ML19319B677
| ML19319B677 | |
| Person / Time | |
|---|---|
| Issue date: | 10/30/2019 |
| From: | Office of Nuclear Material Safety and Safeguards |
| To: | |
| Trussell G | |
| Shared Package | |
| ML19276F011 | List: |
| References | |
| Download: ML19319B677 (38) | |
Text
26 1 leave that.
2 Again, I'm sorry. So, in Appendix A you
) 3 will see both. Appendix A is reliance on a bond 4 rating.
5 Appendix Dis an equivalent use of self-6 guarantee with no bond rating.
7 So, in a sense, Appendix C could be 8 supplanted with Appendix D.
9 And then Appendix E on the next page, 10 again you'll see both, you'll see bond rating and then 11 a similar meeting the test would also be without a 12 bond rating for our criteria.
13 So, some of these criteria and some of the
) 14 concerns that we initially received in the last few 15 months has been about those criteria and the ability 16 of potentially some licensees meeting those. But we 17 may hear about that today from some of the folks who 18 are here or those on the line.
19 So, with that I would just want to -- I 20 will note that few licensees, in conclusion on Slide 21 10, so my last slide, I wanted to know that few 22 licensees rely on the parent company guarantee. The 23 current number is less than five such licensees. And 24 those currently are power reactors. And some power
) 25 reactors in the past that have been in operation have NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
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27 1 relied on those for, I want to say short periods of 2
)
time, but the majority of those relying the 3 majority of the small number that are relying on a 4 parent, on the parent company guarantee are in 5 decommissioning at this time.
6 And, again, most of these are power --
7 historically these have been power reactors, currently 8 the majority being in decommissioning. And it's been 9 for a relatively small portion that the guarantee 10 mechanism has been in place, put in place for a 11 relatively small portion of the overall funds required 12 to address radiological decommissioning.
13 So, in summary, we talked about Dodd-J 14 Frank, the nexus to NRC regulations, specifically NRC 15 decommissioning financial assurance methods accepted 16 by NRC to assure funding, specifically parent 17 companies parent company and self-guarantee 18 mechanisms.
19 And last and finally, we presented staff's 20 analysis for how we were going to approach this 21 legislatively-mandated requirement.
22 With that said, I will turn it back over 23 to Greg Trussell, and I thank you.
24 MR. TRUSSELL: Thanks, Rich.
) 25 Again, this is Rich Trussell from NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
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28 1 Rulemaking. The next slide, Slide 11, I'm going to do
)
2 an overview of where we are in terms of rulemaking 3 efforts and the alternatives to the use of credit 4 ratings.
5 So, the staff initial used the direct 6 final approach to this rulemaking since the removal of 7 the regulations regarding credit ratings have relied 8 on already existing alternative financial tests 9 considered non-controversial.
10 The direct final rule process allows an 11 agency to issue a proposed final rule in parallel.
12 If no significant and adverse comments are 13 received on the deposed rule, the final rule can
) 14 become effective without further formal action. As 15 such, the time and associated schedule to issue a 16 direct final rule is shorter than a standard rule.
17 Even though this rule is required by 18 statute, the staff's plan was to use a direct final 19 rule process rather than issuing a final rule to allow 20 for the public to provide comment on the specific 21 approach being taken to comply with the Dodd-Frank 22 Act.
23 Direct final rule was submitted to the 24 Commission in July, and became publicly available at
) 25 that time.
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29 1 After the direct final rule became 2
_) publicly available, the NRC became aware of concerns 3 from the industry and potentially receiving adverse 4 comments if the direct final rule was published.
5 These concerns from industry was that some power 6 plants, specifically merchant licensees, may be unable 7 to pass the alternative financial test requirements 8 for use of the parent company guarantee as presented 9 and, thus, would submit adverse comments.
10 Based on these concerns, the staff in 11 September requested the direct final rule be withdrawn 12 and allow the staff to seek stakeholder input and 13 proceed with developing a proposed rule. The
.J 14 Commission approved the staff's request.
15 So, this public meeting today is our 16 first time seeking public input on this rulemaking.
17 The staff is in the process of developing a proposed 18 rule. We'll use the input from this meeting in our 19 development of that proposed rule.
20 So, this ends the formal presentation 21 portion of our meeting. We'11 move now into the 22 discussion piece.
23 Before we move to discussion, I want to 24 see if anybody in the room has any remarks that I can
_) 25 make before we move to discussion? Any remarks?
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30 1 (No response. )
2 J
MR. TRUSSELL: Anybody on the phone?
3 MR. MUSSATTI: Kelsey, is there anyone on 4 the phone that would like to make an opening comment 5 here?
6 THE OPERATOR: I'm showing no questions at 7 this time.
8 MR. MUSSATTI: Okay.
9 MR. BONANNO: Greg, I think -- This is 10 Jerry Bonanno from NEI. I think we'll get into a lot 11 of the specifics in the discussion. But I just wanted 12 to start off by saying we appreciate the staff pulling 13 the paper back and going through the traditional
.) 14 rulemaking process.
