ML19319B676
| ML19319B676 | |
| Person / Time | |
|---|---|
| Issue date: | 10/30/2019 |
| From: | Office of Nuclear Material Safety and Safeguards |
| To: | |
| Trussell G | |
| Shared Package | |
| ML19276F011 | List: |
| References | |
| Download: ML19319B676 (25) | |
Text
1 1 UNITED STATES OF AMERICA J
2 NUCLEAR REGULATORY COMMISSION 3 + + + + +
4 OFFICE OF NUCLEAR MATERIAL SAFETY AND SAFEGUARDS 5 + + + + +
6 PUBLIC MEETING FOR ALTERNATIVES TO USE 7 OF CREDIT RATINGS PROPOSED RULEMAKING 8 + + + + +
9 WEDNESDAY 10 OCTOBER 30, 2019 11 + + + + +
12 The meeting met in Room TWFN-6D02, 11555 13 Rockville Pike, Rockville, Maryland, at 10:04 a.m.,
) 14 Daniel Mussatti, Facilitator, presiding.
15 NRC STAFF PRESENT 16 DANIEL MUSSATTI, Facilitator 17 CAROLINE CARUSONE 18 SHAWN HARWELL 19 KENNETH KLINE 20 GREGORY TRUSSELL 21 RICHARD TURTIL 22 23 24 j 25 NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
2 1 ALSO PRESENT J
2 JERRY BONANNO, NEI 3 JEFF DUNLAP, Exelon 4 FRED GERLOFF, Dominion Energy 5 STEVE HAMRICK, Florida Power & Light 6 JOHN MATTHEWS, Morgan & Lewis 7 CRAIG SLY, Dominion Energy 8
9 10 11 12 13
) 14 15 16 17 18 19 20 21 22 23 24
) 25 NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
3 1 P-R-0-C-E-E-D-I-N-G-S (10:04 a.m.)
J 2
3 MR. MUSSATTI: All right, everybody, 4 welcome to the Dodd-Frank Act and the Alternatives to 5 the Use of Credit Ratings Proposed Rule Public 6 Meeting.
7 For those of you that are on the phone, so 8 you will be able to hear what's going on but we're 9 having trouble with this really fancy new room that 10 we've got here, and it doesn't want to talk Skype to 11 us. So, if you'll bear with us, you know, we'll call 12 out the page numbers as we're going through and you'll 13 be able to keep us with us there.
) 14 My name is Daniel Mussatti, and I am your 15 facilitator for the day. And my job is to make sure 16 that this meeting is informative, that it stays on 17 topic, and that we get the information that we need to 18 be able to move on forward.
19 We started a few minutes later because of 20 the technical difficulties here. But as I said, I am 21 a trained facilitator, which means that I will 22 struggle valiantly to get us back on schedule. Before 23 we get started I'd like to go over some basic 24 housekeeping details with you.
) 25 With regards to getting around in the NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., NW .
(2 0 2 ) 2 34 -4 4 3 3 WASHINGTON, D.C. 20005-3701 (202) 234-4433
4 1 building if you're a guest, it's a shame we're not on
)
2 the first floor. If we were on the first floor, that 3 badge of yours now has been redone recently, if you 4 haven't come into the building in the last six or 5 eight months, it gives you free access to everything 6 on the main floor, except behind the guard stations 7 where the elevators are for you to be able to go 8 without having any sort of an escort.
9 But because we're on the sixth floor here 10 you're behind that barrier, and that means you have to 11 have an escort for any sort of reason that you want to 12 leave this room. If it's to take a telephone call, a 13 nature call, anything like that, you need to have an
) 14 escort.
15 Any one of us that's with the NRC is more 16 than happy to help you with that but, please, don't 17 leave the room without having an escort. That's 18 verboten.
19 If we are asked to evacuate this building 20 for any reason, what we would like to have you do is 21 proceed going out following the monitors and any 22 security folks' instructions as to how to get outside.
