeks to ada the new partner as co-owner and co-licensee.
For the purposes of this rule, similar to the situation relating to prelicensing antitrust review of these new owners, the amendment request comprises the initial license application by the new, prospective co-owner, even though the amendment request may actually be filed by the present licensee and owner.
E.o., Detroit Edison Company (Enrico Fermi Atomic Power Plant, Unit No. 2), ALAB-475, 7 NRC 752, 755 n.7 (1978).
Since the same financial qualifications review considerations apply to all electric utility applicants, regardless of the particular manner in which their application is tendered to the NRC, it should be clear that this final rule applies to any request for an amendment that would, if granted, include a new electric utility as a co-owner and co-licensee in a production or utilization facility.
IV.
Conclusion In summary, the Commission has concluded that the adoption of the rule will substantially reduce the effort and resources associated with demonstrating financial qualifications of electric utilities that are applying to construct and operate nuclear production and utilization facilities without reducing the protection of the public health and safety. This portion of the rule will be effective immediately upon publication, pursuant to 5 U.S.C. 5533(d)(1), since the rule is expected to relieve significantly the obligation of certain applicants with respect to information required for constructirn permits and operating licenses, and also to reduce the amount of unnecessary, time-consuming staff review and adjudicatory proceedings.
Since the rule will be applied to ongoing licensing proceedings now pending and to issues or contentions therein, Union of Concerned Scientists v. AEC, 49 ! F.2d 1069 (D.C. Cir.1974), it should be cleer that the NRC neither intends nor expects that the rule will affect the scope of any issues or contentions related to a cost / benefit analysis performed pursuant to the National Environmental Policy Act of 1969, either in pending or future licensing proceedings for nuclear power plants.
Under NEPA, the issue is not whether the applicant can demonstrate reasonable assurance of covering certain projected costs, but rather is merely WMt costs to the apolicant of constructing and oper; ting the plant are to be put into the cost-benefit balance. As is now the case, the rule of reason will continue to govern the scope of what costs are to be included in the balance, and the resulting determinations may still be the subject of litigation.
Thus, financial qualifications would not be expected to become an issue or contention in an NRC licensing proceeding insofar as NEPA might be involved.
The Commission has also concluded that adoption of the on-site property damage insurance requirement, as modified, will better ensure that adequate protection of the health and safety of the public is achieved.
This requirement will be effective [ insert date which is ninety (90) days after publication of this final rule in the FEDERAL REGISTER.]
Paperwork Reduction Act Statement Pursuant to the provisions of the Paperwork Reduction Act of 1980 (Pub.
L.96-511), the NRC has made a determination that this rule contains reporting, recordkeeping or information collection requirements.
These were reviewed by the Office of Management and Budget (OMB), and O!dB approval was granted on
, OMB Approval
- Regulatory Flexibility Certification In accordance with the Regulatory Flexibility Act of 1980, 5 U.S.C.
S 605(b), the NRC hereby certifies that this rule will not have a significant economic impact on a substantial number of small entities.
The rule reduces certain minor informi. tion collection requirements on the owners and operators of nuclear power plants licensed pursuant to Sections 103 and 104b of the Atomic Energy Act of 1954, as amended, 42 U.S.C. 55 2133, 2134b. These electric utility companies are dominant in their service areas. Accordingly, the companies that own and operate nuclear power plants are not within the definition of a small business found in Section 3 of the Small Business Act,15 U.S.C. 6 632, or within the Small Business Size Standards set forth in 13 CFR Part 121.
Pursuant to the Atomic Energy Act of 1954, as amended, the Energy Reorganization Act of 1974, as amended, and Section 553 of Title 5 of the United States Code, the Following amendments to 10 CFR Parts 2 and 50 are published as a document subject to codification.
PART 2 - RULES OF PRACTICE FOR DOMESTIC LICENSING PROCEEDINGS 1.
The authority citation for Part 2 is revised to read as follows:
AUTHORITY:
Secs.161p and 181, Pub. L.83-703, 68 Stat. 950 and 953 (42 U.S.C. 2201(p) and 2231); sec.191, as amended Pub. L.37-615, 76 Stat.
409 (42 U.S.C. 2241); sec. 201, as amended, Pub. L. 93 438, 88 Stat.
1242 (42 U.S.C. 5841); (5 U.S.C. 552), unless otherwise noted.
Sections 2.200-2.206 also issued under sec.186, Pub. L.83-703, 68 Stat. 955 (42 U.S.C.223" and sec. 206, Pub. L.93-438, 88 Stat.1246 (42 U.S.C. 5846).
