ML20059H952
| ML20059H952 | |
| Person / Time | |
|---|---|
| Issue date: | 08/26/1993 |
| From: | Bangart R NRC OFFICE OF STATE PROGRAMS (OSP) |
| To: | Heltemes C NRC OFFICE OF NUCLEAR REGULATORY RESEARCH (RES) |
| Shared Package | |
| ML19348B041 | List: |
| References | |
| FRN-58FR68726, RULE-PR-30, RULE-PR-40, RULE-PR-50, RULE-PR-70, RULE-PR-72 AE16-2-006, AE16-2-6, NUDOCS 9401310250 | |
| Download: ML20059H952 (24) | |
Text
s Cy:
BMorris g
s j
UNITED STATES FCOstanzi I
e NUCLEAR REGULATORY COMMISSION
- SBahadur ;
g g..... /
WASHINGTON, D.C. &55fWXX)1 M
f
/
August 26, 1993
/
b e.
/
p cow
. /uk\\.
Ci Q - clucn aD%
wih HG o
La MEMORANDUM FOR:
C.
J. Heltemes, Jr.,
Deputy Director for Generic Issues and Rulemaking Office of Nuclear Regulatory searcp FROM:
ichard L.
Bangart, Direct.
Office of State Programs
SUBJECT:
OFFICE REVIEW AND CONCURRENCE ON FINAL RULE:
"SELF-GUARANTEE AS AN ADDITIONAL FINANCIAL ASSURANCE MECHANISM" We have reviewed the Commission Paper and concur with the following comment.
The section on Agreement State compatibility in the Federal Recister Notice should be redone to read as follows:
"Section 72.30 is assigned Division 4 compatibility, since regulation of independent storage of spent nuclear fuel and l
high-level radioactive waste are functions reserved to the NRC pursuant to the Atomic Energy Act."
" Sections 30.35, 40.36, and 70.25 are currently considered Division 2 compatibility.
The addition of the self-guarantee mechanism for providing the required financial 1
guarantee does not change the division of compatibility.
Division 2 compatibility allows the Agreement States flexibility to be more stringent.
The Agreement States must t
provide mechanisms in their regulations, but due to the specific State financial regulations, certain mechanisms may not be acceptable in their States.
Limiting the mechanisms I
to a subset of those provided for in the NRC regulations is within the flexibility provided in Division 2 i-compatibility."
l 9401310250 940121' 1
PDR PR i
30 SOFR68726_
PDR l
h E - I V 2-en BUMMARY AND ANALYSIS OF PUBLIC COMMENTS ON BELF-GUARANTEE AS AN ADDITIONAL FINANCIAL ASSURANCE MECHANIBM The comment period for the proposed rule to amend the regulations for decommissioning licensed facilities to allow certain non-electric utility licensees to use a self-guarantee as a means of financial assurance (58 FR 3515, January 11, 1993) ended on March 29, 1993.
Comments were received from 14 individuals and public entities.
Commenters included eight private companies, one regulated electric utility, three universities, one State governmental agency, and one private citizen.
Several of the letters contained similar comments and have been grouped together and addressed as a single issue.
All comments have been grouped into nine broad issues.
For each issue, this document provides a summary of the comments received and an analysis and response to those comments.
1.
Use of Self-Guarantee by Electric Power Utility Licensees comment.
One commenter indicated that nuclear electric Ltilities licensed under 10 CFR Part 50, who are prohibited under the proposed rule from using the self-guarantee, should be allowed to adopt that option.
The commenter, pointing to the i
Regulatory Analysis, argued that NRC's stated reasons do not create a strong technical basis for not allowing nuclear power l
licensees to use the self-guarantee.
That is, the higher decommissioning costs that nuclear power utilities must pay, their different financial characteristics from other materials licensees under 10 CFR Parts 30, 40, 70, and 72, and the possibility that allowing nuclear utilities to self-guarantee would substantially alter the balance of costs attributable to j
the regulation, in the commenter's opinion should not preclude j
utilities from using the self-guarantee.
Response.
The objective of the rule is to reduce the licensee's cost burden without adverse effects on public health and safety.
The Commission already allows electric utilities to accumulato decommissioning funds in an external sinking fund.
Unlike other licensees subject to financial assurance for decommissioning, therefore, electric utilities do not have to provide the full amount of required financial assurances "up front" but instead can build up their sinking funds over time.
Thus, electric utilities already are permitted a cost-reducing financial assurance mechanism.
2.
Use of Self-Guarantee by Non-Profit Entities Comment.
Several commenters suggested that NRC should amend the proposed rule to allow universities and other non-profit
L 2
entities to use the self-guarantee.
They argued that many non-profit entities have been in existence and financially stable for long periods of time.
These commenters proposed several alternative criteria that they said could be used to assess the financial strength of non-profit entities, including size of endowments and various measures of assets.
Response.
NRC plans to begin shortly a study of extending 7
the availability of cost-saving financial assurance alternatives to non-profit entities other than universities.
A similar study 1
for universities will be deferred until after planned rulemaking on fee recovery.
In order to extend the use of self-guarantees to non-profit entities, however, new criteria would have to be developed to assess.the financial strength of the non-profit licensees.
In addition, more than one set of criteria might be necessary, since the non-profit entities include a broad range of institutions that may not employ identical financial accounting procedures.
NRC's review of decommicsioning financial assurance submissions identified third party financial mechanisms, such as surety bonds and letters of credit, as well as encrows and trusts, as the financial mechanisms used most often by private non-profit entities.
In a few instances, private non-profit
?
entities have sought to use parent company guarantees.
Publicly owned non-profits, particularly public universities, have sought to use statements of intent.
To the extent that non-profit entities have been able to make use of guarantees or statements of intent, cost-savings financial assurance alternatives already exist for those licensees.
Development of financial criteria to assess the qualifications of a non-profit entity to provide a self-guarantee is likely to require detailed consideration of the different I
financial accounting methods used by medical institutions.
The financial accounting and reporting of non-profits are unique and substantially different from the accounting and reporting of for-profit entities.
The financial reporting practices of public and private l
hospitals generally follow standards established by the American Institute of Certified Public Accountants.
Hospital reports, however,-also provide information on a fund basis that generally
.l is not compatible with the current and proposed financial tests that establish eligibility for parent or self-guarantees.
Development of financial criteria for self-guarantees for hospitals also could involve analysis of the various accounting funds utilized and establishment of adequate. criteria for evaluating them.
Currently, such criteria have not been identified and evaluated.
