ML19322D813
| ML19322D813 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 02/20/1980 |
| From: | Felton J NRC OFFICE OF ADMINISTRATION (ADM) |
| To: | Marrone J AMERICAN NUCLEAR INSURERS |
| Shared Package | |
| ML19322D814 | List: |
| References | |
| FOIA-80-51 NUDOCS 8002290217 | |
| Download: ML19322D813 (4) | |
Text
jo, UNITED STATES
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! 'h e NUCLEAR REGULATORY COMMISSION i
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, 7, February 20, 1980
.!oseph Marrone, Esquire American Nuclear Insure 1 The Exchange Suite,245 270 Farmington Avenue IN RESPONSE REFER Farmington, CT 06032 TO FOIA-80-51
Dear Mr. Marrone:
This is in response to your letter dated January 24, 1980 in which you requested, pursuant to the Freedom of Information Act, a copy of all documents used to reach the NRC decision that the amount of primary financial protection for the public required for TMI Unit 2 will be $160 million.
The documents listed on Appendix A are enclosed.
Document 1 of Appendix B is being released with two small deletions, a paragraph on page 3 and a sentence on page 5.
These deletions are being made pursuant to Exemption (5) of the Freedom of Information Act becau~se they contain frank legal opinions the disclosure of which would inhibit the ability of the General Counsel to provide confidential advice to the Commission prior to a decision.
Documents 2 through 5 of Appendix B are memoranda to individual Commissioners from members of their personal st0ffs which contain predecisional advice and reconnendations.
These documents are also being withheld pursuant to Exemption (5) of the Freedom of Informatian Act (5 U.S.C. 552(b)(5)) and 10 CFR 9.5(a)(5).
Pursuant to 10 CFR 9.9 and 9.15 of the Commission's regulations, it has been determined that the information withheld is exempt from production or disclosure, and that its production or disclosure is contrary to the public interest. The person responsible for the denial of document 1, Appendix B, is Mr. Leonard Bickwit, Jr., General Counsel.
The person responsible for the denial of documents 2 through 5 of Appendix B is Mr.
Samuel J. Chilk, Secretary of the Commission.
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s This denial may be appealed to the Commission within 30 days from the receipt of this letter.
Any such appeal must be in writing, addressed to the Secretary of the Commission, U. S. Nuclear Regulatory Commission, Washington, DC 20555, and should clearly state on the envelope and in the letter that it is an " Appeal from an Initial FOIA Decision."
Sincerel,
J. M. Felton, Director Division of Rules and Records Office of Administration v
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FOIA-80-51 APPENDIX A 1.
SECY 79-617 Financial Protection For Three Mile Island Unit Nos. 1 and'2.
2.
December 3, 1979 Memo to the General Counsel from Commissioner Ahearne re: SECY 79-617.
3.
January 22, 1980 Memo to L. Gossick from S. Chilk re: SECY 79-617.
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FO T A-80-51 APPENDIX B 1.
January 15, 1980 Memo to Chairman Ahearne from L. Bickwit, General Counsel.
2.
December 4, 1979 Memo to Commissioner Gilinsky from W. Manning.
3.
December 6, 1979 Memo to Commissioner Bradford from W. Clements.
4.
january 18, 1980 Memo to Commissioner Hendrie from H. Fontecilla 5.
January 18, 1980 Memo to Chairman Ahearne from V. Hardina.
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flovember 15, 1979 SECY-79-617 0
COMMISSIONER ACTION For:
.The Commissioners From:
Harold R. Denton, Director Office of Nuclear Reactor Regulation
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Executive Director for'0perations
Subject:
FINANCIAL PROTECTION FOR THREE MILE ISLAND UNIT NOS. 1 AND 2 Purcose:
To infonn the Connission about the need for implementing the increased financial protection
- requirements at Three Mile Island and reinstating the primary insurance amounts and to recommend actions to accomplish this.
Cateoory:
This paper ccvers a minor policy question.
Decision Criteria:
(1) Necessity of implementing increased financial protection requirements at Three Mile Island.
(2) Necessity of requiring reinstatement of amounts paid out for claims resulting from the Three Mile Island accident.
Issues:
(1)
Should the Commission require the licensee of the Three Mile Island facility, in the interim period until such time as the f"lC might permit Unit 2 to resume operation, to prov de increased financial protection of $160 million for Unit 2?
" The subject of this paper is financial orotection provided pursuant to the Price-Anderson Act through nuclear insurance.
This paper does not address matters of nuclear orocerty insurance that a utility would purchase to compensate for losses to its own (reactor) property..This
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paper also does not address the separate Commission financial cualifications revi&w which considers whether the licensee can demonstrate that it.
possesses or has reasonable assurance of obtaining the funds necessary to cover, among other things, the estimated cost of shutting down the facility and maintaining it in a safe condition.
While the reouirement for financial qualifications is covered by Section 182 of the Atomic Energy Act, that section is not part of the Price-Anderson provisions (Section 170) and neither the financial qualifications review nor the maintenance of property insurance is required by Section 170.