Sections 2.800-2.808 also issued under 5 U.S.C. 553.
Section 2.809 also issued under 5 U.S.C. 553 cnd sec. 23, as amenced, Pub. L.85-256, 71 Stat. 579, and Pub. L 95-209, 91 Stat.1483 (42 U.S.C. 2039).
2.
In 52.4, new paragraph (s) is added to read as follows:
52.4 Definitions.
As used in this part, (s)
" Electric utility" means any entity that generates or distributes electricity and which recovers the costs of this electricity, either directly or indirectly, through rates established by the entity itself or by a separate regulatory authority.
Investor-owned utilities including generation or distribution subsidiaries, public utility districts, municipalities, rural electric cooperatives, and state and federal agencies, including associations of any of the foregoing, are included within the meaning of " electric utility."
3.
In s2.104, paragraphs (b)(1)(iii) and (c)(4) are revised to read as follows:
52.104 Notice of hearino (b)
(1)
(iii) Whether the applicant is financially qualified to design and construct the proposed facility, except that this subject shall not be an issue if the applicant is an electric utility seeking a license to construct a production or utilization facility of the type described in 5 50.21(b) or 5 50.22; (c)
(4)
Whether the applicant is technically and financially qualified to engage in the activities to be authorized by the operating license in accordance with the regulations in this chapter, excapt that the issue of financial qualifications shall not be considered by the presiding officer in an coerating license hearing if the applicant is an electric utility seeking a licence to operate a production or utilization facility of the type described in 5 50.21(b) or s 50.22; 4.
In Appendix A of Part 2, Sections VI(c);l)(iii) and VIII(b)(4) are revised to read as follows:
APPENDIX A - STATEMEW10F GENERAL POLICY AND PROCEDURE: CONDUCT OF PROCEEDINGS FOR THE ISSUANCE OF CONSTRUCTION PERMITS AND OPERATING LICENSEES FOR PRODUCTION AND UTILIZATION FACILITIES FOR WHICH A HEARING IS REQUIRED UNDER SECTION 189A 0F THE ATOMIC ENERGY ACT OF 1954, AS AMENDED w
VI.
POSTHEARING PROCEEDINGS, INCLUDING THE INITIAL DECISION (c)
(1)
(iii) 'whether the applicant is financially qualified to design and construct the proposed facility, except that this subject shall not be an issue if the applicant is an electric utility seeking a license to construct a production or utilization facility of the type described in 5 50.21(b) or 5 50.22; VIII.
PROCEDURES APPLICABLE TO OPERATING LICENSE PROCEEDINGS (b)
(4) Whether the applicant is technically and financially qualified to engage in the activities to be authorized by the operating license in accordance with the Commission's regulations, except that the issue of financial qualifications shall not be considered by the board if the applicant is an electric utility seeking a license to operate a production or utilization f acility of the type described in 5 50.21(b) or 5 50.22.
PART 50 - DOMESTIC LICENSING OF PRODUCTION AND UTILIZATION FACILITIES 5.
The authority citation for Part 50 is revised to read as follows:
AUTHORITY:
Secs.103,104,161,182,183,189, 68 Stat. 936, 937, 948, 953, 954, 955, 956, as amended (42 U.S.C. 2133, 2134, 2201, 2232, 2233,
. 2239); secs. 201, 202, 206, 88 Stat.1243,1244,1246 (42 U.S.C. 5841, 5842,5846), unless otherwise noted.
Section 50.78 also issued under sec.122, 68 Stat. 939 (42 U.S.C.
2152).
Sections 50.83-50.81 also issued under sec.184, 68 Stat. 954, as amended (42 U.S.C. 2234).
Sections 50.100-50.102 issued under sec. 186, 68 Stat. 955 (42 U.S.C. 2236).
For the purp;:es )f sec. 223, 68 Stat 958, as amended (42 U.S.C.
2273), Hs50.10(a), (b), and (c), 50.44, 50.46, 50.48, 50.54, and 50.80(a) are issued under sec.161b, 68 Stat. 948, as amended (42 U.S.C. 2201(b));
5150.10(b) and (c) and 50.54 are issued under sec.161i, 68 Stat. 949, as amended (42 U.S.C. 2201(i)); and 5550.55(e), 50.59(b), 50.70, 50.71, 50.72, and 50.78 are issued under sec.1610, 68 Stat. 950, as amended (42 U.S.C. 22Vl(o)), and the laws referred to in Appendices.