NRC has sought information on other financial i
3 assurance programs that might involve non-profit entities.
However, few such programs appear to exist.
EPA financial assurance requirements for various waste-related programs, for example, apparently have developed little experience concerning non profit entities.
The RCRA hazardous waste program does not, in general, include non-profits in its universe of regulated entities.
Those universities and hospitals that generate hazardous waste typically arrange for off-site waste management (treatment, storage, or disposal) and also seek to qualify as so-called small quantity generators.
EPA encounters numerous local governments as regulated entities in its solid waste program.
These governments apparently have not been able to qualify to self-guarantee using EPA's current criteria.
In the past, municipalities have encouraged EPA to develop a special criteria for municipal self-guarantees to accomodate municipalities with regulated solid waste landfills that must provide financial assurance, but to date EPA has not promulgated such criteria.
The EPA underground storage tank (UST) program does encounter entities, particularly universities, with underground tanks containing petroleum.
Such entities apparently have sought unsuccessfully to self-guarantee, but EPA has required them instead to use alternative financial assurance mechanisms.
NRC anticipates that in the future it will carry out a study of potential self-guarantee criteria for non-profit entities other than universities.
Because of the time required, however, it cannot do so in this rulemaking.
Those non-profit entities that can qualify to use either a parent guarantee or a statement of intent will continue to have access to those financial assurance alternatives.
The NRC will review the situation relative to universities after its planned rulemaking on fee recovery.
3.
Elimination of Bond Rating Criterion Comment.
One commenter recommended eliminating the bond rating component of the criteria for determining if a firm meets the requirements for self-guarantee.
The commenter argued that a bond rating requirement unfairly discriminates against companies that have not issued bonds, and creates an incentive to firms to raise capital through publicly traded debt rather than through equity or commercial lines of credit.
Furthermore, according to the commenter, a firm's audited year end financial statement is the best indicator of financial strength, and NRC should use standard financial ratios contained in the year end report or J
derivable from it to determine the ability of the firm to self-guarantee.
Response.
NRC believes that a bond rating requirement is a strong and useful measure of the ability of a firm to self-guarantee because the rating is developed by an independent third i
i l
4 1
party, and relates to the ability of the firm to satisfy its long-term debt obligations.
In addition, a bond rating i
requirement can be implemented efficiently because the necessary information is publicly reported and the ratings constitute a clear and unambiguous criterion.
NRC recognizes that firms that finance their activities through equity or short term commercial lines of credit may be as financially strong as firms that issue bonds.
However, no equivalent third-party assessment of that financial strength is available.
Although the fincncial test used to determine if a parent company may provide a guarantee for its subsidiary might serve that purpose, NRC has determined that it currently wants to employ a' more stringent set of criteria.
NRC's analysis indicated that the requirement that a self-guarantor demonstrate a bond rating of AAA, AA, or A as issued by Standard and Poors (S&P) or Aaa, Aa, or A as issued by Moodys is substantially more stringent than the parent corporation financial test.
4.
Revision of Bond Rating Criterion Comment.
One commenter, while supporting the use of a bond rating criterion, proposed that the criterion should be lowered from a bond rating of AAA, AA, or A as issued by Standard and Poors (S&P) or Aaa, Aa, or A as issued by Moodys to a rating of AAA, AA, A, or BBB as issued by Standard and Poors or Aaa, Aa, A, or Baa as issued by Moodys.
The commenter argued that the requirement of an A or better rating is unnecessarily stringent and unduly limits the utility of the self-guarantee as a means of providing effective assurance and as a means of avoiding significant and unnecessary costs.
The commenter noted that BBB or equivalent is an investment grade rating, that the bonds of a number of Fortune 500 companies have such ratings, and that the BBB rating is a criterion for NRC's parent company guarantee.
Response.
Use of an A or better bond rating, rather than the BBB or better rating criterion, is warranted by two considerations.
First, the A or better criterion provides a stringent measure that will help to ensure that only firms in extremely good financial condition will be allowed to use the self-guarantee.
Second, if firms are required to demonstrate an A or better bond rating in order to self-guarantee, some deterioration in their financial situation can occur before their rating indicates that their bonds are no longer investment grade.
Thus, for example, a firm's bond rating might change from A to A-to BBB before dropping below investment grade.
The firm, which would be required to obtain alternate financial assurance when its rating dropped to A, will be procuring such financial assurance while its bond rating continues to be investment grade.
Thus, NRC will have a better opportunity to ensure that the firm obtains an alternative form of financial assurance than if firms i
5 are allowed to demonstrate a BBB or better rating to qualify for self-assurance, since in that case any deterioration in the firm's bond rating will place the rating outside the investment grade category, with potentially more serious implications for the firm's financial situation.
5.
Requirement that 90 Percent of Total Assets be in the United States comment.
One commenter suggested dropping what it described as the rcquirement that self-guarantors demonstrate that 90 percent of their assets are located within the United States, because otherwise some large, multinational companies will be excluded'from using the self-guarantee simply because a majority of their assets may be outside the U.S.
Response.
The self-guarantee financial test proposed included a provision requiring the self-guarantor to show that it had " Assets located in the United States amounting to at least 90 percent of total assets 2r at least 10 times the total current decommissioning cost estimate for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount required if certification is used" (emphasis added).
The commenter appears to have mistakenly interpreted the provision to require that a firm must show both assets of 10 times the decommissioning' cost gnd 90 percent of its assets in the U.S.
In fact, however, only one or the other need be demonstrated.
If a firm can show that it has assets in the U.S.
at least 10 times the current decommissioning cost it need not demonstrate that 90 percent of its assets are in the U.S.
The option of showing less than 10 percent of assets abroad is intended to reduce costs for firms.
The Securities and Exchange Commission requires firms filing Form 10K to identify assets located outside the U.S.
if those assets exceed 10 percent of the firm's total assets.
Firms filing 10Ks that have less than 10 percent of their assets located abroad do not need to identify the exact amount of assets in the U.S.
Financial Accounting Standards Board (FASB) standards on reporting of foreign assets under Standard 14 (June 1990) place the cutoff for reporting identifiable assets of foreign operations at 10 percent or more of consolidated total assets.
Therefore, rather than excluding firms or imposing additional costs on them, this alternative method of satisfying the rule should reduce the costs to firms of demonstrating that they pass the financial test for self-guarantee.
l 6
6.
Roguire Additional Written Commitment by Self-Guarantors Comment.