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(2) Should the Cor;nission require the licensee to reinstate as primary financial protection the amount paid out for claims and claims expenses resulting from the Three Mile Island accident?
Discussion':
Issue 1:
Section 170 of the Atomic Energy Act of 1954, as amended. (the Act) recuires reactor licensees to have and maintain financial protection to cover public liability claims resulting from a nuclear incident.
Subsection 170b. of the Act requires that for facilities designed for producing substantial' amounts of electricity and having a rated capacity of 100 electrical megawatts or more, the amount of financial protection required shall be the maximum amount available zfrom private sources.
Primary financial protection may be in the form of private insurance, private contractual indemnities, self-insurance or other proof of financial responsibility, or combination.of such measures but is subject to such terms and conditions as the Commission may by rule,. regulation, or order, prescribe.
Since the inception of the Price-Anderson system, all licensees of reactors with a rated capacity of 100 MWe or more have provided their financial protection through nuclear liability insurance at the maximum amount made available by the two nuclear liability insurance pools.
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The tietropolitan Edison Company, Jersey Central Power & Light Company, and Pennsylvania Electric Company (Licensee) are the holders of Facility Operating Licenses Nos. OPR-50 and DPR-73.
In January 1979, American Nuclear Insurers (ANI) and Mutual Atomic Energy Liability Underwriters (l4AELU),
the insurers who provide the nuclear liability insurance used by licensees as primary financial protection, informed the Commission that they were increasing the amount of nuclear liability insurance.
available from $140 million to $160 million.
In accordance with the provisions of subsection.170b.
of the Act, the Commission increased the amount of primary financial protection required for facilities having a rated capacity of 100 electrical megawatts or more from 5140 million to 5160 million.
This change was published by the Ccamission in the Federal Register on April 6, 1979 (44 FR 20632) and became effective May 1, 1979.
Subsection 140.11(a)(4) of the Commission's regulations was amended to require that each power reactor licensee maintain financial protection in an amount equal to the sum of 5160,000,000 and the amount available as secondary financial protection for each nuclear reactor licensed to operate at a rated capacity of 100 MWe or more.
The Commission's regulations further provide in 1140.19 that in any case where the Cc= mission finos that the financial protection maintained by a licensee is not adequate to meet the requirements of the Commission's financial protection regulations, the Commission may suspend or revoke the license or may issue such order with' respect to licensed activities as the Commission determines to be appropriate or necessary in order to carry out the provisions of Part 140 of its regulations and Section 170 of the Act.
On May 1,1979, ANI and MAELU informed the Commission and the licensee that because of the March 28, 1979 accident at Three Mile Island Nuclear Station, Unit 2, ANI and MAELU were unwilling at that time to make $160 million in nuclear liability insurance available for the Three Mile Island site despite the licensee's request for such increased coverage.
The pools' principal reason for not increasing the primary insurance available (from S140 million to S160 million) for the units at the Three Mile Island site was their desire to limit clearly to S140 million their potential liability for claims and claims expenses arising out of the March 28 accident.
The pools are opposed to increasing the primary insurance layer to 5160 million for the units at the Three Mile Island site without the assurance that the additional S20 million would not be used to satisfy public liability claims associated with the March 28 accident.
While it seems clear to the staff (and the pools) that such an increase would apply only pr6spectively (i.e. to a new incident),,
it is not possible to ' state absolutely that a court might not regard the increase as available for claims arising out of the March 28 accident.
- Hence, the pools' reluciance to increase coverage at TMI to
$160 million. The pools emphasized to the staff that once TMI-2 was restoreo to the point of being permitted by the NRC to resume operation they expected that l
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the coverage afforded the TMI site, Units 1 and 2, would be exactly the same as that afforded all other sites.
Following an emergency session, the pocis instructed their lawyers to draft an endorsement that would make the distinction between the Si20 million coverage for TMI Unit 2 and the 5160 million coverage for TMI Unit 1.
Such an endorsement has now been approved by the pools.
It provides S140 million in primary insurance to both TMI Units 1 and 2 with an additional S20 million to Unit 1.
The endorsement submitted by the insurance pools to the NRC would enable Three Mile Island Unit 1 to comply with the financial protection recuirements of 5140.11(a)(4) while leaving the compliance of Unit 2 in doubt. Although the staff approves of the endorsement for providing financial protection for Unit 1, the matter of whether Unit 2 should be required to comply fully with our regulations or be granted an exemption frem the regulations still needs to be resolved.
Since May 1, the staff has been in continuous contact with representatives of the licensee and the pools on this question.
The focus of the licensee and its insurance broker is directed at obtaining, somewhere on the insurance market, additional insurance coverage of $20 million apart from the present policy maintained by the licensee with the insurance pools.
If the ' licensee is successful in obtaining this additional capacity, either from some companies presently participating in -the insurance pools or other nonparticipating companies, the staff would review the terms of the insurance to ensure that it would. mesh with the present policy and indemnity agreement.
