ML20031A453
| ML20031A453 | |
| Person / Time | |
|---|---|
| Site: | Susquehanna  |
| Issue date: | 09/15/1981 |
| From: | Vanderslice G ALLEGHENY ELECTRIC COOPERATIVE, INC., PENNSYLVANIA POWER & LIGHT CO. |
| To: | |
| Shared Package | |
| ML20031A420 | List: |
| References | |
| NUDOCS 8109230531 | |
| Download: ML20031A453 (5) | |
Text
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l UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION INTED CORRESPONDENCE BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of
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PENNSYLVANIA POWER & LIGHT COMPANY
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and
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Docket Nos. 50-387
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50-388 ALLEGHENY ELECTRIC -COOPERATIVE, INC. )
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(Susquehanna Steam Electric Station, )
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9 CA APPLICANTS' TESTIMONY OF GEORGE F. VANDERSLICE ON CONTENTION 9b (FINANCIAL QUALIFICATIONS FOR DECOMMISSIONING) v.
September 15, 1981 O$h
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Decommissioning Costs General Funding Methods Contention 9b states that "the Applicants are not financially qualified to assume the monetary costs of decom-missioning."
There are aeveral different funding methods currently being used to recover estimated decommissioning costs of a nuclear power plant.
The method used is generally a function of the policy of the particular state utility commission involved.
The most common funding methods are as follows:
(1)
Collection of estimated decommissioning costs during the life of the plant from customer revenue as an additional depre-ciation expense The cash flow result-ing from this additional depreciation expense may be used as a source of funds by the company, and the annual amount is credited to the depreciation reserve account, thereby continually reducing net plant and, hence, rate base.
(2)
Collection cf estimated decommissioning costs during the life of the plant from customer revenue as an expence separate from the normal depreciation expense.
This revenue is then deposited annually into a trust fund so that the sum of the deposits, plus return, less taxes, yields an amount ec,ual to the estimated costs of decommissioning.
The fund may be administered either by the company or by an outside independent agency.
The earnings on the fund may or may not be taxable.
Current Pennsylvania Public Utility Commission Decommissioning Policy For the past few years, in all rate cases involving decommissioning of nuclear power plants, the Pennsylvania Public Utility Commission (Pa. P.U.C.) has ordered the companies to use the following method.
See:
Pa. P.U.C. v. Metropolitan Edison Company, Docket No. R.I.D. 434 (1978); Pa. P.U.C. v. Pennsyl-l vania Electric Company, Docket No. R.I.D. 392 (1978); Pa. P.U.C.
- v. Philadelphia Electric Company, Docket No. R-79060865 (1980);
Pa. P.U.C. v. Duquesne Power & Light Company, Docket No.
R-80011059, (1981).
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1.
Revenues are collected from customero during the life of the plant.
2.
These revenues after taxes are deposited into a trust fund.
3.
The trust fund is invested in tax-free Pennsylvania municipal bonds.
4.
The amount of the trust fund is kept sepa-rate from the depreciation reserve and, therefore, is not a deduction when calcu-lating the net plant portion of rate base.
5.
The amount to be deposited into the fund is calculated so that the sum of the de-posits plus interest equals the estimated cost of decommissioning the radioactive portion of the plant.
6.
Costs associated with decommissioning the nonradioactive portion of the plant are not allowed to be collected in current revenue.
These costs are amortized over a five-year period following the year in which they are actually incurred.
This policy of the Pennsylvania Public Utility Commission is based on their interpreta-tion of current Pennsylvania law.
See:
Penn Sheraton Hotel, et al. v. Pa.
P.U.C., 198 Pa. Super 618, 184 A2d 324 (1962).
The Commission does not allow the recognition of ptospective negative net salvage for the portion of the plant which is not radloactive.
7.
The estimated cost of decommissioning is determined in current dollars and is not adjusted for inflation.
However, this amount will be reviewed periodically to reflect inflation and/or changes in decom-missioning technology or requirements.
Pa. P.U.C. v. Pennsylvania Electric Com-
?any, Docket No. R.I.D. 392, (1978); Pa.
T C. v. Metroaolitan Edison Company, Docket No.
R.I.J. 434 (1978).
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Estimated Susquehanna Decommissioning Costs Estimated decommissioning costs for immediate disman-tiement of the Susquehanna Steam Electric Station (Susquehanna SES) as estimated by Mr. A. A Weinstein of S. M. Stoller Corporation are as follows:
Decommissioning Costs Millions of 1980 Dollars Unit 41 96.4 Unit #2 94.5 Total Both Units 190.9 Nonradioactive Portion
- 38 3 Radioactive Portion 152.6 Annual Deposit Required For Fund The following calculations show the amount of annual deposit necessary to accumulate a fund equal to the estimated decommissioning costs of the radioactive. portions of the Susquehanna SES in the year 2013:
Decommissioning In Assumed Annual in 1980 $
Deactivation Service Life Fund Deposit Unit (Millions $)
Date Year Span Return (Million $)
1 79.1 2013 1983 30 7%
0.84 2
73.5 2013 1984 29 7%
0.84 Total 152.6 1.68 A 7% return was assumed as the return on the decommis-sioning fund.
This reflects a conservatively low average inter-est rate on Pennsylvania municipal bonds over the life of the plant.
It was also assumed the plant will be deactivated in 2013 since the operating licenses for both units will expire that year.
Based on the above, an annual deposit of $1.68 million will be required to fund the total estimated amount needed to decommission the radioactive portion of the plant.
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Conclusion In order to provide some perspective on the magnitude of this annual deposit for decommissioning costs, it is helpful to compare this amount to the total anrual depreciation accrued for Pennsylvania Power & Light Company (PP&L).
PP&L's share of the latest estimated cost of the Sus-quehanna SEL
$3.15 billion.
The annual depreciation expuuse
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of this amow ror a life span of 30 years would be $105 l
million.
Thio amount is in addition to the annual depreciation i
currently being charged for current property (annual deprecia-tion expense for 1981 is estimated to be about $85 million).
This means that the total annual depreciation expense at the time both units of the Susquehanna SES are in service will be approximately $190 million.
Prom these figures, it is clear that the additional expense due to decommissioning costs is less than 1% of the total annual depreciation expense (1.68 divided by 190 equr.is 0.9%).
This additional annual expense due to decommissioning costs may increase over the life of the plant due to adjustments for inflation, changes in technology, and regulatory require-ments.
If Ln 8% compounded increase is assumed, a levelized annual expense of about $18 million is required.
Even this number represents less than 10% of the annual depreciation expense of the total plant.
The current Pa. P.U.C. policy on decanuissioning costs not only assures that an actual cash fund will be available for decommissioning, but also provides a systenatic method to collect revenue from customers during the life of the plant to provide for this fund.
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