One commenter recommended adding a requirement that self-guarantors execute a binding commitment to make the necessary funds available for decommissioning.
Under this recommendation, in addition to subpitting proof that the self-guarantor qualifies under the appropriate financial criteria to use the self-guarantee, the self-guarantor would also submit a written agreement providing that, upon issuance of an order by the Commission to undertake decommissioning, the licensee will set up a trust fund in favor of the Commission or obtain other surety accessible to the Commission, in the amount of the current cost estimate for decommissioning activities.
The commenter recommended modeling the written commitment on Recital 7 of the existing parent guarantee.
Response.
Addition of a written commitment by self-guarantors is a useful suggestion.
The provision of a written guarantee to the NRC from the self-guaranteeing licensee will provide NRC with a legally binding commitment to make the funds available for decommissioning when and if NRC determines that it is time to undertake such activities.
NRC therefore is incorporating a provision in the self-guarantee requirements calling for the licensee to provide the Commission with a written guarantee stating that the licensee will fund and carry out the required decommissioning activities, or, upon issuance of an order by the Commission, it will set up and fund a standby trust with sufficient funds to carry out the required decommissioning activities based on the current cost estimate.
7.
Opposition to Self-Guarantee comment.
One commenter opposed the proposed self guarantee mechanism on the grounds that current capabilities of electronically transferring funds make-self-guarantees meaningless even if a firm has initially demonstrated that it has the required assets.
The commenter argued that-recent failures of pensions and health benefits assured by self-guarantees indicate that self-guarantees cannot be trusted.
Response.
NRC does not agree that a well-designed self-guarantee cannot be trusted to provide financial assurance.
Self-guarantees have been used successfully'in a number of applications without incurring the problems pointed out by the commenter.
The Environmental Protection Agency, in particular, currently allows use of a self-guarantee as a means of financial assurance for hazardous waste treatment, storage, and disposal facilities.
By basing the qualification to use a self-guarantee in large part on a specified bond rating, NRC believes that it is tying the self-guarantee to a strong measure of the financial
7 strength of the self-guarantor.
By requiring self-guarantors to notify NRC whenever they cease to qualify to use the self-guarantee, and to obtain an alternative form of financial assurance immediately, NRC believes that potential problem situations will be identified and addressed in a timely manner.
8.
Support ior Solf-Guarantee Comment.
One commenter submitted a detailed argument in support of the self-guarantee.
The commenter argued that a self-guarantee by a financially secure licensee is at least the equivalent of financial assurance provided by certain third-party financia'l assurance mechanisms, including the parent company guarantee, that are currently allowed by NRC.
The commenter stated that, in particular, a study performed for NRC indicating that the parent guarantee might provide a higher degree of certainty than a self-guarantee rested on a questionable assumption concerning the degree of financial independence between parent corporations and their subsidiaries (i.e., the degree to which parent firms will not become involved in the financial difficulties of their subsidiaries or the subsidiaries in the difficulties of the parent).
The commenter argued that a ratio of independent subsidiaries to non-independent subsidiaries of 60:40 is closer to " practical experience and common sense" than the ratio of 97:3 that was employed.
The commenter concluded that a parent guarantee does not provide additional
" defense in depth" compared to a qualified self guarantee.
Response.
NRC agrees that comparisons among financial assurance alternatives, such as parent guarantees and self-guarantees or third-party financial assurance mechanisms such as letters of credit and self-guarantees, are sensitive to assumptions concerning issues, such as the degree of financial independence between parent corporations and subsidiaries, about which little empirical evidence has been collected.
Using the best available information, however, and generally conservative assumptions, NRC concluded that self-guarantees supported by stringent financial criteria present an extremely low risk.
The reason for not allowing electric utilities to use self-guarantee has already been covered in (1.) above.
9.
Roduce or Eliminate Minimum Net Worth Requirement Comment.
Several commenters supported adoption of the self-guarantee as a financial assurance option, but suggested changes to the minimum net worth criterion in the proposed rule that would be used to determine if a licensee qualified to use a self-guarantee.
One commenter suggested that the tangible net worth requirement could be dropped from $1 billion to some lower amount, but recommended that a tangible net worth requirement of
8 at least $100 million be retained.
Two commenters recommended dropping the minimum net worth requirement to $10 million.
Other commenters argued that the minimum net worth requirement was unnecessary, if the bond _ rating requirement was retained, because net worth is already taken into account as one of the most important criteria used to determine the bond rating.
In addition, these commenters suggested that a high net worth requirement discriminates against smaller companies.
Response.
Based on its analysis, NRC has revised the net worth criterion.
Because the criteria for determining when firms may use the self-guarantee include the requirements that a self -
9 guarantor demonstrate a bond rating of AAA, AA, or'A as issued by Standard'and Poors (S&P) or Aaa, Aa, or A as issued by.Moodys, and because tangible net worth is a very important factor in the assignment of bond ratings, a separate tangible net worth requirement does appear to be sufficiently considered with the bond rating requirement.
Thus, the requirement that a self-guarantor demonstrate that it has at least $1 billion in tangible net worth has been dropped.
This will help ensure that smaller firms with the necessary bond ratings will have the opportunity to use the self-guarantee.
To ensure that all firms using the self-guarantee have a sufficient amount of net worth to cover their decommissioning obligations, however, irrespective of their overall size, NRC is retaining the requirement that self-guarantors must demonstrate that they possess tangible net worth at least 10 times the current decommissioning cost estimate or the current amount required if certification is used.
10.
Compatibility
~
I Comment.
One State commenter requested that if NRC incorporates a self-guarantee into the financial assurance requirements it not consider the self-guarantee provision to be an item of compatibility that requires Agreement States to adopt' similar requirements.
Response.
NRC currently considers 10 CFR Sections 30.35, 40.36, and 70.25 to be Division 2 compatibility.
The addition of the self-guarantee mechanism for providing the required financial guarantee does not change the division of compatibility.
Division 2 compatibility allows the Agreement States-to be more stringent.
The Agreement States must provide financial assurance mechanisms in their regulations,;but due to the specific States' financial regulations, certain mechanisms may not be acceptable j
in their States.
Limiting the mechanisms to a subset of those-provided for in the NRC regulations is within the flexibility provided in Division 2 compatibility.