6.
In 550.2, a new paragraph (x) is added to read as follows:
550.2 Definitions.
As used in this part, (x)
" Electric utility" means any entity that generates or distributes electricity and which recovers the costs of this electricity, either directly or indirectly, thrcugh rates established by the entity inself or by a separate regulatory authority.
Investor-owned utilities, including generation or distribution subsidiaries, public utility districts, municipalities, rural electric cooperatives, and state and federal agencies, including associations of any of the foregoing, are included within the meaning of " electric utility."
7.
In 550.33, paragraph (f) is revised to read as follows:
550.33 Contents of applications; general information.
Each application must state:
(f)
(1)
Information sufficient to demonstrate to the Commission the financial qualifications of the applicant to carry out, in accordance with regulations in this chapter, the activities for which the permit or license is sought.
However, no information on financial qualifications, including that in paragraphs (f)(1)(i) and (ii) of this section, is required in any application, nor shall any financial review be conducted, if the applicant is an electric utility applicant for a license to construct or operate a production or utilization facility of the type described in 5 50.21(b) or B 50.22.
.25-(i)
If the application is for a construction permit, the applicant shall submit information that demonstrates the applicant possesses or has reasonable assurance of obtaining the funds necessary to cover estimated construction costs and related fuel cycle costs. The applicant shall submit estimates of the total construction costs of the facility and related fuel cycle costs, and shall indicate the source (s) of funds to cover these costs.
(ii)
If the application is for an operating license, the applicant shall submit information that demonstrates the applicant possesses or has reasonable assurance of obtaining the funds necessary to cover estimated operation costs for the period of the license, plus the estimated costs of permanently shutting the facility down and maintaining it in a safe condition.
The applicant shall submit estimates for 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 facility and maintain it in a safe condition. The applicant shall also indicate the sources (s) of funds to cover these costs.
An application to renew or extend the term of an operating license nust include the same financial informatien as required in an application for an initial license.
(2)
Except for electric utility applicants for construction pemits and operating licenses, 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 must also include information showing:
(1)
The legal and financial relationships it has or proposes to have with its stockholders or owners; (ii) Their financial ability to meet any contractual obligation to the entity which they have incurred or propose to incur; and (iii)
Any other information considered necessary by the Commission to enable it to determine the applicant's financial qualifications.
(3)
Except for electric utility applicants for construction permits and operating licenses, the Commission may request an established entity or newly-formed entity to submit additional or more detailed information respecting its financial arrangements and status of funds if the Conmission considers this information appropriate.
This may include information regarding a licensee's ability to continue the conduct of the activities authorized by the license and to permanent'y shut down the facility and maintain it in a safe condition.
8.
In 550.40, paragraph (b) is revised to read as follows:
550.40 Common standards.
(b) The applicant is technically and financially qualified to engage in the proposed activities in accordance with the regulations in this chapter. However, no consideration of financial qualifications is necessary for an electric utility applicant for a license for a production or utilization facility of the type described in s 50.21(b) or 5 50.22.
9.
In 5 50.54, a new paragraph (w) is added to read as follows:
550.54 Conditions of licenses.
(w) Each electric utility licensee under this cart for a production or utilization facility of the type described in s 50.21(b) or 5 50.22 shall, by [ insert 90 days from date of publication in Federal Recister], take reasonable steps to obtain on-site property damage insurance available at reasonable costs and on reasonable terms from Drivate sources or to demonstrate to the satisfaction of the Commission that it possesses an ecuivalent amount of protection covering the facility, crovided that:
(1) this insurance shall cover reasonable decontamination and cleanup costs associated with the property damage resultinc from an accident at the licensed facility; (2) this insurance must have a minimum coverage limit no less than the combined total of (i) that offered by either American Nuclear Insurers ( ANI) and Mutual Atomic Energy Reinsurance Pool (MAERP) jointly or Nuclear Mutual Limited (NML); olus (ii) that offered by Nuclear Electric Insurance Limited (NEIL),
the Edison Electric Institute (EEI), ANI and MAERP jointly, or NML as excess property insurance; (3) che licensee shall, within ninety (90) days of any increases in policy limits fer primary or excess coverage that it has obtained pursuant to this paragraph, take reasonable steps to obtain these increases; and
' (4) when a licensee is prohibited from purchasing on-site property damage, insurance because of statt or local law, the licensee shall purchase the specific amount of such insurance found by the NRC to be reasonably available Th that licensee, or to obtain an equivalent amount of protection; and (5) the licensee shall report on April 1 of each year to the NRC as to the present levels cf this insurance or financial protection it maintains and the sources of this insurance or protection.