.Further, the staff may find it necessary to review the financial status of the companies writing this increased insurance to assure that there exists a comparable degree of certainty for payment of claims presented years after a nuclear accident under the alternate policy as exists under the present pool policy.
Although the licensee is presently pursuing an insurance approach for obtaining the additional $20 million for Unit 2 and is guardedly optimistic of
success, the question of whether the licensee should be required to provide this increased' insurance must first be decided by the Commission.
This question is especially imcortant if the licensee is ultimately unsuccessful in obtaining 520 million in financial protection through other insurance.
Before the nuclear accident at' TMI Unit 2, subsection 170b. of the Atomic Energy Act had been generally interpreted to require the same amount of (primary) financial crotection for all large nuclear power
- plants, i.e., the maximum amount of liability insurance available from private sources.
Under this interpretation, TMI woul9 need to provide 5160 million in primary financial protection for Unit 2 to retain its operating license for this unit.
The assumption was that the maximum amount of insurance would always be offered for sale to the utilities through the pools and all that was necessary for the NRC to do in this regard was to require the utilities to buy what was being offered.
However, the precise language of the applicable statutory provision is, in relevant part, as follows:
The amount of financial protection shall be the amount of liability insurance available from private sources, except that tne Commission may establish a lesser amount on the basis of criteria set forth in writing,...:
- Provided, that for facilities designed for producing substantial amounts.of electricity and having a rated capacity of 100,000 electrical kilowatts or more, the amount of financial protection required shall be the maximum amount available at reasonable cost ano on reasonable terms from orivate sources.
Such financial protection
... shall be subject to such terms and conditions as the Commission may, by rule, regulation, or order, prescribe.
In prescribing such terms and conditions for licensees required to.have and maintain financial protection equal to the maximum amount of liability insurance available from orivace sources. the Ccamission shall...
include, in cetermining such maximum amount, private liability insurance available under an industry retrospective rating plan... (Subsection 170b. of the Atcmic Energy Act.
Emphasis added.)
For all large nuclear power plants other than the TMI units, the maximum amount (of funds) available from private sources equals the maximum amount of liability insurance available from private sources (i.e., S160 million from the two nuclear liability insurance peols).
Since the TMI licensee has made a reasonable effort.to cbtain SiSO million in financial protection from the liability insurance cools but has been denied the 520 million increase from S140 million to 5160 million by the pools, one could argue that for TMI Unit 2, Sla0 million is the maximum liability insurance available.
Hence, the maintenance of 5140 million in iiability insurance for Unit 2 arguably. satisfies the provisions of subsection 170b.
From a practical standpoint, the effect of permitting TMI Unit 2 to have an operating license with less than S160 million of liability insurance will be of significance only if another nuclear accident at i
that unit alone combined with the March 28 accident j
results in damages exceeding 5140 million.
If damages in a new accident exceed 5140 million and the secondary financial protection layer comes into play, then other power reactor licensees will make up the $20 million difference through the retrospective premium assessment by contributing at an earlier point to their share of the damages than would be the case if the accident had occurred at some other site with 5160 million in primary insurance.
If the damages exceed both primary and secondary financial protection layers, then government indemnity would make up for the increment of 520 million and would be a maximum of S85 riillion instead of $65 million.
The limitation of liability would remain at 5560 million. Total protection for the public would be unchanged.
Issue 2:
In addition to the issue of whether the licensee would be required to obtain the additional S20 millien for Unit 2, there is the issue of whether the licensee must replenish the funds paid out in satisfaction of-public liability claims resulting frca the TMI accident.
Article II, paragraph 2 of the Standard Form of indemnity agreement executed by the Cc= mission with its nuclear pcwer reactor licensees
.l (10 CFR 140.92), requires that in the event of payments made by the insurers under an insurance policy used as financial protection which reduces the aggregate limit of the policy, the licensee must apply to its insurers for reinstatement of the amount of these payments.
If the licensee is r.o:
s0ccessful in c~ :aining reinstatarent by the ir.surance c
pools of the claims paymen:L paic cet in connection with the acciden; within ninety cays, the Commission may require the licensee, in the absence of good cause to the co.ntrary, to furnish financial protection for this acount in another form.
hile the regulations are ambiguous as to the start and end of the ninety day period, with respect to TMI Unit 2 we believe that the period continues in effect since claims continue to be paid and claims expenses incurred.
The licensee has requested reinstatement of the funds paid out for claims and claims expenses arising out of that accident which are approximately S1.29 million.
Pool representatives have informed Commission staff that they have decided not to reinstate these funds for Unit 2 based on the same concern regarding retroactive application bj a court of such reinstated funds as they had with respect to the S20 million increase in financial protection. A smaller pool of participating companies anticipates reinstating -the 51.29 million for Unit 1.
This reinstatement will be accomplished through a separate supplementary insurance policy that would allow claims and expenses paid out through the existing financial protection policies to be reinstated through the new policy.