NRC currently assigns 10 CFR Section 72.30 Division 4 compatibility, since regulation of independent storage of spent nuclear fuel and high level radioactive waste are functions reserved to the NRC pursuant to the Atomic Energy Act.
r
i AE 16 -2
,I s
PP R 1
REGULATORY ANALYSIS OF DECOMMISSIONING FINANCIAL ASSURANCE SELF-GUARANTEE OPTIONS FOR MATERIALS LICENSEES November 3, 1992 i
- '* Draft *
- 1 4
1.
INTRODUCTION
1.1 Background
The U.S. Nuclear Regulatory Commission (NRC) has accepted a petition to amend the current regulations establishing general requirements for decommissioning licensee facilities to allow certain NRC non-electric utility reactor licensees to self-guarantee decommissioning funding costs.
In a notice of receipt of petition for rulemaking published in the Federal Register-(56 FR 48445) on September 25, 1991, NRC requested. comments on the contents of a petition for-rulemaking received from the General Electric Corporation (GE) and the Westinghouse Electric Corporation (Westinghouse) requesting such an amendment. After reviewing the comments and other materials, the Commission in August 1992 directed the staff to proceed with regulatory amendments. This 1
Regulatory Analysis was prepared pursuant to NUREG/BR-0058 to support the regulatory action and examine the costs and benefits of the alternatives considered by the Commission NRC currently administers over 7,000 licenses for the possession and use of nuclear materials under 10 CFR Parts 30, 40, 50 (excluding power reactors),
70, and 72.
Approximately 700 of the licensees who hold these licenses are required to provide financial assurances for decommissioning under rules promulgated in 1988 (53 FR 24018, June 27, 1988).
The rules on financial assurance for decommissioning provide that licensees under 10 CFR Parts 30, 40, 50, 70, and 72 must provide financial asserance to ensure that decommissioning of licensed facilities will be accomplished in a safe and timely manner and that adequate funds'will be available for this purpose. According to the decommissioning regulations,2 financial assurance must be provided by one or more of the following methods:
(1)
Prepayment.
Prepayment is the deposit prior to the start of operation into an account segregated from licensee assets and outside the licensee's administrative control of cash or liquid assets such that the amount of funds would be sufficient to pay decommissioning costs.
Prepayment may be in the. form of a trust, escrow account, government fund, certificate of deposit, or deposit of government securities.
(2)
A surety method, insurance, or other guarantee method. These methods guarantee that decommissioning costs will be~pald should the licensee default. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A parent 1
NUREG/BR-0058. NRC Regulatory Analysis Guidelines. Revision 1 U.S.
Nuclear Regulatory Commission, May 1984.
2 The same four alternative methods of providing financial assurance are authorized for licensees under Parts 30, 40, 50, 70, and 72 in the following sections:
10 CFR 55 30.35(f), 40.36(e), 50.75(e), 70.25(f), and 72.20(c). _,.
3 company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as specified in Appendix A of 10 CFR Part 30.
A parent company guarantee may not be used in combination with any other financial methods to satisfy the [ decommissioning financial assurance) requirements.
(3)
An external sinking fund in which deposits are made at least' annually, coupled with a surety method or insurance, the value of which may decrease by the amount being accumulated in the sinking fund.
An' external sinking fund is a. fund established and maintained by-setting aside funds periodically in an account segregated from licensee assets and outside the licensee's administrative control in which the total amount of funds would be sufficient to pay decommissioning costs at any time termination of operation is expected. An external sinking fund may be in the form of a trest, escrow account, government fund, certificate of deposit, or deposit of government securities.
(4)
In the case of Federal, State, or local government licensees, a statement of intent indicating that funds ior decommissioning will be obtained when necessary."3 With the exception of the financial test component of the parent company
. guarantee, the terms and conditions of the various financial mechanisms that may be used as proof of financial assurance for decommissioning are provided in guidance.' The financial test requirements are provided in the regulations, at 10 CFR Part 30 Appendix A, and are refer anced 'in other pertinent Parts.5 The parent company guarantee provided for under the decommissioning financial assurance regulations contains two elements: a guarantee and an underlying financial test submission. Under this mechanism, a corporate parent of the licensee may submit a guarantee to NRC affirming that the corporate parent will pay the decommissioning costs if the licensee'does nn:
pay.
For such a guarantee to be acceptable, the corporate parent must demonstrate that it has adequate financial resources to cover the costs"of decommissioning activities.
The corporate parent makes such a demonstration when it provides specified documettation to NRC that it passes a financial test that measures the financial strength of the firm.
3 53 FR 24018, June 27,1988.
U.S. Nuclear Regulatory Commission,'Regulatorv Guide 3'.66L Standard Format and Content of Financial Assurance Mechanisms Reauired For Decommissioning Under 10 CFR Parts 30, 40. 70. and 72, June 1990.
5 The decommissioning regulations do not define " parent company."
NP-has provided in Regulatory Guide 3.66 that in order to qualify as a parent company a firm must demonstrate that it has " majority control of the licensee's voting stock."
Reculatory Guide 3.66, pp. 3-21 and 3-23.
, l
)
=
e The financial test currently requires a parent corporation to meet, on an annual basis, one of two sets of alternative financial criteria. Under the first alternative, the parent company must demonstrate that it possesses-tangible net worth of at least $10 million, as well as tangible net worth and net working capital at least six times the decommissioning cost estimate.
Tangible net worth is defined as net worth minus goodwill, patents, trademarks, and copyrights. The parent corporation must show that it possesses assets in the United States amounting to at least 90 percent of its total assets or at least six times the sum of the current decommissioning cost estimates being covered by the test.
The parent corporation also must show that it meets or exceeds at least two of three specified financial ratios (total liabilities to net worth less than 2.0; net income plus depreciation, depletion, and amortization to total liabilities greater than 0.1; and current assets to current liabilities greater than 1.5)..Under the second alternative of the financial test, the parent corporation must show that it possesses tangible net worth of at least $10 million, as well as tangible net worth at least six times decommissioning costs.
It also must show that it possesses assets in the United States amounting to at least 90 percent of its total assets or at least six times the sum of the current decommissioning cost estimates being covered by the test.
Finally, it must show that it has a current investment grade rating for its most recent bond issuance from one of two major bond rating organizations.
1.2 Statement of the Problem With this rulemaking, the NRC is seeking to address a number of issues raised in the petition and also presented by the NRC in its Notice of Receipt of Petition for Rulemaking.6 The primary issues are (1) whether self-guarantees provided by licensees of sufficient financial strength and stability would provide adequate financial assurance and (2) whether use of self-guarantees would substantially reduce the costs of financial assurance to those licensees that qualify to use a self-guarantee mechanism.