23 And the building right next to us, the one that used 24 to have the Staples in it in that parking lot over 25 there, that's now a doggy daycare and veterinarian NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 2 34 -4 4 3 3 WASHINGTON, D.C. 20005-3701 (202) 234-4433
5 1 clinic. They've got a large parking lot. I would like to have you gather there so that we can count 2
) 3 heads.
4 Which reminds me, if you have not signed 5 in on the sign-up sheet, please do so now, because if 6 we do have to count heads we want to make sure that 7 your head got out of the building as well if there's 8 an emergency.
9 And that goes for folks that are on NRC 10 staff as well. If you're supposed to be queuing up 11 with your own folks, you're going to queue up with us 12 here because we need to take care of knowing where 13 you're at as much as your other boss does. So, stay J 14 with us and we'll figure out how to get a message back 15 to your branch so that they know that you got out of 16 the building safely.
17 If you haven't signed in, please find the 18 sign-up sheet and sign it.
19 We have a telephone line available for our 20 remote participants to make comments. And as you 21 listen in you'11 be able to follow along. Like I 22 said, you'll not be able to see the slides, but you 23 should have a copy of them that you downloaded at the 24 same spot where you had the meeting notice that you
) 25 responded to here. If for some reason you cannot hear NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W (202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
6 1 what's going on, please contact the operator. She'll 2 be telling you in a minute as to how to do that.
) 3 Our phone is being managed by Katie 4 Kelsey, who is our operator. And right now I'd like 5 to ask Kelsey to please explain to the people on the 6 phones what you have to do to get into the queue to 7 make a comment at this meeting.
8 THE OPERATOR: Yes. Once it's time for 9 the question and answer session, please press star 10 then one, un-mute your phone, and record your name 11 clearly when prompted. If you would like to withdraw 12 a question, press star two.
13 Thank you.
_) 14 MR. MUSSATTI: And what if they have a 15 technical problem, is there a different number or is 16 it still star one for you?
17 THE OPERATOR: It would still be star one.
18 MR. MUSSATTI: Okay. That works for me.
19 Thank you, Kelsey, I appreciate your help.
20 THE OPERATOR: You're welcome.
21 MR. MUSSATTI: Okay. For the folks that 22 are on phones, we're not going to be able to hear you 23 until we get to the question and answer period. So, 24 there's no sense even shouting into the mike, we're J 25 not going to hear it.
NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(2 0 2 ) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
7 1 For people in the room, we ask you that if 2
)
you have anything that buzzes, beeps, rings, anything 3 like that, please turn it off. We want to get through 4 this meeting with as little disruption as possible.
5 And I know that there are some people at 6 the NRC who have a job that requires them to leave 7 their phone on 24/7 for emergency reasons. And I know 8 that there are often people that have family issues 9 that they need to stay on top of and monitor. So, for 10 anybody that has to leave their phone on, please put 11 it on vibrate. And before you start speaking, grab 12 yourself a NRC helper, proceed outside and take your 13 phone call there.
) 14 I want to manage this meeting a little bit 15 less like Robert's Rules of Orders to give it a more 16 casual feel. I think it helps in a meeting room this 17 size and with this kind of a meeting. It facilitates 18 the flow of discussion a lot better. But we do have 19 some basic rules that we need to follow here.
20 If you ask a question, by all means if 21 they didn't answer, if somebody did not answer that 22 question or misunderstood your question, a follow-up 23 question is fine.
24 Two follow-up questions and I'm going to
) 25 raise one eyebrow. Three follow-up questions and it NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(2 0 2 ) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
8 1 turns into a conversation, and I'm going to have to 2 ask you to let somebody else have a chance to speak.
3 And then if we have a lull in the talk later on I can 4 get back to you and ask you if you'd like to, you 5 know, continue on with that thread that we had to so 6 viciously sever while you were talking to somebody.
7 I don't understand the technical aspects 8 of what we're doing here all the time, so I ask 9 everybody, please, if you sense that we're getting 10 into the weeds, we're starting to talk technical stuff 11 that doesn't really need to be at this meeting, just 12 sort of help me keep the meeting back on track so that 13 we don't wind up, you know, wasting our time talking
) 14 about stuff that could be done in committee work and 15 that sort of thing.