15 We think there's -- I think we agree on a 16 high level that Dodd-Frank requires the NRC to address 17 the references to credit ratings in the appendices for 18 Part 30. I think where we're, where we're coming at 19 this from a little different perspective is how you go 20 about doing that, so, the specific approach to how you 21 comply with Dodd-Frank.
22 So, we can, you know, I don't want to take 23 up too much time at the front end of the discussion, 24 but I think we're going to be able to address some of J 25 these questions today. I think if we need further NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
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31 1 interaction, I think the staff should be open to that 2
_) and provide for that.
3 One of the things that was mentioned in 4 the presentation which was some very good overview of 5 the current state of play is, you know, other agencies 6 have done a lot of work to implement Section 939(a) of 7 Dodd-Frank. And there's been a number of different 8 approaches. You can kind of read forever on, you 9 know, how the other agencies have addressed this.
10 But I think when we reviewed that 11 rulemaking record -- and we haven't gotten through, 12 you know, all of it -- but I think a few things became 13 apparent to us as kind of baseline or foundational
) 14 considerations when going forward with this.
15 The first one was that it looked pretty 16 it was pretty clear to us that Section 939(a) itself 17 didn't require the agencies to change the degree of 18 credit worthiness that their rules currently required 19 or resulted in.
20 So, what I mean by that is other agencies 21 have pursued solutions that really seek to replace the 22 credit ratings with an approach that's roughly, that 23 results in roughly the same amount of credit quality.
24 So, for us when we, when we look at that what we would
_) 25 be after would be something that wouldn't NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE , N.W .
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32 1 substantially impact the availability of these decommissioning funding methods to existing licensees.
)
2 3 So that's kind of the first foundational 4 principle that we pulled out.
5 Second is that 939(a) itself doesn't 6 prohibit the regulated entities from relying on credit 7 ratings. So, a number of regulators, you know, SEC, 8 the Office of the Comptroller, and a few other, 9 National Credit Union Administration, devised 10 solutions where they replaced the credit ratings with 11 kind of a narrative explanation of what they were 12 after through the credit rating, and then made clear 13 that the regulated entity could continue to rely on
_) 14 the credit ratings in part to meet that standard. And 15 that was particularly true where there were kind of 16 multi-factor tests that were involved in assessing 17 credit quality.
18 So that, I think, is something else that 19 we should keep in mind as we move forward.
20 And then the third, the third piece that 21 I thought was just useful to lay out going forward 22 from industry's perspective is, like was mentioned, I 23 think the underlying concern with 939(a) was to avoid 24 an over-reliance on credit ratings. And Congress
) 25 decided that the way to do that was to strike all the NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
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33 1 references to credit ratings in the regulations.
But I think it's important to keep in mind
)
2 3 that, you know, the NRC has been pretty careful with 4 bond ratings. And if you look at the 2011 5 decommissioning planning rulemaking, I think the 6 Agency did a good job of exercising some caution with 7 the use of bond ratings. So, and they did that 8 through a couple means.
9 One was at least in most of these 10 appendices coupling reliance on the bond ratings with 11 the minimum tangible net worth requirement, and then 12 also limiting the reliance on bond ratings for bonds 13 that are uninsured, uncollateralized, and unsecured.
) 14 So, that was meant, I think, to make sure that the 15 bond ratings were actually reflecting the credit 16 worthiness of the bond issuer and not the insurer or 17 the guarantor.
18 So, I think those are just three 19 foundational principles that we kind of pulled from 20 the other regulations that we reviewed. So, I'll stop 21 there.
22 MR. TURTIL: Okay. In terms of process, 23 if I could just add. So, this public meeting we're 24 inviting, we want to hear comment. This is very 25 helpful. It's being transcribed. Staff will review NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
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34 1 that.
What is envisioned is this will go out as 2
) 3 a proposed rule. So whatever you speak to, whatever 4 comment you make here, I will encourage everyone on 5 the phone itself, everyone, please put these in 6 writing to the NRC as well. So, they will certainly 7 be part of our transcribed meeting minutes. And, 8 again, staff will look at that.
9 But we're going to want on the official 10 record as well response to the proposed rulemaking.
11 I hope everyone recognizes that's what we 12 MR. BONANNO: I'm sure, yes.
13 MR. TURTIL: Thank you. Great.
) 14 One minute. So, I just wanted to make 15 sure that was clear to everyone. So, we're listening, 16 we're taking comments. We'll see if we can answer 17 some. If we're unable to at this time, that's all, 18 this is all for just public and put in dialog. And 19 the proposed rule will be really the ultimate place 20 for comments to come in. So, thank you for that.