The petition requests that URC amend the decommissioning financial assurance regulations to allow licensees to provide self-guarantees of decommissioning funding using a more restrictive financial test than the financial test used in the NRC parent guarantee mechanism.
1.3 Objective of the Proposed Rulemaking NRC's objective in proposing a self-guarantee mechanism is to reduce the cost burden of financial assurance on licensees while providing NRC with sufficient assurance that decommissioning costs will be funded when necessary.
2.
PRELIMINARY IDENTIFICATION AND DESCRIPTION OF OPTIONS In analyzing the petition from GE and Westinghouse, NRC considered three regulatory options: (1) no action; (2) adopt the self-guarantee as proposed by the petition; ard (3) adopt the self-guarantee proposed in.the petition but 56 FR 48445, September 25, 1991. The Federal Register Notice 6
summarizes arguments presented in the petition at pp. 4-8.
3
')-
A t
i modified to delete the $1 billion net worth requirement proposed by the petitioners 2.1 Option 1:
No Action i
Under Option 1, NRC would continue to prohibit the use of any type of self-guarar. tee mechanism.
Licensees that are unable to obtain a parent company guarantee because they do not have a parent company will, as at present, be able to demonstrate financial assurance using one of the other financial assurance methods currently allowed (i.e., prepayment, surety method or insurance, external sinking fund coupled with a surety method or insurance, and statement of intent).
i 2.2 Option 2:
Adopt the Self-Guarantee Proposed in the Petition s
Under this option, NRC would allow licensees to use the self-guarantee proposed by GE and Westinghouse in their petition for rulemaking.
The petition details specific criteria for a self-guarantee, which would be i
available for any licensee other than an electric utility licensed to operate a reactor under 10 CFR Part 50.
Many of the criteria under the proposed self-guarantee mechanism parallel requirements that are already applicable for e
parent guarantees and/or other mechanisms. The proposed criteria are listed
?
below:7 1)
The self-guarantee may not be used "in any situation where the applicant or licensee has a parent company holding majority control of the voting stock of the company."
2)
The applicant or licensee must demonstrate that it passes a financial test.
All of the following terms of the test must be satisfied:
i (a)
The company must have a current rating for its most recent bond issuance of AAA, AA, er A, as issued by Standard and l
Poor's or Aaa, Aa, or A, as issued by Moody's.
(b)
The company must have tangible net worth at least 10 times the total current decommissioning cost estimate for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount required if certification is used.
-l (c)
The company must have tangible net worth of at least
$1 billion.
(d)
The company must have assets located in the United States
{
amounting to at least 90 percent of total assets or at least l
10 times the total current decommissioning cost estimate for
}
7 56 FR 48446.
l ;
}
l
~.
~
.)
{
.l b
all decommissioning activities for which the company is j
responsible as self-guaranteeing licensee and as parent-t guarantor, or the current amount required if certification.
is used.
i 3)
The applicant or licensee must continue to satisfy certain
.{
procedural requirements.
1 a)
The company's independent certified public accountant must j
compare the data used by the company in the' financial test l
with the amounts in the company's independently audited j
year end financial statements.
l i
b)
The company must notify NRC within 90 days of any_ matters
{
coming to the attention of the auditor that cause thel l
auditor to believe that the data specified in the financial test should be adjusted and that the company no longer
)
passes the test.
c)
The company must have at least one class of equity
]
securities registered under the Securities Exchange Act of 1934 d)
After the initial financial test, the company must repeat the passage of the test within 90 days after the close of j
each succeeding fiscal year.
e)
If the company no longer passes the financial test, it must send notice of intent to establish alternate financial assurance.
Such notice must be sent within 90 days after-the end of the fiscal year for which the year end data show that the company no longer meets the financial test requirements.
The licensee must provide' alternate financial assurance within 120 days after the end of such fiscal year.
p 4)
The applicant or licensee must furnish its own guarantee that
~
funds will be available for decommissioning costs.
The terms of this self-guarantee must provide that:
l (a)
The self-guarantee will remain in force unless written I
notice of cancellation is sent to NRC.
The self-guarantee,
.j however, must remain in force for 120 days after NRC il receives notice of cancellation.
(b)
Alternative financial assurance will be provided within 90.
days after NRC receives notice of cancellation of the self4 guarantee.
(c)
The self-guarantee and supporting financial test will. remain in force until the Commission has terminated the license'or until another acceptable financial assurance method has been put into effect by the licensee.
)
(d)
The licensee will provide the Commission with copies of all current reports fileo with the Securities and Exchange Commission under Section 13 of the Securities Exchange Act of 1934.
(e)
The licensee will provide notice to the Commission within 20 days after the rating of its most recent bond issuance ceases to be A or above by either Standard and Poor's or Moody's.
2.3 Option 3:
Adopt the Self-Guarantee Proposed in the Petition Modified to Delete the $1 Billion Net Worth Requirement Under Option 3. NRC would allow a self-guarantee based on the financial test criteria proposed in the petition, but would omit the requirement that tangible net worth must be greater than $1 billion.
Thus, licensees would still be required to have a current bond rating of A or better, tangible net worth at least 10 times the current decommissioning cost estimate (or the current amount required if certification is used), and assets located in the United States amounting to at least 90 percent of total assets or at least 10 times the current decommissioning cost estimate (or certification amount).
3.
ANALYSIS OF OPTIONS 3.1 Methodology The method used by NRC to analyze the three regulatory options described above, to determine the number of licensees able to use each of the self-guarantee options, and to evaluate the costs and benefits of each option consists of several key steps.
First, NRC developed a financial data base of material licensees subject to financial assurance requirements under 10 CFR Parts 30, 40, 50, 70, or 72.
NRC then used this database to evaluate the availability and assurance risk of the self-guarantee options.
Finally, NRC calculated and compared the costs and benefits of each regulatory. option.
Development of Financial Data Base NRC#s first step in developing the financial data base was to identify all material licensees subject to financial assurance requirements under 10 CFR Parts 30, 40, 50, 70, or 72.8 NRC then collected financial data for 8
Certain licensees (such as universities) were excluded from the analysis because they generally prepare financial data that is not suited for use in self-guarantee mechanisms.
In addition, Federal, State, and local government licensees were excluded because they are eligible to use a statement of intent to assure for decommissioning costs, and would probably opt for the statement of intent over the self-guarantee. When a Part 50 non-utility licensee also held a license under Part 30, 40, 70, or 72, the analysis treated these licensees as Part 30, 40, 70, or 72 licensees.