10.
In ! 50.57, paragraph (a)(4) is revised to read as follows:
150.57 Issuance of coeratino licenses.
1 w
t (a)
(4) The applicant is techaically and financially cualified to engage in the activities authorized by the operating license in accordac2<. with the regulaticns in this enacter.
^
However, no finding af financial cualifications is necessary far an electric utility applicant for an operating license for a production or utilization facility of the tyDe described in s 50.21(b) or i 50.22.
I 11.
Part 50 is amendet.by removing Appendix C.
APPENDIX C - [ Removed]
'2.
In Appendix M to Part 50, pLragraph 4(b) is revised to read as follows:
APPENDIX M - STt.NDARDIZATION OF DESIGN; MANUFACTURE OF NUCLEAR POWER REACT 0:.S; CONSTRUCTION AND OPERATION OF NUCLEAR POWER REACTORS MANUFACTURED PURSUANT TO COMMISSION LICENSE (4)
(b)
The financial information submitted pursuant to 5 50.33(f' shall he directed at a demonstration of the financial qualifications of tne applicant for the manufacturing license to carry out the manufacturing activity for which the license is sought.
Dates a?. Wasnington, D.C., this day of
,1932.
For The Nuclear Regulatory Commission Samuel J. CEi!L Secretary of tne Dannission
\\
ENCLOSURE 2
Synopsis and Analysis of Comments Over 160 comments were received on the proposed rulemaking.
Appendix A to this enclosure lists each commenter by the number assigned by the Office of the Secretary.
To facilitate comparison of conments, they have been grouped into seven categories, as follows:
Private citizens - 98 comments received Public interest groups - 30 comments received Insurance groups - 2 comments rt eived Legai counsel - 8 comments receiveo Governmental organizations and individuals - 10 comments received Utilities and utility groups - 16 corments received Architect-Engineers and Contractors - 2 comments received All private citizen comments and all but two public interest group comments oppose reducing or eliminating the Commission's financial qualification review requirements.
!lowever, they generally support inmediate imposition of requirements for each utility to demonstrate its ability to finance both decommissionino at ! cleanup after an accident.
By contrast, utilities, utility groups, and utility contractors support completely eliminating from the licensing process all financial qualifications
2 considerations including decommissioning.
Further, utilities and their representatives generally oppose requiring mandatory on-site property damage insurance for decontamination after an accide7t.
Comments from legal counsel generally reflect the interests and views of their utility, insurance, or public interest clients.
Governmental organizations and individuals express a spectrum of views, although most are against eliminating the financial qualifications revie,;.
Some state offices and municipalities identify potential legal conflicts between certain provisions of the proposed rulemaking and state law as indicated below.
Most comments, particularly from private individuals, indicate support of or opposition to various provisions of the proposed rulemaking without providing any reasons.
Many others either reference submissions of other commenters o. are quite similar in their reasons.
Rather than summarize each comment individually, we have discussed the salient points of each argument -- and the staff's reasons for accepting or rejecting each -- so as to reduce length and redundancy. The staff believes that this approach presents all significant points raised by commenters.
1.
Reducing or Eliminatina the Commission's Financial 'Jualifications Review Those arguing against reducing or eliminating the Commission's financial qualifications review make four major points.
First, they discount NRC's presumption that public utilities can meet the financial demands of constructing and operating nuclear plants.
Citing Seabrcok, WPPSS, TMI, South Texas and other examples, cormenters maintain that utilities often have experienced and will continue to experience difficulty in raising capital, operating, and maintenance costs (particalarly in periods of high interest rates and over-capacity), whether or not such costs can be recovered in the rate base through Construction Work in Progress (CWIP) or otherwise recovered in rates.
Second, these commenters maintain that the inability to recover all costs provides an incentive for utilities to skimp on important safety compcnents and quality assurance standards.
Some commenters cite the discussion of finar.cial disincentives in the Rogovin Report (Three Mile Island:
A Report to the Commission and the Public; Mitchell Rogovin, Director; January 1980) to support their views. Another commenter suggests that utilities will be tempted to lower wages which would lead to higher turnover and, thus, to employment of inadequately trained personnel.
Third, cormenters maintain that NRC inspection efforts and capabilities are inadequate to provide sufficient assurance of safety.
Even if violations are found, some commenters argue that NRC enforcement efforts are inadequate.