21 Any other?
22 MR. TRUSSELL: Thanks, Jerry.
23 Maybe we could get the discussion started.
24 We could maybe look at some of these questions that we
) 25 have here.
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35 1 Question one, the answer to that may be yes from the folks here in the room.
2 j 3 The first question is, Are there licensees 4 that meet the current financial test for a guarantee 5 that would no longer be able to meet the financial 6 tests proposed by this rulemaking?
7 Is there a response to that?
8 MR. GERLOFF: Yes.
9 MR. TRUSSELL: So if such is the case, 10 question two is, Would such licensees be able to meet 11 the decommissioning funding assurance requirements 12 using one or more other funding methods allowed by 13 regulation that Rich kind of pointed out earlier.
) 14 MR. TURTIL: Well, so these, so these 15 questions will be part of the proposal in one way or 16 another. And for the sake of this meeting, if it can 17 get our juices flowing, get us thinking about, you 18 know, why the proposal is, you know, will be difficult 19 or will be challenging, or what the concerns are of 20 industry or others, so that's kind of the objective of 21 these discussion questions.
22 MR. GERLOFF: This is Fred Gerloff from 23 Dominion Energy. And I appreciate the opportunity to 24 comment today. There's enough complexity in this
_) 25 topic that it deserves a robust deliberative process.
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36 1 Simple elimination of financial test two 2
) 3 from Appendix A to Part 30 will make parent company guarantees largely unavailable to commercial power 4 reactors operating in merchant environments.
5 The impacts on reactor licensees is 6 predictable, given the regulatory history of the 7 financial tests provided in the appendices to Part 30.
8 Specifically, in its original 1988 decommissioning 9 funding rulemaking, the NRC pulled the financial test 10 used in Part 30 from the EPA's regulations.
11 In EPA's 1982 rulemaking adopting the two 12 tests, EPS -- EPA explained that financial test one is 13 useful for manufacturing businesses, but EPA noted J 14 that the test is not appropriate for utility companies 15 that are credit worthy because they have different 16 financial characteristics. Thus, the EPA developed 17 financial two with minimum bond ratings that utilities 18 could satisfy.
19 We recognize the reason that this 20 rulemaking lS being undertaken is to achieve 21 compliance with Dodd-Frank which requires that 22 agencies remove references to credit ratings in their 23 regulations and replace those with alternative 24 standards of credit-worthiness.
) 25 We ask that the staff take the time to NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
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37 1 develop a proposed rule that achieves this objective.
2
)
Staff should examine what other agencies have done in 3 formulating this rulemaking.
4 With respect to the discussion questions 5 on today's agenda, Are there licensees that meet the 6 current financial tests for a guarantee that would no 7 longer be able to meet the financial tests in the 8 proposed rulemaking? The answer is yes: Dominion 9 Energy, Kewaunee, for one.
10 Dominion Energy committed to demonstrate 11 its ability to meet the criteria in Appendix A as a 12 condition to use the decommissioning trust fund for 13 spent fuel management.
) 14 Second question, Would such licensees be 15 able to meet the decommissioning funding assurance 16 requirements using one or more other funding methods 17 allowed by regulation: prepayment, external, sinking 18 fund, et cetera?
19 In the case of Kewaunee, the Kewaunee 20 decommissioning trust is sufficiently funded.
21 Appendix A to Part 30 is used as a criteria to provide 22 additional funding assurance related to a commitment 23 and not to address a funding shortfall.
24 And then number three, Should the NRC
) 25 consider alternative financial criteria to assess an NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., NW.
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38 1 applicant's or licensee's use of a guarantee to 2
J provide reasonable assurance for funds for 3 decommissioning?
4 The answer is yes, we ask that the staff 5 take the time to develop a proposed rule that doesn't 6 result in this type of unintended consequence.
7 Thank you.
8 MR. MUSSATTI: Response to that?
9 MR. TURTIL: No.
10 (Laughter.)
11 MR. MUSSATTI: Okay, then we'll move on.
12 MR. TURTIL: No, I appreciate it. No, I 13 really do. And I think Staff really appreciates the
) 14 detail and pointing to a current licensee.
15 And we could get into the specifics and 16 details, talking, you know, net working capital and 17 current I think that's part of the challenge.
18 Current assets, current liabilities, networking 19 20 J 25 21 22 23 24 NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., NW.
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. GERLOFF: Well, what I'm saying is
- capital, positive working that thecapital.
parent company is creditworthy.
A nd what I'm hearing is an addition al concern for a facility not generati ng
- revenue, that is relying on in a way too, I guess, license conditio n for decommis sioning.
M R
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I 39 1 MR. TURTIL: Yeah.
