ML20055J457

Denies Request for Specific Exemption from Financial Assurance Instrument Requirements of 10CFR30,40,50 & 70. Vendor Needs to Provide Financial Mechanism Segregated from Licensee Corporation Assets

ML20055J457
Person / Time
Site:	Westinghouse
Issue date:	07/31/1990
From:	Bernero R NRC OFFICE OF NUCLEAR MATERIAL SAFETY & SAFEGUARDS (NMSS)
To:	Stern T WESTINGHOUSE ELECTRIC COMPANY, DIV OF CBS CORP.
References
NUDOCS 9008020291
Download: ML20055J457 (4)

Text

LB/127/

3 Mr. Theodore Stern

/7b

/

Exe.:utive Vice President Westinghouse Electric Corporation Westinghouse Building M $ < tgy i

Gateway Center Pittsburgh, Pennsylvania 15227

SUBJECT:

RESPONSE TO REQUEST FOR SPECIFIC EXEMPTIONS This concerns the subject request for specific exemption from the financial assurance instrument requirements of 10 CFR Parts 30, 40, 50 and 70 of the j

amended decommissioning rule. Your request asked that Westinghouse Electric Corporation (Westinghouse) satisfy the financial assurance requirements

'through the use of a self-guarantee.

After careful consideration of your submittal, the Commission denies the request for exemption (see enclosed Safety Evaluation Report). When the Nuclear Regulatory Commission promulgated the decommissioning financial assurance regulations on June 27. 1988, careful consideration was given to which i

financial assurance mechanisms would best provide protection of public health and safety. The acceptable methods do not include acting as a self-guarantor, which is equivalent to establishing an internal reserve. The use of an internal reserve was carefully considered by the Commission and it concluded that the mechanism does not provide reasonable assurance that funds will be available when needed to pay the cost of decommissioning.

t To ensure that there is a reasonable assurance that sufficient funds wi l be available for the decontamination and decommissioning of Westinghouse's licensed facilities Westinghouse needs to provide a financial mechanism that issegregatedfromlicenseecorporationassets.

In a letter dated June 29 1990, NRC granted your request for a time extension to the July 27,1990,fi1Ingdeadline. We said the NRC would notify you of the Commission's decision regarding your exemption request and that if the decision is not to grant the exemption, the extension would expire 30 days from the time you are notified. Therefore, you should comply with the financial assurance requirements of the decommissioning rule by August 31, 1990.

Sincerely, (Syned) Robert M. Bern90 Robert M. Bernero, Director Office of Nuclear Material Safety and Safeguards

Enclosure:

As stated LLWM 90 122 Distribution: Central File #

NMSS r/f LLRB r/f LBykoski TJohnson JAustin JGreeves RBangart PLohaus JSurmeier Directors r/f LLRB t/f JLepre STreby PDR YES K

NO Category:

Proprietary or CF Only ACNW YES NO 1

SUBJECT ABSTRKCT:

RESPONSE TO REQUEST FOR SPECIFIC EXEMPTIONS

• SEE PREVIOUS CONCURRENCE OFC :LLRB*

LLRB*

LLRB*

0GC*

LLWM*

LLWM*

NM55

NM53

/l

..............................................................................f)y,.......

NAME:LBykoski/es :TJohnson:JAustin :STreby

JGreeves :RBangart :GArlotto :RBernero :

DATE:06/13/90

06/14/90:07/30/90:07/30/90 :07/31/90 :

/ /90 :

/ /90:'?/31-90:

9008020291 900731 0FFICIAL RECORD COPY ADOCK 0700 1

j

{DR

'l

+No tin 'o,,

UNITED STATES

1. !'~

NUCLEAR REGULATORY COMMISSION n

j W A$HINGTON, D. C. 205%

(

,/

M3 wo Mr. Theodore Stern Executive Vice President Westinghouse Electric Corporation Westinghouse Building Gateway Center Pittsburgh, Pennsylvania 15227

SUBJECT:

RESPONSE TO REQUEST FOR SPECIFIC EXEMPTIONS This concerns the subject request for specific exemption from the t 'nancial assurance instrument requirements of 10 CFR Parts 30, 40, 50 and 70 of the o

amended decomissioning rule. Your request asked that Westinghouse Eleci*ic Corporation (Westinghouse) satisfy the financial assurance requirements through the use of a self-guarantee.

Aftei careful consideration of your submittal, the Commission denies the l

request for exemption (see attached Safety Evaluation Report). When the Nuclear degulatory Commission promulgated the decommissioning financial assurance regulations on June 27, 1988, careful consideration was given to which fir.sncial assurance mechanisms would best provide protection of public health and safety.

The acceptable methods do not include acting as a self-guarantor, which is equivalent to establishing an internal reserve. The use of an internal reserve was carefully considered by the Commission and it concluded that the_ mechanism does not provide reasonable assurance that funds will be available when needed to pay the cost of decommissioning.

To ensure that there is a reasonable assurance that sufficient funds will be available for the decontamination and decommissinning of Westinghouse's licensed facilit %, Westinghouse needs to provide a financial mechanism that j

is segregate:l Trom licensee corporation assets.