Fourth, the cormenters assert that the financial qualifications review function is statutorily required by 42 U.S.C. 52232(a), (c) and (d).
Two subsidiary reasons to keep the financial qualification review function were also given.
First, the proposed rule violates citizens' First Amendment rights.
Second, possible increases in the self-insured liability of some nuclear operators could be defeated if financial qualifications reviews were dropped.
Many of those arguing against eliminating the financial qualifications review recomend that the Commission should at least retain that portion of the review pertaining to decommissioning. They state that the ongoing decommissioning rulemaking is no substitute for a general requirement to demonstrate financial capability to decommission a facility safely and expeditiously. Many express the view that the generic decomnissioning study would not be completed in rehsonable enough time.
By contrast, those favoring the Commission's proposed reduction or elimination of the financial qualifications review function generally support the Commission's reasoning that such a review has done little to identify substantive health and safety problems at nuclear power plants and that the Commicsion's inspection and enforcement activities provide more effective protection of public health and safety. Most utilities and their associates support complete elimination of the financial qualifications review, including provisions pertaining to decomissioning.
If any regulations relating to the financing of decommissioning are adopted, they should await completion of the Commission's generic rulemaking on decommissioning.
tiore narrowly, some comenters recommend that the proposed rule, if adopted, should define " elect,-ic utility" to encompass entities such as WPPSS or generating companies and amend appropriate sections of Part 2.
The staff agrees with this comment and has changed the rule accordingly.
The Staff has received no comments to persuade it to change significantly its reasoning in proposing the financial qualifications rule.
As indicated above, many of those opposing the proposed rule change have concluded that experience with Seabrook, WPPSS, and other plants demonstrates the close connection between financial qualifications and public health and safety. The Staff disagrees.
As to the first point raised by commenters opposing elimination of the financial qualifications review, the Staff does not find any reason to consider, in a vacuum, the general ability of utilities to finance the construction of new generation facilities. Only when joined with the issue of adequate protection of the public health and safety does this issue become pertinent.
As to this point, the Commission indicated in Seabrook its support for the substance of the proposed rule -- i.e., elimination of the financial qualifications review because of the lack of any demonstrable link between public health and safety concerns and a utility's ability to make the requisite financial showing.
The actual financial situation analyzed in that case has not changed.
There is no evidence that the safety of the public has been adversely affected by Public Service Company of New Hampshire's (PSCNH) difficulties in obtaining financing.
It is true that, to raise capital, PSCNH has sold part of its ownership in the Seabrook plant, but such action does not have any demonstrable link to any safety problems.
Similarly, citing WPPSS' experience is not convincing, because WPPSS' response (and that of most other utilities encountering financial difficulties) has been to postoone or cancel its plants, an action not inimical to public health and safety.
The Staff finds compelling the observation of one commenter that. "as subsequent experience at Three Mile Island has shown, the biggest loser in a nuclear accident is the owner of the pl ant.
Utilities with nuclear plants under construction have every incentive to ensure that the plant is safely built and to avoid ' cutting corners' in the interest of saving amounts that will, in any event, be miniscule when compared with the total cost."
(Comment #111, p.2-LeBoeuf, camb, Leiby & MacRae)
In the absence of facts to the contrary, the Staff cannot accept unsupported statements that, as a general rule, the Commission's inspection and enforcement efforts are inadequate.
The examples that comenters cite (e.g., South Texas, TMI, etc.) appear to substantiate, rather than undercut, the iew that any violations of safety regulations are being found and corrected and that, in any event, such violations cannot be shown to arise from a licensee's alleged lack of financial qualifications.
With respect to the final assertion that the financial qualifications review function is statutorily mandated, Section 182a of the AEA, 42 U.S.C. s2232(a), clearly indicates that such function is within the Commission's discretionary authority, but is not mandated.
As noted in the proposed rule,..... interpretation of Section 182a has been approved by the United States Court o# Appeals for the First Circuit in New Enoland Coalition on Nuclear Pollution v. NRC, 582 F.2d 87, 93 (1978), affirming the NRC's Seabrook decision.
On balance, the Staff concludes that the better choice is to promulgate the first of the two alternative outlined in the proposed rule, i.e.,
eliminate the financial qualifications review entirely at the CP and OL stages including considerations of decomissioning funding.
This is not meant to discount the importance of decommissioning funding to public health and safety, but rather recognizes that any action on decommissioning is more appropriate when the generic rule is completed.