2
_) MR. GERLOFF: Kewaunee itself is not 3 generating revenue. But the parent company is 4 certainly creditworthy. But reliance on financial 5 test one, which is not designed for utilities, doesn't 6 help us. We need that financial test too.
7 MR. TURTIL: And I didn't write that -- I 8 didn't provide that to myself. What is the credit 9 rating of the parent?
10 MR. GERLOFF: It's triple-B with plus or 11 minus adjustments from Standard Poor. And I don't 12 recall the Moody equivalent. But it includes the plus 13 or minus adjustments.
_) 14 MR. TURTIL: Okay. Thank you.
15 MR. SLY: And we're required by, not 16 license condition but by commitment, to renew 17 submittal letter basically confirming that we have 18 this commitment in place and basically renew the 19 financial test each time we do that.
20 So, this change, as proposed, would put us 21 in a hard spot with respect to meeting this commitment 22 in the future.
23 In other words, being able to show that, 24 for a parent company guarantee that we don't have in
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40 1 become underfunded, that we couldn't write that letter 2
)
every year and meet the financial test.
3 So, it puts us -- it would put us in a 4 hard spot in that respect.
5 MR. TURTIL: Very good. Thank you for 6 that.
7 MR. MUSSATTI: Okay, is there anybody else 8 in the room that would like to speak? Remember, if 9 you're seated in the audience out there, that the 10 microphones aren't probably going to be able to reach 11 that far out into the room.
12 It would be better if you were to walk up 13 to this gap that's right here in front of me, so that J 14 the microphones can hear you. Anyone? Kelsey, has 15 anybody on the phone indicated they'd like to speak?
16 THE OPERATOR: Yes, we do have one 17 question on the phone. Your mike is now open, you 18 may speak.
19 MR. MATTHEWS: Hi. Yeah, this is John 20 Matthews from Morgan Lewis. And I just wanted to add, 21 going back to the financial tests and how they apply 22 with respect to utilities.
23 In 1982, when the EPA did the rulemaking, 24 there were no merchant plants. And the EPA recognized 25 in their rulemaking that financial test one was a NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
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41 1 viable way for assessing the credibility, the 2 financial creditworthiness, rather, of manufacturing
_) 3 companies, but was not a viable way of measuring the 4 financial capability of companies in other industries, 5 such as utilities. There were no merchant plants in 6 1982.
7 So, when we say financial test one doesn't 8 work for utilities, it's across the industry. We have 9 not been able to identify a single utility, cost of 10 service merchant of any kind that can meet financial 11 test one across the industry.
12 I've been doing this for 20-plus years, of 13 working on parent guarantees from time to time for
_) 14 conventional reactors that are owned and operated by 15 utilities, have never encountered a utility that could 16 meet financial test one.
17 So, by eliminating financial test two, you 18 eliminate the capability of utilities to use the 19 parent guarantee as their method.
20 And I think it's very important to 21 understand the history here. In 1998 -- you know, 22 years leading up to 1998 the NRC conducted a 23 rulemaking to address the merchant world.
24 And there were lots of arguments going
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42 1 for the merchant world, in terms of financial or decommissioning and whatnot, and 2 assurance
) 3 ultimately, the NRC staff landed on, hey, you're going 4 to have to provide 100 percent financial assurance.
5 When you're using the prepayment method, 6 you can get credit for earnings and all that, but 7 you're going to have to provide 100 percent. And at 8 that time, the regulations said you use the parent 9 guarantee method in combination with other methods of 10 decommissioning financial assurance.
11 And so, industry went and argued and said, 12 well look, we may come in and, you know, we need 13 $330 million in prepayment method to meet the formula
) 14 amount fine, but gee, something could turn in the 15 marketplace in a given year.
16 The market gets down and suddenly I got 17 $300 million and I have a $30 million gap. And the 18 only way I can fix that is put $30 million in the 19 trust -- which I'm not going to necessarily need to do 20 because in a couple of years the market might come 21 back -- or give a parent guarantee for $330 million, 22 which seems like a big burden and I may or may not 23 have the capacity to do that.
24 So, let me give the parent guarantee
) 25 method in combination with the prepayment method. And NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
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43 1 so the rules were changed in 1998 specifically to 2
)
facilitate the ability of utilities to use the parent 3 guarantee in combination when needed.
4 And that goes to a more important point, 5 which is that the need to use the parent guarantee can 6 be episodic, and over time. So, you can't just look 7 at what the industry's doing today and say, well, this 8 is only a problem for one or two utilities.
9 When we had the financial crisis back in 10 2008 and 2009, funds were down. There were a number 11 of utilities that used the parent guarantee as a 12 stopgap measure, and then were able to either -- you 13 know, either their funds were covered in value, or 14 they were able to do analyses using tech-specific 15 studies and the safe-store method.