~.
J.
l these licensees from Dun and Bradstreet and Standard & Pool's.
Licensees were eliminated from the data base if financial data were unavailable or of i
questionable quality.
i Although the two self-guarantee options include a U.S. assets requirement, data on domestic assets could not be obtained from Dun and Bradstreet.
This may lead to an overestimate of the number of firms able to l
use a'self-guarantee option.
Similarly, because no information is available on auditors' opinions, the da a base could-not be used to evaluate whether j
licensees have their financial statements audited by independent certified accountants to confirm that'their accounting practices are in conformity with generally accepted accounting practices. The absence of this information also could lead to an overestimate of the number of firms able to pass all financial tests, i
i Availability The " availability" of the two self-guarantee options refers to the l
number of NRC licensees that could use a particular option given their ability' to satisfy the financial requirements of the option. Using the data base described above, NRC first determined whether each licensee in the data base would be able to meet the requisite financial criteria. NRC then calculated availability by counting those licensees able to use the self-guarantee option.
l i
Assurance Risk
" Assurance" is a concept closely related to security: something given.
deposited, or pledged to make certain the performance of an obligation or th,-
payment of a debt. Although the licensee always retains primary responsibility for performance of the decommissioning regardless of the methmt.
of assurance used, most financial assurance mechanisms (e.'g.,
prepayment j
mechanisms nnd surety mechanisms) provide a secondary level'of protection'to guard against the possibility.that the licensee may be unable to meet its decommissioning obligation.
Thus, the assurance risk associated with most mechanisms equals the possibility that both the licensee and the financial assurance provider (e.g., banks, sureties) will be unable to meet the requi:. a obligations.'
In the case of self-guarantees, the guarantor is not required to set funds aside or obtain a third-party guarantee if it can demonstrate by mean.
l of a financial test that its financial resources are sufficient to pay.the i
assured costs whenever those costs come due.
Thus, for self-guarantees, the assurance risk equals the possibility that the licensee will be unable to um j
the required obligations.
In other words, the assurance provided by a sel:
guarantee is exposed to the risk that a decline in the financial condition the self-guarantor will not be identified in time so that a prepayment or 9
This analysis assumes that all mechanisms are properly drafted and executed and are issued by qualified providers.
Similarly, the possibilits collusion or fraud has not been considered.
t 1 i
)
third-party financial assurance mechanism can be obtained to replace the self -
guarantee. NRC analyzed this risk associated with self-guarantees by
[
evaluating the "misprediction" rates of components of financial tests proposed for use to screen potential self-guarantors,- and by evaluating the baseline l
failure rates for firms calculated by firm size (as measured by net worth).
i Costs and Benefits The total cost of the proposed rule includes, in addition to implementation costs, the public and private costs associated with the self-guarantee mechanism.
Private costs consist primarily of the fees that licensees must pay to a third party in order to obtain a financial assurance t
mechanism. Thus, firms can avoid much of the private cost of financial assurance if they can obtain a self-guarantee or a parent company guarantee.
Estimates of private costs were derived from the number.of licensees able to pass the proposed self-guarantee test and the number of licenses held by such licenseos.
i Public costs of a self-guarantee include the decommissioning costs that i
are assured by the self-guarantee but which the licensee does not pay due to bankruptcy. Although public costs can largely be avoided by not allowing the self-guarantee, the total cost-(i.e., public plus private) may be reduced by j
allowing the self-guarantee if private costs decline more than public costs rise.
The public costs of the self-guarantee mechanism are calculated by multiplying the assurance risk by the amount of the decommissioning costs i
expected to be assured using the mechanism.
NRC's estimates of public costs l
reflect the assurance risk of each self-guarantee by net worth category and l
the number of licenses covered by firms in each net worth category.
i The net benefit of a self-guarantee would equal the savings to licensees resulting from use of the self-guarantee mechanism (rather.than from a more expensive third-party o 'hanism) minus any increase in public costs.
l 3.2 Availabili:q of Self-Guarantee Options
'f NRC's analysis indicates that Option 2, the self-guarantee option
-l proposed in the GE and Westinghouse petition, could be used by approximately l
20 materials-licensees (estimated to hold the equivalent of about 54 licenses at decommissioning costs of $750,000 per license). Under Option 3, which deletes the $1 billion tangible net worth requirement, an additional 7 firms (holding 11 licenses) with net worth less than $1 billion become capable of i
satisfying the requirements.
3.3 Assurance Risk The estimated annual assurance risk for Option 2 is 0.13 percent.
In other words, there is a 0.13 percent chance that a licensee using the self-guarantee proposed'by GE and Westinghouse will go bankrupt and be unable to cover the costs of decommissioning in a given. year. The estimated assurance
.l i
l 1 i
']
1 J
l I
):
- 4 j
s i
risk for Option 3 is also 0.13 percent.10 There are no available data with which to estimate the default risk of A-rated bonds by net worth category of the bond issuer.
Furthermore, the premise of the bond ratings is that all j
A-rated bonds should be of the same approximate risk (i.e., different bond ratings are assigned to different risk categories). NRC believes that this indicates that a net worth requirement and a minimum bond rating may be i
redundant, i.e.,
if net worth is factored into a firm's bond rating. Moody's data on the historical default risk of A-rated bonds indicate that risk is about 0.13 percent per year. Although this risk is slightly higher than the risk associated with the third party financial assurance mechanisms allowed i
under current regulations," the risk associated with the NRC parent I
guarantee is similar to the risk of the self-guarantee when the parent company / licensee relationship is not independent. NRC believes that the risk of the self-guarantee is extremely small.
Furthermore, allowing use of a self-guarantee mechanism reduce.= the sum of public and private costs (see below),
i 3.4 Public and Private Costs of Self-Guarantee Options In this analysis, public costs are defined as the amount of i
decommissioning costs that would be required to be paid by the public sector due to the financial failure of licensees and/or their guarantors without the substitution of another source of financial assurance.
Private costs are defined as the cost of financial assurance mechanisms that must be obtained by licensees in order to comply with regulatory requirements.
Mechanisms based on financial tests, such as a parent company guarantee and a self-guarantee, reduce private costs by allowing licensees to demonstrate financial assurance without incurring the fees associated with the use of third-party mechanisms such as letters of credit, surety bonds, etc.
The private costs associated with financial test mechanisms are assumed to be the costs of preparing the necessary submissions to NRC and the cost of preparation of letters from an independent auditor.