Until that time, the Staff has concluded that it is premature to include any final decision on the decommissioning in this final rule.
Because the generic decommissioning rule is scheduled to be published in 1982 and since all licensees will be required to meet any financial requirements imposed as a result of that rulemaking, there should be little practical effect in temporarily eliminating consideration of decommissioning funding from licensing activities.
Moreover, if decormissioning financing issues were continued to be allowed in current licensing proceedings, two undesirable effects may result.
First, there would be an increased chance that findings in such cases might contradict evolving Commission rclicy in this area.
Second, one gain from the final rule would be countered in that there could be expected to be little, if any, reduction in the contentions before the l' censing boards on financial qualifications issues, thereby not significantly reducing the time and effort devoted to those issues.
2.
Mandatory Property Insurance for Decontamination Comments are similarly divided on the issue of requiring on-site property insurance to cover decontamination expenses resulting from an accioent.
Those supporting keeping the financial qualifications t 'i?w generally support mandatory property insurance, insofar as it covers accident cleanup costs. Those favoring eliminating the financial qualifications rule generally either (1) oppose mandatory coverage outright because of recent self-initiated moves by the utility industry to obtain insurance or, (2) favor substantial modification of the rule to clarify several of its provisions.
The first group of commenters do not generally state their reasons for favoring mandatory insurance cept for an undefined and non-quantifiable general benefit in protecting public health and safety.
Some indicated that the amount of insurance currently available is not sufficient to cove: accidents such as TMI-2.
However, becaust of recently announced increases in the anount of coverage available and the continuing evolution in the insurance markets, this concern may be not as great as might otherwise be the case. As indicated above, the second group of conmenters --
pr; aarily utilities and their representatives -- object more to the wording of certa'n provisions in the proposed rule on on-site property
.g.
damage insurance rather than to the requirement itself.
Several commenters recognize that the practical effect of requiring mandatory insurance has been reduced, particularly since the TMI-2 accident, because est utilities will buy whatever amcunt of coverage is offered, within reasonable limits, as a matter of good business judgment.
Commenters have indicated that the Commission's estimates of annual premiums required for a typical
~9 actor may have been understated.
Estimates for coverage currently available art $3 million per year for a typical two-unit site.
Several modifications have been made to the proposed rule in light of specific comments received, as indicated below:
1.
The definition of " maximum available amount" is ambiguous and should be clarified.
For example, Nuclear Mutual Limited (NML) currently offers $450 million of on-site property damage insurance while American Nuclear Insurers ( ANI) and Mutual Atomic Energy Reinsurance Pool (MAERP) joirtly offer $375 millic.
" Maximum available amount" could be interpreted to mean that utilities would be required to switch their insurance coverage to whomever offered the greatest amount at any particular time -- in this example, NML.
Another interpretation is that utilities would be required to obtain coverage from the two major insurers together or any other insurer that decided to enter this market.
Finally, the " maximum available" could include any increment no matter how highly priced or how restrictive the terms and conditions. The NRC's intent is not to disrupt the insurance markets by forcing utilities to switch their insurance carriers unnecessarily or to obtain insurance under unreasonable terms and conditions.
Consequently, qualifying language has been added to the final rule that required insurance will be obtained under reasonable costs, terms and conditions. Also, the
" maximum available" provision will be modified to allow the maximum offered at any point either by financially sond, admitted insurance markets, (i.e., ANI/MAERP, or NML) plus any reinsurance offered by NEIL or EEI or the pools. As one cocmenter suggested, "By using admitted insurance markets as a baseline (as opposed to using both admitted and non-admitted markets) one ensures that state insurance regulators retain a measure of control over the capacity offered.
Thus, the financial stability of the carriers and their ability to pay claims can be more closely regulated." (comment #103, p.5 -
The National Association of Insurance Brokers) We would reserve commenting on this narrow insurance point until we receive the views of our insurance co 1sultant in his report on property insurance due in the next few months.
2.
Some commenters maintain.nat the proposed rule should apply only to insurance covering decontamination of a facility suffering an accident and not b "all risk" property damage insurance.
The Staff concurs in principle.
Decontamination insurance is the NRC's only legitimate concern from the point of view of protecting public health and safety.
Insurance coverage to replace the existing facility is beyond the scope of the NRC's authority and is more appropriate to the decisions made by a lice..cee under its best business judgment.
fiorever, as a practical matter, property insurance would cover decontamination after an accident before it would pay for replacement of property.
Thus, there is no regulatory need to make this distinction in our regulations except to indicate that specified limits are for decontamination expenses only.