16 But the ability to use the parent 17 guarantee was a cost-effective for utilities to put 18 financial assurance in place, to give the agency the 19 comfort that it needed, and to comply with the 20 requirement for 100 percent financial assurance 21 consistently, but allow those utilities to then find 22 another way of satisfying the requirements.
23 That flexibility is extremely important to 24 the industry. And that policy decision was made in
_) 25 1998 to allow utilities to use this method.
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44 1 By eliminating financial test two, you're reversing that major policy decision that's been very
)
2 3 important to the industry, and can have enormous 4 impact on utilities in given points in time and we've 5 experienced that multiple times over the last 20 6 years.
7 So, this not a trivial issue. It's not --
8 question two is, well, can utilities use another 9 method? Yes, they can. The other methods are much, 10 much more expensive.
11 And when you're dealing with the nuclear 12 industry that has lots of financial pressures 13 impacting that industry, imposing unnecessary
) 14 financial burdens just because it's convenient to just 15 eliminate financial test two and comply with Dodd-16 Frank and, you know, a quick and easy fix is just not 17 the way to go here.
18 MR. TURTIL: Thank you, John, for your 19 comments. This is Rich Turtil. I will say that the 20 Staff didn't consider this, or wouldn't characterize 21 this, as a quick and easy fix without believing its 22 equivalency in terms of test criteria, as well as 23 being -- considering the risk of funds that may or may 24 not be available.
_) 25 So, I appreciate your comments. You did NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., NW .
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45 1 say -- you did make reference to question two. We're J
2 talking about cost of other alternative methods and I 3 think it's on Slide 6 that I identify some of those 4 other methods.
5 But they're all here prepayment, 6 external, surety bond, letters of credit, insurance.
7 I would encourage, when comments are made going 8 forward, that if you could provide if you could 9 consider providing -- and I know that's detail. It's 10 detail maybe about your relationships with the 11 financial institutions you all interact with.
12 But if so, what would the cost of those 13 methods be? Again, that may be proprietary, I'm not
_) 14 sure. But that would be helpful for the NRC Staff to 15 understand what are those potential costs.
16 Certainly, a bond rating, there's no cost.
17 Well, no significant cost, of course, other than 18 issuing bonds and engaging with Moody's or Standard &
19 Poor's.
20 But in terms of assuring to these other 21 methods prepayment being cash, surety bonds, 22 etc. we would like to understand that if it's 23 possible that you could provide that in your response 24 as we go forward with a proposal.
) 25 MR. MATTHEWS: And, Rich, so let's say I NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
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46 1 have a $20 million shortfall. Well, prepayment method 2
j that costs me $20 million. The only other viable 3 methods are surety bond, or a letter of credit can be 4 the same thing. But financially, they're going to be 5 the same cost.
6 And the problem there, with respect to 7 cost, is its tenets. If I don't need it, if 8 everything is -- you know, the world's awash with 9 cash, the market's doing great and I probably don't 10 need it, it's probably one percent of the value, so 11 $200,000 a year.
12 But after the financial crisis, (a) there 13 was a period of time you couldn't get a letter of
) 14 credit. I mean, a letter of credit for $20 million 15 costs $20 million.
16 When letters of credit started being 17 written, I know for a fact that one letter of credit 18 in the industry that was used cost five percent per 19 year. So, on a $200 million letter of credit, that's 20 $10 million a year, which is an enormous cost.
21 MR. TURTIL: Yeah. So, I'm hearing 22 MR. MATTHEWS: The problem is, is when you 23 need it. When the market has dipped and trust funds 24 are short, that's precisely the time when these other
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47 1 they can be.
2
_) When you don't need it, the market's doing 3 swimmingly, then they can be not that expensive, but 4 still one percent a year versus, if I do a parent 5 guarantee, I may assign an internal cost within the 6 company to the nuclear I'm aware of some 7 companies and actually, they've stated in public 8 meetings with the NRC years ago, that they assigned a 9 one percent per year cost to the parent guarantee to 10 the nuclear budget.
11 And so it impacted the nuclear budget but 12 it didn't cost the shareholders anything. It's just 13 the matter of an accounting thing within the company.
J 14 MR. MUSSATTI: Next speaker in the room 15 here?
16 MR. KLINE: Kenneth Kline. I've worked on 17 a number of the requirements here. I've worked on the 18 2011 decommissioning planning rule NEI referred to 19 earlier.
20 A small clarification. We certainly 21 appreciate all your comments and encourage you to 22 submit them.
23 One area that we're not hearing from right 24 now in the room is we're not hearing from any of our
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48 1 these wholly. They wouldn't have a sinking fund 2 coupled with it.