For the three options, Table 3.1 presents and compares the estimated private costs, public costs, and total costs (private plus public costs) of NRC's decommissioning financial assurance requirements for materials licensees c
regulated under 10 CFR Parts 30, 40, 70, and 72:
i t
10 NRC's estimates of the assurance risk associated with Options 2 and 3
~!
identical because the assurance risk for Option 3 was used to proxy for are the risk associated with Option 2 (which could not be calculated directly).
Because option 2 contains every requirement in Option 3 plus an additional
$1 billion tangible net worth requirement, the actual assurance risk associated with Option 2 is likely to be slightly less than the figure cited above.
For example, the risk associated with small licensees (those with less than $10 million in tangible net worth) using letters of credit from savings and loans is estimated at 0.055 percent.
i 1 )
i 1
=-
1 C
Table 3.1 Public and private costs of financial assurance with and without proposed self-guarantee ($000)12 Private Public Total Financial Assurance Option Costs Costs Costs 1: All licensees use
$3,060
$26
$3,086 parent company guarantee or bank letter of credit 2: All licensees use
$2,453
$78
$2,531 proposed self-guarantee, parent company guarantee, or bank letter of credit 3: All licensees use
$2,329
$89
$2,418 modified self-guarantee (without $1 billion requirement), parent company guarantee, or bank letter of credit option 1 The first scenario represents the existing baseline, i.e.,
the self-guarantee is not allowed, and licensees that are capable of obtaining a parent company guarantee are assumed to use that mechanism.
Licensees that are unable to obtain a parent company guarantee are assumed to use letters of credit at an annual cost of 1.5 percent of their face value.
Option 2 The second scenario anticipates use of the self-guarantee by all licensees that meet the financial conditions of the self-guarantee.
Similarly, licensees that are capable of obtaining a parent company guarantee are assumed to still use that mechanism.13 Under this scenario, only licensees that are unable to use either a self-guarantee or a parent company guarantee are assumed to obtain letters of credit.
Here, public costs are higher than under the first scenario, but both private costs and total costs are further reduced.
12 Source: ICF calculations.
The costs in the table do not reflect any decrease in private decommissioning costs that would occur if the public assumes the decommissioning costs that are unfunded by the private sector.
13 Because the NRC parent company guarantee is available only to licensees that are subsidiaries, and the proposed self-guarantee is available only to licensees that have no parent company, the two tests cover separate groups of licensees.
In some cases, however, a firm may be both a licensee and a parent company to other licensees. - -
i
~
option 3 The third scenario represents the option based on the financial test criteria proposed in the petition, but without the requirement that tangible net worth must be greater than $1 billion.
Under this scenario, the availability of the self-guarantee increases to include a few more licensees.
Public costs rise, but private costs fall by a greater amount, representing an additional decrease in total costs.
As Table 3.1 demonstrates, while private costs decline substantially under the proposed self-guarantee (option 2), public costs rise.
Total annual costs, however, are lower when the self-guarantee mechanism is available.
For example, total annual costs are reduced by an estimated $555,000 under option 2.
Allowing use of the modified self-guarantee (Option 3) reduces total annual costs by an estimated $668,000.
Table 3.2 also shows the total costs of financial assurance under the three regulatory options being considered, but it presents the total costs for 15, 20, and 30 years. Again, total costs are lowest when the self-guarantee mechanism is available.
Under Option 2, which would allow the self-guarantee proposed by the petitioners, total costs would be reduced by an estimated $5,759,000 over 15 years, $6,915,000 over 20 years, and $8,530,000 over 30 years.
Dropping the $1 billion net worth requirement would further reduce total costs by $1,170,000 over 15 years, $1,404,000 over 20 years, and
$1,732,000 over 30 years.
These cost savings may not be large relative to total decommissioning costs; however, the cost savings are substantial relative to total financial assurance costs.
3.5 Decision Rationale for Selection of Proposed Option on the basis of the analyses summarized above, the Commission is considering Options 2 and 3 and is asking for public comments on those options.
4.
FINANCIAL AND ECONOMIC IMPACTS OF SELF-GUARANTEE RULEMAKING i
4.1 Impacts on Licensees Adoption of a self-guarantee option is not expected to produce any negative financial or economic impacts.
Because a self-guarantee option will generate cost savings for tnose licensees able to use the self-guarantee, the rulemaking is expected to produce positive financial impacts.
Other licensees that cannot use the self-guarantee, including licensees that qualify as small j
businesses, will be unaffected by the rulemaking and therefore should not experience significant impacts.
Costs shown represent the net present value of annual costs for 15, 20, and 30 years, assuming a discount rate of 5 percent.
3 e
Table 3.2 Total net present value of financial assurance costs over 15, 20, and 30 years, with and without proposed self-guarantee ($000)15 15 20 30 Financial Assurance Option years years years 1: All licensees use
$32,027
$38,453
$47,433 parent company guarantee or bank letter of credit 2: All licensees use
$26,268
$31,538
$38,903 proposed self-guarantee, parent company guarantee, or bank letter of credit 3: All licensees use
$25,098
$30,134
$37,171 modified self-guarantee (without the $1 billion requirement), parent company guarantee, or bank e
letter of credit 4.2 Impacts on NRC and the States No significant impacts are expected for NRC or the States because the effort to review and administer the self-guarantee is expected to be comparable to that associated with the parent company guarantee and other mechanisms currently allowed.
In each case, NRC or the States will be l
required to review financial assurance submissions, and the size and scope o self-guarantee submissions are not expected to differ significantly from th,-
mechanisms currently allowed.
5.
IMPLICATIONS FOR OTHER NRC REGULATORY PROGRAMS Currently, self-guarantees are not allowed in NRC's financial assurate programs for low-level radioactive waste disposal facilities, uranium recm -
facilities, or tor power reactors.
While much of the analysis behind the proposed self-guarantee rulemaking may be generally applicable to these oth programs, licensees in these programs may also be significantly different materials licensees in at least three ways:
(1)
The decommissioning cost estimates typical of these licensees be much higher than is typical of materials licensees. Higher 15 Source: ICF calculations. i
)
~4 cost estimates could alter the optimal balance between public and private costs.
(2)
The number of licensees in these programs is likely to be far smaller than the number of materials licensees.
Fewer facilities could alter the balance between public and private costs.
(3)
The financial characteristics of these licensees may be very different from those of materials licensees.
Different financial characteristics could suggest different financial test criteria and perhaps different baseline failure rates.