16 I'd like to introduce you to Andrew. He 17 is our transcriber here today. And to help him, when 18 you are speaking, please speak very clearly and 19 slowly, and start with your name and your affiliation 20 when you're ready to make a question.
21 Some items about microphones in here.
22 You'll see that there's a black microphone that looks 23 a little bit like an old time portable telephone.
24 Those are so that the mike can hear, or so that Andrew
_) 25 can hear us while we're talking.
NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE , N.W.
(2 0 2 ) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
9 1 The big green circles on this table is the only way that we're going to be able to get audience J
2 3 participation. So, if you are in the audience and not 4 sitting at the table, please come up to the table so 5 that you can ask your question and it will be heard 6 clearly. The microphones are all green, as you can 7 see right now. If I turn off any one microphone I 8 turn off all the microphones. We don't want to do 9 that, because we want to be able to hear everybody.
10 The trouble is, is that if we take a break 11 and we're sitting here for a minute or two and you 12 start talking something technical or something that's 13 confidential business information or something like
) 14 that, you've got a hot mike in front of you. So, 15 please be careful around these microphones. They're 16 either all on or all off, and it's easy to make a 17 mistake.
18 Finally, the basic rule is to be 19 respectful, one speaker at a time, and let's have fun.
20 To get started, I'd like to introduce Greg 21 Trussell. He's the Rulemaking Project Manager for 22 NMSS's Center of Expertise, Rulemaking, Environmental, 23 and Financial Services Group.
24 Greg.
_) 25 MR. TRUSSELL: Thanks, Daniel.
NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
10 1 I'm going to go over the agenda for today 2
)
real quick for the folks who are on the line. Again, 3 this is Greg Trussell from the Division of Rulemaking.
4 We're going to start off with some opening 5 remarks from Caroline. And after that we're going to 6 go into the purpose of the meeting. Rich Turtil is 7 going to give us a overview of the Dodd-Frank Act.
8 He's also going to go over the NRC's decommissioning 9 funding assurance requirements and the use of credit 10 ratings and how are regulations are impacted by Dodd-11 Frank.
12 We'11 pass on our staff's analysis of that 13 impact and what our recommendations are.
) 14 And then I'11 go over the overview of 15 where we are through the rulemaking at this time.
16 And then we'll open it up for discussion.
17 So, at this time I'm going to turn it over 18 to Caroline for some opening remarks.
19 MS. CARUSONE: Sure. Hi. Good morning.
20 Thanks for being here.
21 My name is Caroline Carusone. I have had 22 an opportunity to meet a few of you just before the 23 meeting started. I'm actually the Deputy Division 24 Director in the Rulemaking, Environmental, and J 25 Financial Support Division. So, the Rulemaking Center NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
11 1 of Expertise and then the Financial Group is now 2 within our area.
) 3 So, we're here today because, as you know, 4 like all federal agencies, NRC has been tasked to 5 comply with the legislatively mandated requirements 6 that were presented in Dodd-Frank Wall Street Reform 7 and Consumer Protection Act of 2010.
8 Where this legislation really intersects 9 with the work we do here at NRC is in the 10 decommissioning financial assurance area.
11 Again, as you guys know, our mission here 12 at NRC is to regulate the nation's civilian use of 13 byproduct, source, and special nuclear material to J 14 ensure adequate protection of public health and 15 safety, to promote common defense and security, and to 16 protect the environment. So, as part of doing so, our 17 regulations around decommissioning financial assurance 18 requirements ensure that at the end of life, licensees 19 are able to safely remove the facility or site from 20 service and reduce any residual radioactivity to a 21 level that permits termination of the NRC license.
22 Criteria found in NRC's material and 23 reactor decommissioning financial assurance 24 requirements, and in particular the financial tests
_) 25 authorizing use by licensees of financial guarantee NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
12 1 mechanisms that allow for licensee planning and 2 funding for future decommissioning activities are 3 impacted by this rulemaking effort.