3 So, we would certainly just encourage 4 more -- or NEI, to seek out comments from those folks.
5 Because a lot of those have used those for many years.
6 Some of them are no longer qualified to use those, 7 based on current financial positions.
8 But some of those are $600 million or so 9 that -- in the past that they've used. So, we would 10 certainly appreciate any input from those folks as 11 well.
12 MR. BONANNO: Yeah, thank you for that.
13 This is Jerry from NEI. So, we have a tight tie with J 14 our fuel cycle group on this. So, we're going to 15 follow up with them after the meeting so we'll be able 16 to get some more input from that.
17 MR. KLINE: Appreciate that.
18 MR. BONANNO: I mean, we've heard from 19 them that there's definitely concerns, but I think 20 we're tied in tightly with them.
21 MR. KLINE: I think probably a lot of the 22 comments will be similar, but we certainly appreciate 23 that and we -- to get everybody's -- as Rich mentioned 24 earlier, it affects those Part 30, 40, 70, 72 and the
) 25 50. So, if we can get everybody's, that would be --
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49 1 we can fully consider everybody's at one time, that would help.
2 j 3 MR. MUSSATTI: Any more comments in the 4 room?
5 MR. TURTIL: I'll make another comment.
6 Or maybe I should wait until closing. I'll wait until 7 closing if there are other comments.
8 MR. MUSSATTI: Okay.
9 MR. BONANNO: I have one comment.
10 MR. MUSSATTI: go for it.
11 MR. BONANNO: So, this is Jerry Bonanno 12 again from NEI. So, I think the discussion with John 13 provided a lot of detail. I'll just pull back a little
) 14 bit.
15 So, I think I understand why the answer to 16 question two would be useful in assessing the burden 17 associated with folks losing accessing to the parent 18 company guarantee method.
19 I guess on a higher level where I am is, 20 I think kind of embedded in your Slide 9 criteria for 21 the Staff should be not to have that happen with this 22 rule change. Not to have folks lose access to that 23 funding method, to the extent you avoid that.
24 And I think that would be consistent with J 25 the fact that, the Dodd-Frank requirements aside, I NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W.
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50 1 think this structure has worked pretty well over the 2 years. It's been looked at and revised several times.
3 I mentioned the 2011 rulemaking. I think 4 the agency was -- had its eyes wide open with respect 5 to the limitation of bond ratings in that rulemaking.
6 They didn't address this specific statutory 7 requirement in that rulemaking.
8 But I think if we step back, I think doing 9 as little damage to the folks' access to these 10 different funding methods should be part of what the 11 staff is concerned about, because you can certainly 12 eliminate financial test two and still have a level of 13 assurance that you would want but you have much less 14 flexibility, as we've been discussing. So, just 15 another comment from a little bit of a higher level.
16 MR. MUSSATTI: Okay, anybody else in the 17 room?
18 MR. SLY: Yeah, I'd like to I'm a 19 licensing guy, not a finance guy. So, focus on the 20 words here.
21 MR. MUSSATTI: Your name and affiliation?
22 MR. SLY: Craig Sly, Dominion Energy. I 23 couldn't help but notice on Slide 5, item number 2, it 24 says, modify regulation and remove reference to a
_) 25 requirement of reliance on credit ratings.
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51 1 So, to me -- and I don't want to put words 2
)
in you all's mouth, but to me the word reliance means 3 that you're -- and maybe I'm misinterpreting it --
4 you're solely relying on the bond rating.
5 But I don't think you're solely relying on 6 the bond rating. You're relying on the bond rating 7 plus some other information. So, I don't know if that 8 makes a difference on whether you feel the need to 9 pull this stuff out of the regulation, but I just 10 thought I'd throw that out that it's --
11 The other thing I would note that it says, 12 substitute a standard of creditworthiness. And in 13 this particular case I think what folks are telling J 14 you is that we don't think that you're substituting an 15 adequate standard that we could meet for the company 16 parent guarantees.
17 MR. MUSSATTI: Okay. Kelsey, is there 18 anyone on the phone?
19 THE OPERATOR: Yes. Our next question 20 comes from Jeff. Jeff, your line is now open.
21 MR. DUNLAP: All right. This is Jeff 22 Dunlap from Exelon. First, I'd like to say that I 23 agree with the comments provided by Jerry and Fred and 24 John. And I'd just like to add a couple of more
) 25 things if I could.
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52 1 First for Exelon, while we don't currently 2
_) have any parent guarantees used for decommissioning 3 funding assurance, we have used them in the past and 4 I don't think it's out of the question that we'll use 5 them in the future.
6 It has been, as John said, a very flexible 7 way for us to address temporary shortfalls. There 8 could be other cases, as you've already mentioned, for 9 utilities that are in decommissioning that may want to 10 use these.
11 As far as the second question about the 12 cost, yes, we could get a letter of credit for 13 instance. There lS definitely a cost to that.