For example, the new poli.cy would start out equal to the S1.29 million paid out so far.
If payments from the financial protection increased, say to 52 million, the new policy's capacity would increase to 52 million. Such increases could continue up to some overall limit of capacity of the new policy.
As with the increase to S160 million, the licensee and its insurance broker are canvassing the insurance market in the hope of obtaining an additional insurance policy to offset these claims expenses and bring its coverage for TMI Unit 2 up to the required primary financial protection. The practical effect of not reinstating the funds paid out for the TMI accident is that if there were ancther nuclear accident at the TMI Unit 2, there would not be S140 million in liability insurance to pay public liability claims
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The base amount available would be S140 million less the 51.29 million expended as a result of the Unit 2 accident.
As was discussed earlier in a different context, if damages in a new accident exceed this base amount and the secondary financial protectior, layer is utilized, other power reactor licensees will make up the shortfall in claims expenses throuch the retrospective i
premium assessmen-by centributing at an earlier point wi-h an increased share of the canages.
If the camages exceec both primary and seconcary financial protection layers, then covernment indemnity would be utilized to meet this shcrtfall resulting from -
the payment of claims expenses. It should be mentioned that the nuclear liability insurance posls are under no oblication to offer to recienish any of the funds paid cut pursuant to -he terms of the policy.
Alternatives:
Issue 1:
Alternative A:
The licensee is only required to maintain S140 million, the maximum liability insurance available from private sources, i.e., the nuclear liability insurance pools.
Under this alternative, one could argue that because the licensee has tried unsuccessfully to purchase $160 million in nuclear liability insurance from the pools, the maximum amount available to this licensee from private sources is 5140 million.
The staff believes that notwithstanding the fact that both the Price-Anderson Act and the legislative history are not clear specifica1.ly as to whether a large power reactor licensee not able to obtain the same level of financial protection as all otrer power reactor licensees could be permitted to obtain a lesser amount, Commission policy has been to require all large power reactor licensees to have the same financial protection requirements placed upon them. If the Commission disagrees with'the staff, bewever, and believes that licensees should only be required to maintain the maximum amount available to them, the licensee could be so informed.
Inasmuch as the regulations in 10 CFR la0.ll(a)(a) reflect the long-standing Cc=missien view that large power reactor licensees are all required to maintain the same amount, for the Commission to now change its view, an amendment of that regulation or a grant of an exemptien on a case-by-case basis would be in order.
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Alternative B:
Until such time as NRC were to permit Unit 2 to resumg operation, grant this licensee an exemption from s140.11(a)(4) so that only 5140 million in primary financial protection would be required for Unit 2.
- -=nt.o exemption and recuire the licensee to Al-=rea-'"=
provide an additional insurance policy, a bank instrument such as a letter of credit or a segregated S20 million portion of an existing line of credit so that-when added to the 5140 million in liability insurance, the total prima:y financial protection would be 5160 million.
Alternative 0:
Gran't no exemption and require the licensee to provide a guarantee equal to S20 million in the form of its own financial resources.
Evaluation of Remainino Alternatives : (if Alternative A is not selected)
Alternative 3: Until such time as NRC were to permit Unit 2 to resume operation, grant this licensee an exemption from 1140.ll(a)(4) so that only 5140 million in primary financial protection would 4
be required.
Pro: (a) Three Mile Island Unit 2 is presently not operating nor will it be operated for
-the next few years.
4 (b) The licensee has tried to purchase 5160 million in nuclear liability insurance from the pools but has not been successful.
i The maximum insurance available to the licensee therefore is only S140 million.
Even if Alternative A above is rejected and the Commission does not wish to change its regulation as to its general effect, some weight might be given, nevertheless to the argument that under the provisions of subsection 170b. of the Act (but not under the more specific provisions of.
subsection 140.ll(a)(4) of the regulations) that for this licensee S140 million is tha
" maximum amount from private sources,"
i.e., the nuclear liability insurance pools.
Thus without subscribing cerrnletely to this arcument but in recognition that i
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. it has some validity in the present case, this licensee in this situation could be granted"an exemption from our regulations.
Con: (a)
Even though the licensee cannot curchase 5150 million in insurance, f140.11(a)(c) does not recuire that it provice this amcunt through the purchase of nuclear liability insurance alone.
The licensee should attempt to meet this requirement by some alternative method.
(b) Although certainly not clear, the Price-Anderson Act has been implemented by the Ccmmission to require that all large power reactors have the same amount of primary financial protection.
Alternative C: Do not grant the licensee an exemption from the regulations and require the licensee to provide an additional insurance policy, a bank instrument such as a letter of credit or a segregated $20 million portion of an existing line of credit so that when added to the $140 million in liability insurance,
.the total primary financial protection would be.5160 million.
Pro: (a) A third party guarantee that is not dependent on the resources of the licensee, such as a line of credit, would provide an assurance that the funds would be available if required.
(b) This licensee, as with all other licensees operating reactors of 100 MWe or more, will be providing the full amount of financial protection available from private sources.