4 So, as Greg mentioned, the objective of 5 today's meeting is to share with you where we're at, 6 and share with you staff's rulemaking efforts. And we 7 want to ensure that any changes that NRC makes to the 8 current decommissions regulations or funding models, 9 as are required by the legislative mandate, results in 10 financial assurance that continues to ensure NRC 11 licensees plan for and provide adequate financial 12 resources to address future decommissioning 13 activities, and make sure that it can be completed in
) 14 a safe and timely manner.
15 So, we really appreciate you coming out 16 and showing interest in participating today. We look 17 forward to hearing your comments during today's 18 meeting, and then also when we go forward and share 19 our proposed rule.
20 And I think that's about it. With that, 21 I'll turn it over to Rich.
22 MR. TURTIL: Thank you, Caroline. I'll 23 speak up because the room, we've got folks behind a 24 big pillar here.
) 25 So, my name is Richard Turtil. I'm one of NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
13 1 the Senior Financial Analysts here at the NRC in NMSS.
2 And there are a handful of others within the branch 3 that are here.
4 So, on Slide 4, so the purpose of the 5 public meeting, as has been discussed, what I'm going 6 to do in the next handful of slides is provide an 7 overview of the Dodd-Frank Wall Street Reform and 8 Consumer Protection Act of 2010. I'll refer to that 9 as Dodd-Frank throughout.
10 We'll talk about the NRC staff's analysis 11 of its impact on NRC regulations, discuss the NRC's 12 rulemaking effort to date on alternatives to the use 13 of credit ratings. And we'll provide an opportunity
) 14 for public comment.
15 So, thank you all for being here.
16 Next slide.
17 So, we're on Slide 5. So, I want to just 18 give background.
19 As background, one would ask why is the 20 NRC dealing with the Dodd-Frank Act issue? And as 21 background, of course there was the financial crisis 22 of 2007 and 2008 which began in the area of subprime 23 mortgages, et cetera, and pools of the debt credit 24 agencies, the three debt -- they're called credit
) 25 rating throughout. I will refer to them often as bond NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
14 1 rating agencies.
J 2 So, basically the pools of debt that the 3 credit rating agencies evaluated, those agencies, 4 there are three primaries, primary agencies, and the 5 NRC cites two of them in its regulations. So that's 6 Moody's Investors Service and Standard & Poor's.
7 There' s a third one called Fitch, but NRC doesn't 8 really, its regulations don't adopt any of the Fitch 9 ratings.
10 So, throughout '07 had '08 and going into 11 ' 0 9 we had the financial crisis. And later the 12 Congress and the -- the Congress and the President 13 established the FCIC, the Financial Crisis Inquiry
) 14 Commission. And, in short, they basically said flawed 15 computer the FCI, that committee, found that 16 agencies' credit ratings were influenced by, and this 17 is a quote, "flawed computer models, the pressure from 18 financial firms that paid for the ratings," again 19 these are bond ratings or credit ratings on issued 20 debt from large corporations, "the relentless drive 21 for market share, the lack of resources to do the job 22 despite record profits, and the absence of meaningful 23 public oversight."
24 So, all of that Dodd-Frank Act legislation
.) 25 came in in 2010 following the crisis. And agencies, NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
15 1 agencies are basically looking at that and seeing what 2 is required.
) 3 So, I've got on the slide this is the 4 objective of the act: promote the financial stability 5 of the U.S. by improving accountability and 6 transparency in the financial system, to end "too big 7 to fail," and to protect American taxpayers by ending 8 bailouts.
9 So, that, the section that we're looking 10 at of the Dodd-Frank Act is Section 939. This is a 11 large piece of legislation. It is some 848 pages in 12 length. So, Section 939 explicitly says removal of 13 statutory references to credit ratings, review of
) 14 reliance on ratings in Section 939(a).
15 And that language states each federal 16 agency shall review any regulation that requires use 17 of credit-worthiness -- and we'll take a look at those 18 at NRC -- and references regarding credit ratings.