Some state that it is unfair to T.any owners of small reactors to require insurance coverage greatly exceeding the cost of replacing the facility. Such an argument -
' rrel evant.
As indicated aoove, the NRC's prin ary concern in imposing mandatory property insurar,ce is to assure adequate funds to clean up a site after an accident.
A TMI-2 type accident could wall require coverage approaching $1 billion, no matter what the original value or size of the facility.
Until the NRC has completed studies evaluating the cost of cleaning up accidents of varying severity, it is prudent to require a reasonable amount of insurance for all facilities.
3.
Several persons commented that reactor licensees shoald not be required to maintain on-site property damage insurance until the operating 1.cer.se has been rece:ved.
Witn fuel merely stored at a reactor, the chance of an accident requiring extensive decontamination is extremely remote.
By analogy, utilities are currently not required to carry the maximum nuclear liability insurance until fuel is loaded.
The Staff agrees and recomends changing the rule accordingly, so that such insurance need be in force only when tne utility is licensed to operate the reactor.
4.
sveral Texas utilities and t ieir representatives indicate that the Texas Constitution as interpreted by the Texas Supreme Court prohibits "a Texas city from purchasir.g insurance which provides for assessment of policyholders or from purchasing insurance from mutual insurance associations where the policyholder becomes the equivalent of a stockholder in the company."
(concent334,p.2, et. al. - Houston Lighting and Power) The cocmenters also point out that similar holdings have been made by the Suprrme Courts in Louisiana and Idaho.
These commenters suggest that a Commission rule should make clear either that:" (1) where an electric utility is legally prohibited from on-site property damage insurance because of local law, such insurance is not available, need not be purchased, nor an equivalent amount of protettion provided; or (2) the rule, requires the purchase of specific insurance which the Commission has found to be reasonably available to the specific utility." The Staff recommends revising the rule to reflect this point.
5.
One commenter recomends additional language to " delineate the amount of time the licensee has in which to obtain any additional insurance which may be offeix-u subsequent to the licensee's initial satisfaction of this requirement.
This time period need not exceed the 90 days granted initially under the proposed rule and may reasonably require no more than 30 days."
(coment #13, p.1 -
Congressman Ertel) However, another comenter suggested that many regulated utilities would have difficulty in obtaining approval to purchase insurance within 90 days.
Rather, utilities should have 90 days to take reasonable s aps to obtain insurance.
The Staff has revised the rule to reflect bod comments and believes that 90 days is a reasonable time in which to take reasonable steps to obtain both initial and any additional insurance.
6.
The phrase " commercially available" insurance may be construed to exclude captive insurers such as NML and NEIL.
(comment #35 et.
al. p.1-The Association of the Bar of the Ci.y of New York) The Staff accepts this comment and will change the wording of the rule accordingly.
APPENDIX A TO ENCLOSURE 2 Roster of Commenters 1.
Council on Energy Independence 2.
Count on Energy Independence 3.
.iichard b. and Pamela J. Ostrander 4.
Sargeant and Lundy 5.
Jennifer Barr 6.
John and Clarice Leamon 7.
William Riley, New Hampshire State Representative 8.
none 9.
William C. Wood
- 10. Marvin Lewis 11.
Portland General Electric Company 12.
Bill Hafner 13.
Congressman Allan Ertel 14.
Fred Millar
- 15. Central Power and Light Company 16.
John F. Doherty
- 17. Wells Eddleman 18.
Carol Holmes 19.
uisconsin's Environmental Decade 20.
Bruce W. von Zellen 21.
John and Helen Hoogewind 22.
Robert W. Tufts 23.
Pam Helsley 24.
Nat Pernick 25.
Francine Kelley 26.
Marjorie A. Spees 27.
Indiana Sassafras Audubon Society 28.
C. E. Linderman 29.
Varilyn Carleton, et. al.
30.
Harmon and Weiss 31.
Robert A. Braun 32.
Jeff and Linda Weintraub 33.
Greenpeace 34.
Houston Lighting and Power 35.
The Association of the Bar of the City of New York 36.
Jeanne Fudala
- 37. Seacoast Anti-Pollution League
- 38. Thomas Atwater
- 39. Michele Guimin 40.
John Abbotts 41.
Citizens for the Conservation of Natui'al Resources, Inc.
42.
Gary Patton, Supervisor, County of Santa Cruz, California 43.
Susan L. Hiatt 44.
B. D. Daily 45.
People's Lobby 46.