Because the present analysis, for the reasons stated above, may not fully apply to NRC's other financial assurance programs, NRC is not proposing self-guarantee option for these programs at the present time, a
6.
IMPLEMENTATION SCHEDULE FOR PROPOSED OPTION This action will be implemented immediately or within several months following the passage of the final rulemaking.
REFERENCES ICF Incorporated, Analysis of Assurance Provided by Current and Proposed Financial *.ssurance Mechanisms. Draft Report, November 1992.
t w i+ ACTION - Beckjord, RES i
~
- d. /4} <,
Cys: Taylor
/fs ucg'o SnieZCk UNITED STATES y
NUCLEAR REGULATORY COMMISSION Thompson c
y, E
W ASMGT ON. O.C. 205% IN RESPONSE, PLEASE Blaha E
REFER TO:
M931209C Murley December 13, 1993 Bernero
%,*****/
Scroggins Knubel orrcc or THe BShelton secasTAny l
DMeyer l
1 A E-lG - 2.
(
00V MEMORANDUM FOR:
James M. Taylor Executive Director for O ions FROM:
Samuel J.
Chilk, Secreta N
SUBJECT:
STAFF REQUIREMENTS - AFF [RMs 6 TION / DISCUSSION AND VOTE, 3:30 P.M.,
THU.SSD4Y, DECEMBER 9, 1993, COMMISSIONERS' CONFERENCE ROOM, ONE WHITE FLINT NORTH, ROCKVILLE, MARYLAND (OPEN l
1 TO PUBLIC ATTENDANCE)
I I.
SECY-93-284 - Final Rule, 10 CFR Parts 30, 40, 50, 70, and 72, "Self-Guarantee as an Additional Financial Assurance Mechanism" The Commission, by a 4-0* vote, approved a final rule amending i
its regulations to allow certain non-electric utility licensees to use self-guarantee as a means of financial assurance of the adequacy of funding for decommissioning costs.
The Federal Register Notice should be reviewed by the Regulatory Publications Branch, ADM and forwarded for signature and publication.
fEDO-)
(RES)
(SECY Suspense:
12/30/93) 9100030 The Commission also agreed that the staff should study the development of alternative financial criteria which can be used by non-bond issuing licensees seeking to use the self-guarantee option and report to the Commission when it reports on its study of the development of. alternative criteria for non-profit entities (reference Cgmmissioner de Planque's vote, attached).
(EDOy (RES)
(SECY Suspense:
TBD) 9300212 i
- Section 201 of the Energy Reorganization Act, 42 U.S.C. Section 5841, provides that action of the Commission shall be determined by a " majority vote of the members present."
Commissioner Remick was not present when this item was affirmed.
Accordingly, the formal vote of the Commission was 3-0 in favor of the decision.
Commissioner Remick, however, had previously indicated that he would approve this paper and had he been present he would have affirmed his prior vote.
['? 1 1 \\ hIl lCn l ;< et >i v
o 1
i.
- 2
Attachment:
As stated j
cc:
The Chairman Commissioner Rogers
.j Commissioner Remick
.J Commissioner de Planque OGC OIG OCA i
Office Directors, Regions, ACRS, ACNW, ASLBP (via E-Mail)
E 9
i i
i I
l t
i
.I
/
f I
l l
t l
j A F F I-R MLA T I 0 N V0TE RESPONSE SHEET l
T0:
SAMUEL J. CHILK, SECRETARY OF THE UOM4ISSION FROM:
COMMISSIONER DE PLANQUE
SUBJECT:
SECY-93-284 - FINAL RULE, 10 CFR PARTS 30,-
40, 50, 70, AND 72, "SELF-GUARANTEE AS AN i
ADDITIONAL FINANCIAL ASSURANCE NECHANISM" i
APPROVED X(w/ comments)
DISAPPROVED ABSTAIN NOT PARTICIPATING REQUEST DISCUSSION l
COMMENTS:
1 See Attached Comments.
i l
i
?. h N A $ / &
SIGNATURE RELEASE VOTE
/ xx /
December 7, 1993 DATE WITHHOLD VOTE
/
/
ENTERED ON "AS" YEs xx No
i l'
1 Commissioner de Planque's Comments on SECY-93-284:
i l
I approve issuance of the final rule providing for self-guarantee as an additional financial assurance mechanism.
However, I believe that staff should study the development of alternative 1
criteria which can be used by non-bond issuing licensees for the reasons explained below.
The staff's analysis o." public comments on the proposed rule note,s tbAt one commentar argued that the bond rating criterion sho*ald be eliminated because it unfairly discriminates against companies that have not issued bonds.
111 SECY-93-284, Enclosure A, p. 3., The staff's response notes that " firms that finance i
their a'ctivities through equity or short term commercial lines of credit may be as financially strong as firms that issue bonds,"
but indicates that it does not intend to remedy this admitted inequity because there is no oriterion equivalent to the stringent bond-rating criterion which can be employed for firms that do not issue bonds.
The Federal Recister Notice itself does not directly address the inequity issue, but does suggest that
"[a]t some future time, when the Commission has gained some experience with self-guarantee, it may consider an appropriate revision of the financial critaria" such as the test that a parent company of a licensee must meet.
This less stringent test could be utilized both by bond-issuing and non-bond issuing firms.
Staff subsequently informed me that the number of non-bond issuing licensees who would otherwise be able to meet all the self-guarantee criteria is 20-40 (7-14% of licensees in the database).
ges Memorandum, James M. Taylor to commissioner de Planque, December 1, 1993.
This is not an insignificant number.
I believe that staff should expand the resources necessary to study the development of alternative financial criteria which could be used by non-bond issuing licensees.
(Presummhly, this would either be stringent criteria equivalent to the bond-rating criterion or less stringent criteria which would be available to both bond-issuing and non-bond issuing firms.)
This would cure the inequity in the final rule and, as staff points out, would also answer objections that the rule favors big companies since bonds are used mainly by larger firms.
Staff indicates that the financial criteria used in the NRC parent guarantee could serve as a starting point for the development of alternative criteria, thereby lessening the resources /needed for this task.
I also note that staff has committed to studying the development of alternative criteria for non-profit entities,.see FRN, p. 11.
This suggests that staff is concerned to treat all licensees as fairly as possible with respect to allowiug self-insurance mechanisms.
Therefore, I propose that when staff reports the results of its study of the development of alternative criteria for non-profit entities, it also report on the results of studying the development of alternative criteria which can be' used by non-bond issuing licensees.