Con: (a) A r4quirement to purchase additional
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financial protection beyond that available through insurance may place an unnecessary burden on the licensee since funds critically needed for other expenses involved in the accident would be diverted to this use with respect to a reactor that will not be operated in the foreseeable future.
(b)
It is possible that whatever new method of financial protection for $20 million is obtained, the licensee may not be able to obtain certain
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. vital elements found in the present insurance policy (e.g., cmnibus coverage, continuous rather than annual coverage, waivers of defenses),
or that insurance coverage will be cbtainable only from sources whose financial status may recuire close scrutiny by the Commissien to the extent allowed under the A:cmic Energy Act cf
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1952, as amended.
Alternative D: Do not grant an exemp;icn but allow the licensee to provide a guarantee equal to S20 nillion in the form of its cwn finan provided in 5140.l'1 and $cial resources as 140.15.
Pro: (a) The licensee can provide that any guarantee it gives through its own resources will be as broad as the nuclear insurance policies.
(b) No unnecessary diversion of critically needed funds would be involved, unless another accident occurred.
Con: (a) Even if the licensee were able at this time to maintain adequate resources to provide the required financial protection, its precarious financial condition may not provide the certainty of availability in the event of another incident that the financial protection layer must provide.
(b) Other methods of providing financial protection for the $20 million difference, while more expensive, could provide greater
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assurance of availability and should at least be explored before this method is accepted.
Issue 2:
Alternative A:
Require the licensee to provide new financial protection equal to the amounts expended to pay claims and claims expenses arising out of the TMI accident.
Alternative B:
Do not require.the licensee to provide these amounts.
Evaluation of Alternatives Alternative A: Require the licensee to provide new financial protection equal to the amcunts expended to pay TMI accident claims.
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Pro: (a)
If there were another nuclear accident' at TMI Unit 2, there would be the full 5140 million in liability insurance to pay claims.
(b) The need would cease for gover-rent incemnity to " drop dean" to meet the gap caused by the payments.
Con: (a) The Ccmmission is not mandated to recuire the licensee to provide reir. statement of these funds if there is good cause that prevents the licensee fron fulfilling this requirement.
(b) A requirement fer the licensee to purchase additional financial protection equal to the amounts expended to pay TMI claims beyond that available through the insurance pools may place an unnecessary burden on the licensee since funds needed for other expenses would be diverted to meet our requirements.
(c)
It is possible that any new method of financial protection for the S1.29 million expended to pay claims may not include certain vital ~ elements found in the present policy or that insurance coverage will be obtainable only from sources whose financial status will require close Commission scrutiny.
Alternative B: Do not require the licensee to provide new financial, protection equal to the funds for the claims and claims expense payments made arising out of the TMI accident.
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Pro: (a) The licensee has requested the insurance pools to reinstate for Unit 2 the amounts expended to pay claims and claims expenses, but has been unsuccessful in its attempts.
(b) Even if another nuclear accident occurred at the Unit 2 protection to the public would not be lessened because the secondary retrospective premium and govern-ment indemnity layer would be utilized to
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. pay claims above the licensee's reduced primary financial protection layer.
(c) The regulaticns do not require the Ccmmissien te ha/5 the licenses provide reinsta;ement Of trase f.nds when g:cd cause prevents tne licensee frca fulfilling this requirement.
Con: (a) The licensee will not be providing -
the same level of primary financial insurance as all other large pcwer reactor licensees.
(b) A failure by the licensee to obtain
. reinstatement of the funds frcm the insurance pools by itself is not gcod reason to exempt the licensee frca providing these funds. in some other manner.
Summary:
The first issue is whether the licensee should be required to maintain the same primary financial protection level of $160 million for Unit 2 as for Unit 1 or whether the licensee should be permitted to maintain only $140 million in financial protection for Unit 2.
On one hand, because Unit 2 is not -
operating, one could argue that the possibility of another nuclear accident occurring at TMI Unit 2 is reduced.
Hence, under this circumstance the lice'nsee should be granted the exemption frem Sla0.ll(a)(4),
described above, during the period before it might be determined by NRC that it will license TMI Unit 2 for resumption of operation.
Public protection, it may further be argued, is not diminished by having the licensee maintain less than the maximum available 1
amount of $160 million in primary financial protection since the government indemnity layer would fill the 520 million gap if the primary insurance and secondary retrospective premium. layers were exhausted.
If Unit 2 were to operate again, the licensee could at that time be required to provide the maximum primary financial protection that is available to all other power reactor licensees.
As indicated earlier, the pools would expect to be able to make full coverage available to the entire TMI site at that time.
Finally, the argument could be made that the licensee, by providing $140 million in insurance, is furnishing the maximum amount of liability insurance available
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to it from private so'urces, i.e., nuclear liability insurance pools, as required by the Price-Anderson Act.
Balanced against these arguments, r.:<,ever, is the ar;ument that shil.e Uni: 2 is r : c: era:ir.g anc
.e possibility of a nuclear accicen: is reducec, :ne possibility cannot ce completely eliminatec.