) 14 And the comment I guess I would like to 15 make about that is, we can find some more details if 16 that is helpful, and it sounds like it would be, on 17 what that cost might be.
18 But what I'm a little concerned about here 19 is that we're introducing additional costs and 20 utilities. And we're not really -- at least for a 21 creditworthy company we're not providing any 22 additional assurance on the amount of funding provided 23 over and above a parent guarantee, which is the method 24 we would have used.
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53 1 make is -- and this goes to Jerry's point about maybe 2
)
we should consider not completely removing reliance on 3 these credit ratings is that there is actually 4 additional information embedded in a credit rating, 5 that is not necessarily something that you can get 6 from a static metric.
7 So, especially when you do have other 8 metrics, which we do here already in the existing 9 regulations, I think we could be more -- the NRC could 10 be losing some valuable information on things like 11 expected growth and profitability, some qualitative 12 factors that may not be inherent in a ratio, like 13 industry characteristics, country risk, things like 14 that.
15 There are a lot of additional information 16 that really does go into there that's hard to get from 17 one particular metric. So, I think there is some 18 benefit to having that kind of test in addition to the 19 right metrics, which I think are already in existence.
20 And that was it, thank you.
21 MR. TURTIL: Thank you.
22 MR. MUSSATTI: All right, thank you, Jeff.
23 We have one more in the room?
24 MR. HARWELL: Hi. This is Shawn Harwell, 25 NRC. And actually, this is to Jeff. If you -- thank NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., NW.
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54 1 you for that, first of all.
If you could provide some of that in
) 2 3 detail in writing, what you're considering are the 4 good metrics, or the valuable information you're 5 talking about, if you could provide that to us, that'd 6 be a great help.
7 MR. DUNLAP: Yes, we can do that in our 8 written comments. No problem.
9 MR. HARWELL: Thanks, Jeff.
10 MR. MUSSATTI: Okay, and I'd like to 11 reiterate one more time that whatever you say here is 12 probably not everything you did want to say and you 13 might not have said what you did say as clearly as you
_) 14 wanted to.
15 So, I recommend that everybody take time 16 to transcribe what you thought you said and what we 17 think we heard, and any other additional comments that 18 you have.
19 And you can send those to 20 gregory.trussell@nrc.gov. And we will get those into 21 the appropriate place. You don't have a government 22 regs address or anything at this time, do you?
23 MR. TRUSSELL: Not at this time, no.
24 MR. MUSSATTI: Okay. But yes, please take
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55 1 are much more accurate than us listening to them.
And J
2 anybody else?
3 MR. TURTIL: So, I would just state the 4 following, because I was thinking this. And then, I 5 got a lot of comments from other Staff as I've walked 6 around the room a little bit here.
7 And what Shawn Harwell indicated, I just 8 want to emphasize that as well. We hear a lot of, 9 certainly hesitancy, resistance, concern, about the 10 proposal.
11 We would seek out -- and I'd have to look 12 at which one of our questions -- I think it's number 13 three probably of alternative financial test
) 14 criteria.
15 So, maybe you've got to turn to your 16 financial folks. John Matthews, I think you may have 17 had some suggestions. I'm not inviting those now at 18 this time, but the commenter we just heard before from 19 Exelon, get in.
20 Get into the weeds with us and suggest 21 what you think might be equivalent, or what might be 22 lost, in your view, from reliance on a credit rating.
23 What financial metrics, what consideration, what 24 alternatives, that you could find.
_) 25 And that's the key noun there, if you (202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
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56 1 will -- alternative financial test criteria. How 2
_) would you propose if an agency has been tasked to, we 3 don't want to rely on the double A or the single A or 4 the triple B or the trip -- what other criteria would 5 you envision?
6 And take a look at what we currently have 7 and please provide -- if you can provide that kind of 8 detail to the NRC, that would be helpful.
9 MR. TRUSSELL: And this is Greg Trussell 10 from Rulemaking. As I believe it was Craig earlier 11 pointed out, we will go look at what other agencies 12 have done, in terms of their reaction, how they 13 changed the regulations to be compliant with Dodd-j 14 Frank.
15 So, we'll definitely go back and do 16 analysis of that as well.
17 MR. MUSSATTI: Okay. More comments?
18 MR. BONANNO: I just had one closing 19 comment, if I could.
20 MR. MUSSATTI: Close quickly.
21 MR. BONANNO: Yeah, more of a comment. I 22 won't commit to being the last one, but this is Jerry 23 Bonanno from NEI again.
24 And again, we haven't discussed this in
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57 1 which is always dangerous.
J 2 I mean, I realize you all started with a 3 direct final rule on this. But as opposed to 4 publishing a proposed rule with this option in it, and 5 then asking questions in the proposed rule, I mean, 6 these questions look like they're shaping up to be the 7 kind of questions you would ask in an advanced notice 8 of proposed rulemaking to gather information, and then 9 do a proposed rule that's closer to, quote unquote, 10 correct or right.