19 Number two, modify those regulations, 20 remove reference to or requirement of reliance on 21 credit ratings, and substitute a standard of credit-22 worthiness that "each respective agency shall 23 determine as appropriate for such regulation."
24 And then, finally, the NRC and all other
) 25 federal agencies to transmit a report to Congress NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
16 1 containing a description of what we did.
So, that being said, let's move on to
)
2 3 Slide 6.
4 So, as Caroline said, why are we doing --
5 why are we making these rulemaking changes? And the 6 first and foremost initially is this is a 7 legislatively mandated requirement based on that Dodd-8 Frank Act. There are other agencies that have 9 undertaken changes in two thousand -- reporting of 10 2014. I think it was the Securities and Exchange 11 Commission report cited at least four or five other 12 agencies that have adopted and made changes to their 13 regulations.
) 14 And as Caroline said, so that's the 15 legislatively mandated part.
16 And I will just review and go over that.
17 You know, our mission, of course, is to regulate the 18 nation's civilian use of byproduct, source, and 19 special nuclear material to ensure adequate protection 20 of the public health and safety through its 21 activities, through its regulatory activities. And 22 that includes its activities associated with 23 decommissioning.
24 So, the nexus between the Dodd-Frank Act,
) 25 for those who are wondering, and the NRC, that nexus NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE, NW .
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
17 1 is through decommissioning funding.
The Dodd-Frank and use of credit ratings
)
2 3 of NRC is through NRC regulations addressing 4 decommissioning funding assurance in particular.
5 NRC requires licensees to plan for and 6 fund the radiological decommissioning of licensed 7 facilities.
8 Throughout NRC regulations, 9 decommissioning financial assurance is required.
10 You'11 see here on this page these, on 11 Slide 6, you'll see explicitly where there is 12 reference to the surety mechanisms that are concerned.
13 So, in section -- so the way NRC is structured under
) 14 10 CFR under Parts 30, 40, 50, 70, and 72, that's 15 byproduct, source, production and utilization 16 facilities, our power reactors, special nuclear 17 material, and spent fuel, high level waste, and 18 greater-than-Class C waste.
19 And on each one of those parts there is a 20 reference to decommissioning funding and the use of 21 what kind of mechanisms licensees can use to assure to 22 decommissioning funding.
23 And I have put in bold on this slide 24 explicitly those areas within each one of those
) 25 sections, each one of those parts that will identify, NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N .W .
(202) 234-4433 W A S H IN G T O N , D .C . 20005-3701 (202) 234-4433
18 1 make reference to that which we're speaking of today, 2 the type of surety mechanism.
3 So, you can see these, these items in bold 4 to the right on the first bullet refer to the items 5 down below. That very last number on the far right, 6 (f)(2) in 30.35, (e)(2) in 40.36, et cetera, makes 7 reference to these surety mechanisms down below.
8 And these are decommissioning funding 9 instruments, if you will, that allow -- or methods, 10 NRC refers to them as methods for assuring 11 decommissioning financial assurance. And, of course, 12 there's prepayment, i.e. cash. And many of our power 13 reactor facilities have cash on hand the vast 14 majority if not really the vast, vast majority are 15 prepayment mechanisms which include prepayments as 16 well as external sinking funds, which you'll see in 17 Item 2, in the second bullet under surety instruments.
18 And the regs, that which we're looking at 19 today, gets into this last green bullet, other surety 20 methods. So there are other ways of assuring that are 21 not cash-specific or cash planning, such as an 22 external sinking fund. And those surety bonds so 23 licensees can establish a surety bond, a letter of 24 credit insurance, or these mechanisms, again in bold 25 for today's discussion, self-guarantee and parent NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N .W .
(202) 234-4433 W A S H IN G T O N , D .C . 20005-3701 (202) 234-4433
19 1 company guarantee mechanisms.
2
)
So, in summary, why are we making these 3 proposed changes? And, of course, legislatively we've 4 discussed that. And basically it's for 5 decommissioning financial assurance concerns.