In fact, as a result of :ne March 28 accident, there will be extensive decentamination activities and increased transportation frcm the Uni 2 reactor which may offer an increased risk of a nuclear accident either at the site or arising during transporta-tion of radioactive waste and contami'nated equipment away from TMI.
While it is true that the protection to the public is not diminished by having the licensee provide less than 5160 million, government indemnity would then be relied on to fill a gap in financial protection, something that it was not intended to do for other than a short interim period. Further, at any one time there are reactors that are either not operating for relatively short periods, such as for refueling or scheduled maintenance, or for much longer periods extending into years (e.g., Indian Point Unit 1).
These power reactor operators are nevertheless still required to provide the maximum financial protection as long as they maintain their operating licenses (although in the case of Indian Point Unit 1, the maximum level of financial protection would be maintained anyway since the protection covers Units 2 and 3 on the site).
There has never before been a situation, however, where a utility wanted to purchase the full amount of nuclear liability insurance that was on the market but 'the pools were unwilling to sell it the full coverage.
Concerning the issue of reinstatement of the funds expended to pay claims from the TMI accident, it could be argued that because the licensee has tried unsuccessfully to obtain reinstatment of these funds the Commission has good cause not to recuire the licensee to arrance for another method of providing for these funds. On the other hand, if there were another accident at the Unit 2, less than the full amount of primary financial protection would be available to pay these claims.
Further, if a second accident were also to exhaus: the secondary layer of 1
financial protection it would be the government indemnity layer that would ultimately have to meet this gap.
On balance, the staff's jucgment is that the licensee shculd be directed within a reesonable time, s~uch as sixty days, to damens rate :: the NRC that it is in c:=piiar.ce. ith tr.e regula:icns by :coviding evider.ce of coverage for 3150 millicn in trimary financial protection for Uni: 2 as well as for Unit 1.
The evicence of coverage for 3150 millien should include reinstatement of the funds ut lized to cay claims i
ar.d claims exper.ses arising out of the March 28 accident.
The staff woulc continue working directly with the licensee and its insurance broker to assist in reviewing any alternatives the licensee proposes.
If tha licensee is unable or unwilling to prcvide 5160 million in primary financial protection in a form satisfactory to the Commission, the Commission may take the following actions pursuant to 10 CFR 140.19: suspend, or revoke the license or issue such order as it deems appropriate or necessary in order to carry out the provisions of 10 CFR Part 140 and Section 170 of the Act.
In view of the present status of the facility it is not clear to what extent any of these sanctions would be efficacious.
Recc=mendations:
That the Commission 1.
Notify the licensee that it must demonstrate compliance with 5140.11(a)(4) by providing the maximum financial protection for both units at Three Mile Island and require the licensee to provide to the staff within sixty days, an evidence of cover. age for aggregate amount of primary financial protection equal to S160 million through insurance or scme other form of third party guarantee, or a ccabination thereof.
2.
Notify the licensee that such financial protection for EiI Units 1 and 2 must include an amount equal to the total of financial protection claims and claims expenses expended by the pools to date and not reinstated by the pools.
This amount of additional financial protection should be supplemented every thirty days if the j
total amount not reinstated by the pools continues i
to rise.
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Note that the letter enclosed as Appendix A will be dispatched to the licensee by the Director, Office of Nuclear Reactor Regulation to acccmplish these notifications.
2 "ots the encerse en- #:r.'rit 1 increasin; the primary insurance :: 5160 million fer bni: '
vill be publishec in the Federal Register and the licensee and pools will be notified :y staff of (a) NRC's acceptance of the endorsedent for Unit 1 and (b) cur un:ers andin; that payments are being reinstated by the pecis for Unit i through a se;arate supplemental insurance policy that should be furnished to Ccmmission for review and cublication in the Federal Recister.
5.
Note that.the appropriate subcommittees of Congress will be notified of the Commission's actions.
Coordination:
The Executive Legal Director concurs in the recommendations of this paper. The Office of Congressional Affairs concurs in the notice to the various Congressional subcommittees.
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Harold R. Denton, Director 3/
Office of Nuclear Reactor Regulation
Enclosures:
1.
Appendix A - Letter to Licensee 2.
Appendix B - Letter to Congressional Subcommittees -
Commissioners' comments sh uld be provided directly to the Office of the Secretary by c.c.b. Fridav, November' 30, 1979.
C:: mission Staff Office c:mments, if any, should be submitted to the Cem=issioners NLT November 26, 1979, with an infermation copy to the Office of the Secretary.
If the cacer is of such a nature that it recuires additional time for analytical review and
- mm'en't, the Commissioners and the Secretariat should be apprised of when c =ments may be ex;ected.