11 Just a thought. I know it's a little more 12 time and maybe some more work, but I know you all need 13 specifics and you hear a lot of anecdotal responses.
_) 14 And maybe a good vehicle to use to get some written 15 responses that could help shape a proposed rule, as 16 opposed to going out with a proposed rule and getting 17 that feedback in response to it.
18 MR. MUSSATTI: Okay, thank you.
19 MR. TRUSSELL: Thanks, Jerry.
20 MR. MUSSATTI: Anybody in the room?
21 Kelsey, is there anyone else who wants to speak on the 22 phones?
23 THE OPERATOR: Yes. Our next question 24 comes from Steven. Steven, your line is now open.
) 25 MR. HAMRICK: Yes, thank you. This is NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE , N.W.
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58 1 Steven Hamrick from Florida Power & Light Company, and 2
) 3 also speaking Resources.
for its affiliates at NextEra Energy 4 And I think Mr. Bonanno just covered what 5 I was going to mention. And it was, you have 6 discussed the desire for people to submit written 7 comments.
8 And I was just going to ask procedurally, 9 does that just mean sending a letter at some point in 10 the next month or two? Is there a deadline? Are you 11 going to publish something requesting comments?
12 I just want to make sure that we can give 13 you comments that are helpful and on a time frame 14 that's helpful. And just wanted to make sure I knew 15 the best way to do that.
16 MR. TRUSSELL: Thanks, Steve. This is 17 Greg Trussell from Rulemaking. The presentation does 18 provide my email address. You can provide us 19 comments. There's no time frame on that. Please use 20 that email if you can to provide those comments.
21 And as I mentioned earlier, we are in the 22 process of doing a proposed rule. And so, we are 23 going to be melding the criteria that we have and what 24 we're hearing today, we'll take that into 25 consideration, as well as anything that I may receive NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., NW .
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59 1 after this meeting via email. So, thanks, Steve, for
)
2 that.
3 MR. HAMRICK: Thank you.
4 MR. MUSSATTI: Okay, one more time around 5 the room. Well, you may have been very pressured 6 about what's going on here. We seem to be slowing 7 down in the comments. Is there anybody on the phone?
8 Kelsey?
9 THE OPERATOR: I'm sorry. No more 10 questions at this time.
11 MR. MUSSATTI: Okay, thank you. Sensing 12 a lull in the enthusiasm in here, I think it's 13 probably time for us to come to an end. Does that
) 14 sound right to you?
15 (Off-microphone comment.)
16 MR. MUSSATTI:Okay. Since we've come to 17 the end here, I'd just like to say thank you. I 18 appreciate the decorum in the forum today. It's been 19 a good group of folks.
20 Remember, you can put things in in writing 21 and send them in to us at gregory.trussell@nrc.gov.
22 I don't think there's anything else here I need to ask 23 of you, except for one thing.
24 This room is a food-and-drink-free room.
) 25 So, unless I get in trouble, I would like to ask NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N .W .
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60 1 everybody to take their evidence with them when they 2
_) leave. And just try not to leave any trash behind.
3 They're trying to make fancier rooms and 4 better rooms for us. And I'd like to show them we 5 appreciate that.
6 Other than that, I think we're -- one last 7 comment from Greg.
8 MR. TRUSSELL: Just, it's gregory.trussell.
9 MR. MUSSATTI: Gregory?
10 MR. TRUSSELL: Yeah.
11 MR. MUSSATTI: I'm sorry. G-R-E-G-0-R-Y.
12 MR. TURTIL: Two S's, two L's, Gregory.
13 Right?
.J 14 MR. TRUSSELL: Yes.
15 MR. MUSSATTI: Yeah. And it's in the 16 slides. It's on our screen right now if you could 17 actually see it on Skype. And at this time I think 18 we're done. Be safe on your travels back to where you 19 came from. And, Kelsey, you can end the call at this 20 time.
21 THE OPERATOR: This concludes today's 22 conference. All participants may disconnect at this 23 time.
24 (Whereupon, the above-entitled matter went
) 25 off the record at 11:17 a.m.)
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) CERT IF ICA T E This is to certify that the attached proceedings before the United States Nuclear Regulatory Commission Proceeding: Public Meeting for Alternatives to Use of Credit Ratings Proposed Rulemaking Docket Number: (n/a)
Location: Rockville, Maryland
_) were held as herein appears, and that this is the original transcript thereof for the file of the United States Nuclear Regulatory Commission taken and thereafter reduced to typewriting under my direction and that said transcript is a true and accurate record of the proceedings.
Official Reporter Neal R. Gross & Co., Inc.
J N E A L R. G R O S S COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE , N.W.
(202)234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com