6 So, that being said, we can move on to the 7 next slide.
8 So, I want to navigate us, if you will, 9 from Dodd-Frank through those requirements that I just 10 made reference to on the previous slide. So, in each 11 one of those sections, so section Parts 30, Part 40, 12 50, 70, and 72, those criteria for decommissioning 13 funding for use of self-guarantee and parent company
) 14 guarantee, are found in 10 CFR Part 30.
15 So, 30, 40, 50, 70, and 72 point to these 16 established mechanisms or methods found in Part 30 17 appendix, four appendices. Appendix A is for parent 18 company guarantee.
19 Appendix C is for a self-guarantee for 20 licensees that issue bonds.
21 Appendix D is a self-guarantee for 22 licensees that do not issue bonds.
23 And don't turn the slide just yet. I want 24 to talk to this.
_) 25 But on the next slide we'll discuss in a NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N .W .
(202) 234-4433 W A S H IN G T O N , D .C . 20005-3701 (202) 234-4433
20 1 moment Appendix E, which makes reference to and allows 2
)
for colleges, universities, and hospitals to use self-3 guarantees as well.
4 So, you can see by and large this whole 5 appendices A, C, D, and E make reference to parent 6 company guarantee in the first. And C, D, and E are 7 all about self-guarantees.
8 This kind of gives you -- so, in these two 9 slides -- Actually, I will ask you to turn to the next 10 slide. Thank you.
11 So Appendix E, self-guarantee. So, if we 12 go back to Slide 7, excuse me. So, you can see all 13 just, I'm going to just walk through these two slides
) 14 and broach some of the technical requirements. And 15 then we'll get, we'll see why NRC is looking at these 16 in particular.
17 So, Appendix A, licensees use a parent 18 company guarantee. There currently exist two 19 approaches to fulfilling the requirements, financial 20 requirements, the financial criteria for a use of a 21 parent company guarantee. And that is let's start 22 with all of these you'11 see the bond rating is 23 addressed in the first, and then the second 24 opportunity is non-bond ratings. But we'll reverse
) 25 that here.
NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N W .
(202) 234-4433 W A S H IN G T O N , D . C . 2 0 0 0 5 - 3 7 0 1 (2 0 2 ) 2 3 4 - 4 4 3 3
21 1 S o , Roman numeral II.A.(2) is a facility 2 that has a bond rating.
)
So, they would use a bond 3 rating.
4 And I'11 talk a little bit about bond 5 ratings in a moment. Generally, bond ratings, credit 6 ratings, one and the same, are ratings, again the ones 7 at NRC relies on are Standard & Poor's and Moody's, 8 and they are cited in our regulations earlier, these 9 criteria. They are, they range from AAA to AA to A to 10 BBB, all the way down.
11 And for those of you who aren't familiar 12 with those ratings, generally investable securities, 13 securities that are of higher value are at the AAA,
_) 14 AA, A level with Moody's.
15 Let me make sure. Let's see. I may need 16 clarification.
17 So, there's a AAA in both cases, Moody's 18 and Standard & Poor's. One of them has the capital 19 letter AAA, and the other has capital letter A, lower 20 case, Aaa. But those are the equivalent of these two 21 bond rating agencies.
22 And when we get below, start getting below 23 BBB you get into the area of non-investor grade. And 24 you'll hear reference to these as junk bonds, much
) 25 lower, below the BBB and lower we start getting into NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N .W .
(202) 234-4433 W A S H IN G T O N , D .C . 20005-3701 (202) 234-4433
22 1 that.
2 So, NRC's requirement, as you can see,
) 3 we're on slide -- the parent company guarantee must 4 pass, excuse me, pass a bond ratings and tests that 5 are referenced here. So, bond rating and three 6 financial tests. And those tests generally refer to 7 they're about net worth, they're about assets. And 8 then the parent company also without a bond rating has 9 more test metrics, has four test metrics. And we can 10 discuss that in a little bit more detail.