DISTRI5UTION C:mr.;ss cners C:mmissien Staff Offices Exe: Dir for Operations
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THIS DOCUMENT CONTAINS POOR QUAUTY PAGES
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Appendix "A" Draft letter to Licensee Metrcoolitan Edison,Comcany Jersey Central Power anc Light Cc ;any Pennsylvania Electric Ccmpany Gentlemen:
As you are aware, the provisiens Of Section 170 of the Atomic Energy Act of 1954, as amended, (the Act) require production and utilization facility licensees to have and maintain financial protection to cover public liability claims resulting from a nuclear incident.
Subsection 170b further requires that for facilities designed for producing substantial amounts of electricity and having a rated capacity of 100 electrical megawatts or more, the amount of financial protection required would be the maximum amount available from private sources.
In January 1979, American Nuclear Insurers (ANI) and Mutual Atomic Energy Liability Underwriters (MAELU), the insurers who provide the nuclear liability insurance provided by licensees as primary financial protection, informed the Comission that they were increasing the amount of nuclear liability insurance available from S140 million to S160 million.
In accordance with the provisions of subsection 17Cb of the Act, the
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Comission increased the amount of primary financial protection required for facilities having a rated capacity of 100 electrical megawatts or t
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6 more from $140 to S160 million.
This change was published by the Commission in the F'ederal Register on April 6,1979 (44 FR 20632) and became effective May 1, 1979.
Subsection 140.11(a)(4) of the Commission's reculations was E ended to recuire that each power reacter licensee r.aintain financial
- ::E icn in an a 05r: ecual :: the su cf 5150 miliice, anc the a.:un; available as sec:ndary financial ' protection for each nuclear reactor
'.icinsed to operate at a rated capacity of 100 MW(e) Or :re.
The
- --issi:n's reculations further provide in s 100.19 that in any case wners the Ccmmission finds that the financial protection maintained by a
'.icer.see is not adecuate to meet the requirements of the C:mmission's financial protection regulations, the Commission may suspend or revoke the license or may issue such order with respect to licensed activities as the Commission determines to be appropriate or in order to carry out provisions of Part 140 of its regulations and Section 170 of the Act.
At present, the primary financial protection being provided for the Three Mile Island site is 5140 million.
The insurance pools have proposed an endorsement, whiqh the staff has reviewed and finds to be acceptable, that would provide 5140 million in primary insurance to both Three Mile Island Units 1 and 2 with an additional $20 million for Unit 1.
On a related matter, Article II, paragraph 2 of Indemnity Agreement B-64 that ycu have executed with the Commission requires that in the _ event of
- a;. cents made by the insurers under an insurance policy used as financial
- r :ecticn which reduces the aggregate limit of the policy, the licensee e
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must apply to its insurers for reinstatement of the amount of these payments. We understand that you have requested reinstatement of the approximately $1.3 million paid out for claims and claims expr..ses arising out of the March 28 accident.
Insurance ;cols representatives have ir. formed the Ctr-issien staf# tha: :ney have deciced r.o: :o reinstats these funds fcr Uni: 2 althoucn :ney will reinstate them for Unit i through a separate supplementary insurance policy.
The practical effect of not reinstating the funds ; aid out fcr.the arch 2S accident is that if there were another accident at Uni: 2, there would not be the full ar. cunt of primary liability insurance to say public liability claims resulting from such an accident.
Therefore, with respect to Units 1 and Unit 2 it will be necessary for you to demonstrate that you are in compliance with cur regulations by providing evidence to the NRC that $160 million in primary insurance is in place as of May 1, 1979.
This evidence should include a copy of the separate supplementary policy reinstating the S1.3 million in claims and claims expenses for both units, and providing for necessary increases in coverage every thirty days for increased amounts beyond the S1.3 million if the total amount not reinstated by the pools rises beyond that figure.
This evidence of primary financial. protection equal to a total of $160 million can be through insurance or some cther form of third party guarantee, or a combination thereof which provides all of the operable provisions of the facility form of nuclear liability insurance.
e Appendix "A" r-
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APPENDIX.B <.--
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e Appendix "B" THIS DOCUMENT CONTAINS POOR QUAUlY PAGES Draft letter to Congressional subcommittees The Hencrabie Merris K. Udall, Chairman Subc:mmit:ss en Ene ;y and the Envice rs-t
- cT.it:se cn Intericr and Insular Af#a'-s
.r.i:Ec 5ta:Es Houst :f :,s:rsser.:sti.ss
asr.ing::n, CC 205'E' Cear Mr. Cnairman:
The provisi:ns of Section 170 of the At:mic -Energy Act of 195", as arsnded, (the Act) require procuction ar.d utilization facility licensees to have and maintain financial'protecticn to cover public iiability claims resulting from a nuclear incident.
Subsection 170b further requires that for facilities designed for producing substantial amounts of electricity and having a rated capacity of 100 electrical megawatts or more, the amount of financial protection required would be the maximum amount available from private sources.
In January 1979, American Nuclear Insurers (ANI) and Mutual Atomic Energy Liability Underwriters (MAELU), the insurers who provide the 6
nuclear liability insurance provided by licensees as primary financial protection, informed the Commission that they were increasing the amount of nuclear liability insurance avaflable from,5140 million to S160 million.