James Leamon 4'/. Sandra K. DuBois 48.
Coalition for Nuclear Power Postponement
- 49. Floridians United for Safe Energy 50.
Michael Burlingame 51.
Ohio Citizens for Responsible Energy
- 52. Third Wave Electi !c Company 53.
Colleen Basham 54.
Dianne L. Boffer
- 55. Michael Martin 56.
Union of Concerned Scientists 57.
Louisianans for Safe Energy 58.
John Simpson 59.
Bob Randolph 60.
S. Cornelius 61.
Martha R. Phillips 62.
Charles R. and M. Dolores Kelly 62.a.
Timothy D. Wright
- 63. Margaret DeKorne 63.a.
Elizabeth Gadbaw 64.
Linda E. Emory 64.a.
Landa and John O'Neill
- 65. Rudy Schroeder
- 66. Bob Gradey 67.
Dennis B. Pierce 68.
James De Korne 69.
Joyce L. White
- 70. Margaret Eetsch 71.
Louise Grenslo 72.
Teresa Mihalko 73.
Calvin Dahm 74.
Cheryl Lee Moore 75.
Chris Pringer 76.
Coriene Kelly 77.
C. Jeffries 78.
Joel Kaufman 79.
Donna Rambo 80.
Edison Electric Institute 81.
City of Austin, Texas - Department of Law 82.
Lee Nipper 83.
Ilene Youngheim 84.
Kathleen Walker 85.
Co-op Members for Responsible Investment 86.
Middle South Services 87.
Sacramento Municipal Utility District 88.
- 89. Theodore Arthur Mahr 90.
Matthews and Nowlin 91.
Michael Mancuso 92.
A. E. Wasserback 93.
Michael Jenkins 94.
New England Coalition On Nuclear Pollution 95.
Edward Pevear 96.
Jeane Crumley 97.
Commonwealth Edison 98.
R. Anderson 99.
Charles L. and Helen M. Hocker 100.
David and Sharon Lawless 1 01.
Shaw, Pittman, Potts and Trowbridge 102.
Debevoise and Liberman 103.
The National Association of Insurance Brokers, Inc.
104.
Citizens Association for Sound Energy 105.
Consumers Power Company 106.
Amy Rich 107.
Indiana and Michigan Electric Company 108.
Co-op Members for Responsible Investment 109.
Hy Mayerson 110.
Joanne Doroshow
- 111.
Le Boeuf Lamb, Leiby and MacRae 112.
Peter H. Gleick 113.
Duke Power Company 114.
Coalition for Safe Power 115. William J. Schuessler 116.
Congressman Ronald V. Dellums 117.
Critical Mass Energy Project 118.
Mar; B. Davis 119.
Lowenstein, Newman, Reis, and Axelrad 120. The L'arry Garrison Family 121.
Judith L. Eby 122.
Jo Ann Shotwell, Assistant Attorney General, Massachusetts 123.
Florida Power and Light Company 124.
Florida Power and Light Company 125. Maria Lain 126. Mary Jo Murray, Assistant Attorney General, Illinois 127.
Martha Drake, Energy Coordinator, Emmet County, Michigan 128.
J. H. White, III 129.
Vicky Anderson Mayer 130.
Bryan Baker 131.
Washington Public Power Supply System 132.
Christa Maria 133.
Gulf States Utilities Company 134.
Ecology Center of Southern California 135.
Richard E. Crosson 136.
Safe Environment Alliance 137.
Northeast Utilities 138.
Refer to 447 139.
Ira Shorr 140. Michael Moran 141. Joel Jaffer 142. Massachusetts Voice of Energy 143.
Kathleen Peace 144 U. S. Department of Energy (Shelby Brewer) 145.
Peter Penner, Illinois Office of Consumer Services 146.
Olga Rosche 147. Arizona Public Service Company 148.
General Atomic Company
5 149.
Lewis E. Resnikoff 150.
Sidney Goodman 1 51.
Eucene Galloway 152.
Nancy Gribble 153. Warren C. Liebold 154.
Larry de Grassi 155.
American Nuclear Insurers, Mutual Atomic Energy Reinsurance Pool 156.
John Holtzelaw 157.
John Chaplick 158. Marie A. Burling 159.
Richard N. Alexander 160.
Steven J. Onysko 161. Juan Byron 162.
Citizens Association for Sound Energy 163.
Mr. Mrs. Thomas C. Valeso 164.
Environmental Law Project 165.
William Harris 166.
R. Fenton Rood r9