11 Appendix C is a self-guarantee for 12 companies, corporations with bonds. And what NRC 13 envisions is Appendix C would wholly go away and we
) 14 would not rely on that because we have an Appendix D 15 that has a self-guarantee for companies that do not 16 have bonds. And we would likely rely on those three 17 financial metrics.
18 And then if we can go to the next slide.
19 So, again, so this is for colleges and 20 universities. I don't see that anyone in the room is 21 representing those organizations. But for colleges 22 and universities we -- there are two criteria for 23 self-guarantees. One is use of a bond rating. And, 24 again, that's the kind of reliance that the NRC was
) 25 relying on. The bond rating only was the criteria.
NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N .W .
(202) 234-4433 W A S H IN G T O N , D .C . 20005-3701 (202) 234-4433
23 1 And those that did not have bonds would 2 rely on a minimum endowment calculation.
) 3 And Appendix E for hospitals, similarly 4 for hospitals that had bonds it would be bond rating 5 only we would rely on. The other financial metric is 6 four financial metrics.
7 So, you can see a bond rating reflected 8 and was giving credit for a great deal of determining 9 the criteria of a licensee. And without that ability 10 to rely on that bond rating there are other tests in 11 place, all for each one of these appendices, A, C, D, 12 and E.
13 So, that being said, if we could move on
_) 14 to Slide 9.
15 So, our analysis. And I've been 16 interjecting that throughout this presentation. In 17 each instance a parent company guarantee in Appendix 18 A, and then self-guarantee for corporations in C and 19 D, as well as for hospitals and universities in E. In 20 each instance if the licensee chooses to use a part 21 from the Appendix A, C, it should be Dor E as well, 22 guarantee mechanism requiring a bond rating, staff 23 believes alternative qualification criteria currently 24 exists within the NRC regulations that need the 25 following two requirements of NRC:
NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N .W .
(202) 234-4433 W A S H IN G T O N , D .C . 20005-3701 (202) 234-4433
24 1 They meet the objective of NRC's
.J 2 decommissioning assurance requirements; and they 3 adequately qualify the licensee to ensure the licensee 4 meets financial qualifications necessary for use of 5 such a mechanism.
6 So, we can move on to the next slide.
7 This is our recommendation. This was our 8 recommendation going forward. And then, of course, 9 Greg will talk to where we are in terms of moving 10 forward with any rulemaking.
11 So, our recommendation was as follows:
12 Appendix A, parent company guarantee, use 13 of the parent company guarantee. Our expectation was
) 14 we could wholly strike Appendix A, II.A.(2) in whole, 15 and rely instead on the current Appendix A, II.A.(1) 16 criteria, which requires additional financial tests 17 and criteria. That would be our replacement for our 18 ability to delete references and rely on some credit 19 ratings and still have what we believe is a similar 20 adequate funding mechanism and financial test for the 21 parent company 22 Appendix C, self-guarantee. Appendix C 23 right now is wholly about those companies that issue 24 bonds. So, we would strike Appendix C in its
) 25 entirety. So, strike Appendix C in its entirety.
NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W (202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
25 1 Rely instead on current Appendix D criteria.
2 For hospital for colleges and 3 universities, similarly. Within each of those 4 appendices, E, for each one of those types of 5 licensees there are criteria for their bond rating, 6 and then there are criteria for non-bond rating.
7 So, you can see we would propose to strike 8 Appendix E, II.A. (1) in its entirety and rely instead 9 on current Appendix E, II.A. (2) criteria; and 10 similarly for hospitals.
11 So, that is, that is staff's 12 consideration.
13 I'd ask us to go back to Slide 7 real 14 briefly.
15 So, again, I want to highlight that in 16 each one of these on pages 7 and page 8 you will see 17 that there is reliance on a bond rating, and in some, 18 in most cases other financial metrics in use of that 19 bond rating. And what staff considers the equivalent 20 test would be a non-bond rating and additional 21 financial metrics.
22 And in each case, Appendix A, you'll see 23 that. Appendix C you'll see that. Appendix -- excuse 24 me. So, Appendix C you will see that. Appendix D
.J 25 there is no bond rating and, hence, we, our view is to NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433