In accordance with the orovisions of subsection 170b of the Act, the C:md.ission increased the amount of primary financial protection required A:pendix "B"
for facilities having a rated capacity of 100 electrical mecawatts er mere from 5140 to 5160 million.
This change was published by the Cc: mission in the Federal Register en A:ril 6, 1979 (22 FR 2;622) and
- sca e effective
- fay 1, 1979.
Subse::icn 120. l 'a';:.2) Of :ne ::--issicn's regulations was a ended to recuire that each ;cwer reactor licensee maintain financial protection in an amcun: equal
- the sum cf 5150 million, and the amcun; available as secondary financial protection for each nuclear reactor licensed to operate at a rated capacity of 100
'P.(e) or mere.
On May 1,1979, ANI and MAELU informed the Comission and Metropolitan Edisen Company, Jersey Central Power and Light Company and Pennsylvania Electric Company, the holders of licenses authorizing operation of the Three Mile Island Nuclear Station, Units 1 and 2 that because of the March 28,1979 accident at TMI, the pools were unwilling at that time to make 5160 million in nuclear liability insurance available for the TMI site despite the licensee's request for such increased coverage.
The s
pools' principal reason for not increasing the primary insurance available (from 5140 million to S160 million) for TMI was their desire to limit clearly to $140 million their potential liability for claims and claims expenses arising out of the March 28 accident.
The pools were opposed to increasing the primary insurance layer to S160 million without the assurance that the additional S20 million would not be used to satisfy Appendix "B" I
F T
3-cublic liability clai=s associated with the March 28 accident which arise either prior.to or subsecuent to "ay 1,1979.
1: : esent, :ne :r ary finar. ial ;retacti:n bein; ; :.i:e: ' r the Three Mile Island site is S1:0 millien.
The insurance ;cels have pr::: sed an er.d:ese,ent,.snich the Commissi:n stiff has revie.sec and finds to :e a::s::able, that wculd provide $100 niilien in primary ins;rance to both Three Mile Island Units 1 and 2 with an additional S20 millien.for Unit 1.
The fccus of the licensee is presently cirected a: c::aining additional insurance coverage of S20 million apart from the present policy maintained by the licensee with the insurance pools.
If the licensee is unsuccessful ir. cbtaining additional insurance of 520 million, the licensee will be required to provide 520 million througn a third party grarantee such as a bank line of credit.
On a related matter, the indemnity agreement executed by the licensee and the Commission requires that in the event of payments made by the insurers under and insurance policy used as financial protection which reduces the aggregate limit of the policy, the. licensee must apply to its insurers for reinstatement of the amount of these payments.
The licansee has.recuested reinstatement of the approximately S1.3 million
- aid cut for claims and ciaims expenses arising out of_the " arch 28 Appendix "B" 1
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accident.
Insurance pools representatives have informed the Commission staff that they have decided not to reinstate :nese funds for Unit 2 althcugh :.sy will reinstate them f:r Uni-1 :necug. a secarate su:;1e-entary insurancs ; li:.
T.e ;rac-ica'. ef#e: :# :: esi, stating the funds paid ou; for the " arch 28 ac:ident is that i# 'here were another accident at Unit 2, :nere woulc nc: be the #uil ar. cunt of crimary liability insurance to pay :ublic liability claims resulting from such an accident.
If damages in a new accident exceed $140 millien and the secondary financial protection layer is util'. zed, then otner power reactor licensees will make up the S20 million difference through the retrospective premium assessment by contributing at an earlier point to their share of the damages than would be the case if the acccident had occurred at some other site with $160 million in primary insurance.
If the damages exceed '
o imary and secondary fianancial protection layers, then government indemnity would make up for the increment of $20 million and would be a maximum of 535 million instead of $65 million.
The limitation of liability would remain at $560 million.
Total protection for the public would be unchanged.
Therefore, with respect to Units 1 and Unit 2 the Commission has reouired that the licensee demonstrate that it is in ccmpliance with our regulations by providing evidence to the NRC that 5160 millien in pr'imary insurance Appendix "B" e
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is in place as of May 1, 1979.
This evidence should include a copy of the separate supplementary policy reinstating the 51.3 million in claims ard s'.cuid r:v{de f:r r.ecessary and clains errerses fer both units, r
increases in :.e a;u eve ;. -.ir y :ajs' f:r in--c= cad am: nts : eyer.d r.e 51.3 millien if -P.e
- tal arcub.: r.ct reir.sta ed by -he :cols "ises beyond na: figure.
Sincerely, Identical letters to be sent to:
The Honorable Gary Hart, Chairman Subcommittee on Nuclear Regulation Committee on Environment and Public Works The Honorable John D. Dingell, Chairman Subcommittee on Energy and Power "
Committee on Interstate and Foreign Ccamerce The Honorable Toby Moffett, Chairman Subcommittee on Environment, Energy and Natural Resources Committee on Government Operations Appendix "B"
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