In a letter dated June 29 1990, NRC granted your request for a time extension to the July 27,1990,fi1Ingdeadline. We said the NRC would notify you of the Commission's decision regarding your exemption request and that if the decision is not to grant the exemption, the extension would expire 30 days from the time you are notified.

Therefore, you should comply with the financial assurance requirements of the decommissioning rule by August 31, 1990.

l Sincerely, f

Robert M. Bernero, Director Office of Nuclear Material Safety and Safeguards

Enclosure:

As stated I

l i

SAFETY EVALUATION REPORT RELATED TO WESTINGHOUSE'S REQUEST FOR EXEMPTION 1

FROM FINANCIAL ASSURANCE INSTRUMENT REQUIREMENTS On May 25, 1990 Westinghouse Electric Corporation (Westinghouse) requested that the Nuclear Regulatory Commission (NRC) grant the company specific exemptions from the financial assurance mechanism requirements in 10 CFR Parts 30, 40, 50, and 70, by allowing Westinghouse to act as a self-guarantor to satisfy the requirements. Westinghouse also requested an exemption to the July 27, 1990, filing deadline, if the Commission was unable to respond to its exemption request by July 1,1990.

In support of its request, Westinghouse cites as a circumstanceslistedin10CFR550.12(a)(ii),"[a]pplicablethespecial pplication of the regulation in the particular circumstances would not serve the underlying purpose of the rule." Westinghouse asserts that to require it to provide financial assurance by a third party mechanism is not necessary to achieve the underlying purpose of the rule.

In the supplemental information published with its final rule, the Ccmission determined that public health and safety can best be protected if its regulations require licensees to use methods which produce reasonable assurance that, at the time of termination of operations, adequate funds are available so that decommissioning can be carried out in a safe and timely manner (53FR24033). The Commission did not include an internal reserve as an allowable ~ method. Acting as a self-guarantor is equivalent to setting up an internal reserve. The Corsnission carefully considered this issue in the rulemaking deliberations when it addressed the use of an internal reserve for utility reactor licensees (see 53 FR 24031 - 24033).

In spite of the traditional stability of utility c5Epanies, the Commission noted that some utilities are having severe financial difficulties and that many utilities are engaging in diversified financial activities which involve more financial risk.

In addition, the Commission noted that because of the nature of an internal reserve, the funds collected are not isolated for use for decommissioning but the utility may use funds for other related purposes. The Comission recognized that, although the law is not fully developed in this area, in the event of bankruptcy there is no reasonable assurance that either unsegregated or segregated internal reserves can be effectively protected from claims of creditors and therefore internal reserves cannot be made legally secure to be available for decontamins' ion and decomissioning.

For these reasons, the Comission concluded that the internal reserve does not provide reasonable assurance that funds will be available when needed to pay the cost of decomissioning, and hence does not provide reasonable assurance that decomissioning will be carried out in a manner that protects public health and safety (53 LR 24033).

Although the Westinghouse submittal demonstrates that the company is financially stable, has an excellent history of profit-making, and easily meets the financial test applicable to a parent guarantee, it is involved in many diversified financial activities that involve financial risks that are similar to or greater than utility companies. Accordingly, Westinghouse's

i

'k.

6 2-arguments that its financial position, "is such that there will be reasonable assurance of funds for decommissioning when the time comes for such decommissioning" are not determinative. To ensure that there is a reasonable assurance that sufficient funds will be available for the decontamination and decommissioning of Westinghouse's licensed facilities, the staff believes that Westinghouse needs to provide a financial assurance mechanism that is segregated from licensee corporation assets.

Such segregation as proposed by Westinghouse is not possible with a self-guarantee, compelling Westinghouse to

.obtain either a third party commitment for financial assurance or establish an external segragated fund to ensure that sufficient funds will be available for decommissioning.

With respect to material licensees, the Commission did not include the financial test as an acceptable funding method in the proposed rule. After receiving comments which pointed out the use of financial tests when accompanied by corporate guarantees was allowed by the Environmental Protection Agency, the regulation was modified in the final rule to permit licensees to use parent company guarantees with accompanying financial test. Westinghouse argues that "to deny Westinghouse the right to guarantee its own decommissioning costs by the same assets with which it would be permitted to guarantee the decommissioning costs of a subsidiary if it had elected to establish such subsidiary would be both illogical and arbitrary." The argument is not valid.

As discussed in the supplemental infor.mation published with the final rule, use of the parent company guarantee and financial test provides assurance in that the parent company will provide an independent commitment beyond that of the licensee to expend funds (53 FR 24036).

The staff has considered the provisions for specific exemption in 10 CFR 550.12, as well as 10 CFR 30.11, 40.14, 70.14, and, based on the information provided, identified no special circumstances or any other material circumstances that were not considered when the regulation was adopted.

An.nli:ation of the regulation to Westinghouse serves the underlying purpose of assuring that decommissioning funds are available for the decontamination and decommissioning of Westinghouse's licensed facilities. Thus, the staff has determined that Westinghouse has failed to demonstrate, under the above provisions, an adequate basis to support its exemption request and, accordingly, denies the request.

1

)

l

__ _ -_,